Adidas braced for €600m hit from supply disruption

9 May 2022

Sportswear company Adidas is braced for a €600m hit in the first half of 2022 due to supply chain constraints – but it expects “unconstrained supply” in the second half.

In its first quarter results the company said lockdowns in Vietnam, where it sources 28% of its products, had cut sales to the tune of €400m. The corporation said Covid-19 lockdowns in China would continue to impact the region in the second quarter, leading to a further €200m negative impact.

Kasper Rorsted, CEO of Adidas, said in an investors’ call: “Industry-wide supply chain constraints continued to impact our top-line trajectory, with production outage and shipping delays causing a significant drag on development.”

Rorsted blamed initial revenue impacts on lockdowns in Vietnam last year, which limited production capacity, and said the company expected this shortage to remain an issue into the second quarter. But he added: “After quarter two 2022 however we do not expect any major impact from the Vietnam capacity loss.”

Harm Ohlmeyer, CFO of Adidas, said: “We expect supply chain costs to rise strongly in fiscal year 2022. Our freight cost per unit alone will double in 2022. This assumption was already confirmed in quarter one, and we expect this development to continue throughout the following quarters.”

In the second half of the year Adidas expects “unconstrained supply” to lead to 20% growth.

Adidas’ gross margin fell by 1.9% due to “a significant increase in sourcing and freight costs”, but sales grew in North America (13%), Europe, Middle East, and Africa (9%), and Latin America (38%). Revenue overall increased by 1% to €5.3bn in the first quarter with operating profit of €437m.

Covid-19 lockdowns meant Chinese revenue fell by 35%.

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