Adidas expects supply chain problems to rein in H1 sales growth

Herzogenaurach, Germany

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 per cent in the last year, were down 2.5 per cent in early Wednesday 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 per cent in 2019, from 8 per cent in 2018, with supply issues accounting for a one to 2 per cent 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 per cent.

"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.

Mr Rorsted added that the shortages had nothing to do with US trade tensions with China.

Adidas said it should reach an operating profit margin of between 11.3 and 11.5 per cent in 2019, up from 10.8 per cent 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 per cent to 5.234 billion euros (S$8.02 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 per cent decline in the fourth quarter.

Mr 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. REUTERS