Supply chain shortages negatively impact sales growth for Adidas

Adidas is experiencing a strong increase in demand for mid-priced apparel, but will not be able to cope with that 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 2019.

The overall effect on the company’s full year growth rate in 2019 is anticipated to be between 1 and 2 percentage points, slowing top-line growth from 8% in 2018 to between 5% and 8% in 2019. This admission was made in the company’s presentation of its 2018 financial results earlier this month. “Record sales, the highest margin in our history, strong net income improvements – 2018 was another successful year for our company,” stated Kasper Rorsted, Adidas CEO. Nevertheless, these results are somewhat tainted by the supply chain issues.

Adidas has been focusing heavily on North America and has doubled its business there over the past three years, helped by high-profile celebrity campaigns with the likes of Kanye West and Pharrell Williams as well as design coups. But the company’s suppliers – the majority of which are based in Cambodia, China and Vietnam – have not been able to keep pace with that growth. “The volume grew quicker than anticipated and we didn’t respond quickly enough to that demand signal,” Rorsted commented.

Meanwhile, Adidas’ biggest rival Nike is expecting to achieve double-digit sales growth for 2019, with Mark Parker, Chairman, President and CEO of Nike stating: “We’re incredibly energized about 2019 – with a full innovation pipeline, the most personal, responsive retail experiences in the industry, and a supply chain that’s delivering speed at scale”. Likewise, German sportswear brand Puma is on track for 10% growth.

Renewed focus on Europe

Elsewhere, Adidas is performing well in Greater China, with sales up by 13%, but suffered a 6% drop in Europe. To strengthen its European position, the company is shifting its focus away from fashion shoes and more towards sports and also investing heavily in marketing. For example, it recently signed a sponsorship deal with England’s Premier League football team Arsenal.

Since 4 March this year Australian Martin Shankland has been Head of Global Operations at Adidas, replacing Frenchman Gil Steyaert after little over a year in the role.