Adidas fears sales to slow in H1 - GulfToday

Adidas fears sales to slow in H1


Kasper Rorsted speaks to press conference in Herzogenaurach, southern Germany. AFP

HERZOGENAURACH: Adidas expects supply chain issues to hit sales growth in the first half of the year, particularly in North America, but hopes to see off a challenge from Nike in Europe and return to growth in the region.

Kasper Rorsted, Chairman of Adidas, spoke during his company’s annual press conference on Wednesday in Herzogenaurach, Germany.

Shares in the German sportswear brand, up 22 per cent in the last year, were indicated down 2.5 per cent in early trade.

Nike has been regaining ground, helped by a steady stream of new product launches and a strong showing by Nike-sponsored teams at the soccer World Cup, after several years when Adidas ate into its home market of North America.

Adidas said currency-neutral sales growth would slow to between 5 and 8 per cent in 2019, from 8 per cent in 2018, with supply issues accounting for a 1-2 per cent fall as it struggles to meet strong demand for mid-priced apparel.

In contrast, Nike has forecast sales growth for 2019 approaching low double digits and German rival Puma a currency-adjusted 10 per cent.

“It is a demand problem,” Kasper Rorsted said, noting that Adidas had doubled the size of its business in North America in the last three years.

Adidas produces 457 pieces of apparel a year, sourcing most of them from Cambodia, China and Vietnam. Rorsted said the shortages had nothing to do with US trade tensions with China.

Adidas said it should reach an operating profit margin of between 11.3 per cent and 11.5 per cent in 2019, up from 10.8 per cent in 2018, with the return of the Reebok brand to profit helping it hit a target originally set for 2020 a year early.