Adidas Escapes Tariff-Related Price Hikes Affecting Regions Beyond the US - Adidas announces no hike in product costs caused by tariffs imposed outside the United States
Adidas, the second-largest sports goods company globally, is grappling with a significant financial burden due to US President Donald Trump's trade policies. The company expects to incur a tariff-related cost of around 200 million euros ($230 million) for the rest of the year.
As a result, Adidas plans to raise prices for consumers in the US to offset these higher costs. However, it's important to note that the direct price increase is mostly localized to the US market.
A significant portion of Adidas products are produced in Asia, including countries like Vietnam and Indonesia. These countries are part of Adidas’s supply chain exposed to tariff-related cost pressures. However, the tariffs are imposed by the US on imports, not on domestic production or exports within those countries.
For countries like Vietnam, Indonesia, Pakistan, Cambodia, and Jordan, the tariffs do not directly increase local prices. However, Adidas sourcing costs and operational decisions could be influenced. For example, Adidas might alter production volumes, shift supply chains, or adjust its product portfolio in response to the tariffs and changing demand in the US market.
Adidas's CEO, Bjoern Gulden, commented on the uncertainty around final tariff levels and showed concern that increased US prices could reduce consumer demand there. However, he did not indicate a plan to increase prices globally. Instead, Adidas aims to keep prices stable on existing models as long as possible and only introduce price increases selectively on new or different SKUs, primarily for the US market.
Despite the financial challenges, Adidas reported significant growth in the first half of the year. Net income from continuing operations increased by 112 percent year-on-year to 811 million euros. Revenue increased by two percent to 5.95 billion euros for the same period.
The stock fell by up to around 15 percent in the Dax after the figures were released, according to analysts. The fall, in part, can be attributed to the fact that Adidas had not raised its forecast due to uncertainty about tariffs and uncertain markets. Analysts also blame the stock's fall on the potential for consumer demand to decrease if the tariffs lead to higher inflation.
Adidas's success can be attributed to its strategy of generating brand desire, extending the life cycles of existing product families, introducing new product families, and transferring brand momentum to the clothing segment. The classic models such as "Samba" and "Gazelle" have been contributing to the company's growth, and the "Superstar" is expected to drive sales even more in the future.
The company is focusing on high-performance running shoes, such as the Adizero series. Adjusted for currency effects and the sale of products from the Yeezy brand, revenue growth was 14 percent.
Despite the US tariffs, Adidas has no plans to raise prices outside the USA due to US tariff policies. The behavior of competitors and the height of the tariffs are factors that will determine whether and in what form price increases will occur, according to Gulden.
- EC countries, being part of Adidas's extensive supply chain, may indirectly feel the effects of the tariffs as Adidas might adjust production volumes, shift supply chains, or alter its product portfolio in response to the US tariffs and changing demand.
- While Adidas is planning to raise prices for consumers in the US to offset higher costs due to tariffs, the company has no intention to increase prices outside the USA, depending on the behavior of competitors and the height of the tariffs.
