Adidas has reported “excellent revenue growth” despite supply chain constraints including port congestion, the Suez Canal blockage and the coup in Myanmar.
The sportswear brand told investors on its quarter one earnings call revenue increased by 27% year-on-year, “against the backdrop of prolonged lockdowns in Europe and industry-wide supply chain challenges”.
Without these external challenges, the brand said its growth “would have been in the mid-30s”.
Despite increased revenues CFO Harm Ohlmeyer said Adidas had not upgraded its bottom-line guidance due to these supply challenges.
“Freight rates are already up significantly and might see further increases given the container shortages that we have seen, and the Suez Canal situation didn't help that either,” he said.
“We also want to make sure there is the availability of the products that consumers desire and that might come with somewhat higher logistics costs, especially air freight. We want to make sure that the product is available.”
Kasper Rorsted, CEO of Adidas, told investors the firm had seen a “dramatic increase in freight rates”, where prices had risen almost five-fold due to a “quicker recovery of the industry than originally anticipated”.
He said: “Normally a container would be about 2,000 [dollars] to 5,000, now it's about 8,000 to 10,000. Across industries, you have a much higher demand than originally anticipated. That's why [...] the Danish company Maersk had the best results ever in the first quarter in its history.”
Rorsted added there had been issues such as the Suez Canal blockage and port congestion around the world that had also impacted its supply chain.
“You have container ships sitting outside the harbours. When they come into the region, particularly in North America, you have a constraint on containers within America.”
The political situation in Myanmar will also impact the garment industry, Rorsted said.
“That has a minor impact for us, because Myanmar is still a very small sourcing country for us.”
Despite the challenges, Rorsted said consumers “might not see an increase in pricing” but could see less discounting of items to manage supply and demand issues.
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