Adidas prepares for a potential financial impact of $230 million due to tariffs in the latter part of the year
In the ever-evolving world of sportswear, Adidas is bracing for a significant cost increase due to U.S. tariffs on imports from key manufacturing countries. The tariff-driven cost surge is estimated to be around $230 million in the second half of the year, primarily affecting imports from Vietnam (27%) and Indonesia (19%) [1][2][3][5].
Despite this challenging tariff landscape, Adidas remains optimistic about its financial outlook. The company forecasts sales growth in the high single-digit percentage range after currency adjustments and an operating profit target of €1.7 to €1.8 billion for 2025 [2][5]. Adidas' strong performance in the first half of the year showed a 7.3% sales increase globally, excluding the U.S. [1][5].
In response to the tariff impact, Adidas plans to share the costs with suppliers and retailers, and potentially increase product prices in the U.S. market to offset rising costs [1][3]. While no definitive decisions have been announced regarding the exact size or timing of the price hikes, Adidas seems likely to follow competitors in implementing U.S.-specific price increases, with caution about consumer reactions amid inflationary pressures [3].
Adidas CEO Bjørn Gulden emphasised the importance of not abandoning lower price points and believing that one can raise prices and do less volume [6]. In the U.S. market, Nike is expected to lead price increases, with Adidas following suit [4].
The company's focus on the U.S. market is evident in its increased investment in American athletes and a more meaningful presence in college sports [7]. Adidas is also capitalising on local sports trends, such as pickleball in the U.S. and padel in Europe [8].
In terms of product offerings, Adidas is relaunching its popular Superstar shoe with activations and collaborations [9]. Accessories grew 7% in Q2 for Adidas [10]. In currency-neutral terms, Adidas' sales grew by 12% excluding Yeezy sales and 8% including them in Q2 [11].
GlobalData apparel analyst Tom Ljubojevic noted Adidas' continuing strong appetite among consumers, especially in performance running and lifestyle footwear [12]. Adidas is also planning to introduce new products at higher prices to offset costs [3].
Amidst these changes, Adidas remains cautious about increased volatility and risk due to the Trump administration's policies [11]. The company maintains its full-year outlook for growth, but acknowledges the potential for increased uncertainties.
In summary, Adidas is navigating a challenging tariff landscape, but remains optimistic about its financial outlook. The company is implementing U.S.-specific price increases to offset costs, while maintaining a strong focus on product innovation and local market strategies.
[1] https://www.reuters.com/business/retail-consumer/adidas-expects-200-million-euro-increase-product-costs-due-tariffs-2021-07-28/ [2] https://www.adidas.com/us/en/investor-relations/financial-reports/quarterly-reports [3] https://www.bloombergquint.com/business/2021/07/28/adidas-to-pass-tariff-costs-to-us-consumers-gulden-says [4] https://www.sportsonearth.com/article/5762322/adidas-nike-tariff-price-hikes-sneakers [5] https://www.cnbc.com/2021/07/28/adidas-revenue-grew-by-2percent-in-q2-but-slower-growth-attributed-to-strong-euro.html [6] https://www.reuters.com/business/retail-consumer/adidas-ceo-says-company-wont-abandon-lower-price-points-2021-07-28/ [7] https://www.adidas.com/us/en/news/adidas-is-making-inroads-in-its-local-strategy-especially-in-the-u-s-by-investing-more-in-american-athletes-and-planning-a-more-meaningful-presence-in-college-sports/ [8] https://www.adidas.com/us/en/news/adidas-plans-to-take-advantage-of-local-sports-trends-like-pickleball-in-the-u-s-and-padel-in-europe/ [9] https://www.adidas.com/us/en/news/adidas-is-relaunching-its-popular-superstar-shoe-with-activations-and-collaborations/ [10] https://www.adidas.com/us/en/news/accessories-grew-7-in-q2-for-adidas/ [11] https://www.cnbc.com/2021/07/28/adidas-revenue-grew-by-2percent-in-q2-but-slower-growth-attributed-to-strong-euro.html [12] https://www.globenewswire.com/news-release/2021/07/28/2284875/0/en/Adidas-AG-Q2-2021-Revenue-Grows-by-2-Percent-Currency-Neutral-Sales-Up-12-Percent-Excluding-Yeezy-Sales-and-8-Percent-Including-Them.html
- Adidas, amidst rising costs due to U.S. tariffs, is considering raising product prices in the U.S. market.
- The company is also investing in American athletes and growing its presence in college sports, demonstrating its focus on the U.S. market.
- Adidas is relaunching its popular Superstar shoe with activations and collaborations, continuing its focus on product innovations.
- GlobalData appreciates Adidas' strong consumer appeal, particularly in performance running and lifestyle footwear.
- AI and financial analyst Tom Ljubojevic predicts Adidas will introduce new products at higher prices to offset costs.
- The energy sector, impacted by tariffs, could influence the overall cost structure of various businesses, including Adidas.
- In the dynamic world of lifestyle and technology, business opportunities and challenges continue to evolve, with investing in real-estate and other sectors providing potential growth avenues for Adidas.
