Tariff Troubles for Adidas: Higher Prices on Sambas and Gazelles Ahead
Brace Yourself for Higher Costs
Adidas issues caution: Trump's trade tariffs could lead to increased prices on athletic footwear
Adidas has issued a warning that the new US tariffs could lead to an increase in the prices of iconic trainers like the Samba and Gazelle. The German sportswear giant explained that trade disruptions have halted any potential improvement in their financial outlook [4][5].
Adidas CEO Bjørn Gulden stated that due to the lack of domestic manufacturing capabilities in the U.S., the higher tariffs will eventually lead to increased costs for all Adidas products sold in America [4]. He further elaborated that these cost increases would eventually result in price increases, not just in the sportswear sector, and it's currently unfeasible to estimate the exact magnitudes or potential impact on demand [4][5].
A Specialty Gap in Shoe Manufacturing
With little manufacturing capacity in the United States equipped to produce today's high-performance running shoes and an insufficient workforce to operate them, companies like Adidas rely heavily on countries such as China and Vietnam for their manufacturing needs [1]. In light of this, Adidas has had to reduce exports from China to the U.S., but Gulden noted that the company still retains some exposure to the presently stratospheric tariffs [4].
Gulden also stated that broader tariff increases affecting key sourcing countries in Southeast Asia, like Vietnam, yield "even worse" consequences [4]. In circumstances where costs go up, it's difficult to predict how U.S. consumer demand will respond, but Adidas' various product categories show resilient sales growth in other regions [4].
Financial Report: A Mixed Bag
Although Adidas had planned to upgrade its yearly revenue and operating profit targets following a stellar first quarter, trade policy uncertainties have thwarted these aspirations [4]. The company recently released preliminary results demonstrating a nearly doubled operating profit of €610mn during the first three months of the year, marking its vigorous sales performance for this period in Adidas’ history [4].
Despite a strong performance across all markets except the U.S., where the dissolution of its Yeezy partnership with Kanye West maintains to weigh on revenues, growth was spearheaded by robust demand for retro footwear collections, such as the Samba and the Taekwondo model [4].
Stock Market Shuffle
Adidas shares traded relatively flat in early Frankfurt trading after recovering most of the previous losses following the announcement of partially suspended steep US tariff increases earlier this month. Over the last 12 months, Adidas shares have slumped minimally, outperforming both local rival Puma and US peer Nike, whose shares plummeted by 47% and 39% respectively amidst a broader deceleration in sales [1].
| Impact | Aspect ||-----------------------------------------------|-----------------------------------------------|| Pricing | Anticipated price increases in the US market || Production | No immediate shift in production locations || Demand | Potential decrease in response to higher prices || Industry Impact | Similar challenges for other sports shoemakers |
- The new US tariffs have warned Adidas of potential higher costs, leading to an increase in the prices of iconic trainers like the Samba and Gazelle in the American market.
- Adidas' financial outlook has been hindered by trade disruptions, and the higher tariffs will inevitably lead to increased costs for all Adidas products in the United States.
- Due to the lack of domestic manufacturing capabilities in the US, companies like Adidas rely heavily on countries such as China and Vietnam for their manufacturing needs, which could yield "even worse" consequences with broader tariff increases.
- In the financial report, while Adidas had initially planned to upgrade its yearly revenue and operating profit targets, trade policy uncertainties have thwarted these aspirations, with a potential decrease in demand due to higher prices.
- The stock market has experienced a shuffle, with Adidas shares outperforming both local rival Puma and US peer Nike, despite a potential industry-wide impact from similar challenges faced by other sports shoemakers, particularly in the US market. Additionally, technology advancements in footwear production could disrupt the current manufacturing landscape in the future.
