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Ladies and gentlemen, welcome to the adidas AG Q1 2026 Conference Call and Live Webcast. I am Moira, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Sebastian Steffen, Head of Investor Relations. Please go ahead.

Yes. Thanks very much, Moira, and hello, everyone, and welcome to our Q1 results conference call. Along with me here today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. You know the drill. First, Bjorn and Harm will take you through the puts and takes of the quarter and our outlook. And then, of course, we will open up the floor to your questions. [Operator Instructions]

Before we kick it off, there's actually one more thing I would like to mention. I guess we all witnessed a very historic sports moment on Sunday at the London Marathon. I have to say I still get goose pumps when I think about it and when I think about the visit of these fantastic athletes here at our campus yesterday, and Bjorn is actually going to talk about it in more detail in a second. But what I wanted to share with you is that there will actually be a documentary about the sub-2 journey going live tomorrow afternoon. And it shows in a very impressive way that these huge achievements have not been reached by luck, but that there's actually a lot of hard work by a lot of great people behind it. And of course, we wanted to make sure that you get a sneak preview of it, and that's why we put together a trailer very quickly yesterday that we're going to show you now. So enjoy.

I hope you enjoyed it, and I hope you accept that we brag a little bit because as you probably understand, for us, the achievement of the weekend meant a lot. It's the result of many, many months, if not years of work from a product point of view, from a marketing point of view and from an athlete's training. And just for you, we have doping tested in twice a week for the last 26 weeks. So there shouldn't be any doubt that this is very, very serious. And when you see what the 3 did, it becomes even more impressive.

Just also commerciality, of course, this is not a shoe where we expect to sell thousands of pairs, but the demand is actually thousands of pairs. So if you go on Stock X, I think the last price that I saw was $5,000. So of course, that tells you there is a curiosity what this is. I think for the business, you should also be a little bit impressed when you look at what happened after the race.

There are some visuals here, and we were able to -- in London 2.5 hours after the race to be, I think, at 350 spots with outdoor advertising with even the time. And all over the world, like you see here, I think it's Shanghai, you see here with big visuals with the time and of course, a visual of the athlete or the athletes.

And again, in my life, when it gets to planning something, when it gets to executing something and then actually enjoying it, I think this is a highlight because it's, of course, historic. [indiscernible] is also, and we should never forget that, that the company is also having a great reputation in many, what should I say, target groups being employers or future employees or being reputation of the brand. You see some of them here.

And again, this is not because we're doing something great today, but it's, of course, accumulated to what adidas have done over many, many years. And it is a fantastic place to work, and we also hope it's going to be a fantastic place again to invest, but that's up to you guys. We have -- and I know some of this is repetitive, but we have talked about that this is the fourth year of a 4 years plan. We defined the '26 to be a healthy company.

I think we have added successful. And I do think when we look into this year, we've had a great start, not only the numbers that we will get to in a second, but the achievements of our athletes, the visibility of our athletes, the way we have been in marketing, in social media, and I think also the energy that we have internally is at least the highest that I have seen at the time that I have been in my 2 phases in the company.

And the numbers, you have probably seen and analyzed them a growth in Q1 around 14% is, I think, very strong. I think it proves that the product we have in the marketplace is in demand of the consumer. You will see that also in the gross margin. And then I will remember -- remind you again that to accelerate our receipts early to make sure that we had the right amount of product and maybe a little bit too much for the sales, but to have, what should I say, reserve in the issues now of supply again was very, very smart.

So in World Cup soccer, if it was balls or it was homeowner wagers is we front-loaded. And I think with all the issues right now in the world, that was actually a good strategy instead of trying to optimize the working capital. The profit also of EUR 705 million, I'm sure Harm can comment on it, must be one of the highest that we ever had. and adding EUR 100 million operating profit compared to last year is very, very nice to actually achieve. If you then look at the P&L, top line, we talked about 40% growth, currency neutral. It's the first time you don't see anything that this is only for the adidas brand. Remember, this is the first time there's no easy comparison in the numbers. That's why you have one simple number, and that is up 14%. Gross margin of 51.1% is, yes, down 100 basis points. The underlying gross margin is actually up, but the currency and the tariffs are working against it. And my friend, Harm will take you through that more in the details. But from a sell-out and an achieved gross margin, very, very healthy in Q1. And that gives you then the 10.7% operating margin and EUR 705 million operating profit.

If you then look where the growth is coming from, you know our map, 12% out of America, again, in a very, I would say, nervous market when it gets to consumer demand, oil prices being high. And of course, also a lot of discounting, we are very happy with that number. You know that we admit that America is for us, of course, the biggest opportunity over a long period because we're so far behind our competitor. But again, for this quarter, we say this is good. Europe, probably a market that is currently not growing at all. Also here with plus 6, we are happy.

You have to remember, we had a 20% growth in Q1 last year. And it's the same thing here, especially in lifestyle footwear, the market is [indiscernible] and a lot of discounts. So it's hard right now to grow on full price. But great growth on apparel, and also good growth in performance. Greater China, no change, great momentum, great energy, great sell-through, and we have proof that our concept and our team works.

Same with South Korea and Japan, great first quarter. Happy to say that especially South Korea is leading on trend, actually having strong growth in both footwear and apparel. I don't think the discount area is so high in this part of the world. So a very positive development on all counts. LatAm, still on fire, now fueled also by the World Cup, fantastic reaction to everything in the LatAm countries. You know that we are now #1 in the region. And that is, of course, not only because of the business model, but also because of a great team, and we think that the World Cup will make it even greater.

And then finally, emerging markets, which also includes the Middle East, needless to say, 10 of the markets involved in the conflict. Of course, we are losing business in these countries, mainly in the last 4, 5 weeks. There are still issues that are very volatile. Sometimes stores are closed. There are some problems getting products in. And I do think we can discuss that later what this could mean going forward, depending on how long this conflict would last. But as you know, all the numbers that we have shown you includes the issues in the regions.

So also here, a great job by the team. And that gives you then the 14% growth and almost the EUR 6.6 billion top line. If you look at channel, 8% growth in the B2B or wholesale, 19% in our own stores and 25% in e-com. This is fully in line with what we told you a quarter ago that in this market, especially in Europe and America, where it is over inventoried, having a strong discipline in how we actually flow products and how much we sell into the trade has been important.

Therefore, the growth in both our stores, which are double-digit up like-for-like, both in factory outlets and concept stores is then, of course, important and also e-com. This is not a strategy for us that D2C should grow faster than wholesale, but it is a result right now of how the market is and that might change. We would love, again, to have a less volatile wholesale business, ut it shows you that the brand when it's presented full price or discounted as a brand works very well and D2C being extremely strong. And I would also say the e-com business, I said it last time, we feel now that we are a good e-com player, both from a system and an app point of view, but also, of course, from the flow of product and the way we present it. That gives you the 638 split. And as you can see, own retail being 22% and e-com 16%, surely a healthy split. And again, not huge changes because it's only the changes of a quarter. We continue to spend quite some energy and money on our retail environment.

You see some of them here. very important for us to have freshness in our products, very important for us that we target the consumer in the different areas with the right product. And as you can see there, even in the store layout and the way we actually are making the front, there are big regional differences depending on what the market is. So we still believe very, very strongly to adapt to the local culture and not try to have one store design all over the world look the same. Same is in e-com. As I said many times, the frame and the system are the same. We have a very, very good global e-com team that works on that. But how we are then fronting the consumer with what programs on the front page and the sort of the different concepts are then, what should I say, targeting consumer in different markets.

So here, you see some of the differences from the left side where we very much target the World Cup in the U.S., the retro product to in the right corner where you have a typical Japanese approach. And again, of course, this is a dynamic process. But I think we have optimized the way we do it in a way that we feel it's really, really working. And you also see that in the digital growth we have.

I would also say that in apparel, where you see the fantastic growth, it's also obvious that it's easier today to sell a lot of new fresh apparel digital than it is in a brick-and-mortar just because of the fact that you can bring newness both in your own e-com and with your digital product quicker than you can do on a normal brick-and-mortar concept. When you then get into the division, yes, footwear only growing 4%, apparel growing 31% and accessory growing 13%. You might think that the 4% is weak. I would say it's not. It tells you that footwear right now is in process of being more discounted and especially in the lifestyle area, there are lack of newness and lack of energy and the stores, especially in Europe and America are, what should I say, I would say, merchandise with a lot of discounts, so it's difficult to get the energy that we've had before.

Therefore, it's great to see that the performance categories then are actually taking off, and we clearly see that there is a big demand for many categories, including running and also soccer for the time being. Apparel, we told you 6 months ago that we expect a huge growth in apparel because we know that the apparel team has developed new trendy concepts, use new materials and been, in many cases, leading.

And as I also said, especially our digital partners had a huge sell-through success with our apparel. And then when you then add all the World Cup products and the soccer cultures into it, it starts to be a substantial growth. Also like to tell you that both training and running as performance categories are also starting to grow in apparel, which, of course, is very important for the future. The accessory numbers has been volatile and very negative in the U.S. because of the delivery problems we had into them. You remember, we had a China issue. As you can see, now we have healthy growth again, of course, fueled also by [indiscernible] care product, but the problems we've had, especially in the U.S. accessories starting to be fixed. And I hope and believe that these numbers then will continue to grow also in the U.S. That gives you the 5637/7 split, which is not very different than we had before. And again, I think under the current market environment, this is a very healthy split.

If you then look at performance, we are showing a 29% growth. I think this is the second quarter where we have a huge growth in performance. And of course, those of you who said this is not dangerous to grow on in lifestyle. Now you have the answer. The plan was then to shift the growth also into performance. And of course, there is always the goal of having balance between the 2. But now having such a growth in performance is, of course, a great, great, what should I say, feedback for us that we have spent time on financing growth in lifestyle and brand heat to put it then into development of the right product and better distribution of our performance categories.

Football, of course, great growth as expected. And again, also probably helped that we have been very, very good in supply. Running continuing at almost 30%, again, and this is before the success in London. We see that we're getting both in retail and wholesale, a great momentum in running. And as you know, there is a globally running boom. Training also starting and continuing to get 12% or double-digit growth. And the only negative number here is the basketball number. Now we have to remember that Q1 is a small basketball quarter. And you also know that we have told you that we need time to turn that business to make it better.

And you also probably know that basketball culture right now, especially in the lifestyle area is not hot in demand. So actually according to what we planned. The other thing you need to note here is, of course, the great number in motorsports. That, of course, has to do that a year ago, we had 1 team in Mercedes, now we have 2 added Audi. But I think it's fair to say that motorsports so far is more than hitting our expectation, a, I think because we've done a decent job; and b, we clearly see that there is a great demand in fan gear and also culture wear coming out of Formula 1.

Also a very positive number for us in the golf market that has been stagnated. So again, very, very happy with the performance side of it. We have for a while said that we want to be like adidas [indiscernible], invest in many sports and be visible in many sports, but there are 4 categories that is important for us to win globally, that is football, DNA of the brand. It's running because it's the biggest. It's training because it's relevant all over the world. And then basketball because it is culturally really relevant, especially in the U.S.

And although the category is struggling a little bit currently, it is, of course, important for us in the future. I hope you agree and see that we are very, very good on the road in football. I would say in all elements of it, we bring innovation. You see here the first printed additive soccer shoe that has been on the market. You see soccer cleats that has the elements of fashion. You see culture wear and you see the lightest speed shoe on the market. And in general, I think our sports marketing have done a great job finding the right players.

And those of you who saw [indiscernible] against Paris yesterday, it is a fantastic sport, and we look forward to the return game next week. Running. We have talked about the importance. We have worked for 3 years with very, very good teams on innovation. It's not only for the top of the market, but also for the everyday running market. And we have new technologies that are starting to break through. So there's many elements that now is helping us on the performance side.

Then training, we have, for the first time, also a hybrid shoe in the market. that is doing extremely well, not only in competition, but now also building a huge order reserve. And we believe in this category and are putting quite some innovation to build the best product available. And so far, we see actually success in all regions in this area, which is very interesting coming from a training area. And then basketball, where we told you we need to reset the business. We are working on new signature shoes. We are working on signing new players. You will see that when we get to the NBA draft. We are working on a bigger presence in women's basketball. And you will also see that we're signing clubs and Federation outside of the U.S. So basketball, although it will take some time, it's clearly in our priority. Motorsport, we talked about. I don't need to explain any of the success of Mercedes. They're back where they belong. I hope you see that both Kimi and George is extremely loyal to our brand. We also do a lot for them.

Here, you see when they were in Japan, they were actually racing in Y3 suits and took a Wolf even was willing to be a model for our Y3 show and the relationship to Mercedes Formula 1 is just fantastic. I have to say the same about Audi, of course, not as good on the track yet, but our neighbor 100 kilometers from here, looking great in merchandise. We also run their e-com site. So we are a business partner on a wider scale than just doing merchandise and selling it.

And we believe that this relationship is going to be a great one, and it's already way ahead of the commercial plans that we had. And then in the, what should I say, Soul or Adi Dassler, we are back again focusing also on the smaller sports, on the local sports. Some of them commercial, others not. I would like to mention paddle, which you see here. I think we're now a market leader in paddle, also in rackets. And it's a booming sport that, of course, is attracting athletes female and male kids and adults in a way that we didn't believe would happen. So a great new segment. The mirror to that in the U.S. is pickle, where we are not that successful yet, but we see the same trend. And then we talked about other sports like cricket, important for us. You see a new signage of volleyball in Turkey. Our sports marketing and business teams are very, very agile, looking for the opportunity to both build the credibility, authenticity and also commercial businesses.

The ones we have talked most about is, of course, America. We bragged about that we had bought a college team in the NCA final, which we then, of course, won. We can now brag that Mendoza, our quarter back was the first draft pick, which, of course, normally indicates a new superstar. And I think we had 15 players in the first and second round, showcasing a much better activity in the NFL draft that we ever have had. But it's not only NFL, it's also NBA. And it's softball, it's volleyball, it's baseball. Our local team is invested in credibility to be a real sports fan again in the U.S. also for the kids.

I told you many times that it will take some time. But I think we are able now to sign because we have the resources, and it should give us a little bit of time I think we will grow to be a much, much, much more visible sports brand also in the U.S., which, of course, is the midterm target. We have, every time we've spoken, talked a lot about innovation. I think many of you thought we were lacking innovation. I think I've told you that I disagree. But of course, to bring ideas and concept to commercial product takes some time. You see some of them here. We talked about the EVO 3, world's fastest shoe for Marathon. We have told you that we need a foam for comfort. That's HyperBoost, which has just been launched and running and that you will see extension on. We'll have the F50 HyperBoost hitting the market next week, which is the liced soccer shoe on the market. We have the Aero Primex EVO [indiscernible], which is a technology that people have never seen before. We have the hybrid training shoe.

And then we have something that we're really proud of. We have built the first adaptive shoe, which is a running shoe for the adaptive athlete or some would call it athletes with disability. And again, the reaction to this from parents, for example, with the Down syndrome has been fantastic. And we are working very, very close with these athletes then to make them better athletes and also give them much, much, much more comfort when they do sport. And then the whole printed technology, you know we have a drama cool printed shoes there for the leisure wear, cool stuff that should work or that works.

Now we are taking the technologies also in the stadium and on the on the arena. So you will see basketball shoes and soccer shoes now being printed for the athlete, which is a very, very cool concept and I think just the start of what you will see for the future. So again, the whole performance footwear is, of course, important for us. And I do think that you will see that the pipeline is really, really good and that many of the things that are coming out of innovation pipeline for the athlete is also then going commercial, which, of course, at the end of the day, is the reason why we're doing it.

But it's not only footwear, it's also apparel. Yes, I think innovation in apparel has been smaller in general industry. But if you watched the Marathon in London, you would have seen that our athlete was either running in the climate cool, what you see here with kind of the bubbles in the material, which helps them keep cool longer or in the tech fit suit or combinations, which you see here with [indiscernible]. These are all technologies that we have developed together with the athletes to make them better. And of course, they will also then show up in commercial products. For other sports, it's the combination of coolness or heating, depending on what sports you are. And if you watch Formula 1, you must have seen the coolness system that George and Kimi is using.

And I think you will see some of that also even we get into World Cup, which we know will be very, very, very, very [indiscernible]. So innovation was important. I think the visibility of what we did in the weekend will, of course, also help us when it gets to the commerciality. And we feel that we have a great pipeline, and that's why we are going to invite you in September.

I think it's the 23rd and the 24th, where we will show you -- from the lab to the commerciality, what we're working on and not hide anything because you will not tell anybody. But we will show the confidence we have also after the World Cup to be present at all sports events going forward with very innovative and competitive products. One thing that we have not been good at, we've talked about this before, is comfort. I think that all the brands have been much, much better in actually translating comfort into performance and lifestyle. We talked to you that AI did that great 10, 15 years ago with Boost, which was the most comfortable mid-sole material. Remember, AI Boost, you remember M&D. You also remember that EC all successful running silhouette side Boost in them. Boost is that it was too heavy. That's why the brief was make a boost that is light, and that's HyperBoost.

We launched the first generation of HyperBoost Edge 4 weeks ago, smaller volumes, but great reaction. And you will start to see colors and more models with HyperBoost coming to the market as we go, both in the performance area and in the lifestyle area. And then finally, when it gets to comfort, an area that no one is really talking about, but as activity is huge and that is walking, we will now build walking shoes, and I'm not talking about competitive walking. I'm talking about what people normally do and build specific products for the needs of that activity and make sure that walking becomes a category a that builds product at the high end, but also, of course, also on the commercial end, and you see some examples on it on the screen behind me.

That was performance. And then lifestyle, then in your area saying growing then probably only 6%. We are actually happy with that. You see the split between Originals and Sportswear almost the same, 7% and 5%. We clearly see that lifestyle footwear has a more difficult time, and I explained it with probably a lack of newness too much inventory of certain brands and high discounting. But therefore, we see a boom in apparel, and we are extremely happy with that development.

We still feel that we, in combination of what you know, Tarras and the extension of court and all the work we have done on running lifestyle have the best lifestyle offer out there. and we still have great sell-throughs, and we feel that we have the pipeline what we need. But we also then have to manage inventory according to what we see in the market and try not to jump on the discount bag. And that's why the, what should I say, growth rate probably is a little bit limited by that.

If you then look into extension of franchises, I think we've been good at that or the team has been good. You see here that the Samba has gone into Mary Jane constructions, which are flying, and that's an area where we don't have enough. We talked about low profile, and you see here Ballerina constructions that are low profile are flying. We know the whole retro running side in [indiscernible] control, also the takedowns. And then you know that our most successful running in volume now is the which started out as a performance shoe, extremely comfortable with a very fast look, has become a double-digit wall in pairs that we're now extending into, I would say, different closure system like sippers into different materials, also waterproof, and that is becoming a whole franchise of a group of shoe. And then to the right side is what we have done with soccer culture. We are putting soccer uppers on, I would say, different technology bottoms. This has not been a major commercial side yet, but we clearly start to see that as we go to the World Cup, the interest for this is getting more and more, and they will be included now in many campaigns. So the visibility will be bigger. Then apparel, I'm extremely proud of what the team has done. If you think about how we looked in apparel 3 years ago, it was basically cotton and polyester and I would say, boring. That's why we also said that the industry was lacking interest and there was, I would say, competitors from fast fashion, and there was a lot of price battles on commodities like the black hoodie with the logo one. So the investment here has been in materials. It's been in, I would say, silhouettes. It's been a combination of global concepts and local concepts and bringing them across the globe.

And also here, clearly leading the different looks and the different trends, digital and then commercialize them also into brick-and-mortar as we go. And you see some of those looks. It's also clear that she is leading in this area with her fashion eye and that we have targeted her very, very, very clearly in our communication. Collaborations been made mostly for footwear, but now also in apparel and not license that you see it, but also with partners when it gets to looks. We have a great process with ASOS, where we launched ideas together and then launch them to fashion shows and then commercialize them. We have also in the U.K. with [indiscernible] fantastic success.

And then we have many global/local cooperations where we do either very exclusive looks, exclusive collections or we combine in line with different partners. And this model is bringing a lot of freshness in the different marketplaces. We talked about the lack of number of footwear trends in the market. Therefore, the need to do takedowns. I know some people just like it, but I don't see an alternative, and I'm proud of it. And we're continuing doing that. And we now are also merging the product teams in a way that the access from the top to the bottom is seamless, so we can much, much quicker agree upon what the segmentation and the distribution are from different sites. It's like that in footwear, but it's also the same in apparel. You see here examples what we're doing in originals and then we take it down to what we call Essentials, but also in materials. When we started with denim, it was maybe a couple of thousand pieces and then it was extended in originals.

And then to get that look wider in the globe, it's also been taken down into the sportswear range. And of course, then you get the multiplier. And we all know that trends goes much faster today than they used to do. Not only do we this in product, but also in marketing. Here, you see a beautiful Thomas Miller doing a culture wear thing for DB, originals. But then at the same time, he's part of a campaign exclusive for [ Deichmann ] because of his popularity and is playing this being Thomas Miller in both areas, and it works very, very fine. So to summarize, we're very happy with the first quarter. We are very happy with the team's work, both globally in the machine, but also in the marketplaces. We think we delivered to you what we have promised.

And what that all is in more details is now up to Harm. So I'm handing the clicker over to you.

Thank you, Bjorn, and good afternoon, good morning from my side as well. And as always, I want to continue with some puts and takes of the financial update when it comes to the P&L and to the balance sheet. And as always, I'll start on the top of the P&L with the net sales. And again, 40% currency neutral or reported 7% in nominal terms. It's a great quarter. And as I said earlier, there's headwind from the currencies, but that headwind should ease quarter-by-quarter as we believe for the full year, it's probably more like 3% to 4% for the full year.

But I also want to reiterate the quality of that 14%. Of course, there's a lot of World Cup business in there. But at the same time, if you're growing 22% in D2C, that also shows you what the quality of that top line is. And when we go to the gross profit, I want to give you some more details. This time, it's a very, very easy bridge because we can get lost in a lot of details on the green bar. At the end of the day, the underlying business is improving compared to last year because pricing is still slightly up, discounting is under control. And in the business mix, overall, you have category mix, you have market mix, you have channel mix. You have product mix, everything is in there, but everything is going up there as well. And then when it comes to product cost and freight, it's pretty much flat and normalized. And then it comes down to the 2 elements that we also mentioned in the full year results when we gave our guidance, it's FX.

And yes, U.S. dollar is positive, but there are other currencies. And luckily or from that point of view, not so good. These businesses are pretty big, meanwhile, whether it's in Turkey or in Argentina or in Japan, and we are growing nicely. So that has a negative impact. And of course, the U.S. tariffs did not exist in Q1 last year. Both these red or pink bars are amounting around EUR 50 million to give you an idea, and that nets up to 100 basis points lower on the gross margin, resulting to 51.1% gross margin, which again shows the quality of our quarter and is definitely a very good result.

When we go further down the P&L, we look first at marketing. And yes, very clearly, we're not saving ourselves to profitability with 11.5% on marketing and only a growth of 1%. But we actually -- if we save something, we save for the next quarter because we want to make sure that we are showing up very, very well during the World Cup that we win that event and use it as a platform for the brand overall, but definitely also for the North American business.

So I expect that marketing is definitely going up in the second quarter, and we're not saving ourselves to profitability. Where we will continue to be disciplined is on the operating overheads, only going up 3%, and that 3% is credit to being very disciplined in every cost item, and it's very much attributed to an annualized effect of retail stores that we opened last year or some expansion in Q1. And then as we are growing volume as well, not just growing through prices, we need to move more volume and some supply chain costs that are going up as well.

So pretty much annualized retail and supply chain cost is the only increase. The rest of the business is run very, very disciplined and pretty happy how we are moving forward there. Then we go -- and of course, we talked about the operating profit, the EUR 705 million or 10.7%. So again, good progress with almost EUR 100 million, up in absolute terms compared to last year. When we go below the line, yes, financial expenses in net are up. The main reason for that is that we have less interest income because our cash is reduced. That was planned. Of course, the share buyback has something to do with that one as well, but that is also something that will normalize over the next couple of quarters.

There's some seasonality in there. Income taxes have normalized. I talked about it at the end of last year already. It is around 25% exactly in Q1 '26, and that leads to a net income of EUR 484 million or 11% up to last year, the same quarter and basic earnings per share is pretty much the same. When it comes to the inventories, I want to click -- do a double-click on this one. Yes, it's up 13% or 70% currency neutral. But as Bjorn indicated already, we made a conscious decision and in hindsight, definitely the right decision to invest our cash into our working capital and primarily in inventory to have availability. Without that availability and the early deliveries in inventory, we would not have been able to grow 14% in the first quarter, and we would not have been able to grow 22% in our direct-to-consumer business.

So definitely in hindsight, the right decision to do that. And of course, we will work through that number through the next couple of quarters, and I was on record on the last quarter that this will stabilize, and it will definitely further go down in the second half as the World Cup is hopefully getting successfully behind us in the third quarter. Linked to our business also in our wholesale accounts, our receivables are up by 11% or currency 16%, a little bit more than the business growth that you have seen. There's also some timing in there and accounts payable are definitely under control linked to what we are sourcing with our factories. So overall, investment into the working capital. You see it up 21% or currency neutral 26%. When we double-click on this one as well. I think the ratio is more important than the absolute number.

You see that we are building up and we have invested in our working capital, primarily in the inventory. Yes, I'm not concerned about it. That was a strategic decision that we made. But rest assured, over time, we will get that below 23%. And of course, looking into next year, I'm pretty sure we will approach something around 21% again, which is linked to what I always said being a healthy company. Most importantly, some of the inventory, of course, is very, very healthy when it comes to the aging.

When it comes to cash and cash equivalents, of course, linked to investment into the working capital and also the share buyback of EUR 500 million is reflected in our cash position in the balance sheet, but also there, no surprises. And of course, when I talk about the share buyback, which is my last chart, we have completed the EUR 500 million of the share buyback. We bought back 3.3 million units of share, whether it was a perfect timing or not, but that's what we have contributed, and we are planning to contribute another EUR 500 million for the quarters to come. And of course, we are planning and proposing for the Annual Shareholders Meeting around EUR 500 million in dividend. So overall, just in '26, we'll return to shareholders EUR 1.5 billion in cash. And with that, I hand over to Bjorn again for an update on where we're heading into the future.

Thanks, Harm. I think what I'm showing you now will be a little bit repetitive. But as I said, continuity is good. We clearly say we want to be a global brand with a local mindset.

That is very, very, very important for us. I hope you agree that everything we should do should focus on the athlete or the consumer. This has been the strength of adidas in many areas, and it should be it again. To be close to the consumer, it is important that the markets today are not all the same. And we have different opportunities in different markets, both from a sourcing point of view, from a marketing point of view, but also physically of what product is trending and what sports are happening. And we strongly believe that we need to put even more responsible close to the consumer, meaning into the market, and that means that they also have to be accountable for the commercial success in a much, much stronger way. Included in that is then to have creation centers who can create products for the market where that makes sense. And that is especially the case in some of the Asian markets, especially in China, but also in Japan.

And of course, it is very important to have a creation sense in the U.S. because we all know that the differences between the U.S. and Europe are bigger than people would like it to be. There will always be a global headquarter in [indiscernible], rumors of people trying to tell that, that's not the case. That is. This is the home of the brand, and this is where headquarter will fit. There will be the center for innovation, for global concept for systems and the strategy and the senior management. But I do hope that the time you're sitting in an office in Hertz of deciding everything, what should happen, that is not possible for a brand that is currently EUR 25 billion. This means that we don't only need the best people in headquarter. We also need extremely strong teams in the local markets. And I do think I can report to you that the teams we're currently having both from a knowledge, from an experience, from an energy is I would say, the best that you can get.

So we feel we are on a very, very good way of executing this strategy. Needless to say, should the trends and the sports merge to be the same, then, of course, we will not hinder that. And to the people that are afraid of efficiencies, I think efficiencies in product you measure on gross margin and not on a spreadsheet, which you can't. So I would just like to put that on record. We have the vision to be the #1 sports brand in all markets, of course, knowing that we will not achieve that, but all our country managers and market leaders should have that ambition with one exception that is in the U.S., where, of course, the market leader is so far ahead of us that we should first focus to get to EUR 10 billion, which I think you agree upon, and I know that our local management agrees upon. The locally relevant products that you see here showcases in apparel some of these differences.

And I'm happy to report that all these products that were designed and initially launched locally have then gone globally, which is the beauty of having creativity happening based on different cultures because some of these cultures then actually move across regions. And our system puts all these concepts up on a platform so all markets can buy whatever they want out of different regional concepts, which again is the beauty of this. It's the same when it gets to activations. Of course, there are global activations. You would see World Cup being activated brand-wise globally, but even there, then taken down to the different markets on a more local basis.

And I think you agree, different markets and different consumers are being motivated by different things. And we are allocating resources from globally to the local so that we can again activate closer to the consumer. And again, the energy that we have achieved with this kind of thinking compared to what we had before is really, really, really high. That was a lot of positive things. And then we also have to admit that when you read the news, there is a lot of negative things. Of course, global conflicts, there has been many things happening over the last years and also this year that we would have hoped it would not happen.

But you also see that the industry is reacting to different things, and there's quite some changes in management and also in layoffs in many companies. And on top of all that, we know that AI will come in and actually be a major change driver for how we are going to do business. And the reason I'm saying this is that agility and the willingness to adopt your model based on what's happening in the world, I think, is going to be crucial, not only for us, but I think on any global company that is working on consumer goods.

And I hope you agree because I don't see any other alternative. And I do think when you see what we're doing, we have been able to generate this attitude, and I think the resistance is getting less and less to this road. 2026 is a great year of sports, of course, especially because of World Cup, it's the first time that I have seen a real culture coming around World Cup when it gets to the product side, not only from the fans. The games will be great. You probably have counted the different teams. We will have 14 teams playing in the tournament. I think we've been very, very lucky with the product that we have designed, at least the reaction is great, both for home and away. I guess around 1/3 of the players in the World Cup will bear our shoes. And as you know, we have the ball, so all the players will play with our wall. So the brand will be exceptionally visible during the tournament on the pitch.

But as I said, not only on the pitch, the fan, you will see the jerseys, you start to see it already. You also see a lot of bring back. That's what I mean by the culture, a lot of fans, but not not fast, even not fast, are buying into all soccer looks. So there's a lot more football on the different streets than you've ever seen before. And as I said, we did a big investment in both design and development of product, both within soccer, but also in originals. And we did bring a lot of this newness into our warehouses. So we have a great, what should I say, group of product ready to go, and you will have newness in the market every week from now until the tournaments end. We live under the spirit of you got this.

We are adding -- we got this for the World Cup because we feel we are very well prepared and really looking forward to it. That means also with the first quarter being as it is and everything that we can see, we will keep our guidance currently for the year. We talked about the time after the 4 years, and we said that '27 and '28, we would like to be a successful company that will continue to improve our business model and our setup to this new world. That means trying to decrease complexity in the way we go to market. and of course, optimize the processes, the systems and our organization and also, I think, be very, very conscious on where we can put AI into the business.

That means that we needed to showcase that we're successful short term because if not, you get upset with us, but then also make sure that the platform that we're building with what we do short term also works for the long term. And that means that when you look into the future, we believe that we continue to add around EUR 2 billion in sales every year and that we can take some of that growth and put it into the bottom line, which then will give you a 10%, 10% plus EBIT. I would like to make one comment about the '26 numbers that we haven't written about, and that is the tariffs where you know that the Supreme Court have made a ruling that certain of the tariffs that were not bilateral should be paid back. I think we have told you before that, that is around EUR 300 million that we can account for.

There are some uncertainties in some of these numbers. We have not put that into neither our numbers. So we haven't booked any or we have not put anything into our guidance. So just so you know that, and then we will see how things develop. The last thing is a beautiful picture of the German Bundesliga. We did a deal yesterday that's not in the package. We signed an agreement with the German League, [indiscernible] until 2034, where we've been their partners on many, many things, including the mall. And that's done not normally with a payment, but it's actually done with the credit that we've given to them. So it's a new way of working together. And as you know, the [indiscernible] plays every week. It's maybe the highest quality league when it gets to the stadiums, the -- and maybe together with the Premier League, the best league also in the quality, at least now when you look at Champions League. And that's why we are extremely proud that we were able to do that. Harm and the finance people have worked on this model for a while. And yesterday, we were then able to actually find it. So another addition to our commitment to sports and to also soccer.

So with that, I hand back to Sebastian.

Yes. Thanks very much, Bjorn. Thanks very much, Harm. Mara, we're now ready to take questions.

[Operator Instructions]

The first question comes from the line of Aneesha Sherman from Bernstein Societe Generale.

I have two, please. So Bjorn, I want to start with your very last slide. You expect to grow high single digits in '27 and '28. And so that would be above-market growth for 5 years in a row and double digit and then high single digit for 5 years in a row. So I understand there's a low base benefit as you're recapturing lost share, but equally, the competitive environment is getting more intense. Can you talk about what drives your confidence that you can continue to gain share for the next 3 years, making it 5 years in a row of share gains?

And then one for Harm, please. So your Q1 margin came in at the high end of that high single-digit guidance. And as you go through the remainder of the year, some of those Q1 headwinds are either going to roll off or disappear tariffs, FX, and you've said underlying margins are improving. So how do you think about the remainder of the year? Should we expect a gradual improvement in margins versus where you are in Q1?

Yes. I think that when we analyze the market, we go market by market, category by category, we identify this potential. And again, the potential is, of course, there in a world that stabilizes a little bit. But we see growth potential both in the performance side, apparel and footwear and the same in lifestyle in all the markets we talk about. And then there are certain markets that we think will grow much faster than maybe you think. And then there are markets where we see that we can take more share maybe quicker by doing some changes. So again, you never guarantee to get a EUR 2 billion growth every year, but this is a bottom-up approach from the markets. And I think this is also a change that this is not us sitting with a strategy group doing a spreadsheet, but it is the potential that the market leads see based on they getting the resources that they need.

So again, you, of course, have never a guarantee that all these things will happen. There are volatility in many things, but we think that the brand we have the awareness we have, everything that we can measure on the upper and the mid-funnel when it gets to how people see our brand and then the pipeline of product we have, of course, not knowing what competition has, I agree with you. That's why we come up with these numbers. The other thing where I disagree, I know there are some colleagues of you that have said that sneakers are over and everything will be formal, and that's why the industry will go down.

I don't think that gentleman is traveling a lot because the markets with the biggest populations are those who will grow the fastest because they are not even close to the saturation that maybe some of the Western markets are when it gets to the using sneaker in all, what should I say, aspects. And then I do think that the whole comfort area, don't forget that there aren't that many footwear brands in the world that are delivering, I would say, comfort. And with many Western population having an older consumer that wants very comfortable footwear, which means cushioning, which means breathability, which means comfort in general, I do think that our industry actually have even a bigger potential targeting that.

That's why we even now dare to talk about walking as a category to also target that group. There's more people walking that are running, but nearly no one talks about it. So there's many, many pieces into this, what should I say, calculation. And then, of course, we are aware of that we need to do a good job. But at the same time, we don't think that we are doing a great, great job so that we don't see improvements, but we see a big opportunity in both categories, markets and the way we actually work with what we have. So we feel that this is the right way of indicating where we think we should land. Harm?

Yes. On the gross margin or operating margin, very quick, Aneesha. First of all, we are not really managing every quarter perfectly or whatsoever, but we want to make sure that we are doing the right things, and that's also the reason why we are refraining from a quarterly guidance. But to answer your question, for sure, with the World Cup, we always said that the top line definitely will come in with higher growth rate in the first half versus the second half given the World Cup. Secondly, we always said that the gross margin will improve towards the second half, especially when it comes to the hedging that we have in the currencies.

And then when it comes to the operating margin, yes, we had a very, very good start in Q1. You might know that Q1 and Q3 are always our bigger quarters. As I indicated earlier, we definitely want to make sure that we invest into the World Cup. So marketing will definitely go up in the second quarter. And then we all know that the fourth quarter is not the most profitable quarter. So this is where we are. But clearly, top line more in the first half, gross margin will improve in the second half. And then it depends quarter-on-quarter. We want to do the right thing. And the right thing is investing into the World Cup in the second quarter. That's pretty much where we are.

Next question comes from the line of Adam Cochrane from Deutsche Bank.

I think it's almost fair to say great quarter on this occasion. Two questions from me. First of all, can you give any idea on how big the impact from Jersey football and the World Cup-related sales were in Q1? And are we still expecting 2Q to have a bigger impact on the top line than we saw in the first quarter? And then the second question is, you talked about maintaining tight inventory to your retail partners. Do you think that their sell-through has remained strong.

And do you think there's been any limit on the sales that they could have generated by you sort of maintaining a tighter inventory position with your retail partners? And just to make sure, you're not keeping some of the best-selling products to sell via DTC rather than giving them to the wholesale partners.

Well, your second question, do I think certain retailers could do more full price sales if they had more of our inventory? I would definitely say yes. But now you know there's a lot of deals in the marketplace, and I think many retailers have bought deals that have been discounting because people have been worried about not having a price aggressive enough offer and price aggressiveness in many markets means discounts. So there's always a, what should I say, wish, how you would like retailers to act. I think the proof is in our D2C numbers. When we have double-digit like-for-like growth in our own stores, I doubt that multi-branded retail has the same number. So that is obvious that if you had had the right adidas product in your stores and have more of it instead for discounted, then you could have done more sales. But this sounds maybe arrogant and it's not meant to be it. It's just that's the way it is. And I guess any brand right now that feels they have a heat would say the same thing. To the issue of do you hold back some inventory and models D2C first, that would normally not be our strategy at all because we want to be the friend of the retailer. But it is true today that in the discounted environment, you might start to do that because you don't want to put a new shoe that has a full price launch and then put it into an environment where everything is minus 20 and especially if big brands having the best franchise is discounted, then it pulls everything down. So there is some truth to it. I wouldn't say this is substantial.

But of course, we would, what should I say, defend the newness now in a different way than we would have done 18 months ago. The sales of World Cup product and now we need to be careful because I know your spreadsheet has all that is World Cup in addition and on top. I would say that the World Cup product that has been sold in our bookings in Q1 is around EUR 250 million ballpark plus/minus. I assume it will be the same in Q2.

But now you have to remember, there's a lot of soccer culture product that is not World Cup product, but are still the lifestyle product or even performance products. So the soccer impact or the football impact as a trend is much bigger than the World Cup product. And of course, the math is not that, okay, you sell EUR 250 million World Cup products in Q2 and then next year, you do 0. That's not how it works. The idea in this is that we are establishing now a trend and a way of working with apparel, especially, but also a little bit shoes that builds over time a business that goes far beyond just an event.

I think you agree that basketball did this for a long time. The basketball lifestyle coming out of America became a normal, I would say, almost commodity in the lifestyle side of sports fans and young people. We start to see that in football. And although some of this is an additional revenue right now that, yes, more Mexicans are buying the Mexican jersey than ever, and you can do those parallel in many markets, the soccer inspiration is going much, much wider than that.

And you could just go back to Oasis last year when we did the merchandise with Oasis, it looked almost like it was a soccer program, but it wasn't, right? So the impact of football that you see is not booked only as World Cup and it's not a onetime wonder. So that's why we are not sitting being nervous saying that we cannot replace the sales next year, but it won't be -- it will probably be less Mexican jerseys unless they won the World Cup, but there will be enough soccer-inspired product and lifestyle and performance product to carry the ball also in the future. That is the plan, and we weigh into these plans.

The next question comes from the line of Ed Aubin from Morgan Stanley.

So two questions for me, Bjorn, on the footwear and the sequential deceleration you mentioned. So maybe to start with the market dynamics, which you already talked about. And I think you mentioned lack of innovation and from your peers and elevated inventory, which led to discounting. You don't have a crystal ball, but you talk to a lot of people in the market, the retailers and you kind of, I assume, track the inventory of your competitors. So for how long, if you look at the next 9 to 12 months, how do you see the situation in terms of the competitive landscape, particularly in footwear?

And then the second question related to that. So one thing, I guess, is the market dynamics. The other thing is the life cycle of some of your franchises in footwear? And would it be fair to say that performance was obviously up in footwear in Q1 and then lifestyle kind of flattish to down? And for how long, again, you don't have a crystal ball, but would you expect the drag from lifestyle footwear to continue?

Well, the -- as to the visibility into competitors' inventory and the next 6 to 9 months, I wish I had that. I think that will be legal, so I don't. And I think this has to do with the attitude of competitors and are you going for your top line, or are you trying then to get more profitability? And I think that goes for the whole industry. I do think as a defense, I think all of us competitors also and retailers, of course, with the instability in the world with wars and conflicts and all that and supply chain issues and tariffs, of course, this uncertainty has also not helped. And I do think that people have guarded their top line by then making deals.

I think the unfortunate thing by the deals is that if a supplier gives a discount to a retailer and it does it to more than one, they will start to discount because that's the competition and people are afraid of not selling. If one discount, we need to discount and then it's a spiral, it's always in the interest of all of us to try to avoid that. And I'm not saying that we have been or are perfect on it, but we've been very conscious about it, and you see that in our gross margin.

And I do hope -- and I also believe that the big brands will get out of this because it doesn't bring anything, to be honest, neither on the retail side nor on the brand side over time. And if it gets a little bit of stability, so we actually know what the tariffs will be, then I think U.S. will also recover pretty quickly. I think the issues in Europe is a little more complicated because the European economy is currently not growing. And then depending on the oil price, I think demand by the consumer is down. And therefore, of course, then you need to adjust your offer so that you have enough, I would say, more commercial price points in your range. I think the uncertainty, actually, Europe is bigger than in the U.S. When it gets to our life cycle, we have on court. I think, as I said before, that, of course, Taras, those 3 models that we talked about very often, Samba, [indiscernible] and Special has, of course, been the backbone, but we have extended that into the campus into the superstar. And we have talked very openly that we believe that the [indiscernible] will get a lot of demand with the plans that we have for it.

So we are not afraid of that we will not continue to grow on the court side. And you see the innovation stream we have on -- if it's silhouettes with the Mary Jane or Ballerinas or materials. I think we have a setup right now with a great team, both in the markets, especially here in Herzo and in L.A., but also in the factories that can turn very quickly around depending on what is selling. So we feel we are in good shape, at least compared to competitors. I think in the running lifestyle area, we are dependent on 2 things. We have not been leading there because other brands have done an earlier and better, what should I say, job than us. And of course, our success in court has, of course, hindered us a little bit in getting the same momentum in running lifestyle. But we have tried now with everything that comes in retro. And then now we have 3 beautiful things.

We have the EVO SL that also goes on the street, which is a huge money bringer, not only for us, but also for the trade, and we're building around that. So it's a whole group of shoes. We have the introduction of Hyperboost, which again is the most comfortable foam, which we will develop into many, what should I say, models. And because comfort is so important, we feel very, very, what should I say, sure that we're on to something at least from the mid- to the high price that will be successful. And then we do hope, to be very honest with you, that the success we're having in high-end running, and you don't see it only that we're winning marathons, but the usage of adidas shoes in races, if it is the Boston Marathon or Long Marathon has in the last 3 years, almost tripled, I think.

And of course, there is a hope that, that consumer and that look is also then going more on the street. So there's many elements right now that makes us feel optimistic. And of course, the 30% growth in running is also coming from that these things are happening. So again, we feel that we're doing, or our people are doing a lot of good stuff in a market that right now, I think, is peaking on volatility, to be honest. And then as always in life, sometimes there is some good news and then everybody can breathe a little bit. I don't remember that we had supply issues in Vietnam, I think just after COVID, there was a supply issue.

So everybody had too little newness and then suddenly no one discounted and we all made money. And I do think when I look at least at our purchasing, we have reacted to it. When I hear the factories, I think orders are down with most brands. So it looks to me that there is a discipline on the way that would help a little bit. But again, I don't have a crystal ball because then I would probably sell and buy shares, right, like you do.

The next question comes from the line of Jurgen Kolb from Kepler Cheuvreux.

And obviously, big congrats to the performance in running. The S2 was a major breakthrough and obviously widely covered very strong performance. Two question areas, really, first one on the whole cost situation. Maybe you could talk about the individual cost lines, the whole cocktail of being it raw material prices, transport costs, tariffs, obviously, what do you see in terms of coming towards you for maybe the second half or then even 2027?

Do you see maybe the first issues on lack of availability of raw materials on the producer side? And secondly, recently, you obviously added soccer teams, you expanded in Formula 1, added additional U.S. universities, the new partnership with the [indiscernible] now. Where do you see additional white spots, Bjorn, for adidas? You touched on it a little bit, basketball, obviously, both in the U.S., but apparently also outside of the U.S. But maybe additional thoughts on where you think you need to bring adidas even more to the forefront in performance.

Well, on the cost side, it's a little bit looking into that crystal ball again. There is no doubt that the current oil price and the issues there are driving discussion about price on materials, components and also on transportation. We haven't seen any increase on product prices yet because you have to remember, we negotiate this way upfront and the material sourcing of the factories are also happening on a longer base than the end product.

And then everybody is, of course, hoping that the oil comes down to a different level. So there is no certainty on this. The only certainty we have is that there are certain off charters on transportation, especially, of course, on sea for us. Air, you can almost forget because you wouldn't fly things now and you have. You remember that most air transport was going through Middle East. So it's not really that easy anymore to move air at all. We have for the Middle East region, where we have 10 markets that are affected by the war, of course, problem also with deliveries, I mean, to deliver product in.

And then, of course, we also have issues in the marketplaces with depending on how the activities are that stores are closed and of course, also that consumers are not actually walking in the streets and shopping. So there is a negativity in that area that is double, a, from a transportation point of view; and b, from a real business point of view. And again, we, of course, all hope that the change in the world power or improvement in the world power will cause these conflicts to end.

So I'm not sure. I assume that when we talk to you the next 4, 8 weeks, we will have more the different possible variances when it gets to cost prices because I think we will start then to price products in a buying price based on what happens if the oil price is $200 and what happens if it's $100 and then start to build a fair relationship with our suppliers because that is, of course, what we have to do. We were together with all our factories in Vietnam 2 weeks ago.

And of course, this was a topic. And as always, I think the strategy for both them and us is then to find common solutions that are transparent like we did with the tariffs. And -- but we're not at the stage yet where this is specific. And in the product that have hit our warehouse until now, there is no increases except for certain upcharges on transportation because of contracts where there is a possibility to raise oil charges. That's the only thing. White spots, I think in general, I would have liked to connect more to the male consumer in lifestyle footwear, especially in the U.S. I think we have connected with her, I think, all over the world in a very good way, lifestyle wise.

I think we're connecting to her now both in footwear and apparel, and there's almost no blind spots, I think, from a geography. I think in the U.S., it's obvious that that's where we have most blind spots and the blind spots are bigger on the male side than on the female side. And I think that's back again that we have not qualified over time to be in the American sports. So there is a natural move for the kid and the family to go to our brand. It's much easier for them to go to more American brand, and I think you know who I'm talking about. And of course, that will take time. When it gets to sports, our clear, clear challenge has been to improve our running.

You know this. We talked about it 3 years ago, and we admitted that we had a long way to go. I think we have been successful in what is visible, but it's obvious that from a distribution and connecting to the running community and building our business into not only the top end, but also to the everyday runner and into the comfort runner, there's still plenty of room to grow, and it's also a growing market. So of course, it has focus for many, but I don't think we need to hide for competition.

And then the comfort area also into maybe boring area like walking is an area that we dare to talk about because we see a huge demand and that will also continue. I think that's how we have to leave it. And then there is so many areas, if it's in teamwear for teams in all kinds of sports, if it's in specialty sports, if it's distribution in some markets in golf, I mean, the list of opportunities that we have is much longer than the growth that we are trying to achieve. So there's a lot of white spot still. But currently, it is to focus on what we currently focus on and then adjust that as we go. [indiscernible] license gear.

Big sales generator.

I know.

The next question comes from Josh Ly from Rothschild & Co Redburn.

Just one question for Harm really. I was really struck by the very tight control of overhead, particularly in the context of how strong your DTC growth was and presumably the incremental costs that come from servicing online growth. Can you help us understand how far you are along this journey of being able to leverage your overhead and how much there is more to go for in terms of jaws between cost and sales growth in 2027 and 2028, please?

Josh, good question. I mean, first and foremost, we always said that we will not be declining in absolute numbers on the cost side. We always talked about leverage, right? And that's why I said there's an annualization of retail stores. Of course, we are moving more volume, so there are supply chain costs. But we also always said we have an infrastructure in place that was built for a EUR 30 billion business.

So yes, we add a warehouse here and there. But we also believe from an organizational point of view, we have what it needs. And now with an operating model that is more local, it's more like empowering the teams to make the right decisions and avoiding to aligning and being in circles, right? And that's why I believe we also did some changes in a very quiet way also in the headquarter in the last couple of years, and we see the benefits of that now how we control the cost.

So you should continue to see in '27 and '28 that in absolute terms, we are growing, but we want to see more leverage. And the main reason for that is that we have the infrastructure from an organizational point of view, also from a from a digital infrastructure to leverage that, we see high single-digit growth, and that's what you should expect. It will not be linear every quarter the same because it depends on the shape of the business. But we are very confident that also the '27, '28, we will be able to leverage our operating overhead line.

The next question comes from the line of [indiscernible] from BNP Paribas.

I'm going to ask a short-term question, please. Given that the Middle East conflict started midway through the quarter, it would be very helpful if you could comment on the quarter exit rate or what you've seen in April, please? And the second one is that in those trade partners where your competitors are selling in aggressively using discounts, what are you actively able to do to maintain shelf space and market share?

Well, I do think that if many people are aggressively making deals that, of course, you cannot protect shelf space. So that is the trade-off that you're having. But I do think as far as we can grow like we are currently doing with the gross margin, then there's an argument not to jump on that boat, right? So that's the argument. And hopefully -- and I assume this will happen. I don't think people will continue to do this because I don't think it helps neither the retailers doing it, to be honest, nor the brands.

And we've all been in situation here or in other brands where we had that choice either in the marketplace or maybe even globally. And you know that it is a difficult decision. So it's obvious that in certain areas, we would have lost shelf space. But the good thing is that then we have catched that sale ourselves in D2C by having more consumer than buying our brand at full price or with a less discount than neither digital or brick-and-mortar. So, so far, the brand heat and the offer has kind of balanced it. But there, of course, is no guarantee for that, to be honest.

When it gets to the Middle East, it's, of course, difficult to do anything linear, but I think we could say we have lost around EUR 30 million in sales in the quarter, up and down. And of course, that's mainly in the last month. So if you take that as an indicator of how it could be, you could lose EUR 100 million in sales in next quarter if there's no change. And of course, you're losing then the full margin on that and the cost of doing business is expensive. So there is some pressure, although not huge, huge, huge, but it could easily be EUR 50 million, EUR 60 million loss or profit in next quarter should we not get out of this. But again, don't take that number and put it into the spreadsheet because it's not -- there's not any proof that this is a number, but that could happen, right?

Because it's kind of obvious if you had sales there last year and no sales in the store this year, then that's a loss. And it's also needless to tell that when the government telling you to not run the stores or your management says it's not safe, then we will close it. And it's also obvious that it's more expensive now to get products into the region. So there are negativities, but in the big scheme of thing, the emerging markets group are then focusing first on the safety of our people, which is important. And then secondly, then to get growth and profitability out of those regions that are not affected. So there's always ways of counter negative things.

But this one was, of course, not planned. And of course, we are mainly concerned every morning that everybody is well, and we will continue to do that, which is more important.

I'll probably add a little bit to that, Warwick. First of all, we need to summarize what Bjorn talked about is, of course, the gross impact when you talk about the Middle East, but the Middle East is part of the overall emerging markets. And of course, there's other opportunities outside of the Middle East. And then just for -- whether you put in a spreadsheet or not and don't do it, just as a percentage of the total business, we are talking in the low single digit when it comes to the Middle East, right? So as sad as it is and as much as we hope that it comes to an end very quickly to normalize our business, the low single digit of our total business. And again, the emerging market is not just the Middle East. There are more opportunities outside of the Middle East.

The next question comes from the line of Robert Karkonski from UBS.

Two questions from me, please. So first one will be on EBIT margin. You reiterated your target of around 10% by 2027, which implies significant gross margin expansion. When we think about this gross margin ambition and then paying this target and applying similar framework that you did in Q1, so underlying gross margin expansion, do you assume to see it, so excluding any FX hedge benefits that you're assuming in 2027? And the second question would be just a follow-up on the current trends.

We talked about the Middle East, but what do you see in other regions, Europe, North America, LatAm and in your DTC, but also in the wholesale, like I appreciate that probably your momentum is so strong that some of the wholesalers might plan to put some reorders, I guess, getting closer to Q2? Or do you see maybe some level of cautiousness from them given the volatility in the market?

I think when it gets to the wholesalers, it's very different from region to region and also different from the different categories. So of course, we hope for reorders on things that are selling well. But as I said to you, in a market that is uncertain because of the general economy and oil prices, it is, of course, also important for us to be, I would say, conservative in the way we plan that. And as I said, as long as the D2C demand is so high, we are not pressuring any retail partners to take more that they want to take.

And I think, again, that any retail partner now in their buys are trying to shorten their open to buy to clean their inventory and then do a new start at the point in time depending on where they're sitting. And it's also obvious that the issue with discounting and what should I say, not great sell-throughs for many retailers is mostly in Europe and in America. I think any other market that we look upon are much more optimistic for different reasons. So I think we will leave it with that. The beauty of having a wholesale business, brick-and-mortar retail and e-com is, of course, that if you have something good, then you can market it, there are 3 ways of actually selling it.

And I do think as much as I would like to take more share with many retail partners, of course, it's just sometimes it doesn't make sense to push for it because starting to discount is almost like a drug because if you start with it, how do you get out of it. And again, we are not market leader in all categories. And of course, we need to follow what is then happening in certain markets. So I think that's the only answer I can give you. I don't know if you want to talk about the EBIT.

Yes. On the EBIT, of course, it's not such a steep increase from '26 to '27. But rest assured, we are fully on plan to hit the 10% EBIT in '27. And we're not going to count just on what we're hedging in the U.S. dollar whatsoever because we don't know what's happening with the oil price, as Bjorn said. So the margin is not the main driver. we have a non-World Cup event next year. And of course, as I said earlier, we will spend significantly more in the second quarter than we did in the first quarter. That's why we don't need to repeat next year.

And as I said to Jeff as well, we keep leveraging the operating overhead infrastructure that we have. So what you should expect in '27 over '26, of course, the solid top line that we can leverage the marketing line without the World Cup and more growth, we're leveraging operating overheads again. And then hopefully, we have a less promotional environment also on the lifestyle footwear, as Bjorn talked about, as other competitors have ordered apparently less. So let's see how we're getting into '27, but we are definitely not relying on on the currencies because they come and go as you learned in the last 15 months, and we need to have a sustainable business regardless of currencies. Of course, as you know, the dollar will help going into next year. We are well hedged, and we will use it in the right way.

Next question comes from the line of Monique Pollard from Citi.

Just a couple for me, if I can. The first one was just if you could give us an update potentially Bjorn, on how you're doing in the North American running specialty stores. I know this was a key area of focus and just given how strong that running business has been doing and the halo effect, I'm sure you'll get from the sub to our London Marathon Times, how that's progressing. And the second question was just on product pricing, probably more one for second half this year into 2027 for you, Harm. Just given that 99% of your polyester is actually recycled, what I was trying to understand is, does the pricing for the recycled polyester move one for one with the virgin and move with the oil prices or not so much?

I started answering you without a microphone. So I said something brilliant. I hope I repeat it. The question about running specialty in U.S. is a good one because we were basically gone. I think 3 years ago, we were measuring a market share below 1%. And of course, to build that business back again is not only depend on the product, but it's to get back in the running community, having people on the road and all that. So we have a huge job to do still, but all the fundamentals are now in place. We have top shoes, and you're absolutely right.

Of course, the demand for having us in the store with our best product is now fueled by the success. And that started already, I would say, 2 years ago with the success of the Auto models, but now it's being fueled even more. I think what we were missing was an offer in the comfort running that was competitive with some of our other competitors. Now we have it. So I can assure you that the interest from running specialty is at a complete different level. But if you go into many areas of the U.S. and you see stores, the visibility is not close to what it should be. So a huge potential and accept that we have not done a great job for a long period of time, but also accept that it takes time to build back the trust and, of course, the relationship, and I have the full what should I say trust also that the local teams are doing that.

Your second question on pricing, I mean, yes, we try to use 100% recycled polyester. And we even in the future, are trying to use polyester coming from polyester, meaning textile for textile, which is the new way of recycling, not from bottles and other plastic product. And I think it's fair to say that when oil prices and I would say, new polyester is going up in price, the market coincidentally for recycling goes up the same amount. You know how the mechanics work. So we don't think there will be any price, what should I say, advantage on recycled compared to virgin. It could even be the opposite, to be honest with you, because that's how sellers work.

So I think that's the answer to it. I think we all hope, and I think we all know that the world needs that oil prices comes down, right? Because I think that is now fueling even more conflicts and frustration around the world. So let's hope that the smartest people on the planet gets together and find solution to the conflicts because then we will not have this issue. And I think also the good thing is that because people believe that there are solutions, the price increases that you would maybe have seen 5, 6 years ago immediately also on components and materials are now currently more on a -- this could happen if A, B, C, D and there is more hypothetical different scenarios. But again, we are running very, very close to time lines where prices will actually start to get into the product. So I think that's all I can say.

The next question is from Andreas Riemann from ODDO BHF.

Two questions, one for Harm on the free cash flow. Actually, you didn't mention it in the presentation, but it looks like free cash flow was up. Maybe you can shed more light on the free cash flow in Q1. And what would be your free cash flow guidance roughly for full year '26, assuming EBIT of EUR 2.3 billion and assuming inventory improvement? And the second one on your top line guidance actually for full year '26. So we saw 14% growth in Q1. Was it actually in line with your own plan and you expect mid-single-digit growth in H2? Or was Q1 above and you now want to keep this buffer for the remainder of the year? These would be my 2 questions.

There is no buffers in our industry. I think the 14% to be very honest with you, is above what we planned initially. But then I also told you that we did take product into the markets early. So there was, of course, a possibility to deliver if there was demand. But we haven't pulled everything -- anything forward to make it look better than it is. The growth that has been in addition has not been on the wholesale business. It's been on D2C, right? So if you have product in the store and it's being bought, then planning retail is difficult. And I can assure you that we didn't plan the like-for-like as high as it is. So that is, of course, again, an assurance that we're doing something right, and that is above what we expected. I would say the wholesale business, I think we told you a while ago that in the middle of last summer when there was a lot of uncertainty, the order book for the beginning of this year was low. But that order book actually built into a decent level. And I think the 8% you saw in wholesale was pretty much where we expected to land. So the upside has been on D2C, both in brick-and-mortar and especially on e-comm. I think that would be the best answer. And then harm, cash flow is your area.

Yes, Andreas, good question. And yes, indeed, we have been slightly down in the first quarter when it comes to the free cash flow, and it's improving quarter-by-quarter, but it's a story of 2 halves, definitely much, much better in the second half as we had to and was the right thing to invest into our working capital that will flip for the second half. And then for the full year, you should assume that we convert our net income that we're generating EUR 1.3 billion profit guidance by a factor of 1. So I would say around EUR 1.5 billion is probably a good number, whether it's EUR 100 million more, EUR 100 million less, we don't know. But assume that we are converting roughly the net income that we're generating for the full year.

Today's last question is from Nick Anderson from Berenberg.

Just one question from me then, please. It's just a question on the store closures. Assuming my data is correct, it looks like there was net store closures for the first time in about 3 years. And I just wonder what was driving that, what the outlook is and how that squares with the DC opportunity you've been talking about on the call.

I think we had a bad sound on the store closings over the last 12 months is positive, meaning that we opened about 65 to 70 more stores than we closed. And the number from...

My question is on the sequential closure. So Q-on-Q, it was the first net closure in stores in 3 years. I just wonder if we should read much into that.

No, no, nothing. nothing. Nothing. To be very honest with you, right now, we haven't opened as many stores because what we have done is that we have renovated a lot of stores.

But the opening plans -- and again, we're trying to open bigger stores that we closed. So the addition is actually bigger than the number. But I think in the last 12 months, we opened around the last 12 months, 65, and that is negative just in the first quarter as that's just coincidence. There's nothing to read into it.

No, Bjorn is absolutely right. And there's one anomaly from quarter-to-quarter Q1 '26 to Q1 '25 because we started to have some temporary factory outlet clearance stores in the U.S. that we needed because of too much inventory, but we started to close them already last year. That's probably what you have seen in Q1. But don't read anything into it. We will keep expanding our store fleet, both on concept stores and also on factory outlets.

Thank you very much, Bjorn. Thanks very much, Harm. Ladies and gentlemen, thanks very much for joining our Q1 call today. This concludes the call. As always, if you have any questions today, tomorrow or over the next couple of weeks, please feel free to reach out to Adrian, Philip, Kara, myself or anyone else from the IR team. We will also be on the road. So hopefully, going to see you there. And again, before we go, I want to remind you, enjoy watching the documentary on the S2 journey. It's definitely worth it. And with that, thanks very much again. Have a lovely day. Talk to you soon. Bye-bye.

Ladies and gentlemen, welcome to the adidas AG Full Year 2025 Conference Call and Live Webcast. I am Maura, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sebastian Steffen, Senior Vice President, Investor Relations, Corporate Communications and Corporate Strategy. Please go ahead.

We just realize it's a long title. Thanks very much, Maura. Good evening, good afternoon, good morning, everyone, wherever you're joining us today, and welcome to our full year 2025 conference call. Our presenters today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. I know that there's a lot to talk about today, and we will kick it off in a second with Bjorn and Harm, who will provide the details for 2025. They will be sharing with you our operational and financial highlights for last year, present our outlook for 2026 and of course, also talk about our outlook for '27 and '28. [Operator Instructions] And now before I hand over to Bjorn, we will, of course, kick it off with a video.

[Presentation]

Yes. Hello also from my side. I'm sure you have spent some time looking at our numbers already. But I think in the interest of all of us, I'll take you through the story that I think we have achieved in '25, and then we will talk '26 and even a little bit further as we go ahead. As a sports romantic, I have to remind you again that in a very complicated world with many negative things, there are also great sports events. And I do think that the Winter Olympics in Italy was one of them. And we felt that our athletes and our teams did very well. And don't forget that I'm a Norwegian, so I have to remind you all the time who's on the top. And I also tell you that I'm extremely proud of being Norwegian when it gets to sport.

I also remind you that the Paralympics is starting in 2 days, which is also a very important sports event, and I hope all of you have a chance also to support that. Which then links into our plan, you remember that '25 is the third year that we work together. We promised you that we would be a good company in '25. And to be very honest with you, when I look back, I think actually '25 was a fantastic year for us, not only in the numbers that we will get to, but more with what the brand achieved for visibility, performance, product and actually showing that we are a good company. And I think this is what adidas has always been when you look from the outside in and you look what people are looking at, adidas has been and is a very, very good company to work for. And I think you see that when we achieve a lot of prizes from the outside and not prizes that you can buy, but actually prizes where people look at you in competition with other companies.

And I can also say that at my age, looking at all the young people who wants to work for us, it's obvious that we currently are an attractive company to actually be associated with. And it is also important for us that although there is a focus on, of course, the numbers and there is a focus on many things, we also want to be -- continue to be a good citizen. And we look at that for what we do for the planet environment and also, of course, how we work on the human rights side. And you've probably seen from the targets that we are achieving them, we will continue to do things as a good citizen that will make the planet and the world a better place because I do think that's still important in a, as I said, pretty complicated world.

It's also important to look at that we actually have 64,000 employees that works for us directly. And if you then take into account suppliers and everything, you talk about more than 1 million people. So of course, we have a great responsibility as a company. And when you know that we have 180 nationalities employed, then you also know the task with different culture and different backgrounds, we have a huge responsibility. I'm also proud of knowing that we now have 52% of our workforce being female to 48% male. And not because it's a target, but actually it showcases the evolution of this business. And again, I think I can say that the female consumer is now more important than the male consumer, and it's good to see that the company is also moving in that direction.

And although in some parts of the world, gender equality is not something to be measured and talked about, we actually do and it's nice to see that 41% of our leadership are now women. And we do believe that in the next years, that will increase. And if it's 50% or 48% or 52%, it doesn't really matter, but we should be a company that has gender balance, not necessarily because we have to, but actually because it makes sense to be a good company making the right products and concepts for our consumer.

If you then go into what you are interested in the numbers, again, I'm probably just repeating what you already know, but Q4 was also better than we had expected. And as you can see, we grew 11% currency neutral for the adidas brand in Q4. And remember that we're also comparing against the year before when we had YEEZY and there's a 1 percentage difference in those numbers. Especially proud is, of course, that we had more than 50 -- almost 51% gross margin in Q4, which is normally a quarter where you lose margin. And that showcases again that the quality of our sales was very high in a pretty, I would say, discounted and volatile market. That gave us a profit of the EUR 164 million. That is almost up 3x what we had last year.

Remember that Q4 is always from a profitability in our industry, especially for us, but also for other company, almost a breakeven quarter. And again, that's why we are very happy with that result. That gave us a 13% growth when you look to the adidas brand, the 3% difference to the 10% is, of course, the old YEEZY, and that's a sale of almost EUR 25 billion and gross margin approaching 52%, which I think is all-time high without YEEZY. And then a profitability on an EBIT level of EUR 2.056 billion, which is up 54%. And to be honest with you, higher than what we would have expected both 1, 2 and 3 years ago.

When you look at where the growth is coming from, the left side is Q4 and the right side is the full year. And you see that even in North America, we grew 10%. And yes, I think we've said it many times, our focus going forward is, of course, to improve our business in the U.S. We are not by far where we should be, and that's not necessarily due to the American team, but more us as a company, and we will talk more about that as we move ahead. Europe, after 2 fantastic years with growth, another one at 10%. Of course, Europe, we have much higher market share, and we are market leader in many markets.

So the growth here going forward will probably not be at the level that in other regions, but a very, very strong performance. And again, it should be like that since we have our headquarters sitting in the middle of Europe.

Greater China, another year, up 13%, very happy with the development of the business and the team. And I think you'll also start to see a lot of influence actually of the Chinese organization in other parts of the world, and we will get back to that when we talk about the product.

Japan and South Korea, the same, growing at 14%. We used to be market leader in those markets, and we are gaining share. Same thing here, very, very happy with the development.

LatAm has been on fire for the last 3 years. We are a market leader in the region and in most other countries and again, growing at 22%.

Emerging markets, which again are in a very, very tough situation. Remember that they are responsible, I think, for 72 different countries. And right now sitting in Dubai as an organization and looking into the terrible conflict that we have in the area. Happy to report that no one is injured, but of course, they're having a terrible situation, many of them sitting in shelters. And we also had one franchise stores actually being hit by a rocket and destroyed. So again, I am very proud of the team and also, of course, maybe not so important now, but the performance in '25 being up 17%, very impressive.

That gives us then an 11% growth in Q4 for the brand and then 13% for the full year. We talked about the channels every time we speak. You see here a very balanced, what should I say, growth in wholesale on retail, which is brick-and-mortar and e-com. I'm happy to report that we comped in our full price stores and in our factory outlets. And we added around 90 net stores during the year. I think we opened 247 new ones, and we closed 158. So growth both on the like-for-like, which is important, but also expanding into better stores.

And you see the e-com, very, very good development. And again, our global e-com team working very well with the markets, we are slowly becoming a very good e-com operator again, which I think adidas used to be. That gives us the famous 60% wholesale and 40% D2C. I think we told you about that already 3 years ago. And on retail, meaning brick-and-mortar at 23% and e-com at 17%. There's not a goal in itself to be 60-40, but that's actually mathematically what happens with the geographical mix we have. And as I said before, there are markets that will be more e-com because that's the distribution. There will be markets that will have more D2C. And again, depending on the growth rate we have in the different parts of the world, this -- what should I say ratio might change, but we actually do believe that 60-40 is very healthy currently.

Same thing here. You know because we repeat it again and again that our markets should adopt retail concepts that fits into their market, both from a cultural and architectural point of view. And you see here stores around the world where the storefronts are not the same because we don't want to have all the stores look the same. We want to look great in the market. And that's also what we feel the teams are doing.

And the same thing goes actually, believe it or not, for e-com. The pipes are global, meaning that the buildup of the sites are the same. They have access to all the same content, but it probably makes sense as you see here that we're using different celebrities or different culture relevant persons to market the same things in the different markets. And the local teams again adopt them to optimize the performance of the sites in the different markets. So exactly the same logic in the digital world as we do in the physical world.

When it gets to the divisions, we have said in the 3 years that we need growth and lead in footwear. You can see here, again, growing 12%. But we also said that there is a time when apparel needs to get into the lead because the visibility of the brand and the chances to actually build brand heat and apparel has been around the corner. And you have seen an accelerated growth in apparel during the year. I'm very happy then to showcase that we actually grew apparel during the full year at 15%.

Accessories building the growth. Remember, we told you that we had some issues in sourcing for the U.S. market, meaning that we were negative in the last quarter. The U.S. business is now flattish. So we have sorted out some of the problems. And then globally, especially accessories that are linked to soccer World Cup, especially balls, are highly, highly up. And you should expect this number to continue to actually be positive during the quarters of '26. That gives us the 58% footwear, 35% apparel and 7% accessories. Again, a very healthy growth where, then, what should I say, most of the business then being in footwear. But you should expect that apparel growth rate could be actually higher than footwear for a period, and that is probably also what will be best for our P&L, at least short term.

Our performance business now growing at 15%. So mathematically, you will then understand that performance grows quicker than lifestyle, which again is positive. And sometimes lifestyle will grow quicker and sometimes performance. But in the long run, it is, of course, important that we establish a very solid performance business in all categories being both the global ones and the local ones. Important here, football, our DNA, growing at 12%. I think it's fair to say that wherever you research, you will probably agree that we now are the market leader again in football. Running coming, of course, from a lower base, but accelerating the growth. I think the Q4 quarter had a growth of 36%. So that means 29% for the full year.

Training becoming a real growth vehicle again at 13% Basketball, negative through the first 3 quarters, but then positive in Q4. So now that is also growing. Outdoor, a little bit better than flattish. Golf, slightly down. And I think that's following the market. Specialist sports, which also are there for sports marketing visibility growing at 12% and the U.S. sports then being up 9% following the growth in the U.S. market. A very solid, I would say, pattern for our performance business. We told you, I think, since a year that the 4 categories we need to win in globally is football. It's our DNA. Running because it's the biggest category. Training because it's important because globally, every, what should I say, consumer trains, it might be a different way of doing it, but very important for us. And then basketball, of course, because of the cultural relevance in the U.S., but also globally.

I hope and think you agree that our football business did extremely well in '25, not only from the 12% growth, but also from the visibility and the way we looked and of course, also the way our teams and players, what should I say, performed. I am very proud to say that adidas is back again as a leader in where adidas was probably the pioneer in the industry. Running for 3 years, we've said it has a priority. We spent a lot of time establishing credibility again, signing athletes, developing the best performance shoes that exist. We are winning a lot of races because we have the best athletes and the best shoes. Extremely proud of what we did in the majors. You know there are 6 majors, so you can win 12 times in the 2 genders. We won more than half of them. And not only did we win, we were on the podium, I think, in all of the majors.

And it wasn't only in '25. It started now also in '26. The first marathon was now in Tokyo and our male runners were 1 and 3 with Tadese and Alex. And in women, we were 2 and 3. So we took 4 out of 6 podium places, again, showcasing that our product is really, really, really good. In running, again, the adizero range is for those people who like to run fast, and it's been the credit builder -- credibility builder. We then said that we will take the look and bring it into a normal runner, and we did that with Evo SL, maybe the most seen running shoes in the market right now. The volume on the shoe is approaching 10 million pairs. So it's been a very successful, what should I say, launch and execution.

We have then gone further with the everyday runner with Supernova, modern version, a really, really good franchise for normal people like myself. And then where we have not been competitive is in what we call comfort running, which we will talk about later, but that's where we're launching Hyperboost in the next couple of weeks and months as the most comfortable foam that you can find in the industry.

We talked about training. As I said, there's many versions of training and people train differently in different regions. We have seen a huge development in so-called hybrid training. And therefore, we have signed a lot of athletes, and we have built special product for hybrid training. And hybrid is, of course, where you combine running cardio with strength. And it is then logic that we take a running shoe and we combine it with a strength shoe, and that's what we've done with the adizero Dropset, which has tested fantastic and has a huge order book for the next, what should I say, season. As an example of how serious we take this, we actually, what should I say, almost build a hybrid, what should I say, stadium in our brand center. And last week, we had both the world-class athletes, many world champions together with our own employees, then doing a full, what should I say, competition in our facilities. And again, it showcases how great it is to work for a sports company like ours when you can do these things, great engagement and many of our people were really exhausted, which was cool to see.

We also see a clear, what should I say, development in the training fitness area for her, where there is a blend of lifestyle, fashion and sports, and you have seen many collabs happening in the market. We do, of course, also do collabs, but I think the best collab we do is that we actually are now doing original sport where we take the Trefoil, the Three stripes and the original, what should I say, fashion direction and we do it with the functional performance fabrics. The pictures you see here as examples of it. And I don't need to tell you that the reaction from the trade actually globally has been extremely positive, and we see this as a game changer for us in the women's training area. And it might be that we will also see similar development on the men's side.

And then basketball, yes, we know that we have not been competitive compared to our biggest competitor, and there's a huge way to go. But again, the new team who has been in place for around 12 months have been a game changer. We have built a lot of new products. We have an innovation pipeline. And when you look at the players at the All-Star weekend, Anthony Edwards was named MVP. VJ Edgecombe won the Rookie MVP and Damian, although he's injured, even won the 3-point contest. So again, the visibility of adidas in AllStar was great. And I know that both on the performance shoes, the signature shoes and the lifestyle, there is a lot of good expectations in the market about our product.

Motorsport, we have 1 year behind us with the relationship with Mercedes, AMG PETRONAS, successful both the way we look, the way we produce content. And actually, the commercial side of it is more than EUR 100 million. So we achieved all what should I say, the targets we have and are very, very close to the 2 drivers and the team in developing new products for the future. You know that we added our neighbor. I mean, the Audi headquarter is 100 kilometers from here. So when they went into Formula 1, it was a natural thing that we do it together. They debut in Formula 1 next week. And again, the reaction to the range has been great and the 2 drivers, they've been here many, many times. And we will then have 2, I would call them German-rooted teams together with adidas and Three stripes in the Formula 1 circuits, and we really look forward to that, knowing that the merchandise, the fan base is increasing and it's a good, good thing for our brand, both from an image and from a commercial point of view.

And then in the, what should I say, footsteps of adidas, we are back again focusing on many, many local sports and also smaller sports, both to get credibility and visibility. And that also goes into the U.S. Yes, we have a long way to go to be a real, real, real sports brand in the U.S. And of course, we would like to have more college teams, and we would like to have more athletes and we would like to have leagues, but it takes a while. But I think it's extremely cool to see that we had both teams in the NCAA final, when Indiana beat Miami, all the players in adidas, that was a great feeling. But it wasn't only there. We also won the volleyball tournament, and we won the NCAA soccer. And again, this showcases again that our sports marketing people in U.S. now have the freedom and the resources to do what is right for the American market. And that will, of course, continue, although we all know that it will take time to get the visibility and credibility that we need to be fully competitive in that market.

This page is probably the one I'm mostly proud of because 2 years ago, people said that adidas didn't have the right product and they didn't have performance product. I would say that we are more than competitive in all sports we compete, and you will see that on this page. Our product people, our development, design and innovation people are as good as anybody else, if not better. And I'm very, very happy with the pipeline of product that is currently hitting the market and actually a little bit proud of it, which I think is in line with what Adi Dassler would have wished from us.

Same thing in apparel. It is important for us that our athletes look good, feel good and perform well. And it's the same thing there. We are innovating and investing in product development in all the sports we are in. And I would say in 99% of the, what should I say, situation, we also look good. There was a couple of things that wasn't that good, but that will always happen.

And then back to innovation. Innovation is, of course, an investment where people are allowed to try things that haven't existed before. We have quite some innovation when it gets to foam, when it gets to carbon, when it gets to how to treat it. You see it here actually with oxygen and with Colas. We are working a lot on additive or printed, and we are very, very close to actually launching performance shoes that are printed. We are working both with heating and with Climacool systems. And there are some really interesting, what should I say, technologies now coming out also in apparel when it gets to fit compression and also Climacool. So again, same thing here, a lot of very, very energetic innovators that we give the freedom also to bring people or bring product to the market.

And sometimes, like you see here, we were able to take together with Mercedes AMG product to the, what should I say, to real activities and set world record. Sibusiso running 5:59:20 in a 100k in a very, very good documented, what should I say, event, an enormous effort from, of course, the athletes, but also from our own people and from Mercedes AMG, again, showcasing something that you can see online. It's a very, very emotional project. And out of that, you will see many products that will also go commercial.

And then I mentioned comfort. I personally believe that comfort is something that we and other sports brand maybe haven't focused enough on. We do know that some brands have had tremendous success focusing on comfort. And now we are at the point where we also focus on it. On this slide, you see a lot of footwear models that has been designed and developed with comfort in mind. And the most important thing there is, of course, the new Boost foam, which is Hyperboost. You remember probably that Boost was the most comfortable foam in the industry, shoes like NMD and Ultraboost, but also the most successful YEEZY shoes all had Boost in them. Boost had one problem. It was too heavy. And that's why our innovation team had the brief since 3 years to develop Boost, but to be much lighter. And the answer is HyperBoost, 40% lighter than the old Boost and therefore, a performance foam extremely comfortable and light. And you see here some of the silhouettes that are on the way of hitting the market, both in performance, but also in lifestyle.

Adidas Performance growing at 15%, Lifestyle growing at 12%, and you see both Originals and Sportswear growing double digit. I think that you would agree that we have partners that are extremely relevant on a global scale. You see some of them here. I mean, newly signed Kendall Jenner. I mean we know about Grace and the other ones I probably don't need to present. I hope that you saw Bad Bunny at Super Bowl halftime. I think it's the first time in the history where the halftime show was dominated by one brand, not only him wearing his own shoe, the BadBo 1 but also the dances being in Three stripes. And again, very, very proud to see that halftime show, but also proud to see that the shoes blew out very quickly. And of course, there will be releases now in different colors around the world that you can actually buy.

Same with our, what should I say, a very close relationship to Pharrell. He's on development with us the Jellyfish was Shoe of the Year in the U.S. And you will see his design direction, both on the high end and the more commercial rolling out in different versions and colors. And here, you see the XLG, which is already doing very well in the U.S.

And again, lifestyle, yes, there has been a lot of talk about our Terrace, the Samba, Gazelle and Spezial. But I think you now have to widen it because all the shoes you see here from the Samba all the way down to running and actually soccer culture shoes are selling at quite some high volumes everywhere. And I think right now, it is important to extend the range globally and not forget that the Terrace product is actually continuing to be very, very strong.

I would remind you that the Stan Smith is a look that you will see more and more of at the back end of '26. And I don't think I'm wrong if I believe that you and maybe your kids would like to wear Stan Smith in '27. There are very clear indications that, that is going to be a big shoe. But of course, you're also allowed to carry any of the other shoes.

Apparel, we did talk about the need 3 years ago to innovate in apparel. 3 years ago, most of our lifestyle product, both in Originals and in Sportswear were Fleece, fleece, fleece. Now you see denim, you see satin, you see knit and you see completely new design elements. A great job from our apparel team, and I don't need to tell you that right now, many of these products are really flying off the shelf and especially online, where some of the good online players are really, really able to showcase newness and freshness all the time. So we continue to see Three stripes dominating the Sportswear side.

And again, Three stripes, maybe the most known element of any sports brand in the world. And it's fair to say that we now have a run on Three stripes, and we try also, of course, to do that in a very, very, what should I say, adidas-like way, taking care of it with not overdoing a bit, but at the same time, showing it in many innovative way. So I think with that, I've tried to tell you the story of what's going on with the brand. And then I'll hand over to Harm that Harm can actually do the details of the numbers.

Thank you, Bjorn, and ready to have break now for a couple of minutes as I go through the financial update. So good morning, good afternoon from my side as well. And as always, I want to shed some light into the P&L, the balance sheet, but also an update on the share buyback, where we are. So starting with the P&L, as always, Bjorn alluded to some of these numbers already. The most important one is the 13% currency neutral growth for the adidas brand.

I want to highlight that again, we can't say it often enough. I mean the total company grew currency neutral, including the YEEZY impact, 10% and reported 5%. So there's a 5 percentage point difference between currency neutral and reported. That is around EUR 1 billion. I'll come back to that in a second because that's an important number to remember in '25 when it comes to the operational performance versus the reported performance.

Gross profit, very solid. I give some details, to double-click on that as well. And the operating profit, as Bjorn mentioned, EUR 2.056 billion, 54% up in a very difficult market. So definitely very proud of what we have achieved. When you look at the guidance and how we started, we started March 5 last year with double digit for the adidas brand. We have always been very confident on that one. We said high single digit currency neutral on the reported, including the YEEZY impact from '24, where we had around EUR 700 million of YEEZY sales and an operating profit of EUR 1.7 billion to EUR 1.8 billion.

I know at some stage, I got criticized that we changed the guidance 4 times in '24. So we told you that we're not going to change it 4 times again, but we did once on October 21. And what we changed there is not the double digit for the adidas brand, but we still had the high single-digit net sales growth, but improved the operating profit to EUR 2 billion. And now finally, we came in, as you read this morning and actually in the pre-release already, 30% growth for the adidas brand, 10% reported currency neutral, including the YEEZY impact and an operating profit of EUR 2.056 billion.

Now I think what's important coming back to the currency impact and the YEEZY sales. You see the quarterly breakdown and the growth percentages in the first quarter, second, third and fourth, 17%, 12%, 12% and 11%, overall 13%, pretty significant. And then when you look at the quarterly breakdown, I think it's important, something you get lost into the percentages, it's important and probably even going forward even more so that we talk about absolute growth. And when you see the quarters, pretty much every quarter is growing absolutely in the amount that On is growing, which is, of course, celebrated quite a bit and rightfully so.

But this absolute amount shows you the progress that we have done. And for the full year, would have been -- or it was actually EUR 2.8 billion on operational growth for the adidas brand. And then, yes, part of the truth is that we couldn't comp the YEEZY sales from '24, which is EUR 700 million. And as I just mentioned, the 5 percentage points has a negative FX of around EUR 1 billion. That's why in the books, you only see the EUR 1.1 billion growth. But I think the most important number here is the EUR 2.8 billion that we grew operationally, credit to all the marketing and sales teams around the world.

Talking about the fourth quarter very quick. Again, great trajectory with 11% growth for the adidas brand. There, again, it's a big gap between currency neutral and reported 8 percentage points. The main reason for that is not just FX overall, but it's also hyperinflation when it comes to Argentina and Turkey. As you guys in the investor community know, when it comes to hyperinflation, we always need to use the spot rate at the last month to apply it for the full year. That's why the impact in Q4 is always a little bigger than the previous quarters. And that's why it is 8 percentage points in Q4. Bjorn mentioned already the improvement on the bottom line, so I don't need to repeat that again.

From the top line, going to gross profit, and I want to double-click on that one right away because it's more important to dissect that a little bit. So again, coming from 50.8% in '24. Now underlying, again, similar to the EUR 2.8 billion growth that we have on the top line, we also made good progress to improve our gross margin product costs, not just because the volume is growing and we are doing a good job in sourcing, but we are also the brand or meaningful brand that gives our suppliers margin because we are growing the business. Not every brand can say that nowadays. And that's why we have an improvement there. The freight costs have more than normalized. It's normal course of business in a volatile environment, of course. Business mix, Bjorn mentioned the 60-40. We still made some improvements from a D2C point of view. So that's a positive business mix and also across the categories.

And then pricing and discounting, we have remained very disciplined. It's a neutral element in that underlying driving as other brands are much more discounting and being promotional, not just in Q4 in '25. Of course, here, you have an FX again. And again, the FX is not just a U.S. dollar topic. It's definitely your other currencies as well, whether it's the Argentinian peso, Japanese yen, Korean won, it's Turkish lira. And even nowadays, it's British pound. So -- and I come back to that when it comes to '26, what that really means.

The tariffs, we talked about a lot since April. But also here, you see the gross effect and then the mitigation that we have, which is primarily in '25, the discounts that we get from our suppliers. So there's a net impact of roughly 50 basis points. And again, when we promised a healthy company in '26, we also said, ideally, we get to a 52% margin. As Bjorn said, we are probably even ahead of it if the tariffs haven't been hit us, and it would have been 50 basis points on top of the 51.6%. So we would have exceeded the 52% already and would have called out being a healthy company.

Now going into '26, what is the first indication for the gross margin driver to be transparent to all of you? We believe we have done a great job on the product cost. So we are considering that as being neutral. The same on freight, whatever is happening in the Middle East, I think we can manage it. We are on top of it. We built a lot of resilience when it comes to our supply chain and logistics. So probably more neutral effect. The same on the business mix. We always talked about the 60-40 wholesale and D2C, but also the categories as performance is now even growing faster than lifestyle. It's probably a neutral one as well.

Still opportunities on pricing and discounting. It differences by market. But overall, we still believe there are opportunities unlike other brands, and we see that as a slight positive. But then I have to talk about FX and tariffs a little bit, which is a negative, which is again, on the FX, on the transactional side, we have a positive on the euro to the U.S. dollar. It's not as positive as you all might hope for in '26. But rest assured, as we are moving into '27 and Bjorn will talk about it later on, we have significant benefits coming towards us in '27 because don't forget, just 14 months ago, the euro to the U.S. dollar was around 1.03. Then we had times of 1.20. We are very comfortably hedged going into '27, but there's already some benefits in '26.

But unfortunately, we have other currencies and very significant markets as well like Turkey, Argentina, Japan, Korea, Brazil, Mexico, but also the U.K. These are significant markets. They are all significantly above EUR 500 million in size, and they weigh on our transactional FX as well. That's what you will see later on, in the bridge. This roughly is EUR 100 million, and then there's another EUR 100 million on the FX that we get on the translation again. You will see that later on in the bridge, but very much looking forward to '27 as well when we get some of the benefits of the currencies.

Going further down the line, it's a story of investing into marketing. We always said the last 3 years, we are going to saving ourselves to profitability through saving on marketing. even as a percentage, 12.4%. That is probably close to the highest we have ever done. And you see it in the trajectory on the top line as well that we are very well invested from a marketing point of view. And what's even important, and you all want to see that tremendous leverage on the operating overheads coming from 34.2% to 31.4%, so 280 basis points or 4% down. Yes, some help with currencies. Yes, some help with onetime in '24. But overall, definitely going in the right direction. And without that, we couldn't have grown our operating profit by 54%.

Then, of course, we looked critically at Q3 when we came from operating profit to net income, but also here for the full year and with help in Q4, you see that we are translating the 54% growth in operating profit to a 67% net income growth. How did we do that? The net financial expenses went up by 10%. That is on the one hand, because we carry less cash on the balance sheet. And because of that, we have less interest income. And primarily because of Turkey, the hyperinflation weighs on financial expenses. That is the main reason why we are slightly up compared to '24, but also that is normalizing in '26. And you see that we have a good trajectory on the income taxes. We went down from 26.5% to 24.3%. We always said as we become a normal and healthy company, you will see the benefits in our tax rate as well as we become more profitable. And you should assume also in '26 that we will play around 24% to 25% of tax rate as you start updating your financial models.

So overall, very, very good net income growth of 67% and even more so on basic earnings per share of 76%. Now that's the P&L. Now moving to the balance sheet. Inventories up 70% or currency neutral 23%. I want to deep dive into that one right away. You might remember that we started '23 with a challenge in inventories with EUR 6 billion coming out of '22. In hindsight, we believe we have been too disciplined on the inventory in '23, coming down to EUR 4.5 billion. One reason was, yes, very disciplined because it was a problem. Secondly, our top line grew faster than we would have expected, and that's why we went too low. It normalized in '24, and now we have some special effects in '25. On the one hand, of course, we are preparing for further top line growth in '26, and this is the real volume growth, not just what you see reported because there's FX impacts. We have some early product purchases to secure availability for our World Cup because that's important. You all know it's not just a significant event for the brand, but also commercially significant for us.

And after some challenges with supply chain hiccups here and there for the industry, we actually managed to have some earlier inbounds at year-end. So rest assured that for the quarters to come, we will bring that further down. And you should assume that we make progress in the first half of '26. And you can take me serious at year-end '26, you will see a number that is below the EUR 5.8 billion. Now what's even more important and testament to a good inventory position, what is the goods on hand and goods in transit and what is actually current inventory. You see that the goods on hand, that is what we have in our DCs around the world is actually 72% and only 7% of the total inventory is not current season. These are things that are sitting in factory outlets. That's what we say again, we have good full price sell-through. We have current inventory and 28% is actually goods in transit. So on the ship somewhere around the world or on a train or on a truck, wherever we are around the world.

So very, very current, and it's the most current inventory we have seen for many, many years. Really quick, the rest of the balance sheet. Accounts receivables, of course, up as we are growing with our retail partners. That's normal, especially in Q4 as we have shipped in quite a bit with the growth that we had. Accounts payable are slightly down. That is, as you know, what we need to pay to our suppliers in Asia as we get the shipments going. And then the operating working capital is, of course, up as well, but that is mainly attributable to the inventories that I just explained. And also there, when we go to the deep dive, we came from not so good average working capital over net sales in '22 and '23. We went probably too low in '24 with 19.7%. I always said if you get below 20%, you're an excellent company, but we are definitely a healthy company if you're anywhere between 21% to 22%. So we are slightly up given the reasons that I explained around the inventory, but I'm pretty sure we will get that to the range of 21% to 22% in '26.

Now talking about capital expenditures as well, another piece where we have been very disciplined. So we spent less in '25 and where do we spend it? It's most importantly that we spent more than half of it in areas where the consumer will see it. It's either new retail stores. As Bjorn mentioned, there's 90 net openings. We have renovated or upgraded some retail stores around the world. We are investing into shop-in-shop. That's where the majority of the CapEx is going into where the consumer sees it. We are investing into our IT infrastructure, whether it's S/4HANA that we are rolling out around the world, but definitely also in our digital ecosystem, which will always be updated and will never be finished, and that's where the investment is going into and also there, the consumer will see it.

And on logistics, you see it's pretty small. Why? We always said we have an infrastructure that can cater towards the EUR 30 billion business. The truth is also that there will be some markets where we are by far the market leader in Latin America, some of the emerging markets where we need to invest in one or the other DC. But you see from a CapEx point of view, it's not dramatic. So we have the infrastructure that we need for the future.

Of course, the working capital, especially the inventory led to less cash than we originally had planned. It's EUR 1.6 billion at year-end. It's down from last year, but it's also important that we put that in correlation to what is our cash overall, what is our adjusted net borrowings and most importantly, what are our net leverage ratios, and that is important for our credit agencies as well. So we are very, very strong from a leverage ratio. We have an internal policy of being below 2.0x. We are still coming from above 3x to now 1.4x in '25. And that's why it's important to mention, even given the cash that we have on the balance sheet, we have a strong investment-grade rating from both S&P with A and stable outlook and also Moody's and A3 and a stable outlook because we've made a lot of progress in the last couple of years and is being recognized by them with the efforts that we have done.

Because we have a strong balance sheet, we also propose an increase of 40% of the dividend. So going from EUR 2 per share to EUR 2.80. We believe that's the right amount. The shares outstanding, of course, is the number that was at year-end that is changing as we do the share buyback, but that would amount without the share buyback to EUR 500 million dividend. It's a payout ratio of 36%. We believe that's around right amount, absolute and also ratio considering our share buyback of up to EUR 1 billion in '26. And you know that we had a first tranche that is finishing latest by March 18 of EUR 500 million. You see here as of yesterday evening, we have already bought back the amount of EUR 400 million or 2.6 million shares. So definitely, the banks have accelerated in the last couple of days. but also well progressed, and you will see the benefit of that in the future.

So overall, when you see the return to shareholders, which, of course, all of you are interested in, we had EUR 357 million in the year '24 only through dividends. And you see now the combination of dividend and the share buyback in '26 will return EUR 1.5 billion, around EUR 1.5 billion to shareholders, and we believe that's pretty significant. And we also believe we can only do that if you carry a strong balance sheet and if you're a healthy company, which we believe we are, and you will see further on that we will strengthen that one with our midterm plan. With that, I'm happy to hand over to Bjorn again.

Thanks, Harm. And then you probably remember our road map that we started talking about 4 years ago that said '25, we should be a good company. And then in '26, we wanted to define ourselves to be a healthy company. And I think we have now added successful because with the numbers we're showing you and the evolution we've had over the 4 years, we think adidas is then healthy and successful.

I want to again, although I do it many, many, many times, again, repeat the way we look at our business model. And I hope you agree that it all has to start with the consumer and the athlete because that's in the end, our customer. And the closer you are to the consumer or the athlete, the better decisions will you do. And that's why we believe in a world that is getting more and more complicated and more and more diversified, we need to be closer to the consumer. And that means that the markets will have to take more responsibility in the decisions whatever we define a market to be, it can be a country or it can be a region. But important is that we define where we want to go to make what decisions. And that's not sitting in a central office and believing that we know what's happening all over the world. And this is important because if you want to be EUR 25 billion, EUR 30 billion, EUR 35 billion, EUR 40 billion, you need to make good decisions when it gets to what kind of product are you bringing, developing and sourcing where and not try to believe that you can do the same all over the world.

So global will always exist and headquarter will stay here in Herzo and we will, of course, develop systems, processes and frames and also innovation and even run some of the categories very stringent, but we will be more and more local in the way we actually make decisions because there is no alternative at this size. And that means, again, that we will make decisions as close as we can to the consumer, and we need very, very good people, not only in headquarter, but also in the local market. And I am extremely proud to see the energy we have now all over the world and the positivity our management in the market show how they think they can reach growth in the future.

And when you then look at it, living this kind of world means that not everything looks the same. There are stores that look different. There are products that are hot in one market and not exist in others. And this is the way the world currently is. And I know there are different opinion about this, but I think we all agree here that there is no alternative. And it could look like when we do a Superstar campaign, and don't forget Superstar is not only a shoe, Superstar is also an apparel word and it is an expression of a consumer, then the frame of the campaign will look the same, but how we execute it, where we execute it can actually be then different from market to market, and you see some examples of it here.

It is also true that creativity doesn't only happen in Herzo, in our headquarter, but it happens all over the world. And I assume if you are on social media, you see in the tank jacket. And this China design that was meant to be for the Chinese New Year went viral all over the world, and now we have a demand in every market around the globe. And that showcases again the creativity power that we have and that we can exploit when we have the right attitude and the right systems. It is also true that there are local developments and local fashion shows and local relevance that we do only for the market like you see here. And that's not only in China, it is, of course, also in other markets. It is also true that to be a sports brand, we need to make sure we are in the sports that are relevant. And I don't need to tell you that part of the problem we had in the U.S. of not being what we should be is, of course, that we haven't been visible in American sports the way we should for many, many years.

And again, I can assure you that we are doing everything we can to build that over time. But of course, we also have to admit that it takes time. You can't sign the biggest colleges or sign any leagues or the biggest players unless they are free or unless you identify them early. But our sports marketing teams, both globally and especially now in the U.S. are, of course, very, very active, making sure that we can build a base that we can grow from.

But it's not only in the U.S. This is a topic we have talked about many times, the cricket in India or the Rugby in New Zealand or even rugby in France. I mean, the cultural relevance of that is very important. It could also be netball for the women in Australia or winter sport for that sake in my country in Norway. We want to be like Adi Dassler made it the sports brand that are in the relevant sports, both commercially and non-commercially, so we can have the ambition of being the #1 sports brand in all the markets. We do know that we will not be the #1 in all markets. We should have the ambition, except for in the U.S., where I think the distance to Nike is so big that we should first have a target of actually doubling our business.

All other responsible people in the market should have the ambition of being #1. That doesn't mean we will be it, but it means that they have to identify what they would need to theoretically be #1. And then it is a priority for global then in what markets we have the resources to do it and where the priorities sit. And again, there is no doubt that from the global point of view, it is mostly important now that we keep the leadership where we have it, that we ambition in all markets. And then in addition to that, specifically target the American consumer from America.

And again, for the people that are afraid that we will lose the control of the brand, you shouldn't be, because an adidas employee sitting in China or sitting in India or sitting in America is absolutely as much worth and should be as knowledgeable as a Norwegian sitting here in Germany. And then we have to, and unfortunately, we see it again, we are in a very, very fast-changing environment. And you have seen all these headlines, there are jobs being cut in Germany. There are conflicts that are terrible. And that, of course, means again that we need an extremely agile organization with people that are, a, allowed to make decisions and have the attitude of making decisions.

And again, being a global brand with a local mindset is easy to say, but it also has to do with the people and the culture. And I hope you agree that over the last 3 years, we have created brand heat and credibility in all our divisions, and we have connected much better with our consumer. We have taken leadership in many markets and in many categories. But of course, we are not where we think we should be at the end. We still have many things to improve. But if you look at the sales increases of the adidas brand, you see that we have grown now twice 13%. And if you really look at the real growth of the adidas brand, it's even much higher. The brand growth of adidas was EUR 5.5 billion because then you have to remember that we lost EUR 1.3 billion of the YEEZY business and we had an FX impact on our top line of almost EUR 2 billion. And that, of course, then reduces this growth to be then only EUR 2.3 billion when the original growth was actually EUR 5.5 billion. I think it's important that you don't forget that.

And it is the same on the profit side. We went from EUR 268 million up to EUR 2.056 billion, so more than EUR 2 billion in profit. But again, if you look at the adidas brand's operating profit growth, it's even EUR 2.3 billion on top of the EUR 669 million. The YEEZY business we lost, contributed to EUR 700 million. The FX impact on the bottom line was EUR 300 million. And then the tariffs that hit us in '25 were also EUR 100 million, and that gives you then the reduction in the profit from what we really created. And I think you need to give us some credibility for this because it's reality and it's not really in our control.

So again, I'm not saying that everything we do is great, but I'm saying we work for a fantastic company and a fantastic brand, and we have moved in the right direction, and we are very, very aware of what our challenges are. We believe in an operating model that empower more the markets. And of course, that has many, many, what should I say, tasks that we need to solve, but we think it's the only way.

If you then look at '26, the underlying growth for the adidas brand is actually EUR 2 billion, and that is then the high single-digit growth that we talk about. But again, sitting in Europe, the FX impact will reduce the reported one by an estimate of around EUR 800 million to EUR 900 million that we currently see. And again, this is just because we're sitting in a euro land in Germany and it's not operational. If you then look at the profit bridge, it's the same. You started with the EUR 2.056 billion, which we rounded here to EUR 2.1 billion. The underlying development that we promised you is actually EUR 650 million improvement. But then there are non-mitigated tariffs of EUR 200 million and an FX impact of around EUR 200 million that actually reduces this then by EUR 400 million.

It is a little bit strange, but if that hadn't happened, and again, these 2 things are outside of our thing, you would actually be at the 10% EBIT, which was the number we talked about 4 or 3.5 years ago. Again, not an excuse, but it is things that you have to have in our mind. When it gets to the tariffs, you could ask, so why can't you mitigate them all? Well, you cannot get the price increases through the market right now because of discounts. And it doesn't help if you put up the price on the shoe box if discount increases. And I think it's fair to say in the American market and actually also in the U.S. market, there's a lot of deals in the market from other brands that takes down the realized price. We also, in all these numbers that we talk about have not adjusted any tariffs for the changes that you see in the last 2 weeks. So the high court's or the Supreme Court's decision that all the tariffs were illegal, we are not taking any positive things into these numbers. And also the lower rate of the 10% and 15% that they issued compared to the 19%, 20% and other, this upside is also not in the numbers.

If the Supreme Court's decision should be upheld and we could, what should I say, get back tariffs, you're talking about EUR 300 million, EUR 400 million that we have paid of so-called illegal tariffs. But I think we all know that there's a long way to get that back, and we are not accounting for it at this point in time, but there is an upside to it. So with all that, our official guidance is then high single-digit growth in local currencies and an operating profit or an EBIT of EUR 2.3 billion with all the considerations that we have talked about. And again, I then have to repeat again that in the 4-year plan, we said healthy company, it was a 10% EBIT with the 50%, 52%, the 12% and the 30%, which ironically is what we would actually hit if we didn't have the FX and the tariff thing in '26.

So we actually believe that we have, from an operational point of view, delivered what we should do. And you know what, there is an upside after this in '27 and '28 that things will turn, and that's why we probably feel a little bit more comfortable than maybe some of you do. For '27 and '28, we want to stay a successful company. And to do that, we need to optimize our working model, and that means decreased complexity or increased simplicity, which is kind of the same thing and then optimize both processes systems and of course, the organization to also formally work towards this new goal because we have broken a lot of internal processes and systems to actually be where we are because we have focused so hard on the consumer that we have not been able to catch up to actually formalize that.

And of course, that's a stress on both organization and systems and still with quite some dis-efficiencies. We think we have to do this to win in the new global real world short and long term because we don't believe that the world will go back again to be one global marketplace where everybody wants the same and the your supply chain can be one big systems that works on averages. We actually believe, unfortunately, that the complexity when it gets to consumer demand and supply chain will continue to be very complicated. And we think the brands that maneuver through that, the best way will actually win and we want to win.

So when you look at then the period '25 through to '28, you know the results for '25. We told you that '26 is high single-digit growth for the brand, EUR 2.3 billion in EBIT. We will continue to add around EUR 2 billion on the top line, and that would then cause with everything that we are aware of around 10% EBIT in '27. We think we can continue to do EUR 2 billion in increase also in '28, and that would then with some leverage and actually be EBIT margin above 10%. And again, I think it's important that we don't only talk percentages because the percentage we don't sell, we actually sell money or gain money. And I think you agree that EUR 2 billion yearly growth is more important than a percentage number.

That means that from an operating profit point of view, you are in the mid-teens CAGR. And that will, of course, if we execute properly and the world are somewhat stable, generate a very strong cash flow. And in addition to the share buyback we announced for '26, we have been authorized by the Supervisory Board to actually buy back shares up to EUR 1 billion each year. And I think that's also what you could expect should we be able to do what we think we should and of course, in a world that is somewhat working stable. We have not talked about the Capital Markets Day to showcase what we do because we have said we want to focus in the next months on really getting ready for the World Cup. Yes, the uncertainty currently in Middle East are asking some questions, but I'm pretty sure that it will be a very successful World Cup, and we have a lot of work to do to make sure that we will show up and that all our marketing that actually starts very soon are going to be as good as we want it to be.

But we would then to showcase the confidence that we have after World Cup, invite you in September. I think the preliminary date is the 23 and 24 to actually show you the pipeline of innovation and product going forward because there's a lot of innovation, especially in the performance products, but of course, also in lifestyle that I think you will be interesting to see. So we will call it an Innovation Day and invite you, and I'm sure Sebastian will inform you about that in the near future. I think that's kind of the story.

I think you saw in the announcement a couple of other, what should I say, announcement. One is that Thomas, which has been our Chairman for a long time and which I think we all have worked very well with, has told us that he will resign as a Chairman by the AGM. And again, I think we're all very thankful at least in the time that I've been here, we've had a very, very good and close relationship, and I wish him all the best. We have then been able to talk Nassef Sawiris to be our Chairman. I mean, he's been with the company for a long, long time. He's a big fan of the brand. He's interested in our industry, very knowledgeable and again, a person that we have worked with for a long time and look forward to. So we hope that he will be confirmed at the AGM.

Ian Gallienne, we hope will be reelected, same profile and extremely close to the brand. And then as a new member, the proposal is Mathias Dopfner, who will bring a lot of expertise and a global knowledge that I think will do our Board well. And we all look forward to work with these people and at the same time, wish Thomas all the best.

In addition to that, I think we're all extremely happy that Michelle agreed to extend her contract. She is a long-term adidas employee, knows the industry, has a great, great heart for our people and a really good understanding of what is needed and works very close with all of us. So not only congratulations, but thank you.

And then, yes, you can't get rid of me again. I will stay around because I don't know what else to do, and I feel energized and I feel I can bring something. And again, it is an honor actually to sit with the Three stripes and be part of it also for the future. And I wouldn't do it if I didn't believe that we have a great future, and I can contribute at least for another, what should I say, time period. I think with that, I'll hand back again to you, Seb, and then we see where we go from there.

Yes. Thanks very much, Bjorn and Harm. And of course, also congratulations to Bjorn. Mora, we are now ready to take questions.

[Operator Instructions] The first question comes from the line of Edouard Aubin from Morgan Stanley.

Congratulations, Bjorn, for getting your contract extended. So two for me on the top line actually. The first one is on lifestyle, which was still up 3% year-over-year in the fourth quarter. You mentioned in the preliminary remarks that Terrace was still strong, if I understood correctly. But maybe it was strong, but negative year-over-year. If that's the case, which kind of other franchises more than offset this headwind? And looking ahead, how do you see the different lifestyle franchise evolving in '26? So that's question number one.

And then question number two, and sorry to go into the maybe the granularities of the guidance, apologies. But if you look at the benefit from the World Cup. Bjorn, I think in the past, you had kind of commented the EUR 1 billion type of top line. I know you already had some in '25. But as for my calculation, it would help about the top line of 3% in '26. So if I'm right with the math, that would imply kind of a mid-single-digit ex World Cup in '26 and then reaccelerating in '27 and '28. And if that's the case, kind of what makes you confident that you will have a reacceleration in '27 and '28?

I'll start with the second first. You know when you have EUR 1 billion in World Cup product, it doesn't mean that, that does cannibalize something else. In the merchandise, it's always like when you sell a lot of a national team, you will sell less of some clubs. So you have to be careful to believe that one sale is kind of just on top. If you think about a store that has 4 walls where there are World Cup products now, there will be other products next year. And last year, there were other products.

So when we talk about the business, you can't just plug in that business and saying everything is equal. So we are very confident that, yes, the World Cup is part of it. And EUR 1 billion, you do the math and you say, it's 3%, yes. But it doesn't mean that the 3% is then missing when we get into '27 because it doesn't work like that.

So we are confident that we can take any event or any merchandising team, and we can replace businesses as we go ahead. So there isn't any, what should I say, hole in the collection for '27 that doesn't give us the confidence.

When it gets to your question about the headwind. I think it's a little bit tough to talk about headwinds. We have generated a lifestyle business that I think grew 12% for the full year. And I think everybody has been surprised by the longevity of Terrace. And we have, of course, not believed that we will grow Terrace double-digit every quarter for the next 10 years. We have said that we are launching newness in Terrace, and we're launching a lot of silhouettes in addition to it to grow the lifestyle business over time.

And what we also told you was that when we have created the heat on footwear, there is a time when we were ready to also grow in apparel because you need to also grow in both areas, right, maybe with different timing. And with luck or good planning or execution in the second half accelerated the lifestyle part of apparel. I mean you know that footwear is almost 60% and apparel mid-30s, it is obvious for a while that you can grow then apparel quicker than footwear.

When you look at the franchises, then Terrace is, of course, stagnating, but it's still at an extremely high level. I think you see it in the stores and you see it in the street. Then we said we were extending court into Campus, into Superstar and eventually, even into Stan Smith. And I think yes, many people will say, "Oh, Superstar is not working that well." Well, Superstar is not only a shoe. Superstar campaign is a look. So it's also an apparel collection that is doing excellent. And when you look at Kendall Jenner, the way she's dressing, that is a whole statement for the brand.

So it might be that Superstar is not going to be the big issue in the next, I would say, quarters, but the court side of the business, if you add Terrace, if you add Superstar, and then the introduction of Stan Smith, you will see that the dominance of adidas on the court side will continue.

And then what no one talks about more is that the low profile piece is an extension of that. And I don't need to tell you when the weather went warm now, I mean Ballerinas was going through the sky. So I'm not worried that we don't have the pipeline of Classics to actually continue to grow, especially on the court side.

When it gets to the Running lifestyle side, then I have to admit that there has been other brands. I mean, New Balance with the retro, ASICS with the retro, and HOKA and On with their comfort that, of course, has been more dominant. We said that we need to bring newness and we didn't have the right silhouettes. We have done quite some business on retro, too. And that's why the whole Hyperboost is so important because that is the extension of performance into lifestyle that we've been looking for. And remember, again, I wasn't here so other people should take the success. But shoes like NMD, Ultraboost and everything we did with our friend at DC was clearly, clearly because also of the Boost foam.

So we think we have engineered the products to be successful. And then again, not everything can grow higher than average. It doesn't work. And that's why we think that the growth we had during the year was very healthy. We see where we are now in Q1. So we feel, except for the circumstances right now when it gets to the terrible thing happening in the Middle East, we actually feel that the pipeline of product and what's going into market is very, very strong. So yes, we feel comfortable.

Next question comes from the line of Erwan Rambourg from HSBC.

I'd like to add my congrats to Bjorn for sticking around for longer, if I can put it that way. So I'll stick to two. China, very fast growing in Q4 last year. Does this continue? Are you seeing any change in the landscape vis-a-vis local competition? And is there a reason for China to continue to outperform other markets? Naively, I get the sense that football might be more relevant for LatAm in Europe than it might be for China, but I might be wrong on that. Any sense on whether China continues to outperform?

And then second question, possibly more for Harm. In terms of margin expansion, if you look the 2, 3 years out that you detailed, if you look at gross margin expansion versus operating leverage, I suspect, given what you're mentioning about tariffs and FX, gross margin might not contribute that much this year, but maybe you have a more balanced contribution from gross margin expansion and operating leverage in the outer years. Is that the way to think about it? Maybe if you can help us think about the different buckets.

I think you're right that football and the World Cup in China is not a game-changing thing. We see that the Chinese business is built on lifestyle. It's also built on Running, and it's based on silhouettes not necessarily linked to football, although the soccer culture is actually doing also pretty well in China.

We are extremely confident with the development in China because our team has really found the business model where they both develop and design their own stuff, but they also tweak global stuff. And because you can produce in a local market in the factories. And as you know, the Chinese retail market is mono-branded where you control the space even if you don't own the stores, I think that's the business model where we have most of the tools to actually be successful.

The local brands have made huge improvements when you go back to the time after COVID, you probably remember also that Western brands are struggling with all the conflict coming from the Xinjiang cotton issue. Since then, I would say that we have answered in a way that we have focused on the Chinese consumer to our Chinese organization, giving them freedom and support to actually compete on the same level.

And remember, our management in China are Chinese. They are industry people that used to work for us that then left and worked for Chinese brands and then came back again so they understand the model. So I am actually -- if I should look at it probably most confident with the Chinese market compared to any of the markets because I'm not sure what negativity should actually hit China, to be honest. So I think that China will continue to outperform. And as you know, it's a pretty profitable market. And again, very, very happy with the development.

And then I think I'm handing over to you, Harm.

Erwan, a very good question. And I'll start probably with the gross margin. You're absolutely right. I mean '26, what we indicated earlier, we have EUR 200 million in tariffs that we have in the gross margin, and it's EUR 100 million more in '25. And we have EUR 100 million transactional FX impact in the margin. So that's why we look at '26 as being more stable compared to '25, that shows you already that operationally, we made good progress. And they're not going to go or entertain the discounting or promotions that other brands are doing. Otherwise, it can be done.

But overall, rest assured, we know exactly how we have hedged for '27 already, especially for spring/summer, but we started early also in the -- dollar was pretty weak and weaker than today going into fall/winter '27 already, which is earlier than usual. So we know that we have a very, very good gross margin going into '27. That's the gross margin piece. So you're absolutely right, stable at '26, benefits in '27.

And on the operating overhead leverage, you saw versus 31.4%, we are not yet where we want to be with the 30% or lower. So we'll definitely make progress year-end '26, and we'll continue to make progress into '27 as well to get eventually to that 30% or lower. You also need to see now it's becoming a ratio game. Of course, when you lose EUR 1 billion in top line, and you have a lot of operating overheads in euro, it's tougher to hit the ratio, right? So that's also part of the equation.

But that also leads you to the third topic, as Bjorn indicated that we lost almost EUR 2 billion in translation impact on the top line. I mean this could also flip at some stage and then we have a different P&L, whether it's ratio absolute. So we become a much bigger net sales company all of a sudden, and that will definitely lead to absolute benefit, right, whatever the ratio will be. So that's pretty much where we are. So it's a very important question that we definitely don't take lightly.

Next question comes from the line of Jurgen Kolb from Kepler Cheuvreux.

Yes. And again, Bjorn, good that you don't have anything else to do and stay with us for some more years. Good to hear that. On the question side, on China, coming back to that. We know that China, there are 2 major trends Running, and Outdoor is actually quite strong. So I was wondering how TERREX is doing, especially in China? And if that is a real driving force for you guys maybe also go into other markets?

And then coming back to the gross margin side again. In raw material maybe, how are you hedged there? How long can you kind of sustain the rising pressure from oil and oil derivatives? When would that become a nagging problem for the gross margin also going maybe into 2027?

The China market is, of course, not only Running and Outdoor. But from an activity point of view, you're pretty spot on that Running is booming. And as you know, we have worked very hard to kind of build credibility and then take the credibility down in price. The Evo SL is currently our best-selling shoe. And then in China, we also built even products below that with technology. So the pipeline in Running, both from a visibility, having events and having runners and also answering that with an offer that is targeting, I think we are in very good control.

When it gets to Outdoor, you are actually right. Although the Outdoor in China goes in the street and a little bit up the mountain, it's not on the top of the mountain. So it's a combination of lifestyle and Performance. And you're probably referring to some of our competitors, the Chinese that have bought Western brands and has done excellent in that area.

And TERREX, which is our answer to it, has started to build the same thing. So we are building, I would call it, EUR 150 shoes and below with, I would say, full technology, but that goes in the street and a little bit up the mountain. We are building light down jackets. We are building fleece and we're building collections that goes both on the street and a little bit of the mountains, so let's put it this way. And it's actually doing very well. And it's probably going to be our strongest TERREX market quickly if it isn't already.

So you have identified 2 areas that are right. And again, not a surprise to you probably, but the Chinese team are then building, tweaking products for local production to actually then achieve high margin and also targeting the specs that is needed for China. So that is correct.

When it gets to the raw materials, we don't hedge raw materials. You have to remember that we develop materials together with the suppliers, and the suppliers give us prices normally for a season. So they actually, if at all, are hedging the materials. We don't see a price increase in materials currently. So when you look at the oil price and the short term thing, the only place where we see it right now is on airfreight because that has exploded for obvious reasons. And we don't know yet what will happen to materials prices, but we are okay in our pricing, I would say, through at least first quarter of '27 when it gets to the agreements we have with the suppliers.

Should this conflict cause other areas, then I'm sure we will have areas in freight and maybe even in materials. But right now, we don't have anything in the pipeline that you need to worry about that, that would have a major impact. And again, I hope, both of us hope that there should be no rockets left, so they need to talk, right? I mean that would be the objective and the dream, to be honest.

Next question comes from the line of Geoff Lowery from Rothschild & Co Redburn.

Just one question, please. You've referenced a few times a promotional environment. I was just interested in your perspective on what sat behind that. Is that particular brands with particular product issues or inventory issues that they'll gradually work through? Or do you think this is a new cost of doing business more generally in terms of activating consumers?

No, I do think that especially in Europe and America, these are issues to keep the space in distribution and of course, also inventory issues, and also retailers that are nervous, so they're buying these. It's a combination of many things. I think if you've been in the stores over the last 6 months, I think you've seen a lot of red marked product that normally wouldn't be red marked. So I think it's a combination of those 2 things. I don't think this is a long-term sustainable way because it doesn't make any sense for any of the brands or retail. So we are counting on that this will disappear over time.

Next question comes from the line of Warwick Okines from BNP Paribas.

I wanted to ask the sort of same outlook question you've had already, but in millions of euros rather than percentages. The profit bridge you've given are very helpful. But in '25, you grew operating profits by EUR 700 million despite EUR 300 million headwinds of YEEZY and tariffs. And in '26, the headwinds are a bit bigger, EUR 400 million, but you're only expecting a EUR 250 million increase this year. So what is that bridge, please?

And then second question is what would the EUR 200 million tariff headwind in '26 be if you were to take into account the news of the last 2 weeks?

You have to remember that the tariffs that has happened since he installed them, this part of those that he just installed, that has been deemed illegal, right? And then there are agreements between nations that are bilateral that are not illegal because if you make an agreement with a country like you did with India, that is not illegal. So there are different, what should I say, topics. If we calculate through all this, which is not easy because there are markets like China that have 5 different duty rates for 12 months receipt. Then the impact of the changes that he did, the 10% and the 15% after the Supreme Court compared to what it used to be, I would say it's probably EUR 30 million, EUR 40 million, but it's not really that relevant.

If you look at all the duties or the tariffs that we have paid for the period that could be illegal, you are speaking close to EUR 400 million. So there is a big variance here between the different things. And I don't think any brand right now knows what we can expect, right? But it cannot be anything negative other than what you have seen. What you see is the worst case, right? It is the duties that were there before the Supreme Court said it was illegal. And there is no, what should I say, positivity on maybe claiming back paid duties. I think that's the only thing that I can tell you.

On your first question, I'm not 100% sure what you asked, but the improvement in the profitability, everything being equal, it's actually EUR 650 million. And then you have the duty and the FX that takes you back EUR 400 million, right? So that's the only bridge I can do. The EUR 650 million is, of course, leverage and gross margin on the growth that you're having. So I don't know how else to answer it.

Just real quick, Warwick, I understand that you compare like the improvement that we did in '25 with the improvement that we plan to do in '26, right? But the detail is that is in the FX, where the FX impact is coming from the respective countries. And if the FX is primarily coming from the U.S. dollar, it's less of an impact, what we saw in '25. It's across many countries. And when it comes to Argentina, Turkey and Japan and Korea, what I just said, it's across countries that are more profitable, and that's part of the answer.

So again, it's complex with all the countries that we're operating in. So there's not an easy bridge that we normally have in gross margin when it comes across all these countries and the currency impacts of all the detailed currencies. But I'm happy to do that in a one-on-one when we see each other on a roadshow.

The next question comes from the line of Robert Krankowski from UBS.

Two questions for me, please. We talked about the gross margin that is going to be stable, and then there is a big benefit from the hedging of FX in 2027. But could you talk a bit about what kind of gross margin level you're assuming for by 2028? Previously, we talked about 50% to 52% to get to 10% EBIT margin, 12% marketing spend. Is it the same?

And also, what kind of impact does performance, I guess, do to the growth at the beginning versus lifestyle. I mean, like what kind of gross margin gap are we talking about? Is it now better than it was historically, given assumptions that you did?

And maybe secondly, if you could touch on like what has been the performance year-to-date. I guess, the environment is very volatile. But are we talking about the growth above high single digit? And what is the shape of the order book, if you could comment?

That was many questions and many difficult ones. I'll start with the last one is that the start of the year has been good. I think I'll leave it like that in a very volatile marketplace. That's both for retail and wholesale. So we are happy with where we are end of February.

I think on all the other, when you start talking about margin in '28, you're jumping a little bit ahead. I do think that if we bring EUR 2 billion every year on the top line, there should be leverage on every cost line that you can think about. We know that we can improve our processes and systems, and we do know there's something called AI that we haven't even priced into the leverage. So I think we should continue to say that we think we can take market share that the growth in absolute terms that we talk about realistically is around EUR 2 billion a year. And then I think how far we get then on the EBIT margin then depends on all the other elements. And I think it will be very crazy for us now to start to define those bridges for '28 because I wouldn't know other than there should be improvements on many levels that then should please you as an investor.

I don't know, Harm, if you want to add something to that.

No, absolutely. Now mapping out '28 gross margin. I mean, it's probably the most difficult KPI to manage even on a quarterly basis. But I mean whether it's the hedging, and it's not just the U.S. dollar, it's many currencies that we're hedging or not actually hedging because it's too expensive. There's footwear apparel, there's categories, there is country mix. I mean lot of things are happening.

But looking forward, why we're so confident about where we are heading and that we are going beyond the 10% EBIT margin is definitely coming out of the cost leverage. We will be a more sizable company. There's no question. And again, if we're getting to a 52% margin or better, the key is that we leverage our infrastructure, right? And we will be a much bigger company. And the key to watch is how we leverage our infrastructure and our cost overall. And that's where we can do a lot, whether it's AI or other things where we can run the company differently. That is definitely the element that will bring us beyond the 10% EBIT.

Next question comes from the line of Aneesha Sherman from Bernstein Societe Generale.

I have two, please. Bjorn, the first one is when you first joined, you inherited a very early-stage Samba launch in early 2023. And you were able to grow it and make Terrace such a powerful driver over the last 3 years. You're now looking at the next stage, and rather than one kind of blockbuster product, you've got a wide range of products in Performance, lifestyle, apparel, et cetera. How do you think about that ramp-up in brand heat that you saw with Terrace playing out across a wider range of products? Do you need to have those 1 to 3 blockbuster products that really carry the brand? Or is it possible with a much wider range of products where each individual franchise is not as powerful? Just curious about your philosophy.

And then a second one for Harm, please. When you think about costs, the cost base for 2026. You just said on the prior answer that you should have leverage on every item. If you can get to that EUR 2 billion incremental sales. For overheads, you've been at about EUR 7.8 billion for the last 2 years, if I take out those one-off costs for 2024. Is that a pretty steady state level you think you can stay at, in which case, you should see more leverage on the overhead line item? I'm just trying to bridge your operating margin guidance and see where the leverage could come from versus where there could be some deleverage. That would be helpful.

Well, I can tell you that I feel a lot better having many franchises doing well, both performance and lifestyle and both footwear and apparel doing well than putting my destiny on one franchise. I think we have to be very honest that at the beginning of '23, when the negativity and the performance of the company was not that great, it was a gift from heaven to see that we had a Samba that actually was in high demand. And I think we then did a great job scaling it and it ended up not being only the Samba, but what we later teach people that it's called Terrace. And it included Gazelle and Spezial and then later Campus and more shoes.

So the risk we took at that point in time, I think for us, for many outsiders, "Are you crazy?" but we did what we felt we had to do. And of course, the portfolio of product we have now is much, much more healthy. I think many companies today, without mentioning names, are now hanging on one franchise or actually hanging on one look which, of course, is not very pleasant. So it is a clear tier goal for us to have a wider portfolio product and to always have the possibility to also create brand heat on apparel because let's face it, footwear has a much more narrow, what should I say, platform, and there's not that many trends. If you do apparel well, in addition to your performance and your lifestyle footwear business, you have a much, much bigger, what should I say, area to play in.

And I think you agree that on apparel, the regional differences from a Tang jacket in Japan to a soccer culture item in U.K. that there are many, many variables that you are much, much, much more easier to play on, to be honest, to get business going. So very, very proud of what the product teams have done to expand the ranges. So we're not dependent on only the Samba, which for maybe 12 months was very unpleasant because if that hadn't worked, I might not have extended my contract. Let's put it that way. Harm?

Yes. When it comes to the cost base, you listened very well in the past. We indeed, excluding the one-offs, we are around the EUR 7.8 billion. Of course, there's some FX impact on that one as well, especially in '25. But on the other hand, I mean, when you're growing high single digit in '26 or the years to come, of course, you drive more volumes, it is not just done through pricing. And so you need to see that the absolute increase that we might have in cost is coming from freight cost, either you bring the product into the markets or you ship out to the retailers or to the consumers because you move more volume.

Secondly, we said earlier that we have net 90 more retail stores. You got to pay rent, you have depreciation. You have people running these retail stores as well. There's some annualization effect. When it comes to all of the overall personnel expenses that we have, we try to keep it where it is because there's an expectation of salary increases, not just here in Europe but also in some markets where you have inflation, so it's going up, more than here probably in the headquarter. But of course, through some programs, we have fewer people. We can become more efficient over time, and that's what we're working through. So we definitely can do better.

And then the leverage really comes from our DC infrastructure, it comes through our IT infrastructure, it comes through normal office costs that we have or less depreciation because we invest more disciplined on CapEx. But just staying flat on the EUR 7.8 billion is not that easy if you're growing the volume as well. But again, there's focus on it. We are, first and foremost, looking at the ratio and the leverage, but we can definitely do better, not even bringing out the big word of AI, but there are a lot of things that we can do better to become more efficient, but it's not always the same absolute number, right? The leverage is what we are focusing on.

Next question comes from the line of James Grzinic from Jefferies.

Just a quick one really for Bjorn, a follow-up, I guess, to your answer to Geoff's question in terms of over inventory position in the industry, especially in North America and Europe. Do you feel that more broadly for the industry, we are in a bigger over inventory situation now compared to a year or 2 years ago? I'm just curious about hearing your thoughts on that. And perhaps if you can comment specifically even in big parts of the world like the U.S. and China, for instance.

No. I don't think I even said over inventory. I would say that I think brands are fighting to keep their sales by making deals with retailers. That doesn't necessarily have to be old inventory. So I don't think there is a huge inventory problem as such, like we had coming if you go 3 years back, especially in China and the U.S., there was a lot of inventory, including ourselves.

I think if people are uncertain and to make sure that their wholesale business is holding up, people are making deals and the retailers are nervous, so they are asking for deals. So I think it's the right -- the special attitude that the business is currently having more than there is a lot of inventory hanging around them. I would describe it like that. I'm sure there are some inventory for certain brands who are negative in the top line in certain markets like in China, and I want to get rid of that inventory. But I think the issue is more that people are afraid of losing top line and therefore, making deals. I think that's the description I would give.

Next question comes from the line of Andreas Riemann from ODDO BHF.

Two questions also on the brand. So Bjorn, you are broadening the range with more categories. You had more wholesale partners every year. So how do you make sure that you don't stretch the adidas brand too far? Or from a different perspective, what are the things that you don't do to keep the brand hot? So any insight here would be appreciated.

And the second one is related to takedown versions. You're not talking about takedown versions anymore. So are those products still growing? And then what categories are you offering these products if you do that? These would be my two questions.

Well, first of all, adding retail partners, I don't think I ever said that. What I've said is that we are servicing retail partners better in the sense that we take care of them and we have a much tighter dialogue with them, what kind of product we can build together, and that's both in Performance and in lifestyle, and it also includes in many areas, what you call takedowns in sportswear.

I don't feel that we have an issue of controlling the brand because the people that are dealing with the retail in China and developing products in the U.S. or here are all adidas employees. And we all have the same interest. We have the same creative direction. We have the same calling card. We have the same technologies. But the point is that if you decide that China should have a lot of local in running shoes at price points between EUR 50 and EUR 100, I think the Chinese team knows that better than global product managers sitting in Germany.

So it's not necessarily that we are widening neither distribution, which we're not, nor widening the categories that you said, it is more that we make much better decisions where the consumer is. Don't forget that the biggest mistake you can do in this industry is essentially push concepts out in the markets that no one wants because then they get discounted. And I think you agree that product that are heavily discounted does not bring, a, brand heat and, b, it does not bring you any margin. And I think if you go to the P&L, so many brands right now, you can measure the brand heat and assortment on the gross margin. And I think when you look at our gross margin build over the last 3 years, knowing that YEEZY is not there and we're approaching 52%, I don't think anybody can raise the question if we have the right range or if we're stretching the range. And so I don't think -- I don't know who told you this, but I don't agree with you that this is the case. What was the other one?

Yes. What about the takedowns?

Yes, the takedown is, again, if you look at footwear, I mean, let's face it, every brand are doing takedowns. There aren't gazillions of variations. So if you look at our competitors, you will see that you see the same look in many price points. If you look at Nike Vomero you will see that in 5 different price points. If you look at New Balance, you will see the same look in all kinds of price points. So I think takedowns, we could call them something else, but taking a trend and multiply the offer to different distribution and price points has always been in this industry. So I don't see that as an issue either.

What has been good for us or you can say negative is that the growth in originals has been higher than in Sportswear, which would tell you that the higher end has actually been more in demand where we have supplied it more than we have on the lower end. So people tend to say we are -- or I am to commercial and they try to build that story. I don't know if that's maybe to, what should I say, to less focus on themselves. I would measure the gross margin on the different brands. And then when they say they don't want to distribute where maybe we are distributing, I don't know any place where we distribute our product that our competitors are not. And it's very easy if you go to a store to see what brands are there, and I have never gone into a distribution where I'm the only brand, not in my previous jobs or on this job.

So I think the brands that end up in the wrong channels are maybe because what they try to do in the right channels didn't work and then they have to clear it, right. So again, I don't agree with stretching distribution because I don't think you will find us in any distribution that you will say is wrong. If you do, then please call me because then, I would like to know about it myself.

No, I only made the point because the number of wholesale partners, if I'm not mistaken, was growing from 100-plus to 200-plus in the last 3 years, if I'm not mistaken, right? That's why my question.

I don't know the number you're talking about. You're talking about visiting headquarter? That number you're referring to is that we double the amount of customers that can see our range here in Herzo. But that's the same. It's just, yes, but it's just better service. That doesn't mean that the new customers. We don't have more customers now as partners than we had 3 years ago. But it is true that they're all allowed, or not all, but many of them are allowed to actually come here to Herzo because that's why we have the campus. It's not secret place. This is a place where the adidas family, both our partners, our athletes, customers can come. So that's where you have the number from. But we don't have more distribution points and weaker quality distribution points now that we had 3 year -- I would say it's the opposite because we have a lot of clearance back in '23. So there might have been products in the wrong channels. And I don't think you'll find that now.

Maura, we have time for one more question.

So our last question for today comes from the line of Monique Pollard from Citi.

Just two from me. The first question was just given your commentary about being conservative on the wholesale sell-in for Europe and North America and also your comments on the level of discounting by some of the retailers in those markets. Just wondered if you have continued being so conservative that the wholesale sellers in regions into the first quarter or whether you've been a bit more bullish on the selling there?

And then the final question, obviously, I understand that the situation at the moment, is very volatile. But just wondered within your EM segment, whether you could break out sort of MENA exposure for the key countries that have been impacted?

Well, I'll start with Emerging Markets and the situation. You know that we have 6 subsidiaries that are affected by this that are run out of the Dubai office. And of course, they are in a terrible situation and most of them sitting in lockdowns. And also from time to time, sitting in shelters. So the only focus in those markets the last couple of days has been the safety of our people. Business issues is not really relevant.

When it gets to other markets in the regions, there are stores that are actually open and in certain of the markets, the government are asking us to keep them open. And if our people are then willing or want to keep them open, we do. So it's again the local decision on how we or how they, what should I say, behave in a very difficult situation, and our job from headquarters is just to support them. We even offered to charter planes and fly people out if that's what they want. And there's no financial limitation on anything that they can do. But as always in these situations, the people that are used to living in a volatile world have a different attitude than us and are extremely strong. And again, are doing fantastic things. The impact on the business, it's impossible to say right now, and it's not even something we look at, to be honest.

When it gets to the global business, we don't see any impact short term on this. And there's no, what should I say, other means than being very close to everything that we can. There is an area where we'll see problems, that's on airfreight because of the situation in the airspace and a lot of planes being grounded that we will have delays on certain, what should I say, products that means air freight, that could be samples that we need for meetings. It could be special products for special events. But also that there is no impact right now that would adjust any numbers, to be honest.

Same thing on the cost base, it's like, yes we see oil going up, but we currently don't have any guesstimates or estimates of what impact that could have. And in freight and all that, we currently have long-term contracts that also does react short term. So it's too early to say. And I think you agree, we all hope that as I said, that some of these countries will run out of rockets so that people will talk instead shooting at each other. And then the hope is, of course, talking will cause some kind of peace. I think that's the only thing that I can say.

When it gets to the conservative selling in the wholesale, I think there is -- the quarter is more coming from that we have clearly not been willing to do these deals that we talked about. A lot of retailers, and I can understand them, are looking for deals, if it's clearance or if it is even production if they commit to bigger volumes where they will get a higher discount. And then that allows them again to sell discount. And I think if you follow the retail environment, especially in Europe and the U.S., you will see that there a lot of products that used to be full price are now discounted.

And we have -- I mean, Mathieu is not here, but our Commercial Director has so far avoided to do these deals because it's your own business. As soon as you start to do it, it's like a drug, right? I mean if you are on to it, it's hard to get off it. And I think you see that in our gross margin that we have been able to kind of, at least in our own business and also the wholesale business, to avoid it, that our product has been discounted is, of course, there because if a retailer does 20% in the window or there's vouchers online, it also affect us, but it doesn't take our margin down because then it's the cost of the retailer, right?

So again, we are looking at it. But we know running after every sale by making deals and are hoping and believing that the market will dry up in the sense that this is not necessary. And we hope that all the companies in our industry have the help that we can actually avoid it because it, of course, takes the profit pool in the industry down.

Thanks, Monique. Thanks, Maura. Thanks very much to Bjorn and Harm. And of course, as always, thanks very much to all of you for participating in our call today.

As always, if you have any follow-up questions, please feel free to reach out to Adrian, Philipp, Chiara or myself. We very much look forward to speaking with you. In fact, we're actually looking forward to meeting with you as we will be on the road quite a bit, both here in Europe and also in the U.S.

And lastly, you've heard it from Bjorn. We, of course, hope to welcome all of you here on our beautiful campus later this year for our Innovation Day. The details about this and the detailed timing at the end of September will follow soon. So thanks again for your participation. Speak soon. All the best. Bye-bye.

Ladies and gentlemen, welcome to the adidas AG Q3 2025 Conference Call and Live Webcast. I am Maura, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Sebastian Steffen, SVP IR and Corporate Communications. Please go ahead.

Thanks very much, Maura, and good evening, good afternoon, good morning, everyone, wherever you're joining us today, and welcome to our Q3 2025 results conference call. With me here today is our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. Bjorn and Harm will take you through the highlights of the quarter, our financials, the outlook. And afterwards, we will open up the floor for your questions. As always, I would like to ask you to limit your initial questions to 2 in order to allow as many people as possible to ask their questions.

And now before I hand over to Bjorn, we want to get everybody in the right adidas mood with this video. Let's go.

[Presentation]

Hello, everybody. I hope you enjoyed the live showings of what the brand has done over the last 3 to 6 months because we are actually very proud of what we have achieved. Also, very proud and happy what happened last night, where 2 of our teams, Germany and Spain, won each of the semifinals in the so-called Nations League. And we'll then need to play the final and it's always cool to have 2 teams wearing the 3 stripes play each other in the final, which happened pretty often, especially on the women's side.

Also happy actually about what we did achieve in Q3. I think the momentum that we have seen globally even strengthened. And we feel that our teams in the different markets have been very active and has been a lot of positive feedback also when it gets to the activations we have for the future, for example, the workup that you see out there.

What also very, very, what should I say, close to today happened was the Shanghai Fashion Week, where we showed up in China in a way that I think we've never done before. And last weekend with the ComplexCon, where we showcased both the jellyfish coming from our friend, Pharrell. And we had many, many versions of Superstar also with our partners from Hellstar. And I think all of you have followed the discussion about Bad Bunny and the Super Show, it happened to be at the same time where we had a Mercedes call up with him, which also did very well. So a lot of fashionable things happening, which is very, very positive for us.

And also before we go into the numbers, important for us. We were again named the top employer for those working in the fashion from the TextilWirtschaft. And again, that's a research with ask the employees and the hearing that your employees are happy is always a great confirmation for us in management.

And then the Forbes Research who looks at 400 of the biggest companies in the world when it gets to how it is to work for them when you share a woman, we also came up in the top. And again, a very positive story for us confirming that we are a good company to work for.

The numbers, you've probably been through them many times. Last week, we reached EUR 6.63 billion in Q3, which is the highest quarter that we ever had, which, again, then for the adidas brand was a growth of 12% currency-neutral. Again, another very strong quarter when it gets to the margin at 51.8%, which was 50 basis points up. And then an EBIT of EUR 736 million, which then is an EBIT percentage of 11.1%, which, again, we are very, very happy with.

If you then take Q3 to the 2 first quarters, you get to the EUR 18.7 billion in sales, 14% up for the adidas brand, a margin close to 52%, and then an operating profit of EUR 1.892 billion which is again about 10%. And so again, when we look back, we are very happy with these results.

When you look at the regional growth, the North America grew only 8%, year-to-date 12%. I did say in the press call that if you take accessories out, you will see that both Apparel and Foot were up 14% and 11%, and that reason for the accessories being down is that we have a reset in the accessory business that will hit us this quarter. And it has to do with distribution. It also had to do with deliveries. But I don't think you should read too much into it. I think it was heavily exaggerated in some of the press. This is not something that is very crucial for our business. It is a short-term blip. And again, remember, accessories is 7% of our business, so you shouldn't worry too much about it.

Look at Europe, the home market, we were skeptical last year that the growth will slow down because it was 9%, now it's back to 12%. We are 11%, what should I say, for the year, and a very strong development, again, both in our own stores and then especially on the performance side around different markets in Europe.

Greater China. Again, you probably see a lot of, I would say, tough numbers from our competitors. We grew again double digit and are very happy with the development being up 12% for the year. And you probably know that the profitability also in China is improving. So we are very, very happy with the development that we currently have in China.

Same with Japan and South Korea, up 11%, 14% for the year. Historically, 2 very strong markets for us where we had some issues, but very, very strong development now with new management in both of the markets, and feel we are in a very, very good way with very, very strong like-for-like numbers in our own retail in both those markets.

Lat Am, still on fire. We are now a market leader in many of the LatAm markets, including Brazil. And as you can see, '21 and '24, extremely happy with that development. Emerging markets, of course, always a little bit mixed bags because it's a group of countries where you have quite some issues, but the team are our entrepreneurs and 13% and 17% confirms that. And that gives you then the Q3 number of plus 12% and plus 14% for the year, in a world, which I think you agree, is not the easiest to maneuver in. So very happy with where we are after 9 months.

Wholesale growing at 10%, shows you the support from our partners. And again, happy with that. Own stores, up 13%, we are comping positive both in concept stores and in factory outlets. And we have added net around 85 stores in the last 12 months, and we will get back to that in a second.

E-com, up 15% shows you that the digital side of the business is also working. And some of the pure players are actually doing better than the brick-and-mortar guys and so is also with us because we can showcase news quicker and wider than you can do in brick and mortar. That gives you the split of 63-37 and you see brick-and-mortar and e-comm than 22-15. I think we agree that, that's a globally a very healthy split.

I talked about the stores. I think we have said to you now for a couple of quarter that what we are doing is that we're trying to open, I would say, impressive brand stores in bigger cities and in bigger trade communities. And instead of having 1 store buildup, we're trying to explore the possibilities in the different markets, as you can see here. And we are investing a lot in the creativity in the stores and I hope when you travel around the world that you get to see some of them extremely happy with the way we look. And they're also, of course, when we open a big store that looks like this, the numbers are also very impressive. As long as we fill it with the right product, which I think we have done lately.

Footwear, again, you were skeptical. I think it was 9% in the last quarter. Now it's back again to double-digit, 11%. We have talked about the wish of growing Apparel at the back end of Footwear. So now we are doing that at plus 16%. And then the accessory issue, which, again, I explained that in the U.S., we have kind of a reset when it gets to both the sourcing because it was very China driven and the distribution and that caused that in this quarter, the numbers were negative, and that had an impact on the global accessory business.

The performance accessories, meaning, for example, soccer balls is up. And I think I can promise you that you will see accessories very quickly coming back again. And I think I quoted I said we need to clean up something, but I think people, again, overdramatize that there's nothing that you should be concerned about that Accessory is only up 1%, knowing that, as you see here, Accessory is only 7% of the business. And I think we have said that when you have brand heat and you could focus on it, you should get more growth on Accessories going forward. So I think we have some reserve in our pocket, and you shouldn't look upon this negative.

Footwear being 57%, Apparel 36%, again, as long as Footwear is above 50%, I think we are in good shape brand-wise.

And then very, very important. Even if we have turned the company around on the lifestyle side and the heat, we have said that we have to celebrate sport. And I think when you see the activities from ultra marathon to marathon to running 100,000, basketball, soccer, cricket, whatever, I don't think we have ever been more visible in sports, and we're also producing a lot of content that is visible all over the world because that is what we want to do.

That shows also up in the numbers. Our performance, meaning the Sports business is up 17%. Remember, we have told you that there are 4 categories that we need to win globally; football, running, training and basketball. I think you see in football that coming out of comp numbers from the euro last year, we are very, very strong now with our Footwear taking share, I might be arrested saying we are market leader, but that's my feeling on everything I can read. Very happy with the players and also very happy with the product.

And then for those of you who follow soccer closely, the Liverpool launch was fantastic globally, although they haven't played very well lately, losing I think, 5 out of the 6 last games, the sales of Liverpool has been tremendous compared to what they used to sell. And again, I think we all know that Liverpool is a street culture city in the U.K., very relevant for the kids. We are extremely happy with that relationship and the way it was executed.

Also very proud of the Ballon d'Or. You know that's where they give the prizes to the best players in the world. They give out 5 prizes. We won them all. We had the best male player with Dembélé. We had the best young player with our friend, Yamal. We had the best female player in Aitana Bonmatí. We had the best young female player in Lopez, and we actually also won the best goalie with Donnarumma also; 5 out of 5. I guess we will have to pay a heavy bonus to our sports marketing people because I don't think that's ever happened before.

What shows you, why I'm proud and positive is that we were also able, the day after the Ballon d'Or to honor both Dembélé in Paris with both what should I say, outdoor marketing, as you see here and the store and the same in Barcelona with Bonmati. So again, the teams were then actually gambling on that they will win. They didn't have the insight. And we were able then to activate this overnight. So when people woke up, this was what you would see in those 2 cities. And I think this is the energy that we actually need as adidas then to win.

And the same thing, we have launched the World Cup Ball. We used a lot of other celebrities and sports people to do that. I have never seen such a campaign ever done organic and I can also report to you that the sellout of the ball has been fantastic. And you have to remember, we have even started with the jerseys. The jerseys for World Cup will start to go on sale on November 6. So that's when you will start to see some impact of World Cup coming into the numbers, which will be very, very positive.

Running, we have told you for the last 2 years that we are building our running portfolio up, changing both the collections and also, of course, going back again to running specialty to build credibility and the business. When you follow the marathons and the half marathons and other races you see we win half of them, very proud of what Sebastian Sawe did in Berlin. The weather was too warm; if not, he would have beaten the world record in sub 2 hours. He didn't because it was 27 degrees, but we will save that for next year.

We also won the women's class with Rosemary. And again, I think it's not the weekend, where we don't win a major race somewhere because we have the best runners and the best product, that is also proven by this fact, we did set the world record on 100k. Sibusiso won in 5:59:20 and you can calculate the average pace, it's unbelievable. I think he runs 333 per kilometer. And again, with a shoe especially made for it. And again, this is part of our innovation pipeline to do extreme things that we can then feed into the more commercial line.

And our Adizero line, which starts then with the Prime X and then down to the Adios Pro 4 is the best line today for racing shoes and speed shoes. And we are taking market share and we're growing this business very, very heavily. And again, this has been the strategy from the beginning that we start at the top and then we start to scale it into every day running and to comfort running.

What you see here is new. This is what will go to market next year starting in February and then scaling up during the year. We have developed something called Hyper Boost, which is a new boost material, 40% percent lighter than the old Boost. Boost was the most successful midsole construction that we had, the most successful foam, but a little bit heavy. That's why we have been working for 3 years now to establish this. These are the sign directions, not necessarily the way the shoes will look, but it gives you some kind of feeling how we're going to attack the comfort training area. And then we will also use the foam as a platform into other areas in the performance side and also into Lifestyle.

Don't forget that all the successful Lifestyle running shoes we had in the past, both those from Yeezy, but also NMD, for example, Ultra Boost was Boost shoes and that's why this is so crucial for us going forward. And we are very proud that we now have developed this.

Training is a huge category that might be executed different from region to region, but what we are doing is that we're using our top athletes from different sports and then showcasing them in training in our products. We can tell that story everywhere. And what we also have done because training today consists of both running and strength, we have combined then the Adizero line with the Dropset line and then creating shoes that are both runnable and stable for strength, gym work, and that's then the Adizero Dropset, which you will see next year and which has received a lot of orders already from the retailers who love it, and we are very, very positive about that development.

Maybe a surprise to you, we are then taking the originals into sport. We have seen, especially on the female side that we connect to that young consumer through our original line with the use of threefold and three stripes. And it was then a natural way then together with some of our retail partners then to develop a functional training line in functional fabrics and functional fit also with the design ethics of original.

You see some of the samples here. And needless to say, the demand for this for next year is huge. And it's one way for us to differentiate ourselves in the training area where there's a lot of brands that have established themselves lately. But again, very, very positive feedback from the retailers around the world.

Basketball, we all know we're a market leader, but we also know we have to invest in it. We have in the design and development of the product for a while now, had a very special language. And it's great to see that this language is now coming through also in sell-through. All our signature shoes are now doing well and the players that we're using are also extremely popular. And we have used them now not only in the U.S., but also in other markets. They've all been to China during the summer, and we see a lot of positive effect for them being active actually selling not only our performance product, but selling the brand as relevant in the culture.

And then we have said it the way adidas did the brand, we want to be visible in all sports and also local sports that are relevant. That is why we are making products for more sports, and we also produce more content for those sports so that we get back again the credibility and authenticity that we used to have, and you see some examples of that here.

In that trend is also track and field. For a while, we lost the visibility. We are now back again. And if you watch the World Championship on Tokyo, you saw we had more federation. There were more three stripes on the apparel and a lot more feet with our spikes and special shoes. That will continue because for us, track and field is the core of all sports also in the Olympics, and that's why you will actually see a wider investment for us going forward as more federations are actually able to change into our brand.

Then finally, when it gets to sport, we have said to you many times, we need to be more American. We need to be a sports brand also in America. You can only do that by investing in the so-called American sports. That is, of course, starting with colleges. It is baseball, it is American football. It is also basketball. You see some of the people we have signed now over the last couple of months. We have also started to get feedback that we are attacking the clear market leader. That's not even the strategy to be visible and actually have personalities that perform. And I think that is also what we have achieved.

The college sport in the U.S. is very, very special, very emotional and everybody who's gone to college is a big fan of their college and especially in American football, that is important. And you know that this college team draw attendances up to 100,000. You see that we are now starting to get a pretty impressive portfolio. And in that, what should I say, strategy of getting more visibility and getting more into the college merchandise business, we have then added both Tennessee and Penn State, which are 2 huge colleges when it gives both to the performance and also to the merchandising value.

What we also have done is that we started to combine the American sports. So here, you see on the left side, Anthony Edwards and his basketball look. We have then made a clip. So Travis Hunter debuted in the NFL. He's the Heisman Trophy winner of last year. He is, I think, the only one who plays offense and defense, at least in his rookie season, and he's then playing in a clip that is designed the way Anthony Edwards basketball shoes. So a pretty cool thing, and it shows what we can do going forward in the U.S.

Short about Formula 1. You know great success when it gets to the agreement with Mercedes, a lot higher sales than I think both we and the Mercedes thought, a lot of collapse, a lot of interesting stuff happening. And then on the left side, we announced that for next year, we will also do Audi. And again, we see a huge demand from wholesalers already in those 2 setups.

And then, again, I'm repeating myself, but we are, of course, trying to take everything we do on the pitch in the stadium then to the street. And I think that's the magic of ours. We are using our athletes and our, what should I say, teams on both sides and are trying then to create the street culture out of not only basketball, but also other sports.

We have talked about the need for doing this in football, and it's finally happening. We have never seen so high demand for soccer-related apparel as we do currently. And a lot of non-soccer fans are actually wearing retro jerseys or even the current jerseys or product that is coming out of the soccer world. And I think I've mentioned to it a couple of times that the Oasis collab, for example, are soccer pieces that have been batched up and the demand has been unbelievable for people that has not any connections to football.

And then on the footwear side, EVO SL, our $150 Evo Adizero shoe without the carbon plate meant to be a running shoe, but gone widely on the lifestyle side, best-selling running shoes currently and the best named running shoes in many, many markets, a great development for us.

So when do they get to lifestyle, you saw performance growing at 17%, Lifestyle now growing at 10%. Again, this was always the strategy that you build the heat through marketing and lifestyle, you sell shoes, then you hope that it will also go into performance and then you start to commercialize apparel that has actually happened.

And two, the haters, who are the people who don't like it, Terrace is not over. We have grown Terrace every quarter. So Q3 was actually the highest quarter ever also of the Samba. I think the key to it is, of course, that you're not selling the white black and the black white more and more and more because you're actually putting, what should I say, a limit on it. But when you work on materials and you work on different, what should I say, Collabs and you keep the excitement in it, all Terrace shoes are doing extremely well.

And especially in certain markets now, the Spezial is doing great. And as you probably know, Spezial has never been a lifestyle shoe before. So -- it's not over, and it's a huge business, and we will manage this business probably longer than many of you had expected.

The Campus was more a freebie that came unplanned with the heat of the brand. We did then put a lot of shoes in the market. It worked perfectly. But we also said we will then start to limit the Campus because we were waiting for the Superstar to come. And let's face it, the Superstar is from a construction point of view and from a target consumer probably closer to the Campus than to anything else.

We talked about Low Profile. Yes, it has been growing and growing. It's not as big as some people thought. But I think I can promise you that the same thing is here. You need to invest in SKUs, you need to invest in materials, then it will continue to grow also into the spring of '26. And then we have the Superstar, which we again told you we were delaying. But right now, we are pushing it for fall, especially now in Q4 and then into spring next year with global campaigns, a lot of activations. And again, although the language is global, the content is very local.

And then may be new to you, you will start to see the Triple White coming back. There are clearly signs that Apparel is going more preppy and more college and then Triple White will be again coming back. And as you know, the Stan Smith is probably the typical shoe to go to when that is happening.

So we have limited the pairs heavily. You won't find Stan Smith discounted anywhere, but we will start during next year then both with Collabs and loading up that shoe because we want to be ready when these things are going commercial.

And then the final thing on the lifestyle that we talked a lot about, Lifestyle Running. Yes, we admit that all the brands have had a big trend, both on '90s and 2000 running and that we had many options starting with the retro thing all the way into 3D printed shoes. Many of these shoes are now starting to get volume. None of them are the winners right now, except for EVO SL. But when you look to the left, you see Adistar, where you will see the Jellyfish coming out of Pharrell. You will see takedowns of that hitting the market, and you will also start to see a lot of 2,000 retro running shoes from us with Open Mesh and Metallics, which are already selling very well, and we will start to scale them because we see that the demand is there.

And then the final thing where people laugh a little bit is Lifestyle Football. We talked about it in Apparel. You will see soccer-inspired product going also fashion, where we put soccer uppers from the past or also present, and we put them on different constructions.

Very different opinion if this is going to be commercial or not. We will have limited pairs in the beginning, and then we will scale it if we see the demand is there. But at least on her, it seems like there is demand there also to scale it.

Then on Apparel, we have great success, especially with Her, especially very colorful, the use of 3 stripes, of course, a lot of them are not original. But I think where we have been even better than anybody else instilling innovation in materials.

We have denim. We have a lot of knit constructions, and we have a lot of innovation that has not normally been in the sports industry. And this is especially where then people online has a huge success because they can showcase it very quickly, and we've been very quick to the market.

Very, very proud of this. Grace Wales Bonner has helped us a lot. I think she had a huge impact on the success of the Samba, to be honest. She has now been made the head creative for Hermes Men, a great honor to her, but I'm also happy to report she will not leave us. She will continue to work with us because we have a fantastic relationship with her, and this will, of course, help us.

In general, collabs, a lot of discussions. If there are too many, has it lost this interest? No, it hasn't. If you look at this page, you see some of the ones that we work with. Down left, Hellstar has been great for us in the last couple of months. I mean, Chavvaria has been great for a while. And in general, I think we all have to agree that you need Collabs. You just need to make sure that they fit the market where you're using them. and that you never do too many at the same time.

Then at last, accessories. Again, I tried to explain that accessory and performance, great, including soccer balls. All markets actually done well. There is a small clash in the U.S. that we need to fix, and we will fix it. And I'm pretty sure that when we get to next quarter, you will see it fixed already. So don't read anything into it. That was not the intention. So with that background, I hand back to Harm, and then Harm will give you the more details about the numbers.

This is the operator. We are not receiving audio from the speaker line.

Can you hear me now?

Yes, sir.

Good. all right. Then I'll repeat it again. Thanks, Bjorn, for the update, and I would like to bring some more details to the financials now in the next couple of minutes. Apologies for the short technical issue here. So as always, we start with the net sales. And as Bjorn said already, record net sales from an absolute point of view in Q3 was EUR 6.6 billion. That has been a great achievement. And of course, the most important number there is 12% currency-neutral growth for the adidas brand. Of course, for the people on the call here, you always look at the 8% currency-neutral, which includes Yeezy in the prior year for the reported number, which is 3%. What we believe is relevant as well to show you the next chart, it's a lot of numbers on there, but sometimes we probably forget what percentages mean in absolute numbers. And I want to start on the upper left where we see 17% growth in Q1 for adidas brand and 12% and 12% in Q2 and Q3, so overall 14%.

When we look at the absolute numbers in currency-neutral terms, we actually grew EUR 900 million in Q1, EUR 600 million in Q2, and another EUR 700 million in Q3. So we believe it's important summarize that for the first 9 months, what we actually have achieved with the adidas brand. So it's a EUR 2.2 billion in constant currencies in the first 9 months. And then, of course, you got to deduct then the EUR 600 million from Yeezy sales last year. And then you have an FX impact so many currencies, that is a negative EUR 600 million as well leading to only EUR 1 billion nominal growth that you see in the P&L being reported. We believe it's just right to show these numbers in absolute as well to actually showcase again what our brand and sales teams have achieved with great products and good execution on the sales.

When it comes to the gross margin, of course, a great story as well is almost 52% or 51.8% in correct terms. It's 50 basis points above prior year. This is again a very, very good achievement. And if I go to the details and decompose it a little bit, a huge, huge credit to our sourcing organization, making sure that we get reasonable prices in strategic relations with our suppliers, still some positives on the freight side, even so some of the transportation lead times are complicated in today's world. The business mix is still positive. And also from a discounting point of view, we did a great job the last couple of years and now it's stabilizing and still very, very good sell-through of our products when it comes to the underlying drivers.

Of course, you know that FX has still been negative. It's just directional when you look at the bars here, but we also talked a lot about the tariffs. Of course, they are negative in the U.S. And you see that is a new thing compared to Q2 call that we had some mitigating actions there as well. That led us still to the very, very good gross margins, 51.8%. So very good achievement, and you can imagine where it would have been without the tariffs in the U.S.

When I go further down the P&L line, of course, as always, we say, we keep investing into marketing with almost EUR 800 million in Q3 and actually 10% up or 12% of net sales. Great, great campaigns, as Bjorn alluded to earlier, fantastic product launches and relentless opportunities with our partnerships, whether it's on the cultural side or on the performance side. So very, very well usage of our marketing.

Also on the operating overheads, you see there's great leverage with minus 8% or 3.5 basis points. And you see for the first time since the third quarter '21 that we are below 30% when it comes to the operating overheads. Okay. Part of the truth, you might remember also that we had a release in our other operating income with the settlement of Yeezy of around EUR 100 million, and we did a donation of around EUR 100 million in the operating overhead line as well in the third quarter last year. But the real number now, forget about last year, is still below 30% on the operating overhead, which actually leads with a great gross margin to now 11.1% operating profit of EUR 736 million.

If I decompose that again from a profitability point of view, similar to what I did on the net sales, great achievement in Q1 with almost 10% already in the second quarter, 9.2%, up from 5.9% and then a very, very good achievement in Q3 with a profitability of 11.1%. That is a great achievement again to the teams. And when you look at the first 9 months with 10.1%, we actually where we wanted to be in '26. That's a great achievement in the first 9 months. Of course, we all know given our guidance that will not be sustainable for this year, but that's where we wanted to be for next year we achieved in the first 9 months.

Of course, there have been some questions below the line as well, and I want to spend some time on this one to explain that more clearer. When I start with the net financial results, you see the EUR 4 million plus last year. So during that quarter, we had some stabilized currencies, whether it's the Argentinian peso, the Turkish lira or the U.S. dollar was still stronger. So we had some positive effects from an FX point of view, but also from a hyperinflation point of view. And now the comparison to this year looks dramatic with the almost EUR 90 million.

But also there is now a devaluation of the Argentinian peso of the Turkish lira. We all know where the U.S. dollar is right now. So these are the effects that we had in Q3. But it's also important that -- to note that this is normalizing in the fourth quarter again. And well, I wouldn't have imagined that I talk about the election in Argentina with Milei, but we had our Argentinian General Manager here yesterday as well to give an update. So these are also important events for us as a company. So that's why we believe that election and the outcome just want to stabilize again in Q4.

Similar things on income taxes, was very low last year, but also this year, it's a pretty much normalized rate with some withholding taxes in there, but that will also stabilize in the fourth quarter. So 2 notes on this one. In the first 9 months, if you looked at the numbers that the operating profit was up 48% in the first 9 months, the net income was up 52%, and that is something you should expect as well more leverage in Q4 on the net financial results. It's normalizing.

And you can definitely take away today that the tax rate for the full year will be around what you have seen in the first half. So anywhere between 24% to 25%, hopefully closer to the 24%, which would definitely drive the net income faster than the operating profit and respectively, the earnings per share as well.

When it comes to the inventories, also that is a topic, 26% currency neutral up. And I would like to move to the next chart very quickly because also that is something that we are not concerned about. I said it on the last call already, we went probably too low in '24 with a lot of discipline because we came with a lot of inventories into Q4 -- into 2024. So this is where we have a low level last year. We actually made the strategic decision to bring products in earlier, especially World Cup related. So we wanted to make sure that anything around World Cup related, whether it's [indiscernible] or federations available to remain and continue to remain a reliable partner for our retailers that when the demand is there and of course, where we need to ship in for the launch date that the product is already here. And you know that the supply chains are volatile nowadays. So we didn't want to take any risk. So we took them early.

What's most important for us internally is that this product is current and with either current this season or for future seasons already, which means spring/summer '26. So also there, you will see an update going forward as well in the next quarter where we definitely go in the right direction again.

The same is on accounts receivables. That shows the success that we have with our retail partners. It's not just about D2C, so 22% up. That is not 1:1 the growth in the third quarter, but that's where we see that we have great relations with our retailers, and that also gives us confidence for the fourth quarter when it comes to the cash generation.

But before I go there, most importantly, the operating working capital, I've been on this call many, many times. We said if we get below 20% of operating working capital over net sales, we are an excellent company; if we are anywhere between 21% to 22%, we are a pretty good company, and we are still in that range, and we will definitely make sure that we stay within that range and over time, get below the 20% again.

That all led with the investment into working capital that the cash got reduced from EUR 1.8 billion to EUR 1 billion. I also said on a previous call that we expect to generate a lot of cash flow in the fourth quarter. And rest assured, we still believe there's probably around EUR 800 million to EUR 1 billion of cash flow being generated in the fourth quarter, which is linked to the inventory increase for the World Cup, which will be reduced and also the accounts receivables that we will cash in, in the fourth quarter. So that's what you should rely on here as well.

When it comes to cash and cash equivalents, you see the development here, which led to the EUR 1 billion and also important adjusted net borrowings have been reduced from EUR 5 billion in the second quarter to EUR 4.8 billion. And just as a side note, some of you might remember that we're maturing a bond in November and probably stay tuned for that one. We believe we want to refinance that one in due course, which we believe is also a good message to the capital market because once in a while, the last one we had in '22, we also want to test the market and be a bond issuer in the market once in a while. So that's what you should not be surprised in the next couple of weeks that this could happen.

Overall, when it comes to the leverage, we are very stable, which is important for our rating agencies as well. So also no surprise there regardless of what our cash position is. So overall, very, very confident when it comes to the P&L, when it comes to the balance sheet. And with that, Bjorn will finish up with the guidance.

Great, Harm. As you see on this slide, you have seen that many times, we are now into the third quarter, if you will say, some out of 4. We did tell you at the beginning of '23 that we think that this should be a 10% EBIT business. We gave you the different components. And it's pretty cool to see that after 9 months in the third year, we basically hit it with the numbers that you see here and are currently showing you that this is a 10% EBIT business model even if we are not doing everything perfect and even if I would say the world is not that easy to maneuver in.

What is very, very crucial, I think, in the business model going forward is this, I don't know what other brands or consumer companies are telling you. But to be a global brand with a local mindset, I think, is crucial, if you are consumer-focused and for us and also athlete focused, you need to be close to the consumer. And unfortunately, there is no global average consumer, the way many consultants and agencies are trying to sell you, the consumer in different parts of the world has their own, what should I say, taste and willingness and are also influenced by different things. And that's why it becomes more and more important to be more local, especially between Asia, with China driving it between America and Europe because there are big, big differences, not only in consumer taste and facing of sports and activities, but also now in supply chain, given all the political tension we have.

So again, getting the best people in the market and giving them the authority to make decisions. And in many cases, even the authority to make products becomes important. And then, of course, the role of a headquarter then is, of course, to keep the brand together to provide innovation and concepts. And of course, also maybe the most important thing to make sure that we have the right people in the markets and in the right functions and of course, also provide the systems that we need.

And when it gets to creating product, I think this slide is also important for you because we are now making products in all these centers. And these centers are then in addition to having a part of the global, what should I say, creation like LA has for basketball and U.S. sports, they also, of course, have the, what should I say, the clear goal of supplying the local consumer with the products that they need, and that goes for all these centers where you see there are now 5 of them in Asia. And again, the speed to market by actually producing in China or in India is, of course, much bigger for those local markets than there are for Europe and America, where you have very little production, and it's not easy to actually find a supply chain who can make footwear for you.

So I think you need to be very, very, what should I say, conscious about this development because I think it's the key to be successful. And I think, for example, our success now in China is because of this setup. We have the ambition to be the #1 sports brand and all our, what should I say, leaders in the market should have the ambition of being #1 in their market. We are, of course, aware of that we will not be #1 in all the markets that will be naive. But if you are hired in Adidas to run a market, you should have the ambition and you should talk to us what you need when it gets to investment and infrastructure to be #1, and then we will together see where we can reach it or not.

There is one exception, that is the U.S. The market leader there is so far ahead of us because they've done a fantastic job living the culture, and we have not done it over the time. But we have a clear ambition there to double our business. And we do think with the story of our brand, with the history of the brand and the resources we have that we can start to be a sports brand again in the U.S. with all the things I have explained to you and then also extend that into lifestyle and culture. And that is why we also have a management now sitting in both L.A. and in Portland who has all the tools to do that.

And the way we do this globally is, of course, to have the best product. I mean our pipeline and products, I think, has improved a lot. We have talented and creative people, and we have a great supply chain. It is, of course, also the way we present ourselves in the stores. We have said that we're using a lot of creativity to actually build stores that are that also connect to the local culture and to the possibility of utilizing what is allowed or not because you see many of these stores would not be allowed to do here in Germany, but the creativity in other markets we need them to utilize.

And then very, very important, the activations and the visibility around the world, not only global, but also in the local markets so that you connect with the consumer and you also let the consumer be part of your activation has become much, much, much more important and all the social media and all the platforms and also actually physical events have become tremendously important around the world. And that's where you, of course, need a lot of talented people with a lot of energy, and that's what we have.

So back to the end of this, the outlook, you remember our initial guidance for March, double-digit growth for our brand, if you take Yeezy out. If you include everything, high single digit currency neutral and an operating profit between EUR 1.7 billion and EUR 1.8 billion. Where we are now is that we keep, of course, the brand being at double digit. We have narrowed the high single digit to be around 9%. And then we say that our operating profit will be around EUR 2 billion.

Yes, we know that we are in a challenging world. I don't need to repeat that. And we also need again to remind ourselves, we have no Yeezy, neither revenues nor profit in these numbers. And then the other considerations that you need to have is that we think that the positive side is that we're better than we expected after 9 months. And the attitude in general from the consumer and from the retailer is actually more positive than we expected.

I know somebody reacted to that there were no strong order book in there. But remember, there's only 2 months left of the order book. So that's why we took it out. There is not a lot to talk about when you only have November and December open for the order book. So that's why that's not removed. There's nothing other into that number.

And then the negative thing, which, again, we have to address. I mean, I know you don't like us to talk about it. But of course, there is a direct impact on the tariffs. We told you that the gross impact, meaning how much more duty it would be on the products that we thought we would sell was more than EUR 200 million, and we have mitigated for I would say, almost half of that.

So now the estimated negative impact on our P&L, meaning what would the profit be higher if we didn't have tariffs would be around EUR 120 million. This is not a scientific number because it's an estimate, right? So you need to be careful when you try to say is it's EUR 117 million or EUR 123 million because we don't know.

And then what we don't know, and again, I think maybe we are too honest about this because you read a lot of criticism into it, is of course, that the indirect impact of the tariffs, no one knows. And prices increases, normally consumer buys less, and that is not only in our sector, but in all sector. And that's why we don't know and are flagging it. And I assume that everybody will flag it after a while. I think maybe we flagged it early and got criticized for it, but I do think that's better to be honest about it than actually trying to hide it.

And then, yes, sitting in Europe, there are quite some negative FX impacts when you consolidate your numbers, both on your top line and also on your bottom line, and that's just the way it is. And I'm sure that you understand that.

The good thing about ending '25 is that we're going into another great sports year. It starts with the Winter Olympics in Italy, which again is not huge commercially, but it's a great event that will be having interest also for the smaller sports and the winter sports. And then we have this fantastic World Cup that will come in the U.S., Mexico and Canada.

I would like to say one comment about that, too. We have said that this is a EUR 1 billion business or more. And people say, of course, that's on top of everything. I mean you don't know that. I mean it's obvious that it is -- some of that is additional, but it's never been an event where everything that you sell for an event is on top of everything else. So you have to have that in your mind when you do your math.

And then the last slide I will show you is this. When we met the first time at the beginning of '23, we had the situation over there where we did EUR 300 million. We told you that we had the 4 years plan to get to 10%. And I do think I'm allowed to say that we're pretty proud of the development that we have done. Not everything we have done is fantastic, and we are by far not perfect. But I do think you have to admit that we've done a decent job in a very difficult market. And yes, maybe the market will always be difficult. So I will continue to say that. But the need to change things, especially in the development of products and in the supply chain and also the way you go to market and change the attitude has been enormous. And I'm very, very grateful and proud of what our people have done. So with that, I hand over to you again, Seb.

This is the operator. We are not receiving audio from the speaker's line.

We're now ready to take questions.

[Operator Instructions] First question comes from Ed Aubin from Morgan Stanley.

So I guess I've got 2 questions on Footwear, Bjorn. So the first one is on Classic and Terrace. So did I understand correctly that you said that Terrace was still growing year-over-year in Q3. And if we look ahead in 2026, if you look at the Classic segment, the slide that you showed us, can Classic expand if Terrace contracts and so how you see that? So that would be question number one.

And then question number two, still on Footwear, I am sorry. On the opportunity with kind of Lifestyle Running, one of your distributor a few weeks ago, JD Sports, not to name it, showed a slide showing that for them, at least Lifestyle Running is substantially bigger than Classic. So I was just wondering to what extent how much an opportunity this category? Obviously, you're already making good inroads in Lifestyle Running. but if you can help us kind of size the opportunity, that would be very helpful.

Two good questions, to be honest. Yes, I said and I confirm that the Terrace Group was actually bigger in Q3 this year than it was in Q3 last year. And that even the Samba from a selling point of view is actually bigger than it was a year ago and that we have continuously grown what you call Terrace, these 3 shoes.

Again, I think many people are surprised by it and maybe some of our own people too. But the fact of the matter is that with the innovation that we've done on design and materials, we kept it hot. And we have gazillions of different SKUs around the market when it gets to different versions of it. And of course, some market have stagnated and we stopped supplying growth, but other markets are still on a growing trend. And that was also the reason why we were careful with Superstar. And to be honest, also careful with some of the low-profile side because we didn't see the need in, as you correctly say, in the classic range to oversupply too many franchises.

We are now transferring the Campus volumes into the Superstar because that's more of the same consumer. And then as I said, when Triple White is coming on, the whole Classic area will get another boost and that is typically then that we will then load on the Stan Smith.

I think it's also correct what JD showed you, although it's different from market to market, what they call Lifestyle Running is substantially bigger, especially on the male side than the Classic side. But again, many of the so-called Lifestyle Running shoes might from some of our competitors then not be running. But if you look at it now, we can be very honest. I mean, New Balance and my friends from ASICS have had a big run on shoes from the '90s and from the 2000. And even Hoka and On to be honest, have with their so-called performance shoes also had a run on the Lifestyle side, maybe for an older consumer depending on where you are in the world.

So I agree with you, if you cume all that, the category is actually bigger. And that's why it's been so important for us then to put more effort into the Lifestyle Running side, and we have. I mean the EVO SL was meant to be a performance shoe, but it's then gone Lifestyle also. So that's a huge volume for us.

The SL 72, which is the 70s running has been great for us. And then some of the other running models have been, I would call it, mixed. What you will see now is that you will, a, see that we are coming out with products around the Jellyfish, meaning the Adistar shoe that Pharrell did with different takedowns. And then we have a series of shoes from also the 2000 with Openmesh and metallics that is already starting to sell.

So we will grow in Running Lifestyle in '26, no doubt about it. Will we be market leader in any other segments? I think that's too early to say. And then we have to admit that with the success we had in the Classic, you couldn't expect that we also have the same success in Running, right? There is always a sequential effort here.

And then what I'm very, very positive about is, of course, the development of HyperBoost because that form, when we go from performance into lifestyle, you have to remember that all our lifestyle Boost shoes that were new, did well when coming with Boost. And you should not underestimate that comfort and cushioning, extreme cushioning has a lot to say in that segment. So we are very optimistic about that segment, and that's why we put so much effort in actually developing HyperBoost. And yes, it's taken 2.5 years, but that's why it's also a very good product. So I think that's my answer to your 2.5 questions.

The next question comes from Jurgen Kolb from Kepler Cheuvreux.

A quick one, just housekeeping for Harm. You guided for -- you expected EUR 2 billion of roundabout cash at the end of the year. I guess, with the guidance on free cash flow in the fourth quarter, this is still on and you're quite confident to achieve that, just to double check here. And maybe on prices, I think on Reuters, there were some comments on your reaction on the tariffs in the U.S. Maybe, Bjorn, you could double check and again, talk us through what you have done so far in terms of the prices in the U.S. and what we shall expect going into 2026 in order to mitigate the tariff impact.

I can do it first, and Harm can fill in at the back. The mitigation that we have done, which is about EUR 100 million mitigation from where we started with the EUR 200 million plus down to the EUR 120 million. How many components? One is, of course, in the sourcing in the sense that we have worked with suppliers to get better prices of some of these products. It has then been increasing pricing on new products. You have to remember that the price of a product that hasn't hit the market that is not known. So of course, that's where you can increase it without getting a negative reaction that you're increasing.

We have tried to keep all carryovers at the lower price points at the same price, so no increase for the consumer, but therefore, better sourcing or more efficient sourcing and then we have increased prices on some of the expensive models because we believe that the consumer and the higher end will be less sensitive to price increases. And then again, then lifted prices on new models that have never been priced before. So that's not going to be visible for anybody else than us. And of course, some of the retailers have been part of the development. That's basically what we've done.

Now I have to tell you that the price increases you see in the market and that you can read about the question is, are these prices then going to stay for the consumer or are discounts going to go up? And I think when you look at the U.S. right now, it's pretty heavily discounted. There has been some big brands that have had a lot of inventory. And I think maybe independent of tariffs, there was a lot of discounted products out there and I think that's what the jury on what's going to happen when it gets to sales, meaning the value of the product. And then the margin on the product when it gets to discounting, I think the jury is still out on that because we need to take and counter at the end of the year and then especially at the end of Q1 where most of the products that are then being sold are actually with a higher tariff on the buying price.

So I think that's all I can say to you because everything else is just 100 assumptions, right? We actually feel that we told you very early that the gross impact of this in the financial year of '25 will be EUR 200 million plus. We have reduced it to EUR 120 million, so we think we have done a good job. And remember, we were very, very early telling you that we have removed China sourcing almost completely from the U.S. So we're not exposed to this 100% duties that he has done as of November 1. So let's see what the other people say, and then we can compare notes. We feel we've done what we could do. And again, I actually feel pretty good about it. But how the consumer then in the end reacts on everything happening, I think it's too early to say.

On your question on the cash on the balance sheet, the EUR 2 billion. I said to the last time, and I confirmed it earlier in the call, will it be exactly EUR 2 billion, depends a little bit on FX and a little bit on the timing. So I wouldn't have sleepless nights if it's EUR 1.9 billion or whatever, but the goal is still to collect on the receivables, and that's what we plan for. So whether it's EUR 1.9 billion or EUR 2 billion, you know, don't get sleepless nights over it, but we want to get close to the EUR 2 billion, that's correct.

The next question comes from the line of Geoff Lowery from Rothschild & Co Redburn.

Just one question, please, on China. Could you talk a little bit more about what's powering the performance in terms of product and distribution? Obviously, you've done tremendous cleanup work there over the last couple of years, but the outperformance against the market is looking really very marked at this point.

The strategy in China has been, of course, to compete both against the success of the local brands and, you know, to the Western brands. And we figured pretty quick out that to do that, you need to have more local initiatives and utilize that you have factories in the market so you can go to market quicker and you can actually work with less inventory. So we developed this creation center in Shanghai. We put together a team of Chinese management that also used to work for Adidas in the past and has then worked in other brands to learn how local brands do it and then come back again.

And we have, you know, as we speak, between 50% and 60% of the product that we sell, especially on the apparel side, is designed and developed in China. So they are not the same product as you would then design and develop for America or Europe. On footwear, most of the model are franchises that comes out of the global range, but they might be tweaked when it gets to materials. And then there are certain pockets of product that are only for China, also in the lifestyle, even in originals, and especially in performance.

We see that the local brands have brought a lot of quality into price points between [ EUR 80 and EUR 100 ], where we were not competitive. And we have then used the creatives and the developers and the factories to develop them competitive products against that. And we have in those, you call them third, fourth, fifth tier cities where the local brands are dominating, we have started opening stores then which focuses on, I call them this value products and have a special offer for them.

I think our success when you look at double digit growth and also the margin that we have is because that we have changed that model to be local and that we give the authority to very, very good people. And I also have to say that the energy, I think the LatAm team and the Chinese team are probably the two teams that has, in a market, the highest energy when it gets to actually chasing business, when it gets to where the consumer is. So I would say that's the reason for the success. And I also think it's the only way in the future to get success. I don't think you can sit in neither in the U.S. nor in Europe and just design a collection and tell them to sell it. I don't think that works anymore.

The next question comes from Wendy Liu from JPMorgan.

I have two, please. One is on the World Cup. I think, Bjorn, you previously mentioned that it will be a EUR 1 billion opportunity. Would you mind sharing a bit more details about the drivers behind this EUR 1 billion, and how does this compare with previous World Cups? This is number one.

Number two, I wanted to go back to the 10% EBIT margin target you had for next year. If I look at this by region, it looks to me like it was really like North America where you probably still have a bit of gap. And then I look at Q3 numbers, 12.4% EBIT margin in North America was actually better than previous couple quarters in last year, despite you have this tariff headwind and you no longer have [ EV ]. So I just wanted to ask what were the drivers and what are your expectations about North America EBIT margin into 2026?

The EUR 1 billion, I think is the number that we have said that we assume that World Cup can bring when we look upon both what we're selling of replicas meaning connected to the teams and cultural relevant I would say products around World Cup. I think the discussion that some analysts have had is this then fully in addition and what I said is that you can never say it's fully in addition because you have to remember that the stores, when you put World Cup product in, you take something else out. So you can never say it's fully, what should I say, in addition.

I wasn't at Adidas in the previous World Cup, so I'm not sure, but I would assume that this is 40% or something higher than what we had before, just to give you a ballpark number. And the number is not final. As I said, we launched the ball three weeks ago. It's been tremendously successful, so we might actually take more orders and produce even more than we planned. We are launching the replicas for the home jersey on the 6th of November, so we will see the reaction to that. I will not be surprised when I look at demand around the world that, that will also increase, so the business might even be higher. And we are pretty sure that we will do EUR 1 billion, and I would not be surprised if it is more.

When it gets to the 10% EBIT target, I think we've talked about that from a global point of view, and it was the assumptions in '23 that we will keep basically the mix of the business when it gets to D2C and wholesale the same. And with, of course, the development in certain markets that are higher than they are today, You know that the U.S. market, to get really profitable in the U.S., you need scale, and you can clearly see that our profit margin in the U.S. historically has been lower than our major competitors, and that is just because of scale.

The improvement that you have seen this year already compared to last year is, of course, that we are doing a better job. The local, what should I say, development, the investment in American sports, the performance in our own stores, have improved the EBIT margin in the U.S. Having said that, there is a huge upside to that if we get more scale. So it's clearly a target for us and also our American management, of course, to grow over proportionally in the U.S. and then put some of that into the leverage when it gets to getting a higher EBIT margin. I think that's my feedback.

The next question comes from Warwick Okines from BNP Paribas Exane.

I've got one on gross margins, one on costs, please. On gross margins, discounting was a fairly neutral dynamic in Q3. Have you reached the limits of what you can do in full price? And then secondly, on operating costs, I wonder if you could just comment a little bit more about what's happening there. Have you been taking OpEx out of overheads, and if so, have you got any examples of that, or is the cost story more about leverage and the movements in currency?

You know, the gross margin, that has different components because when it gets to the D2C business, we have been very strong on sellout on inline products. The only place where we've been a little bit more promotional has actually been on e-com. And that is because e-com in general has been, you know, I would say aggressive on discount. And we were probably too restrictive on it last year, mainly because we didn't have enough product. And this year, we've been better in supplying product, we have decided to follow certain events more aggressive. But it's not hugely different, though, because the full price sellout has been very strong.

The other discount where you don't control, of course, is what are the retailers doing. And depending on how much inventory is in the market from other competitors, and I do assume you are aware of that big competitors have a lot of inventory that the retailers have discounted, And then, of course, that hurts your full price sale because if you are at full price on EUR 100 shoe and the competitor is on 50% on EUR 200 shoe, then, of course, you will sell less. That's just the math. And we hope, of course, that the inventory level in the trade will go down so that the discounting will be slower. But again, that's outside of your control.

On lifestyle products and on the new performance product, I would say that our sell-through rate has been very good. But of course, in a very heavy discounted environment, you had sometimes a slower sell-through because of the discount level in general. But that is very different from market-to-market. But sell-through on full price for us has not been the problem, and I think you see that also in our margins, so we're actually very happy with that.

When it gets to the cost, I'm looking at you, Harm.

Yes, Warwick, good question. There's probably three things I would like to mention. First, I mean, we have been very, very disciplined in the organization around the world because we believe in the past there was a culture of you need to have more people in order to grow the business. And now we put it the other way around. If you do more with one account, whoever the account is, it doesn't mean you need to have more people, right? And even if you, you know, develop the products, you know, I mentioned earlier, the Oasis product is more a batched up, you know, you know, soccer products and you don't need more people in order to do an Oasis range, right? So we put a lot of discipline in, you know, what are the commercial opportunities without asking, you know, for more people. So that has been very disciplined.

Secondly, as we said, we have simplified how we run the company overall. We have empowered the markets. It's a new operating model. And we, of course, there were some tasks that we used to be in headquarters that are now being taken over by the markets or there have been duplications, right? And you know that we had a volunteer relief program at the beginning of the year, so that is definitely something that is contributing to that as well. But it's first and foremost simplification of our processes, avoiding duplication. And of course, if you do that, we need fewer people, and that's what you see continuously in the P&L quarter by quarter.

Yes, you have a good point. FX helps as well. I mean, that brought the absolute number down in that quarter. But at the end of the day, I want to highlight again, Q3 is a very clean quarter when you look at this here, and that shows you that we can be below, you know, 30% when we have the right top line, right? So that's why I believe regardless of any comparison or path or whatsoever, we show in, you know, with a good top line, we have a clean, you know, cost as well, and that brings us below 30%, and we are not done.

Next question comes from Robert Krankowski from UBS.

I've got like two questions. Just first one on the top line, second one on margins. We are almost in 2026 and given your strong confidence around the World Cup, the running category, the lack of easy now in the base, anything that you can see and or any reason why you shouldn't grow double digit in 2026?

And then second one on gross margin, like again, we are looking at the gross margin close to 52%, so upper end of your guidance. And next week, we are going to see all the benefits probably of the mix with upper strong growth, as well as some of the transaction effects coming. So how should we think about the gross margin range? Is it more now 52% to 53%, for example, in 2026? Any comment would be really appreciated.

You should be a sales guy, right? I think when you look at '26, we're not guiding it yet. It's the same thing always. We are very conservative when we look into the future because we don't want to disappoint you. We want to bring Q4 behind us. We want to see what's going on in the world. When you look at the industry and you look at what we think we have in the pipeline, I think you're right. But the external factors is; a, how is retail reacting to the uncertainty? How is the consumer reacting? And what other political tensions are getting into the way? Who knows?

And the reason why I showed you the slide at the end of the presentation, where we've gone from EUR 300 million EBIT to EUR 2 billion, is, of course, that we think we have; a, taken risk in the sense that we bought enough and marketed enough to actually get there, because growing double-digit three years in a row is, of course, a risk in an environment.

And secondly, in the transition to the new business model, you have to remember we changed a lot. So I think it's about, again, how confident are we that we can continue to grow in an environment that they're uncertain? And how can we make sure that we have a base in our organization and the way we work that is aligning to this growth with a new business model? And I think that's the only risk factors.

I'm 100% convinced that Adidas is a brand that can stabilize over years a double-digit EBIT. And that the growth to take market shares should be double-digit in most markets, depending, again, what else is happening. And I don't think I can say something else than that because you're going to arrest me, you know, first quarter if something goes wrong, right? When it gets to the margin, is it 52% to 53% again? That, of course, depends on where we are growing then. Are we growing in the e-com side ourselves and in the D2C because, you know, we can do that? Then you're probably right. Are we growing in the markets with high margin like China? Then you're right.

The growth for us in the U.S. is, of course, the one with the lowest margin. That's the way it is. So it depends, again, on the mix going forward. But in principle, when we said 50% to 52%, we did not believe that we already would be at 52% now, right? So we have achieved this margin higher or quicker than we thought, and not because of the mix but because of the success in the growth and maybe also because all the brands then didn't have the success that we had.

So, again, there's many factors. And, of course, you always want us to be very accurate, but it's very difficult because there's so many variables. We are taking shares, I think, in all markets currently. We have a pipeline of products that we believe in. But of course we do not know these external factors. And of course we don't know what the competitors are doing, especially when it gets to being aggressive on discounts and pricing. So I think that's all I can give you.

And I'm looking around if someone wants to add anything.

Next question comes from Aneesha Sherman from Bernstein Societe.

I have two please. The first one's about your running business. It's been growing at strong double digits all year in contrast to the slowdown that we're seeing in some other big running brands. Can you remind us how big your running business is and are you seeing any pressure on order books for 2026 given how competitive this category is becoming?

And then related to that, my second question is around marketing. So marketing, you've ramped it slightly through the year. You're still guiding for that 12% level, but we've now seen some big competitors ramping up marketing, trying to gain share. Do you still think 12% is the right level given the increase in competitive intensity, or is there a possibility you might push that up a little bit higher next year?

I don't think Harm will give me more than 12%, to be honest. And I'm not even sure if increasing it will make you more efficient. I mean, marketing is a funny thing because the number itself doesn't necessarily mean that you're better. And I think even in our 12% is not like we will look back and say all the 12% we had were invested the best way. So I think there's room within the 12% to actually do it better. My marketing people will kill me now for saying it, but I think that's the case. So we don't have any plans or needs right now to go above 12%.

The beauty would be if we could find ways of actually taking the percentage down, but we also don't have any plans about that because we have said that investment level, when it gets to having the assets, you know, we invest about half of the money in actually having relationship with federations, with teams, with athletes and celebrities and the rest to activate them. And so far, I think that that's been a decent number. If that is changing, I mean, you say people are ramping up, and we don't really see that because, yes, there are some brands who are ramping up, but there's also someone who's slowing down. So when it goes to the competitiveness by actually signing things, I feel it's pretty stable. The best athletes and the hottest celebrities are always getting more expensive. But when you look at the width of it, I don't really see any big differences.

The running business, your question is, again, an interesting one. And to quantify exactly how big running is depends on what shoes do you put in there. But I would say it's around EUR 2.5 billion, which, again, when you put that into the context, you will see it is a pretty big running brand. But again, we have created that mostly on the higher end of the pyramid and on the speed thing. And if you look at competitors that have been very successful, they have been much more in the everyday running and especially in the comfort running. And I think we learned from that, and that's also why this hyperboosting is so important for us because we really, really believe that there are Adidas consumers that love a brand who didn't have the products available that they would like to buy from us. And all research that we have done shows that.

And we believe that the sector of comfort running, because heavy cushioning, instep comfort, and all those things are also things that people are looking for in their non-performance, what should I say, shoes, meaning in the lifestyle and comfort area. So this hyperboosting is for us very important. We might be a little bit late to the game in your eyes, but we didn't have it ready yet, and that's why we waited. And again, since we were growing anyway and running on the high-end side, we also didn't see the necessity of it.

And the third thing is you have to remember we went out of running specialty, meaning that we didn't have any, what should I say, activities and relationships with running specialty because previous management thought we could go D2C on it. To build that back again, a; to hire people to be in the running communities and also to get the specialty to buy into you again, is, of course, something that takes time. And in many, many markets, we were totally out, and the share we have in running specialty in many markets are still very low. And as we're building that with more innovative products and more visibility, of course, we see huge potential in the running category. So that is the category I think that has the biggest potential in performance side to grow in.

The next question comes from Piral Dadhania from RBC.

My first question is on the top line, and my second question is on share buyback potential. So sorry to have to come back to this, but could you just help us understand perhaps for the first half of 2026 whether the wholesale order books, which make up like 60% of your revenue base, is showing double-digit revenue growth? I think when you took over, Bjorn, you talked about 10% revenue growth through cycle. So is there anything, aside from obviously the external macro, which is very uncertain, but I think that's true for not just your company but your competitors, is there anything beyond that within your control that would lend itself to a different outcome for '26?

And then the second question is just on the buyback potential. I think it's fair to say that the Adidas share price and equity valuation doesn't appear to be fully reflecting all the strong execution and the performance that you're delivering, including relative to peers. I think, Harm, that the initial targets when you guys all took over was to reduce the leverage to 1x net debt to EBITDA to build up a gross cash balance to close to EUR 2 billion, which it looks like you'll achieve either by the end of this year or into the first part of next year. So do we think that a good use of growing free cash flow, especially as the working capital position starts to wind down, as you suggested in your prepared remarks, may be useful in sending a positive signal to the equity markets and to start buying back your stock at a discounted valuation?

I mean, the simple answer to your first question is no. There's no reason why we shouldn't only internal-wise get to the double-digit growth. I think that's fair.

And buyback is not my area of speciality, so I give it over to Harm.

Piral, thanks for acknowledging that the capital market didn't get our story in full. And that's probably true. So we actually, we look at that when you look at the share price, right? But, first and foremost, we say we want to invest into the operational business. What we have done, you have seen that in the operating working capital. Secondly, you want to be a solid dividend payer, which is always on the 30% to 50% of the net income from continued operations. And then of course, you know, I have a good, good analogy. And what I said, I was one to have EUR 2 billion of cash on the balance sheet. We either, you know, achieve the year end or with some rounding, you know, getting there in Q1. Yes, there are always some cycles from a working capital point of view.

But you're absolutely right. So, but that's definitely something we will look into next year when it comes to share buyback, not this year, unless we believe we want to be opportunistic here or there, and then we want to do something short-term, right? But right now, let's get to the EUR 2 billion first and then look at that for next year. That's probably the most logical answer. But we always, you know, look at that opportunistic as well.

Next question comes from Thierry Cota from Bank of America.

Actually, two questions on Q4 and H2 '25. You've said your implied guidance leads to 6% to 7% organic growth rate in the fourth quarter. So what do you think would be the factors of such a slowdown versus Q3, especially when the Yeezy headwind drops to about 1%.

And the second question would be on the EBIT. The EBIT guidance, the new one for '25, implies about EUR 100 million EBIT in the fourth quarter. So what do you think would be the drivers of such a decline versus Q4 '24? So you're on your decline when you remove the one-offs that you saw last year. And I would like to ask, would that be linked to the DNA, which it seems was pretty low in Q3? So is there a catch-up that we could expect in the fourth quarter and impacting negatively the EBIT?

Well, I think as always, Q4 is this quarter where people react to different things, and we are always careful guiding for Q4. It's always the same because we are dependent on that retailers take their order book. We are dependent on what happens when it gets to discounting on the digital side. That's why I think historically you always see me guide very, very conservatively on Q4. I think that's the only reason.

And, you know, there might be in the way that we are trying to improve ourselves that we will also have some one-offs that we will do in Q4. So I think it's just a conservative outlook and the need not to say anything that we actually disappoint you because that's always in the way we talk.

And then I think there was a question to you, Harm, wasn't there?

Yes, there's nothing specific on the depreciation that you called out, and that is not the reason for the Q4, but I want to echo what Bjorn said. I mean, when you get ready for '26, we have achieved a lot in the first nine months, and there's nothing specific we look at last year as well, or even going back in history, what our Q4 was. There's some seasonality in this one, but there's nothing specific we want to call out. So as Bjorn said, I want to make sure that we achieve what we say and then get ready for the World Cup here.

Sorry, just a follow-up. The DNA again was particularly in Q3. Was there any particular reason for that? And should we expect a rebound in fourth quarter?

I'm not aware of any specific reason, quite honestly. Let me come back to you then, Thierry, but I could not say there was any specific in Q3 or anything special for Q4 relative to Q3, but -- and if you look into this one, I'm not have anything specific.

The next question comes from the line of Andreas Riemann from ODDO BHF.

Two topics here. One is tariffs. In the past, you stated that the market for takedown versions of tariffs would be larger than the market for original versions of Samba or Gazelle. So today, you didn't mention that. So how relevant are those takedown versions at this stage? And then what markets is the penetration of the takedown versions already quite high? This will be the first topic.

And the second one on the cash flow, Harm, you mentioned the EUR 800 million or EUR 1 billion to be generated in Q4, that operating cash flow, right? That's from my side.

Yes. I think I quoted that because normally, when you have higher end price points, the market for the takedowns is bigger, I have to tell that the sell-through of the higher end, meaning the originals, has been so high. So still, the higher end is actually bigger than the takedowns. Having said that, if you look at the family channel, of course, they have followed all these trends. So you will find takedowns of all the [ Terrex ] shoes in the market. But it is true that in this case, and it might have to do that, you know, the original classics and [ Terrex ] are, you know, between EUR 100 and EUR 120. So it's not expensive, expensive, that the higher end of the market has actually been bigger than the takedowns.

That might change as we are converting more of the takedowns also into the same materials as we do upstairs. But to be honest with you, because we've been so successful upstairs, we haven't pushed the takedowns as much as I thought that we had to. So this is more of a, what should I say, coincidence in the sense that it has worked so well in the distribution upstairs, also in our D2C, that the need for doing takedowns hasn't been there. So I think this is a very unique situation, to be honest.

Yes. And to the second question, we indeed talked about operating cash flow, you're right.

Maura, we have time for 2 more questions.

Next question comes from Anne-Laure Bismuth from HSBC .

Yes. My first question is regarding the FX. So can you tell us or help us to quantify what would be the tailwind from FX on margin in 2026?

My second question is related to tariff. Actually, regarding the tariffs in Vietnam, a final trade agreement is expected soon. So is there any industry expectation on Vietnam tariff changes for the sportswear industry?

And maybe your last one regarding the performance in the U.S. So you talk about the reset in accessories. So is it a one-off impact? So does that mean that all things being equal, you can return to a double-digit growth rate in Q4 -- thank you very much -- in the U.S.?

Well, the tariff for the U.S. hasn't changed. They came out and said they keep it at 20% and then negotiate in categories that might be exempt. But there's nothing new on that. So all products currently is at 20%. And we are not assuming any reduction because that would be dangerous. But, of course, we hope with Vietnam and other markets that shoes and apparel would be exempt. But that's not the case. And I think that came out actually yesterday for many markets, if I'm right.

And then when it gets to the US, the accessory business that is not performance-oriented has been, I would say, first of all, a lot China sourcing. So, of course, that had to change. And secondly, it's been in the distribution that you're trying to upgrade. So, It's not a one-off in the sense that there is something you do from today to tomorrow, but I think there's good, good chances that that will come up again to double-digit increases. There's nothing drama in this, to be honest, and maybe we didn't explain it well, but it did hit us in Q3 for those reasons, and then there are plans actually to improve that very quickly.

There is also no inventory sitting anywhere to clean up. I think people under or overestimated the impact of this. So I think accessories being global is 7% of our business, and we have said all the time that it should grow quicker over time. It's kind of the last thing in the sequence of footwear apparel that accessories come. And we grew it 1% now, and I do think that in the future when we get to '26, we should see double-digit growth there. I think that's my only answer to it. And don't read too much into this because it is not a big, big thing, to be honest. Harm?

Yes, When it comes to the FX for '26, I understand you all want to have a concrete percentage or number for your spreadsheets, but I can just promise you there will be tailwind, given where we're hedged. But there's more than just the U.S. dollar. There are other currencies as well, whether it's the Japanese yen. I talked about Argentinian peso, Mexican peso, the other currencies as well. We have sizable markets, meanwhile, not just in Latin America, but around the world. But also, assume it will be tailwind when it comes to Euro, U.S. dollar. We also are fully hedged already for spring-summer '26, but there are also some open hedges. We normally hedge only 80% of our exposure, so it also depends on where the spot rate is, and we always run a simulated hedge rate if you would close it today, but of course we are waiting. It will be more tailwind if the dollar goes to $1.25, then we probably struggle on the translation again. But overall, we are going very positively from an FX point of view into '26. That's all I can say.

Today's last question comes from the line of Anna Andreeva from Piper Sandler.

Happy to have made it. A follow up on North America. Great to hear about the double digit strength in footwear and apparel during the quarter. Can you talk about how lifestyle is performing versus performance in the U.S.? Is Terrace still growing in the U.S.? And what are you seeing with sell-through in Run Specialty and other wholesale partners? And then separately on gross margin, improved very nicely sequentially in the region, despite the tariffs. Maybe talk about what drove that and sustainability of that as we get into the fourth quarter.

I think it's fair to say that the growth in the U.S. has been more lifestyle-driven than performance. I do think it's fair to say that for us to be a real sports plan in the U.S. we need to continue to invest, to get better distribution of a market share in the sports trade is very low.

And you're asking about the Running Specialty. We were almost out of it. So we expect actually over the next 18 months to see a pretty high growth when it gets to Running Specialty because you're coming from a low base. And we are a hundred percent sure that the investments that we're currently doing in American sports, connecting to both college and professional sport will help us to get much better distribution with the [indiscernible] of this world and the academies and also in the specialties. So I think it's fair to say that it's obviously been lifestyle-driven so far.

Terrific. And on gross margin as a follow-up.

Yes. As I said, I do think that the gross margin in the U.S. is, of course, dependent on that you get good distribution and that you avoid discounting. I do think also that the margin in general in the U.S. has to do with scale. There is an upside on margin in the U.S., no doubt about it. You have seen improvement, and that has, of course, to do that we have had better sell-through, and we got more of the right product into the wholesale business and we have run especially our factory outlet much better than we used to do, but that has clear an upside. So we see optimistic.

Okay. If you take the tariffs out, which, of course, is then the negative side of it. But everything being equal, we should be able to build gross margin and actually our operating margin in the U.S. over time because we have not run that market optimal, to be honest with you.

Thanks very much, Anna. Thanks very much, Maura. And of course, thanks very much to Bjorn and Harm. And thanks very much to all of you for participating in our call today. .

Before concluding today's call, I would like to highlight that we will be welcoming a group of investors here at the World of Sports next week. We talked quite a bit about our excitement about our product pipeline, be it Hyperboost, be it our new Original sports line, be it the Superstar, but also the material updates within tariff. So if you're interested in experiencing that, then please let us know, and we'll be happy to host you next week as well.

If you have any more questions to ask, then please feel free to reach out to Adrian, Philip, myself or any other member of the IR team. And with that, thanks very much again for your participation. We wish you a good and golden autumn season and look forward to chatting with you soon. Bye-bye.

Good morning, everyone, wherever you're joining us today. Welcome to our Q2 2025 results conference call here in Herzogenaurach. Our presenters today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. Before Bjorn and Harm will take you through the puts and takes of the quarter and explain our expectations for the remainder of the year, I would like to ask you once again to limit your initial questions to two during our Q&A session to allow as many people as possible to ask the questions. Thanks very much. And now without any further ado, over to you, Bjorn.

Thanks, Sebastian. Before I go into the numbers and the story about adidas, we have to say it's a sad day for us here. We have lost a very good family member, Laura Dahlmeier, which you see on the picture, Olympic champion, World Champion and very, very good friend of ours has passed away in the mountains of Pakistan, and we are actually very sad. This news came in a couple of hours ago. So it puts things into perspective and at least we thought we should recognize it because the mood in the building because of this is not very good.

So -- but as the world moves on, then into the story, and we start the story with the marketing that we did for the Women's Euro, which had their final on Sunday.

[Presentation]

I hope you all watched the Women's Euro, great tournament, where unfortunately, competitors team won. I hope you recognize that we had 3 of the 4 teams in the semifinal. We, as adidas had the best player, the best young player and the top scorer. And I do think you also saw that this was a great tournament. Stadiums were full, great television ratings. And even commercially, although at a different league than the men's Euro, we actually sold in and out of the trade many times what we have done before.

So another great step for women's football, and I hope you will all support it because it is a great, great sport that will continue to grow both from a participation, but also for us in the business of sports. I'm then moving into our business. And although I've seen a lot of comments being partly negative, I have a little bit problems understanding that. We feel that Q2 and H1 has been extremely strong. And I think as we wrote, we are both happy and proud of what we have delivered.

If you look at the top line, you see the adidas brand growing 12%, currency-neutral, the company grew 8%. You know the difference is about EUR 200 million plus of the Yeeze business, which we don't have this year, but we had last year. Gross margin in the high 51s, 90 basis points up, showcasing again the good sell-throughs, both in the trade and to the trade. And that gives you then the EBITDA operating profit of EUR 546 million, which is 9.2% EBIT margin and a growth of almost 60%.

If you then look at the first half, EUR 12.1 billion in sales, 14% growth for the adidas brand, double-digit, 10%, for the company, currency-neutral, and that's almost with EUR 400 million Yeeze business missing that we then had last year and not could replace this year.

Gross margin at 61.9%, very, very healthy, and also here, 90 basis points better than we had last year. And that gives you then the operating profit for the first half of EUR 1.156 billion, which is an EBIT percentage of 9.6% and up 70%. And remember that is not very far away from what we told you 2.5 years ago would be the midterm target of 10% EBIT at the end of '26. So we are actually very happy with where we are, knowing that this performance are in a very uncertain and volatile environment.

And when you see the tariffs on the screen, we will, of course, come back to that at the end of the presentation. We say that adidas is hot, meaning that the demand for our product globally are strong and are building. And again, I think I want to recognize that our marketing teams, both locally and globally have done a great job, building back the heat in the brand, and that's, of course, what we are capitalizing on globally.

If you look at the different markets, you know -- we know that America is the biggest challenge for adidas European brand. But now after a while of no growth and then at the back end of last year growth, we again grew 15% in Q2, 14% for the brand in the first half. We know we have a lot to catch up, but we are extremely happy with this development. Europe, this quarter at 7%, 11% for the first half. I have seen and heard that you are skeptical about these numbers. You have to remember that last year, there was something called the Euro, where you also, at that time, concluded that we were selling a lot of Replicas. And I would say there is at least EUR 100 million missing in that number.

And then yes, there was a very quiet June when it gets to retail in general, but it picked up in July. And we feel comfortable that we can again come back to double-digit growth also in Europe in the next quarters.

Greater China, we have seen terrible numbers from some brands. We grew again 11%, 13% for the first half. Extremely happy. We are having like-for-likes -- or like-for-like growth in all our retail concepts, both with our partners and ourselves. And extremely happy with the energy that the local team are showing.

Japan and South Korea, same thing, plus 15%, both for the second quarter and the first half. We have changed management there. We have changed a lot of stuff, and have the feeling same thing that we are back again towards leadership in both those 2 markets.

LatAm, been growing strongly for a long, long time. Same thing here, 23% and 25% in Q2 and H1. Happy to report that officially, we are now the market leader again in Mexico, which is a growing market for us and of course, extremely important next year with the World Cup coming up. And same thing here, very happy with the development of the brand in some of the markets that also has been difficult.

Emerging markets, a group of many, many markets, some of them, of course, now very difficult, growing 14% for the quarter, 19% for the first half. These are the entrepreneurs in our company and some of the markets doing extremely well and some of them being in military conflicts, of course, having some issues. But again, very strong numbers and very happy with the team.

That gives you then the 12% for the brand in Q2 and 14% for H1. And as I said, this is ahead of our plan and a number that we are actually very proud of.

Channels, wholesale business, which you know had or has the priority for us for a while, plus 14%. Our own brick-and-mortar store up 9%. Same thing here, continuing with like-for-like pluses. And I feel that we are a much better retailer now than we were a year ago.

E-comm also at plus 9%. So same thing, a very balanced growth across the channels. That gives you the 61%, 39% between wholesale and D2C, and the split between stores and e-com, the same due to the same growth.

The divisions, Footwear growing at 9%. Yes, it's the highest single-digit number you can get, but I don't think you should read anything into it. Apparel, we have told you that the goal was to start to bring the brand heat also over to Apparel, and that's what you have seen over the last 2 quarters. I think also when you now follow retail, you will see that especially for her, we have a lot of innovative designs, concepts and materials, and you see that now also in the results.

Accessories, plus 7%. Yes, we can always do better in accessories, but also there, more innovative designs on the Lifestyle side. And of course, we have a ball business that is starting to do very well, and that will continue into the '26 side because of the World Cup.

That gives you Footwear being at almost 60%, at 58%, Apparel at 34% and accessories at 8%. And again, very happy with this mix. Yes, you have to lead with Footwear, but that does not mean that Footwear in every quarter has to grow more than Apparel because in the end, then you will have 0 Apparel. So that wouldn't make any sense.

A lot of discussions also about the Performance business. I think our logic has been all the time, we create brand heat on Lifestyle, Footwear. We then roll it over to Apparel and to Performance. And as you can see here, the so-called Performance business of 12%, very strong growth in Running, Performance Basketball and Training, which are, of course, the -- what should I say, the categories that we need to grow globally.

Football, again, referring to no COPA and no Euro for the men's side, a more flattish business in the first half. And as we know, the football business will start to grow again in Q4 and then, of course, in Q1 and Q2 next year, moving into the World Cup.

Very successful launches on the unisex Footwear side with both Predator and F50 and all the updates. A new concept for Her with the Sparkfusion range, which was launched for the Women's Euro. And then on the Replica side, of course, now not such a focus on the national teams, but more on the clubs. And yes, there is a delay, I would say, in the business with the consumer if we compare it to last year, but you will see very strong sales of the A clubs and also the B clubs in the third quarter.

Running, been a challenge for us for a long time, to make sure that we are growing the Performance side. Happy to report more than 25% growth in the Running business. In addition to Adizero, which is the competitive and the fast side now also into Supernova. And we will, for the next year, have a great, great comfort concept coming, which will then give us 3 very solid pillars in the Running business going forward.

Training, what people actually buy to do sports in the gym and in different other, what should I say, facilities different setup in different markets, also different, what should I say, product. But we need to win also on the training side. So people are using our shoes and Apparel when they train. And good to see here also more than 20% growth in the second quarter.

Basketball, something that we will never stop talking about. This is Performance Basketball, not Lifestyle Basketball. And as you can see, very modern, very unique innovative designs, both for Anthony Edwards and for Harden, a lot of color rollouts. And I think when you check with the trade, you will see that the sell-through of our basketball shoes have improved dramatically and that our setup in L.A. is starting to pay out. And also here, although knowing that we have a lot of market share to try to grab, a very positive development.

And then as we have talked to you a lot of times, we want to be the adidas that we used to be, be in many, many, many sports also in the local ones to make sure that we have the credibility in those sports that gives credibility, but also, of course, move into sports that are then growing into the commercial. I think you all probably play either pickleball in the U.S. or you play paddle in Europe. And even with us, we clearly see that those 2 are sports that are also becoming commercial, which shows you that there are new sports that are turning in also to be commercial.

What's also been important for us for the last 6 months is to invest more in American athletes. This shows you recruits that the American team have done in the typical American sports, so basketball, baseball and American football, some of them also NIL players. And this again underlies the wish and the need to be an American sports brand and then get visibility all the way from college into the professional leagues. And this is then very, very, very much more investment than we've done before. And you will also see that we are going to invest in more university teams and have more adidas visibility also in the college game, again, decided by our local team because they have the knowledge.

The Lifestyle side, both originals and sportswear growing double digit, and the sum of that is 13%. I'll take you through the logic of the Footwear side. You've seen it many times, but it's changing a little bit. It started out with the success of Terrace, the Samba, Gazelle and Spezial. We added the Campus. And yes, of course, there is stagnation in some of those malls in certain markets, that we knew. That was also the reason why we added more categories, so Low Profile being one of them, talked about it now for about a year. You see an offer of many silhouettes and in a lot of materials.

And I can show you that especially She is moving into this segment at different speeds in different markets, but I'm convinced that it will continue to grow and that Low Profile will be stronger in '26 than it was in the whole sector of '25, and we feel very, very good about it.

Then we told you that the next classic would be Superstar. We are relaunching the most sold adidas shoe ever. Campaign are just being rolling out now, a lot of collabs, a lot of activations and of course, a lot of media on it. This is the visual language, and I'm now going to play one of the videos with one of our partners, so you get a little bit of the attitude. So let's see.

[Presentation]

Yes, pretty cool with Samuel L. Jackson, and I hope you like it as much as we, and the feedback is, of course, also very positive. You should also not be surprised that you will see more classics on this sheet going forward. We clearly see in the trend that the Triple White look is coming back again, I guess, at the back end of '26 and into '27. So you will probably see shoes like Stan Smith showing up again in a wider distribution than you currently see it. And of course, that is a good trend for us when it comes back.

We have talked to you for a long time about Lifestyle Running, about the need to have the, what should I say, the distribution and the visibility and of course, also the sales. You know that we have invested from the classic side that you see on the left side, with shoes from the '70s, all the way through a lot of silhouettes into 3D-printed shoes like the Climacool, and happy to report that this is starting to work.

The shoe in the middle, Evo SL, is doing very well. It's a shoe coming out of Performance, but that we also placed into Lifestyle. And then on the extreme side is the Climacool 3D-printed shoe, which I think is the first real printed shoe that is comfortable to be worn, was meant to be a marketing tool that has turned into be a commercial program, and it's selling out everywhere. And of course, we are then buying more machines and running the machines faster to have more volumes, and you will see more of this coming forward.

What is new, and we haven't talked to you a lot about after Running Lifestyle is this, might be surprising for you, but it's actually the Lifestyle side coming out of football. If you move around in the fashion world, you will even see that people are wearing real soccer boots, football shoes on the street, even with studs. I don't think I will see many of you doing that, but it is actually a trend. And of course, we are playing that trend.

So we have taken a lot of soccer uppers, meaning Predator, F50s and the likes and put them on different bottoms. You see here, for example, on Vistech on Megaride, but you also see them on indoor Sala shoes, or on Low Profile. And we believe from what we can see, both in distribution and in the fashion scene and in the sell-through that this is going to grow and grow and grow into the World Cup in '26. And we also think it's a global phenomenon.

So again, being the soccer brand, this is something that we should own. We do, of course, see that competition is also loading on this. So that's good because it will get more visibility, but watch it. I think it's going to be a big category in '26 and hopefully also carried through to '27. Apparel, plus 17%. I told you over the last 18 months that we were afraid of Apparel because there was too much Apparel in the market, too much, I call them black hoodies and too much fleece. We said that we need to make sure that we bring innovation in design and material and concepts. I think when you look at this, you clearly see what we have done.

We have brought Tennis-Core back again with the Trefoil, very fashionable, very classic. We have done tons of animal prints in different materials. We even brought denim, not as a jeans brand, but denim as a material both for tops and bottoms. We took knitwear out of the Chinese line and made a lot of that. And then I do think that our color people has done a great job. So the more fashionable the retailer wanted to go, the more success that we have had with our brand, which I think is a credit to the job our people have done.

The same on Apparel is the collabs. I mean, who do you partner up with from celebrities, influencers, athletes and also brands to make it visible. I think the most successful right now is with Oasis. You know Oasis is on their comeback tour in the U.K. We did a deal with them on the merchandise. And if you go to the concerts that are all sold out and are fantastic, you will see it's almost an adidas event with the lot of Three Stripes and Trefoil. And we are very, very proud of what our U.K. team has there executed because it again shows you a local initiative that actually has gone global. And it's not only image-wise very good, it's also commercially become a big business.

And then finally, accessories. I think I said it in the beginning, we had some work to do in accessories. We feel that we have also there become fresher and more fashionable. And then you know in accessories, we also have the ball business. And every launch we have done on balls, soccer balls lately has been good. And we have a huge order book for the World Cup balls going into '26. So you will continue to see growth on that level.

So when we conclude the first half, we feel very good. We are ahead of our plan. We feel that we have done what we promised, and we have a lot of energy in the market. It's all based on what we have talked about a long time, being a global brand with a local mindset. It's to put the consumer and the athlete in the center of all we do. It is to make sure that the markets are really responsible for the business because they are closest to the retailers and the consumer, and that we in global should facilitate for that by giving them the resources, making sure we have the right people, giving them concepts and, of course, work on innovations. And therefore, we feel that we're moving in the right direction actually in all regions. And in that, it is, of course, also that we need to make decisions as close as we can to the consumer and that means strong local leadership. And I think when you look at our local leaders now, we think we have the right team, and this is going to be extremely important and maybe a competitive advantage as we go forward.

We see this in the products, a lot of local products that are being made, designed either globally or locally and some of those products then going back again into the international line because everything we do in China or the U.S. or in any other markets is visible also for the other markets. So a lot of movement across that. We see it in marketing. We have talked about the global frame. For example, you got this, which you see on the Performance side. But we feel it with local content, so the athletes that are being showcased are relevant for the market where the marketing is being done.

And then maybe a surprise to you, the same goes for the retail stores. The culture and the architecture of different stores in different parts of the world are different. And also the legal side is different. So you are allowed to do many things in certain markets that are more the adidas brand than maybe you can do in a German city. And you see that here, there's a lot of innovation. There is a lot of, I call it, cool adidas designs that are hitting the market. And therefore, we are also opening more stores. I think we have opened about 60 to 70 stores net in the first half year, more than we had last year. And since it's working, we will continue to open new and modern stores because not only does it showcase the brand in the best possible way, it is also now commercially successful.

So with that background, I hand over to Harm, who will take you through more details of the numbers.

Thank you, Bjorn. And as always, a warm welcome from my side as well. Good morning, good afternoon, wherever you reside right now. I just want to give you some updates on the more deep dives on the financials, with the P&L and the working capital. But I want to start with the overall P&L in the second quarter. And I want to say again, yet again, we delivered a quality quarter in, of course, a much more volatile environment. And I believe and we believe there is no surprise in these numbers, and we executed as we planned and as we communicated before.

Of course, it starts with the double-digit growth on the adidas brand with 12% currency-neutral, and Bjorn talked about the 40% for the half year. More importantly, even a very healthy gross margin with 51.7%. And of course, it's worthwhile to go into some of the details there on the gross margin. First and foremost, the 90 basis points would be underlying 120 basis points if we exclude the Yeeze part in '24. Now how could we deliver this? Of course, it starts with more volume. On the product side, we have a fantastic sourcing organization that generated savings through more volume and better relationship to the suppliers. So it's a green arrow.

Yes, you all know there were still some freight spikes in '24. Also, that is a green arrow when it comes the gross margin. Bjorn already talked about the tariffs. I mean, we said it in the press release, it's a low double-digit amount already in the second quarter. We will talk about the second half later on. When we talk about business mix, you know that it's a combination of markets, channels and categories, and most probably what I want to call out there is the more we grow in the U.S. just on the gross margin, of course, that has a negative effect on the business mix. And of course, with the success and support of our wholesale partners, it also carries a lower gross margin compared to DTC, which, of course, was a channel that was carrying the lion's share of the tariffs in '24. So shouldn't look at negatively. That was actually planned as well.

What you also see it's a more quality distribution as well when it comes to the discounting, especially in China and North America, where the brand is really, really hot besides other markets as well. We are still able to do to be less promotional and that's why discounting is still a green arrow here. I don't want to talk about Yeeze a lot. Luckily that last year, when we talk about the comparisons of Yeeze, of course, is in the red here for the second quarter. And FX is also negative. I want to call out here that is actually more than a percentage point on the gross margin when we look at the second quarter. But also there, which is interesting for many of you, it's not necessarily the U.S. dollar. This is more we talk about the Argentinian peso or the Turkish currencies. So it's more of the countries where we have more inflationary environments where we got an FX impact, that hopefully is also a good indication for you in the future.

When we go further down in the P&L, of course, we are successful to spend exactly 12% on the marketing. But jokes aside, we keep investing in the brand because that's what we believe will give us in the midterm, well, here as well, to keep the top line going where it needs to be. And what you see probably for the first time, more meaningful after the first quarter as well is a significant leverage on the operating overheads with 230 basis points in the second quarter. And I want to call out here as well, this is not impacted by onetime last year in the second quarter because some of the onetimes then came in the third and primarily in the fourth quarter. So this is very much like-for-like, and it really shows you the discipline that we put in place and what we always said, leveraging the top line with double-digit growth to the bottom line, which is EUR 546 million is up by almost 60%.

That absolute number is even more remarkable when we remind all of ourselves that we lost EUR 300 million in translation on the top line and still delivered in absolute terms, EUR 546 million or 9.2% in operating profit. So definitely speaks for the quality of the quarter. When we go further down on the operating profit, also no further surprises, slight increase on currencies on the financial expenses, but even more importantly, also income taxes. As we said all along, with the right top line and the right profitability, we get the income taxes normalized here with 23.3% and you should or can update your financial models for the full year around the 24% of a tax rate. That's probably a good assumption for the full year as well, which results in the net income growing even faster than the operating profit with 77% over the prior year.

When it comes to inventories, I know there were some concerns on inventories being 22% up. I also want to give you some more details on this one on the next chart. You might remember, I said even in '24 with EUR 4.5 billion is probably the lowest inventory you will see hopefully forever because we will continue to have a growing business and a growing brand. So we probably -- we were overshooting a little bit with the reduction of inventory. That's what you do when you focus on it, and that's why you should see the increase in light of where we are coming from with the EUR 4.5 billion, but also understanding that it's an inventory for future growth. It's also an inventory that is impacted by some of the tariff discussions that we have. It's an inventory that's impacted by the Red Sea, and we have some goods and trends that are longer on the sea on the container ships to make sure that we are a reliable partner to our wholesale partners as well.

We have it available when it's needed. And that's why I'm absolutely no concerns on the inventory. And even more importantly, the aging is healthier than ever. So 80% of that is current season inventory. And hopefully, we have still enough inventory left to do some clearance in our factory outlets or whatever opportunities will be out there. So very, very healthy inventory also when we look at the EUR 5.3 billion here. When I go further down the line of working capital, accounts receivable, of course, being up with our focus on our wholesale partners growing nicely, growing faster than D2C, that will also enable us to cash in a little better in the second half, which we will come to in a second. And you also see the accounts payable being up, which is an indication of what we are paying to our suppliers around the world.

So overall, working capital up by 28%, but also that the percentage is one thing, but the percentage of our net sales is probably more relevant for all of you and of course, for us internally. Similar to the inventory, I was -- when I finished '24, in Q1, I said, if we get below 20%, we are already a healthy company from a working capital point of view. That's why I said we probably went too quickly too healthy. That's why I'm very, very happy still where we are. And you can count on me whenever we are between 20% to 21%, we're actually a good company. And yes, in midterm, everything is normal and not as volatile anymore, we want to be a healthy company below 20%. But that's also an indication where we are.

That, of course, has an impact on our cash. At this point in time, we reduced the cash by EUR 800 million. That also is not a surprise because we invested in the inventory. We know that we need to place these orders early. So no concerns on this one, which also shows you on the next chart. You see it's going down by EUR 900 million. But you can also model in your sheets depending on whether we pay down our bond that becomes due in November, you can probably play around with EUR 2 billion of cash at year-end, depending whether we pay down the bond or not in November. That's something we go to decide in the next couple of weeks and months. But also there, it's a timing effect, and we plan to generate probably EUR 1.2 billion to EUR 1.4 billion in cash in the second half.

When we talk about adjusted net borrowings, also there, the better indicator is probably what we discussed with our rating agencies. And you see here where we are coming from, from Q2 '23, Q2 '24 and now having a 1.7 multiple of the adjusted net debt over EBITDA. That is a very, very strong number and also that gives us some flexibility on the balance sheet, whether we have it right on the cash or overall, a very healthy balance sheet, that also delivered an uptick in the rating from S&P from A- to A. So also a good start if you decide to refinance a bond in November, then we would do that coming from the strength on the balance sheet. But again, that call is still out. But with that, I would like to hand over to Bjorn again.

Thanks, Harm. As we have said many times, we are halfway into the third year. So we are a little bit further than the half time since we started together as a new team. We promised you the numbers that you see on the screen that gives you 10% EBIT. If you then put the H1 of '25 next to it, I think we have actually delivered what we told you almost, we're growing double digit. We have a gross margin at the high end of the 50% to 52%, with 51.9%. Marketing expenses is at 12%, which we said all the time.

Operating overhead is a little bit higher than the 30%, and 9.6% is a little bit lower than the 10%. So again, we promised you that the adidas brand with the current business model in the market that we saw in '23 could deliver 10%. And I think there we are right now with, of course, certain uncertainties, which I know you don't like. But of course, we don't like it either, but we have to work through it.

You remember, we started the year with the following outlook, double-digit growth if you take Yeeze out, high single digit, if you include it, and an operating profit of EUR 1.7 billion to EUR 1.8 billion. And then we did flag some issues that we saw, but we did not flag the tariff issue because we didn't see that coming. I have a slide, and I will explain you what the tariff situation is for us. It's a little bit complicated, but I'll try to take you through it.

If you start on the left side, it is Vietnam, which is the biggest country or region for our U.S. business. The blue box, 30% means that 30% of our imports into the U.S. comes from Vietnam. All that means the duties that were before the tariff discussion started. So basically, 14% was the Footwear duty, 26% was Apparel and 8% was then the accessory duty. Then that changed with 10% in the first indication from the American authorities, so then to 24%, 36% and 18%. And then in the second round, it went to 20%, so it's 34%, 46% and 28%. So there's an increase of 20% on all duties in the assumption.

Then you go to the second biggest country, which is Indonesia, exactly the same logic. But there, the difference is not 20%, but it's 19%. And then you can go on like this, Pakistan, 30%; Cambodia, 36%; and Jordan, 20. You will ask where is China? Well, here it is. But if you see in the blue box, China is almost irrelevant for us because we have reduced the amount of China imports into the U.S. to only 2%. But here, you can see it started out with an old duty rate of 21%, 32% and 20%. And then during 3 increases, it went up to 166%, 177% and 165%. And then it came down again to the 30% more, which is then 51%, 62% and 50%. But again, for us, midterm, not really relevant.

I can then add the other 4 countries, which is Thailand, Honduras, India and El Salvador. And there, you can see the full picture. If you take the planned volumes that we have in the second half, not what we're buying because that will be more, but what we expect to sell, the impact of these duties, if they are the way we have calculated them here, an increase in cost of goods sold of about EUR 200 million. Again, there are uncertainties on this.

There is not even a certainty by many people if these additional duties are in addition, maybe they're only replacing. We have made an assumption based on all the advice that it is actually in addition, and that's why we get to these numbers. If you then look at what we have done, I talked about China. We didn't go out of China. What we did is that we transferred the Chinese capacities to be mostly China for China, and you see the growth we have in China. So I would say close to 90% of the production in China now made in China. And then we took some of the additional capacities and then use them for other non-U.S. markets.

We work with our suppliers who are mostly multi-country, and are then, of course, depending on the FOB plus the duty for the country origin, trying to optimize this based on the tariffs that we think will come. And hopefully, when we have them final, we can optimize it correctly. We have been very close to the local governments to understand where they are, although we also understand that our impact, which of course, not that great, but we feel we have worked well with them.

And you have to remember that since there are no shoe factories in the U.S. that can take these volumes and also no Apparel, then, of course, local production is not the alternative. And I think that is important for all of you to understand, which might be different in other sectors. And then, of course, all suppliers know that when we have the truth, we will then work with the suppliers to see how we can then take this cost as much as we can down by sharing then the burden in different forms, and as I said, also reallocate production then where the duties plus the FOBs are then the lowest for the U.S.

And then finally, of course, we will -- and believe me, we have modeled thousands of different programs, what kind of price increases could we take depending on the different, what should I say, duties, but there's no decision on that. And I think you all know, we've said it also from beginning, we are not the price leader, but we, of course, follow, a, what the market is doing, our competitor is doing and also, of course, look very closely what the consumer is accepting because in the end, it's to keep the balance between all these factors.

So knowing that, we confirm our outlook. So the growth in double digit, excluding Yeeze, the high single digit when you include Yeeze and still, we can deliver an operating profit of EUR 1.7 billion to EUR 1.8 billion. Many companies have, I've seen, removed the outlook totally and some have reduced it dramatically. We thought that we were very prudent the way we're doing it. We do acknowledge that there is an upside to this should these duties be lower. But again, with the uncertainty both on what they're going to be and with the uncertainty of what the consumer demand will be, we felt this was the most prudent way of doing it like we always do. And again, you shouldn't have a lot of fantasy to think that if we didn't have the duties, the guidance will probably be at least EUR 200 million higher. That is an easy math for you to do.

The reason for that we would have been more bullish is, of course, that the first half has been stronger than what we thought it would be when we started the year. We still have a very strong order book for Q3 and Q4 despite these uncertainties. And I think you also can measure it that the attitude towards the brand, both from retailers and consumers are actually strengthening in all markets.

And then the negatives in addition to conflicts and uncertainty in many markets is, of course, the direct and the indirect impact on the tariffs, which no one knows. And when we don't know, we always go on the conservative side. So I think that kind of tells you the story, hopefully, gives you a perspective of what we have done and how we think. We feel that we have a great pipeline of products and great marketing and have momentum. And of course, the time from now up to the World Cup in the U.S. is important for us. But believe me, we are also working on things after that, which, of course, is the way adidas should work. So with that, I hope we gave you some confidence, and I'm handing over to Sebastian to do whatever you want to do.

I assume there's going to be some questions, so I would suggest that we move to the Q&A session. So Maura, if you could lead us into that part.

[Operator Instructions] The first question comes from the line of Grace Smalley from Morgan Stanley.

My first question would be on the order book. I think you commented on strong order books for the remainder of 2025. Could you also just touch on the initial reads on order books going into spring/summer 2026 and therefore, your confidence level on continued double-digit growth for the adidas brand going into next year, perhaps particularly in light of changes in the competitive landscape? And then my second question, you mentioned the excitement around the World Cup and that we should start to see tailwinds from that in Q4 and then building in the front half of next year. Could you just comment on how we should think about the magnitude of those tailwinds and how big that benefit could be?

Yes. The order book, when you look at it, is as solid as it's been all the time. The order book according to the normal time lines are full for the rest of the year, meaning Q3 and Q4, and then it's currently building for Q1. But there's no indication from the way people are placing the orders that there is a change in the order book. So same confidence on that. What we all know, though, and that's the only, what should I say, disclaimer is that should the sales in the U.S. go down because of inflation, you don't know what's happening to the order book because as you know, better than me, orders can be canceled and moved depending on what is happening in the market. We have not seen cancellations, and we have not canceled anything with the factories. So currently, it's all on green. But I think we all know should we get mega inflation in the U.S., things will happen on the demand side, then of course, volumes will go down.

I think when you look at the import, I think the last official month that we have of Footwear imports to the U.S. is May. And I think you already there saw that imports of Footwear are down double digits. So again, it's an indicator that you can look upon, but we haven't changed anything right now in our planning based on neither order book nor what we have seen on consumer demand. But again, we're only a week away from having the tariffs final, hopefully, and then we will see what that means.

The World Cup this time has a big impact because I think it's the first time, at least that I'm around, where we believe that soccer will have a cultural impact that is bigger than the fan, meaning there are Lifestyle trends on both Apparel and Footwear that we haven't seen before. And it looks to me from the demand that they are global. So you're probably looking at the business that are in the EUR 1 billion and more that you've never seen before in the soccer side. But again, we will see. I think we have shown you over the last 6 months that the culture wear around soccer has increased. You see it everywhere, and that we now also are bringing Footwear to the street that comes from soccer, that has never happened before. So it might be we're sitting on something that is even much bigger than that. But currently, I would say it's EUR 1 billion or more that is connected to World Cup that we currently see.

The next question comes from the line of Jurgen Kolb from Kepler Cheuvreux.

Indeed, 2 questions. First of all, on all the product initiatives that you showed, Bjorn. Is there a chance for you to increase average selling prices? Or is there an intention to do so with all these new products that are coming in? And secondly, specifically on the Running side, you mentioned very strong performance here, specifically on the specialty Running channel, have you made inroads there? Is that now also moving into growth? Or do you still think this needs a little bit of more time?

I mean, Jurgen, we always need more time. It's obvious that we have improved our Running business, I think, from a product and also from a Performance. And now from a sales, it's growing 25% and more, and it's across all the channels. We feel with Adizero, which is the fast side. Also, shoes with carbon plates and are made to run races and run fast. I think we are in very good shape. We added Evo SL underneath, which is EUR 150 shoe that has been accepted tremendously well in the industry and maybe it's one of the best-selling shoes at all. I think the area where we've not been happy is on the comfort side that other brands have done a better job than us. But that's where we next year with a new concept, which I think you would love, feel very comfortable that we get another leg to stand on, that will actually be both in specialty, but also have the legs to go into, I would call it, normal sports distribution and the concept itself even into Lifestyle.

So if there is a category right now that we feel comfortable with what we have in the pipeline, it's actually probably the Running side right now. That doesn't mean that we feel we are close to being saturated. There's many, many markets where our market shares in specialty is a joke. But again, if we continue doing what we're doing and we have some time, then you will see very good progress. In general, with all the product initiatives, of course, there are new products where you can raise prices. But important is that you cover each category with the right price points. So I think the price points in general will not change, but we might be able then to fulfill some of the higher price points with more volumes, which is, of course, always, I would say, a goal.

But I think you also have to be careful with the uncertainty in the trade right now. And I would say also a little bit depressed consumer in many areas. I think it is very, very important that you don't run away from the lower price points and believe you can just raise prices and do less volumes. So you will see our pipeline being targeting everything from, I would call, the Deichmann consumer and all the way up to specialty and even higher than that when it gets to fashion. So we have all the product we need in all price points, and the go-to-market process market by market is important that we fill it. You also have to remember that the price increases that might come in the U.S. because of the tariffs should not have any impact on prices in any of the market. We will not try to take the tariffs in the U.S. and then put them on the prices in Germany. We will not do that.

The next question comes from the line of Anne-Laure Bismuth from HSBC.

My first question is about the FX. So can you explain how you see FX tailwinds help you in H2 this year, and in 2026, and how much this can mitigate the potential tariff pressure? And my second question is about the Lifestyle. What is the balance between Terrace and Low Profile? And also, you mentioned to the press that you might relaunch the Stan Smith late 2026. What would prompt you to do or not?

Yes, I'll hand over to Harm afterwards for the FX. I mean, Terrace, if you look at the models, it's, of course, still much bigger than Low Profile. But you start to see Low Profile growing week by week, month by month in most markets. But of course, none of the Low Profile models have replaced some yet, and they shouldn't, to be honest. And then you have to remember, it's not only Low Profile, but it's also then what we are doing with Superstar.

And then the Stan Smith issue is we -- there was a time where every fashion item from other brands with Triple White, and then Triple White was replaced also, I think, because of us into more color. And then trends normally go like this. Triple White always comes back. And we feel knowing that the soles have to come lower and the fashion has become sleeker, that Stan Smith will be our answer. If we then need to scale it at the back end of '26, maybe, maybe not. But we are at least cleaning the market. So you will see very little Stan Smith now on sale anywhere. And then we will start also there to incubate and hold it. And it might be '27, it might be the back end of '26, but we feel that we have it in the pipeline. And then I think, Harm, FX?

Yes, Anne-Laure, on the FX, of course, it's an interesting topic. And yes, there will be light at the end of the tunnel for us looking forward. But very concretely for the second half, as I indicated for the first half, the currency impact was primarily from countries like Argentina and Turkey. So the first thing is Argentina has definitely stabilized. So it should be more neutral in the second half. Turkey is a slightly different story. There's still some volatility in that one. So it means that it's neutral to tailwind when it comes to these 2 currencies.

When it comes to the U.S. dollar, of course, we are hedging earlier. And all the weakness of the dollar that we have seen, we have probably seen in the last 4, 5 months, where a lot of hedges have been done for Fall/Winter '25 already. Yes, there are slight benefits, but there were not a lot of headwinds in the first half either. So dollar is probably more neutral. But of course, going into '26, it will become a tailwind. Very clearly, we are more favorably hedged on the dollar going into '26. We actually started early looking into '27. So it's definitely a tailwind in '26, and it will probably accelerate going into '27.

What we should not forget, however, there's always a translation impact as well when you have a weak dollar or weak RMB or whatever, as you have seen in Q2. But we are better able to mitigate these things because these are local things. If we lose something on the RMB or the dollar, we lose something on the cost side in these markets as well. So as you saw in Q2, we are more likely to compensate for the translation impact when it comes to the absolute number, potentially even leading to a percentage better profitability. But in sum, don't expect too much in the second half of this year, but it will not be a headwind anymore. Secondly, yes, there will be a tailwind going into '26, especially when you talk about the dollar, probably ignore to some degree the translation because that can change very quickly and even more so going into '27.

So as I said previously, I was always praying for [ $1.15 ]. My prayers have been heard. But again, this is a short-term thing. The last thing that you asked, can we compensate for the tariffs in the U.S.? It's a mathematical question. The key thing for us is that we want to be profitable in the U.S. So yes, it might help in the short term, but we want to make sure that we are profitable in the midterm in the U.S. And that's why what Bjorn said, we look at selective price increases, we look at mitigation with our suppliers. But first and foremost, if there's certainty what the tariffs will be, and then we take actions as always with calm hands.

Next question comes from Thierry Cota from Bank of America.

I have two of them. First, could you restate the one-offs that hit the EBIT margin last year in Q3 and Q4? I think this was mentioned earlier so that we are sure to get the clean base, notably removing donations and restructuring costs on the assumptions I have, I think I have a cumulative EUR 150 million in Q3 and EUR 200 million in Q4. Just wanted to make sure this was correct. And secondly, Bjorn, on the discussion on the mitigation action on the tariffs in the U.S., you did not mention sharing the pain with retailers. So I was wondering if anything was discussed there. And you did mention on price -- the question of price, the issue potential of price elasticity, and you sounded a little cautious. So I was wondering what has been your experience across the companies where you worked on price hikes in the U.S. and the response you've seen from the U.S. consumer?

Yes, I'll take the last one. The pricing in a circumstance like this, no one has the formula because, again, first of all, there is the uncertainty of what the tariff is going to be. And then, of course, there is a brand that is much bigger than us that probably will lead, in my opinion, the price increases. So what we are doing is that we are, of course, playing different scenarios on how we price different products. And to be honest with you, totally new products that hasn't existed before, people wouldn't know what the price would have been, right? So you're free to price it the way you want. So of course, there are possibilities to mitigate this cost compared to what it would have been if you didn't have the price increases. So I think you just have to wait and see what the markets are doing. There has -- so far in the U.S., if you look at prices in retail, not been any price increases because the discounts have been going up.

You've also seen that, I think, in the import statistics, that imports have gone down. So it's going to be interesting to see how the next couple of months as soon as we know what the real tariffs are. And then don't forget if you look at the whole chain, then it's obvious that the suppliers will take part of it, we will take part of it, and then, of course, also the retailers will take part of it. So in all those discussions, I think it's very important to keep the transparency and try to help each other and not try to optimize your own situation. We have seen, and I'm sure when you talk to the factories, they will tell you that there has been a lot of cancellations. We have not canceled one order. We have not seen any cancellations yet from any retailers. That might, of course, change depending on what happens in 5, 6 days. But we have the clear, clear, meaning that we need to manage this very balanced, try short term to be fair, both to our retail partners and our suppliers and then, of course, try the midterm and going into next year and to have the recipe.

The EUR 200 million cost of goods sold will, of course, not stand there by itself as a reduction in our EBIT. We will, of course, mitigate. But we think it is important that you know what the cost would and could be just because of the increases in tariffs, and that's what we flagged to you. We already had a double-digit hit when it gets to cost of goods sold already in Q2 in the U.S., which we, of course, followed in the results that you saw. So again, I do understand that you would rather have us increase our guidance as you always like to and then be very confident, but I hope you understand that regardless of what you read, we don't even know what the duties will be.

There are still a lot of discussions based on, for example, the European duty to the U.S., which the 15% replaced the 10%. It was not on top. And here, of course, we made the assumption that all the duties we talk about are stacked on top of the old duties. We don't get any real confirmation that this is true enough because there are no, what should I say, written confirmation of this. So still a lot of uncertainty. And you know us, when we have uncertainty, we always go the conservative way.

Maybe just as a follow-up. So EUR 200 million, is mitigation action an effect already in H2 as much as in the following year, you think? Or it's really a ramping up, of the negotiations are still ongoing with suppliers and retailers, so impact moderate H2 and more visible next year? Is that the same?

Well, it's obvious that your mitigation will be stronger in '26 than it will be in '25. It's kind of obvious. But what I'm saying is that the cost of goods sold increasing EUR 200 million. And remember, that's not on all your buys because you don't sell everything you buy. So there is quite some volumes that are then sitting on your balance sheet at the end of the year. And of course, we will mitigate some of it. But again, I think it is important first to say, okay, these increases have that kind of impact. So tariffs is nothing else than a cost. And regardless what people are saying, you can't -- you just throw a cost away. It's there.

And secondly is, of course, that the time it takes then to mitigate for it are depending also on how the consumer reacts. And don't forget that these tariffs are not only targeting Footwear and Apparel, it's everything. So it's like -- we feel, to be very honest with you, that could we have produced in the U.S., we will understand it because then you could move some of the production in the U.S., but let's face it in Footwear, where you're going to move it. So there is a slight hope maybe that later, there will be an exemption for Footwear, for example, or a reduced one. But at least this is just hope. So we have to work with the worst case, and we have told you the worst case. Harm?

Yes, you raised a very good question, Thierry, on the third quarter and fourth quarter, what kind of one-off costs we have. And I'm pretty sure when we announce our third quarter results, we will pull out the chart from last year. And just to repeat again what we said last year and what we will repeat in 3 months from now. So first, of course, we had an accrual release linked to Yeeze as well, which was roughly EUR 100 million we said in other operating income. So it's really important that we get the line items right, and that is definitely something for the road show and for our Investor Relations team, for Adrian and Sebastian to explain that in more detail. So EUR 100 million positive in other operating income last year, that will not repeat again this year. Of course, we offset that one with a donation of around EUR 100 million, and I'm talking about rounding numbers here -- of around EUR 100 million that did hit in operating overheads last year, which will not be repeated this year.

And then we had 2 more items. There was, of course, the profit contribution from the remaining sales of the Yeeze, which was around EUR 50 million and primarily the gross margin. And of course, that was offset with some restructuring and one-off costs of around EUR 50 million as well, which hit operating overheads again. So you have kind of EUR 150 million operating overheads negative last year one-off, EUR 100 million other operating income positive and EUR 50 million Yeeze contribution in the gross margin positive. That's kind of from last year.

When we look at Q4 again, then there was another restructuring of around EUR 150 million that we accrued for the voluntary leave program that we had here at our headquarter. So these are kind of the numbers. I know it's tricky sometimes to get the line items right, but I appreciate the question because that's something that will keep us busy on the next call in Q3, and we try to be as transparent as possible. And of course, these are rough numbers, and we try to keep it simple last year, and we will try our utmost to keep it simple again during the next quarter and when we communicate it.

Next question comes from the line of Aneesha Sherman from Bernstein Societe Generale.

The first one is on the Lifestyle Footwear percent of the mix. Lifestyle slightly outgrew Performance this quarter, and it seems you're broadening the mix with a lot of new launches. Of the 58% that's Footwear, can you talk about how much of that is Lifestyle Footwear? And do you expect the mix to continue to skew towards Lifestyle? And any commentary on how that might impact margins over the next year or so? And then my second question is just a clarification on your tariff guidance. Of the EUR 200 million, is that fully going to hit the second half? Tariffs were a headwind in Q2 already. Is some of that EUR 200 million already embedded in Q2?

You know the definition of Lifestyle and Performance is a very difficult one. If I put one shoe on the table, 5 would say it's a Performance, 5 would say it's a Lifestyle shoe. So when we start to talk about this, it is extremely difficult because if you take a running shoe and walk in it for the street or you take a tennis shoe and use it as a fashion shoe, it's up to the consumer. So it's very, very difficult to give you an answer for that, that gives you any, what should I say, truth to it. What we have seen is, of course, that we turned around the brand by selling more shoes that the consumer classified as Lifestyle. And we believe, and I think it's proven that the consumer that buys us because they like the brand has a bigger probability to also buy us in Performance.

So if you bought 3 pairs of Samba, and you're now using the knitwear because you like the Three Stripe and the Trefoil and you start running, the probability that you will then pick up a running shoe that looks good and our advice as being a good running shoe is bigger than if you have no connection to the brand on the Lifestyle side. You also know that there are so-called running brands that most of the product that they actually sell are not being used for running, but for comfort and actually walking and being, what should I say, stylish. So I don't want to go into those mixes because it gets very complicated.

If you look at the margin on what we're selling on Footwear, we think we are at a stage where our markdown rate is very, very low, meaning that the offer is very good. And then that we then have to engineer the product and the supply in a way that we can continue to improve the margins. But you know 52% margin in our business with a 60-40 wholesale retail is a very good, I would say, gross margin. We can work on improving that, but we also feel very happy with where we are. To your tariff thing, the things we have told you is that there was a double-digit million taken care of already in Q2 because we bought products with higher duties that we sold. And then the EUR 200 million is what we expect would be the product that we have imported or will import with higher duties that will be sold. The number of what we're importing is, of course, higher, meaning that this will then have an impact in Q1, Q2 of '26.

So worst-case scenario, the way it is today is that you have another EUR 200 million of increased cost of goods sold in the second half that has an impact on second half of EUR 200 million before we mitigate anything. But then, of course, we will mitigate. And I'm sure when we get to the Q3 release, we will start to tell you how much we could mitigate and what the impact is. What I'm mostly worried about, to be honest, is not only the cost, but it's what is going to be the consumer reaction in the market when all these price increases that I think will come, not only in our sector, but in general in the U.S., what will then happen. And that uncertainty, I think everybody, what should I say, sees. And I think that's why many companies doesn't even give you an outlook. We think that we are very fair because we confirm our outlook after a strong first half. And then hopefully, we can even deliver you better results than that. But as prudent as we are, we like to be conservative.

The next question comes from Warwick Okines from BNP Paribas Exane.

Two questions from me, please. Firstly, you've talked about this a bit, but what would you say the main reasons are for why you're outperforming by so much in China? And secondly, another question for Harm on costs. Harm, on the Q1 call, you said that flat or negative cost was sort of too ambitious for the year. But given what you've already set out about the one-offs in the other operating overheads, isn't that a reasonable assumption for the second half of the year after delivering plus 1% on costs in the first half?

I think on China, when you look at sellout data, I will agree with you that we are outperforming all the other brands, which I think has to do with that our Chinese team after a very difficult time, the BCI conflict, the lack of possibilities in marketing and also the lack of flexibility in doing local product has gotten the freedom and the energy of it. So when you look at it now, we have a design center in Shanghai that works on tweaking global concept or even designing from scratch. All apparel have been changed to Chinese spec. So the sizing and, what should I say, the patterns are made for Chinese consumers and not for Germans. And I think the sum of that in a market where we now are also doing marketing, meaning that we have signed both athletes, federations teams, celebrities and we're doing a lot of activations are causing a brand heat that was not there.

And suddenly, you have like-for-like growth, both with our retail partners and in our own stores. And that, of course, again, causes energy. I think when you look at Pou Chen, for example, and I'm sure you talk to them, they had negative numbers reporting, but with us, the numbers are positive. And of course, it's a great situation to be in. When the team feels that what they're doing is right, that gives them the hope and the belief that we can actually continue this in a positive way. And don't forget, China, regardless what issues are, is a huge market, and we see great potential in it. And don't forget, it's also very profitable. So we are very, very happy with the local team and the way we globally actually work with them right now.

Yes, it's a good question on the operating overheads. And of course, we made good progress in the first half. And just talking about the onetime cost that we had last year. It's a fair question. It just confirms again, we are very prudent on what we are saying, and we want to over-deliver. But the honest answer is also that we got some tailwind through the FX as well and the comparability on operating overhead, we don't show you the currency neutral.

So there's definitely some benefit on the FX on the operating overheads as well. But again, what's more important for us, Warwick, is that we have a clear plan, which, of course, we have to get below the 30% in '26 to get to our formula right and to get to double-digit EBIT in '26. That's what we are focusing on. It's more the percentage. And then secondly, implementing around the world, the right cost-consciousness and the right culture, that we understand that we are not done with all the efficiency that we need to do. So there needs to be the right culture to question things that are not helping the brand, that are not helping to accelerate the top line. And that's still some work to be done. We still see some opportunities here and there, and that's what we're really focusing on. And then we will see in the results. And yes, it's a fair question. And hopefully, the results will lead to what you expect.

Next question comes from Robert Krankowski from UBS.

Two for me, please. I had one on Terrace and [ Jennie ], the new franchises. I think you mentioned a couple of times that Terrace is now maturing in some of the markets. When you look at your low-profile Adizero, Superstar, the progress that you've been making so far, do you think it's enough to offset this kind of slowdown from Terrace somewhere towards the end of the year and maybe early in 2026? Or do you need to see this sustainable acceleration in Apparel to offset the slowdown in Terrace? And the second one, as usual, the same question, like could you talk a bit about the start to the quarter? I think you mentioned in Europe, you saw the acceleration, but what about the other regions? Is it double digit? Maybe that would be the most helpful.

Your first question is a clear yes. We believe we have the franchises and products to continue to grow in Footwear. And you have to be careful when you talk about Terrace. Terrace is not over. There are many, many retailers who still have Terrace models as the best-selling items. And when we heat it up with collabs and new materials and stuff, there is no indication that, that trend is over. But of course, we need to manage it market by market, so we don't overheat it. When I then look at the pipeline that I showed you in Lifestyle product, we are not worried that we cannot replace that business or actually add to the business in a way that we get an even bigger share in the Lifestyle side. I think you also probably have seen that we're very successful with Her and that the momentum on Him are lagging behind. So of course, a lot of the initiatives that we're now taking and also what you've seen in Running Lifestyle. And I would also put probably a Superstar in there is also more target to Him to also get a bigger share on the male consumer on that side.

I'm not worried that based on what we have seen from the reaction in July and what we can see on the order book that we shouldn't, at least outside the U.S. grow double digit. The U.S. side, again, I don't dare to say because I don't know because as soon as the price increases hit, the consumer might react differently. I think outside the U.S., we feel very comfortable about growing double digit. And we haven't seen the demand in the U.S. going down yet, but the price increases haven't been there yet either. So I think the 2nd of August when the duties are hopefully being communicated, the reaction then, not only in our industry, but in general, when people start to talk about price, I think we will tell you what is going to happen in the U.S. But outside of the U.S., the 80%, very comfortable.

The next question comes from Andreas Riemann from ODDO BHF.

Two topics. One would be Europe. Here, my question is on sponsorship deals. In Q3, the deal with Liverpool will start, also Eintracht, of course. So the effect from more sponsorship deals in soccer, isn't it quite meaningful for Q3 so that this should allow for an acceleration of growth in Europe? And linked to that, Bjorn, I think this morning in the press call, didn't you say that the growth in Europe should return to the double digits in the coming quarters? So this would be topic number one. Number two, on wholesale, if I'm not mistaken, the number of wholesale partners visiting your showrooms is still growing nicely. So where are new partners coming from? Can you provide any insight what region or what category are you able to win new wholesale accounts?

Yes, I did say that I expect Europe to be double digit. That is correct. I think adding Eintracht Frankfurt and Liverpool will, of course, add business. That is true. But you have to remember, you're coming last year against the euro sales, and I don't know if you remember, but the Euro last year generated this unbelievable German trend, where we were selling 5x what people have expected. So need to be careful. But yes, soccer in general, when we look at both replicas of existing partners, new partners and all the things that are leading into World Cup should have a strong Q3, Q4. That is correct.

But Frankfurt alone doesn't replace, what should I say, everything else that is happening in the market. I do also -- we see a strange thing. We actually -- and that might help us in Q3 that soccer replicas, meaning what the fans were buying started later this year. I don't know if that has to do with maybe the soccer fan has been saturated by too many things and are waiting closer to the season. And then, of course, Liverpool, to be honest, are playing, as we speak, the late last game in Nike. So the next game will be in Three Stripes. So of course, that's culturally also relevant. And when you then see the whole Oasis thing, I don't know if you follow that, but it's the Firebird Tracksuit, Three Stripe, Trefoil. It's very, very soccer inspired. And of course, seeing the tremendous success of that is, of course, also making us very, I would say, positive on the whole soccer culture lifestyle thing. So what did I forget?

Wholesale.

Wholesale partner. Yes, the wholesale partners that are coming from Germany doesn't mean that they're new. What is new with that is that we have opened up our podium here where we have 35,000, 40,000 samples for more regions to take more customers, but that doesn't mean they're new customers. And we do that because seeing the whole brand is, of course, very inspiring also for retailers that are far, far away. So that's growing continuously, and it starts again, I think, in a couple of weeks. And to be honest, we could have even more. The request to come here is huge. But that doesn't mean that there are new partners. It means just that we are giving the old partners in smaller markets, they're allowing us also to come and see the whole global range.

I thought maybe there are new partners in the Running category or something like that. So...

Specialty, yes. That's true. Specialty is true, but that is like specialty in general is that we were gone, and we have a lot of activations with specialty right now, also have hired sales forces and are taking care of them in a different way. But that doesn't necessarily mean that they're all coming to Herzo. But they all welcome, but it also means more that we are in the Running culture and that we have people visiting the stores and are part of the running clubs and are active in running. So that's much more than actually just inviting them to Herzo.

The next question comes from the line of Adam Cochrane from Deutsche Bank.

First question, when you're looking at your gross margin being almost at 52% this year, with the FX gains that you've got coming through in 2026, can the gross margin go beyond your 50% to 52% corridor? Or if it goes above that 52%, is that something where you would choose to reinvest the gains in something else to drive higher sales? And with the commitment to go to the 30% of OpEx sales looking well on track, is there any chance the EBIT margin could be higher than 10% as we look at 2026? And the second question for Harm. You mentioned, just a clarification, on the cash improvement in the second half, did you say EUR 1.2 billion to EUR 1.4 billion cash generation in the second half or for the year as a whole? And if it is the second half, how do we reconcile the difference between EUR 500 million to EUR 600 million of EBIT delivery in the second half versus a much higher cash number?

Well, you're trying to get me on thin ice, by putting the components to be higher than 10% EBIT, right? Of course, there's an upside on margin depending on what we do in different markets. But I think when we started 2.5 years ago, we felt that this 50% to 52% with a 60-40 split between wholesale and retail was a fair one. Then you also know that there's big differences between the gross margin in a market like China or the U.S. So of course, the country mix, the channel mix and the category mix has an influence on this. We feel, again, that we have brought the margin to 52% or almost 52% earlier than people expected. So I think we've done a good job. We're not planning with it higher, but it might go higher depending on many things. I think right now, the tariff discussion is, of course, putting in opposite direction on it. So we will have to work against that first.

And the same is on the leverage. We were coming from 34%, 35%, and now we're down at below 31%. And I do think it's the same thing if you compare apples by apples and you have a global setup, then around 30% is a fair point. Is it possible to leverage it more over time? Yes. But I think we should deliver now first what we have said in those kind of corridors. And then hopefully, the world stabilizes a little bit, so we can start to talk about a higher target. But don't forget, we were coming from a very, very low target and are now at 9.6%. And give us a little bit more time, give the American side the time to decide on what the tariffs are, let us all watch what that causes in the marketplace with the consumer. And then let's see what options we have. We don't have any, what should I say, secondary EBIT target yet in our head. But of course, we are discussing it, as you can imagine. But right now, we are focused on getting through this volatile uncertainty kind of crisis mode because of the tariffs, and then we'll see further. Harm?

Yes, you listened correctly, Adam. I mean, I said EUR 1.2 billion to EUR 1.4 billion in the second half, not for the full year, it's actually in the second half. And again, normally in the normal course of business, we should convert our net income before dividend payments into cash, but that didn't work in the first half given the buildup in the inventory that we planned for. But as we are collecting on the receivables and the growth in wholesale and as we keep -- keeping the inventory where it needs to be going forward, that's where we generate the EUR 1.2 billion to EUR 1.4 billion operational cash flow, which should lead then still pending whether we pay back the bond in November to around EUR 2 billion on the balance sheet and cash.

That's great. One more, if I can. Just could you say with regards to tariffs trend and still being in growth, is it higher -- is it a lower proportion of the sales growth in 2Q than it was in 1Q, if you're prepared to answer?

Yes. The answer is yes.

Maura, we have time for one more question.

Today's last question comes from the line of Cristina Fernández from Telsey Advisory Group.

I wanted to go back to inventory. Does the inventory increase reflect any sort of like pull forward because of tariffs? And is inventory balance across regions? Or are inventories higher in the U.S. because of the tariff situation?

No, it doesn't. It's rounding what we have probably shipped earlier to the U.S. or put earlier on the ship. I mean, we know that we need to pay the right duty, right, when we put the product on the ship. So we accelerated some, but not a meaningful number. And it's pretty much balanced around the markets. It's probably a little lighter in China because we have a more verticalized supply chain in China. So we actually get the benefits of lower inventories in China over time as we have more China-for-China sourcing right now and then you have a shorter period of lead times as well. So -- but overall, it's very, very balanced around the world. No outlier.

And then my second question is on prior calls, you have talked about taking down some of the fashion from the high end to more commercial styles. How is that performing? And are you pleased with their performance across price points for the adidas brand?

Well, the strategy for us has always been to give the consumer at different price points, the same design directions as you do upstairs because the trends are the same. And we feel that we have actually been better upstairs than downstairs. We haven't exploited the takedowns maybe as much as we could do, but we will continue that strategy. And we also measure our share in the lower end of the distribution. And as long as the share is higher in the high end than in the lower end, we feel very healthy. And it's a strategy that I think not only we, but everybody is going after. And I think actually, we have even more potential there when you think at the commercial side in many markets than we have exploited, but that will continue.

All right. Thanks very much, Bjorn. Thanks very much, Harm, and thanks very much, Maura. And of course, also thanks very much to all of you for participating in our call today. This concludes our Q2 2025 results conference call. As always, if you have follow-up questions, and I could imagine that there is still a few, please feel free to reach out to Adrian, Philip or myself or any other member of the IR team. We're very much looking forward to chatting with you and meeting with you over the next couple of weeks and months. And with that, thanks very much again for your participation. Enjoy a well-deserved summer break. And as I said, speak soon. All the best. Bye-bye.