The second largest sporting goods company in the world is feeling the global lockdowns and delivery problems.
(Photo: imago images / Harry Koerber)
Munich Problems in supply chains and production have slowed growth at Adidas. In the third quarter the revenues of the second largest sporting goods company in the world only increased by a good three percent to 5.8 billion euros. The profit from continuing operations fell by a good ten percent to 479 million euros.
“In a challenging environment on both the supply and the demand side, Adidas has done well,” said CEO Kasper Rorsted. In contrast to rival Nike, he largely confirmed the sales and profit forecast for the current financial year. However, some of the numbers could be “in the lower part of the range”. The gross margin could also be slightly below the previous forecasts.
The entire sporting goods industry is currently feeling high demand – but can hardly meet it. Without the difficult situation in China, the lockdowns especially in South Vietnam and the problems in the supply chains, Adidas sales would have been around 600 million euros higher, according to Rorsted. In the first nine months, Adidas achieved sales growth of 21 percent to around 16.1 billion euros.
This means that Adidas is currently growing less dynamically than Puma. The smaller competitor had increased the revenues in the third quarter by 20 percent to 1.9 billion euros. In the first nine months the growth was 39 percent. As a consequence, Puma boss Björn Gulden raised the forecast again and now expects a currency-adjusted sales increase of at least 25 percent for the year as a whole.
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The situation at Nike is different: In the first quarter of the 2021/22 financial year (May 31), the world market leader increased sales, weaker than expected, by only 12 percent to 12.25 billion dollars. For the current year, Nike did not rule out a decline in sales and lowered the forecast for the year as a whole. “We’ve already lost ten weeks of production,” said CFO Matt Friend. Instead of low double-digit growth, Nike now expects only medium single-digit growth in 2021/22.
Great reliance on factories in Vietnam
Most of the factories in South Vietnam are now up and running again. But it takes time for the plants to reach their full capacity again. Nike, for example, produces around half of its shoes and 30 percent of its sportswear in Vietnam. In view of the plant closings, some production was relocated to China and Indonesia. However, according to Nike, the goods need 80 days to get to North America – twice as long as usual.
It is a consolation for the sporting goods companies that there is no demand problem. Consumer interest in shoes and textiles has seldom been greater. Because of the shortage, the products do not have to be sold with discounts. Adidas was able to largely confirm its forecast. Currency-adjusted sales are expected to increase by up to 20 percent. However, growth will probably be in the lower end of the range. Adidas did not say where the lower end is.
The operating margin should remain between 9.5 and 10 percent. However, one could also end up “in the lower range” here. Rorsted expects the gross margin to only be between 50.5 and 51 percent due to the “considerably higher procurement and logistics costs and a less favorable market mix” – instead of the previously announced 52 percent.
The long-term forecasts in the industry are good. According to a study by Boston Consulting, global sporting goods trade is expected to grow by seven percent annually to $ 670 billion by 2025. In e-commerce, the experts expect double-digit growth rates.
More: What Puma boss Gulden advises his wife before Christmas