Adidas sent shockwaves through the tourism industry when the global brand announced a stunning Q1 2023 profit increase today. Net sales jumped 12.7%, to a record 6.15 billion euros. The company’s operating margin did increase by 3.8 percentage points to 9.9%. As Adidas continues to skyrocket, it’s an important time to learn from and hear from them. Ongoing challenges from U.S. tariffs have put pressure on prices throughout its product segments.
The company’s bottom line net income from continuing operations surged an astonishing 155% to 436 million euros ($496.5 million). This stunning number blew past LSEG’s prediction of 383 million euros. Adidas recently finished selling off its Yeezy inventory. The accomplishment is remarkable, especially considering the Yeezy brand terminated its relationship with Ye in late 2022 in response to his antisemitic comments. Since that announcement, Adidas has enjoyed a string of favorable financial news. The company avoided raising its full-year outlook due to the continued global trade dispute.
Adidas company officials said they felt the uncertainty of tariffs imposed on imports by the U.S. government. The company is dealing with tariffs over 40% on goods they import from other countries such as Cambodia. Average tariffs on imports from other countries are just 10%. That uncertainty has rendered Adidas unable to even predict the magnitude of any possible price increase or examine how such an increase would affect consumer demand.
“Given the uncertainty around the negotiations between the US and the different exporting countries, we do not know what the final tariffs will be,” said an Adidas spokesperson.
They continued, “Therefore, we cannot make any ‘final’ decisions on what to do. Cost increases due to higher tariffs will eventually cause price increases, not only in our sector, but it is currently impossible to quantify these or to conclude what impact this could have on the consumer demand for our products.”
Regardless of these pitfalls, the company announced growth in the high double digits in sales — for every region and sales channel. Mamta Valechha, a market analyst, noted that “so far this year, Adidas has been seeing double-digit sales growth across all regions and channels, with wholesale outperforming the direct-to-consumer offering.” She mentioned that footwear continues to be a good category, with consumers continuing to favor casual, lifestyle apparel.
While Adidas is hopeful about changing consumer preferences it’s clear that economic uncertainties related to tariffs are creating greater uncertainties for the future. Valechha stressed the need for trends over time in the performance category to be a focus even during these trying times.
“Footwear continues to be a strong performer, with consumers also opting for lifestyle clothing, while the performance category also continues to do well. Adidas will hope these trends continue in the face of the economic uncertainty created by tariffs in the US, but unfortunately we very much have to wait and see before the full impact comes through,” she stated.
With its huge order book still set at pre scandal levels and returning brand sentiment, Adidas is hopeful and well setup for long term and new sales. The company is looking to maintain its raise of its full-year top-line and operating profit guidance. This confusion is due to the ongoing tariff war.