Adidas has released very solid first quarter preliminary results. Profits almost doubled to €610 million (£519 million)! It means, quite simply, that their remarkable performance has translated into the highest sales results in the company’s history as well for the same period. Adidas, for example, has been hit hard by the US-imposed tariffs. Even so, the company has avoided the pitfalls of international trade woes and so far, continued strong demand for its products.
The latter point was underscored by the company’s new chief executive, Bjorn Gulden, when he noted that Adidas experienced double-digit sales growth in every market except the US. Most impressively, it’s been success in core products like the Sambas and Taekwondo trainers that’s accelerated that success. Adidas sources labor primarily from countries like China and Vietnam but has faced steep levies from the US government, leading to strategic adjustments in its operations.
Adidas hopes to protect itself from the worst effects of these tariffs. They are re-routing products produced in China, that were intended for the U.S. market, to other countries. As a result, the company doesn’t even know what those final tariffs will be. Consequently, it is unable at this time to quantify the possible dollar increases resulting from these tariffs.
“Since we currently cannot produce almost any of our products in the US, these higher tariffs will eventually cause higher costs for all our products for the US market,” – Bjorn Gulden
Despite these challenges, Adidas has seen its stock recover most of its losses following the partial suspension of some tariffs announced earlier this month. Vietnam is a major global center of athletic shoe production, and Vietnam represents the largest or second largest factory zone for Adidas. Unfortunately, the country is also dealt some of the most punitive US tariffs. Adidas, for example, has exported a greater volume of products to the US in order to lessen the damage of the tariffs before they were instituted.
Gulden expressed a sense of irony regarding the company’s current position, stating, “You could ironically say that not being so dependent on the US now is an advantage for us compared to maybe companies that are more American.” He echoed concerns about consumer demand and its clear relation to the continuing tariff war.
“Or to conclude what impact this could have on the consumer demand for our products,” – Bjorn Gulden
Adidas is making moves to respond to the changing trade environment. The company is focused on continuing to provide great products while managing the complexities of international tariffs. The company’s ability to achieve record profits amidst these challenges speaks to its resilience and strategic planning in a competitive global market.