Supply chain shortages to hit Adidas growth

brett mathews | 13th March 2019

HERZOGENAURACH – Supply chain shortages will hamper growth at German sports giant Adidas during 2019. The company said demand has been rising in key growth market, North America, faster than expected and that its predominantly Asian supply chain has not been able to keep pace. Chief executive officer Kasper Rorsted said supply shortages for the US market will prevent Adidas from meeting demand for mid-priced apparel, and that this will cut the company’s growth rate by 1 to 2 per cent and lead to a slow first half to 2019.

Said a press note by Adidas: “The company projects sales to increase at a rate of between 5 per cent and 8 per cent on a currency-neutral basis in 2019. While the company is experiencing a strong increase in demand for mid-priced apparel, adidas will not be able to immediately cover this demand in full due to supply chain shortages. Consequently, growth is expected to be negatively impacted, particularly in North America during the first half of the year. Adidas anticipates growth of between 3 per cent and 4 per cent in the first half of 2019, followed by a sequential acceleration during the second half of the year as the company will be able to scale the respective supply over time.”

Overall in 2018, adidas delivered a year of top-line growth with currency-neutral revenues increasing by 8 per cent. This development was driven by a 9 per cent improvement at brand adidas, reflecting a double-digit sales increase in Sport Inspired as well as a high-single-digit gain in Sport Performance. The latter was driven by double-digit sales growth in the training and running categories. Currency-neutral Reebok brand sales were down 3 per cent versus the prior year.

From a channel perspective, the company’s top line increase was largely driven by double-digit improvements in direct-to-consumer revenues with particularly strong support from e-commerce, where revenues grew 36 per cent to more than €2bn in 2018. In euro terms, the company’s revenues grew 3 per cent to € 21.915bn (2017: € 21.218bn), reflecting significant negative currency translation effects.