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Adidas faces supply chain and China headwinds: S&P Global

·Writer
·3 min read
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Sportswear giant Adidas (ADDYY) posted strong Q1 earnings, which saw the brand increase its overall currency-neutral revenues by 27% and its footwear sales by 31%. The German sportswear maker has now upgraded its full-year outlook with expectations that sales will now grow at a high-teens rate in 2021. However, there are still some causes for concern regarding supply chain management, which has bogged down some of the biggest sportswear retailers as of late, according to Christopher Rogers, Senior researcher at Panjiva, the supply chain research unit of S&P Global Market Intelligence.

BEIJING, CHINA - MAY 5, 2021 - Adidas store in Wangfujing Commercial Street, Beijing, China, May 5, 2021. (Photo credit should read Costfoto/Barcroft Media via Getty Images)
BEIJING, CHINA - MAY 5, 2021 - Adidas store in Wangfujing Commercial Street, Beijing, China, May 5, 2021. (Photo credit should read Costfoto/Barcroft Media via Getty Images)

Rogers notes that Adidas U.S. seaborne imports linked to the company increased 17.3% year over year in the first quarter of 2021 before slowing to an 11.0% increase in April. Rogers also notes that Adidas’s seaborne import performance versus the pre-pandemic period was worse, with imports in April down 13.7% compared to April 2019.

Adidas has also has lagged behind its competitors in the space as well. Fellow German sportswear maker Puma (PUM.DE) has increased its seaborne imports by 58% year over year in the first quarter of 2021, by 200.8% year over year in April 119.3% compared to April 2019. Nike’s (NKE) seaborne imports in April, like Adidas, were modest, with only an 8.2% increase when compared to the previous year.

In a call with analysts, Adidas CEO Kasper Rørsted brought up some of the logistical headwinds the brand is facing.

“And while store openings improve and are north of 90% now, we still have to deal with some industry-wide challenges on the logistic side for the time being. And there are three aspects to consider. Freight costs have increased. We’re seeing capacities are constraints, especially regarding the availability of containers, and Port congestion have led to delays, especially in the U.S. Those are the results of the long-lasting pandemic, and have recently been intensified by the issue in the Suez Canal,” he said.

Panjiva, the supply chain research unit of S&P Global Market Intelligence
Panjiva, the supply chain research unit of S&P Global Market Intelligence

“While Adidas performed incredibly well with China Sales in Q1, their April month apparently started off with a negative sales bounce. The decline is related to Chinese nationalistic uproar about the Adidas stand on products sourced from China’s Xinjiang region,” Rick Helfenbein, retail and fashion industry consultant and former CEO of the American Apparel & Footwear Association, told Yahoo Finance.

When asked about the situation in China, the Adidas CEO said, “So, while the trend is positive, it’s still too early to tell what China will look like in detail. And we will not disclose the details any further.” Rorsted went on to say that Adidas is, however, expecting a very strong growth in China for 2021.

Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.

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