Sportswear giant Adidas on Tuesday said that U.S. President Donald Trump’s tariffs would result in price hikes for all its U.S. products.
The company said it did not yet know by how much it would boost prices, also noting that the global trade dispute was preventing it from raising its full-year outlook despite a bumper increase in first-quarter profits.
“Higher tariffs will eventually cause higher costs for all our products for the US market,” Adidas said in a statement.
The company said it was “somewhat exposed” to White House tariffs on Beijing — currently at an effective rate of 145% — but that it had already reduced exports of its China-made products to the U.S. to a minimum. However, it said the biggest impact was coming from the general increase in U.S. tariffs on all other countries, which are largely held at 10% while trade negotiations take place.
“Given the uncertainty around the negotiations between the US and the different exporting countries, we do not know what the final tariffs will be,” the Adidas statement continued.
“Therefore, we cannot make any ‘final’ decisions on what to do. Cost increases due to higher tariffs will eventually cause price increases, not only in our sector, but it is currently impossible to quantify these or to conclude what impact this could have on the consumer demand for our products.”
Adidas said it was currently unable to produce almost any of its products in the U.S.
The company, best-known for sneakers including Superstar, Sambas, Stan Smiths and Gazelles as well as sportswear, uses factories in countries including Vietnam and Cambodia — which are facing U.S. tariffs upwards of 40% in the absence of a trade deal.
A similar dilemma regarding price hikes and demand impact is facing almost all retail businesses which serve the U.S., from ultra-low-cost e-retailers like Temu to luxury giants such as Hermès.
Earnings improve
Without the cloud of U.S. tariffs, Adidas would have raised its full-year outlook for revenues and operating profit due to a strong order book and positive brand sentiment, the company said. It instead reaffirmed its existing outlook, but said the “range of possible outcomes has increased.”
In results that were largely pre-released, net income from continuing operations leapt 155% in the first quarter to 436 million euros ($496.5 million), above the 383 million euros forecast in an LSEG-compiled consensus. Net sales climbed 12.7% to 6.15 billion euros as its operating margin rose 3.8 percentage points to 9.9%.
The firm has finally shaken off a years-long headache from its collaboration with controversial musician Ye, with whom it cut ties in 2022 over antisemitic comments. It announced last month it had sold the last of its Yeezy stock.
Analysts at Deutsche Bank said in a Tuesday note that Adidas delivered a “good print with the company making progress across all areas,” despite higher uncertainty.
“So far this year, Adidas has been seeing double digit sales growth across all regions and channels, with wholesale outperforming the direct-to-consumer offering,” Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said in a note.
“Footwear continues to be a strong performer, with consumers also opting for lifestyle clothing, while the performance category also continues to do well. Adidas will hope these trends continue in the face of the economic uncertainty created by tariffs in the US, but unfortunately we very much have to wait and see before the full impact comes through.”
(Source)