Adidas says supply chain problems to rein in sales growth

Adidas expects supply chain issues to hit sales growth in the first half of the year, particularly in North America, but hopes to see off a challenge from Nike in Europe and return to growth in the region.

Shares in the German sportswear brand, up 22 percent in the last year, were indicated down 2.5 percent in early trade.

Nike has been regaining ground, helped by a steady stream of new product launches and a strong showing by Nike-sponsored teams at the soccer World Cup, after several years when Adidas ate into its home market of North America.

Adidas said currency-neutral sales growth would slow to between 5 and 8 percent in 2019, from 8 percent in 2018, with supply issues accounting for a 1-2 percent fall as it struggles to meet strong demand for mid-priced apparel.

In contrast, Nike has forecast sales growth for 2019 approaching low double digits and German rival Puma a currency-adjusted 10 percent.

“It is a demand problem,” Chief Executive Kasper Rorsted told CNBC, noting that Adidas had doubled the size of its business in North America in the last three years.
Adidas produces 457 pieces of apparel a year, sourcing most of them from Cambodia, China and Vietnam. Rorsted said the shortages had nothing to do with U.S. trade tensions with China.

Adidas said it should reach an operating profit margin of between 11.3 percent and 11.5 percent in 2019, up from 10.8 percent in 2018, with the return of the Reebok brand to profit helping it hit a target originally set for 2020 a year early.

Fourth-quarter sales rose by a currency-adjusted 5 percent to 5.234 billion euros (£4.5 billion), versus average analyst forecasts for 5.2 billion, while attributable net profit came in at 108 million, versus consensus for 88 million.

Adidas said it expected to revive growth in Europe in the course of 2019, forecasting a slight increase in currency-neutral revenues for the region after a 6 percent decline in the fourth quarter.

Rorsted has said that Adidas in Europe relied too much on a short-term trend for fashion shoes, like its retro Stan Smith and Superstar, and not enough on sports performance gear.

Adidas saw strong growth in “sport inspired” styles and in training and running in the quarter, but a steep decline in soccer, where it benefited a year earlier from sales of team jerseys in the run-up to the World Cup.