Frankfurt (Germany) (AFP) – German sportswear giant Adidas on Tuesday warned that US President Donald Trump’s tariffs will increase prices for its products in the United States, and the hardline trade policies could dent its ongoing recovery. The firm makes a large chunk of its goods in Asian countries that Trump has singled out for running hefty trade surpluses with the United States, including China, which is facing the highest US levies. CEO Bjorn Gulden said Adidas had reduced its exports from China to the United States “to a minimum,” but added that the group was still “somewhat exposed to those currently very high tariffs.”
“What is even worse for us is the general increase in US tariffs from all other countries of origin,” he said, adding that they “will eventually cause higher costs for all our products for the US market.” He said it was “currently impossible” to work out by how much prices might rise or conclude what impact this might have on consumer demand. Adidas’s shares were down around one percent in early afternoon trade on the Frankfurt Stock Exchange. Beyond China, Adidas also makes products in countries including Vietnam, Indonesia, and Bangladesh. The North American market accounted for around a fifth of the group’s sales last year.
– Kanye crisis – The US tariffs are set to deal a hefty blow to the company just as it was getting back on its feet following a torrid period triggered by the end of its lucrative tie-up with US rapper Kanye West. The group developed the popular Yeezy line of trainers with West but halted the collaboration in late 2022 after the rapper sparked anger with anti-Semitic outbursts online. Adidas was robbed of a vital revenue stream and left saddled with a mountain of Yeezy trainers, which it had to offload at knockdown prices, leading it to slump to its first annual net loss in over three decades in 2023.
But it has turned a corner under Gulden, who has focused on promoting Adidas’s classic trainers. The company logged a better-than-expected net profit of 428 million euros ($488 million) from January to March, with sales rising to 6.1 billion euros. Gulden said that, after such a strong performance, the group would typically hike its outlook but had decided against doing so due to the tariff uncertainty. The group stuck to its guidance, predicting operating profit of 1.7 billion to 1.8 billion euros for the year.
However, the CEO added that Adidas recognised that there were “uncertainties that could put negative pressure on this later in the year.” The effects of US tariffs in the second quarter “should not be huge,” he said, but added that the “impact will then come in (the third quarter) for the US market.” The sports outfitter would try to compensate for the uncertainty in the United States by “delivering even better results in the rest of the world,” Gulden added.
© 2024 AFP
