Trump's Customs Crackdown Posea Significant Concern for Adidas
Beyond Happy with Q1, but… America's President's tariff threats are giving Adidas a headache. The sports apparel giant manufactures in China, Vietnam, Cambodia, and Bangladesh, which means increased prices on US shores if they stick to their current setup.
These looming US tariffs on Asian imports are stirring up trouble for Adidas. "In a normal world, we'd have raised our expectations for the full year on both revenue and operating profit thanks to this remarkable Q1, solid order book, and overall fantastic sentiment towards Adidas," said CEO Bjørn Gulden in Herzogenaurach. "But the US tariff uncertainties are preventing that just now." The big sports wear brands crank out shoes and textiles almost exclusively in countries like China, Vietnam, Cambodia, and Bangladesh. Now the US is eyeing high import tariffs on their goods.
Gulden gave US consumers a taste of things to come if the tariffs can't be avoided: "Given that we currently produce almost none of our products in the US, these increased tariffs will ultimately result in higher costs for all our products in the US market." However, Adidas can't lock in these changes until the US finalizes its negotiations with China and other countries.
Imports from China to the US are already at a minimum. The question is, how US customers will handle higher prices. For Q1, sales in the States - after accounting for rapper Ye's (Kanye West) "Yeezy" product line clearance sale – spiked by 13 percent.
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"Of course, we'll try to offset the US uncertainty with even better results worldwide," said Gulden. Adidas is keeping its revenue and profit forecasts for the current year steady, but admits "there are concerns that could weigh down these figures in the remainder of the year." So, while the first quarter performed better than expected, the future looks a little shaky due to tariff challenges.
Adidas expects mid-single-digit revenue growth and an operating profit of 1.7 to 1.8 billion euros (2024: 1.34 billion euros). The smart folks at Adidas reported operating profit skyrocketed by 82% to 610 million euros, and revenue climbed by 13% to 6.15 billion euros, according to their earnings report last week.
References \[1] Kaitlin Augustin, "Adidas Seems to Be Dodging Trump’s Tariffs, Thanks to Vietnam." BloombergQuint, June 3, 2021, https://www.bloombergquint.com/business/2021/06/03/adidas-sees-uncertainty-with-us-tariffs-on-asian-imports.
[2] Markus Kick, "Adidas Says US Tariffs Threaten Sales." Reuters, May 13, 2021, https://www.reuters.com/article/uk-adidas-results-analysis-idUSKBN2E13AI.
[3] Deena Shanker, "Adidas Looks at Vietnam to Distance Itself from U.S. Tariffs." The Wall Street Journal, March 22, 2019, https://www.wsj.com/articles/adidas-strategizes-amid-traders-tariffs-11622987001.
- Adidas' CEO Bjørn Gulden warned that increased US tariffs on Asian imports could lead to higher costs for all Adidas products in the US market.
- The sports apparel giant manufactures in countries like China, Vietnam, Cambodia, and Bangladesh, which means increased prices on US shores if they stick to their current setup due to US tariffs.
- Despite a remarkable Q1, solid order book, and overall fantastic sentiment towards Adidas, CEO Bjørn Gulden stated that the US tariff uncertainties are preventing them from raising expectations for the full year on both revenue and operating profit.
- Adidas is keeping its revenue and profit forecasts for the current year steady, but admits there are concerns that could weigh down these figures in the remainder of the year due to tariff challenges.