It may be Nike that owns the Air brand of sports shoes, but its Germany-based rival, Adidas, may be catching a lot more “air” in the form of airfreight shipments in the next fiscal quarter, due to supply chain shortages that began in Q1 and could possibly affect sales figures for the rest of the year.
In a May 3 conference call to discuss its recent Q1 earnings for 2019, Adidas CFO Harm Ohlmeyer began with the news that the sportswear giant would have to expedite some shipments by air, rather than by ocean or trucking, in Q2 and Q3, in order to speed products to retailers and consumers. “First and foremost,” he said, “we are going to reasonably increase the use of airfreight from Q2 as part of the mitigating impact of supply chain shortages in Q1.”
While Adidas did not go into specifics, CEO Kasper Rorsted said the “supply chain challenges” should be corrected by the end year, but not before the company endures “roughly between €200 million and €400 million” in revenue losses in Q2 and Q3, mainly in the North American market.
While the company did not mention the cause of these delays, the majority of its suppliers are located in China, raising the question of whether the current trade wars between China and the United States – or any efforts to shift to new, non-Chinese suppliers to avoid the tariffs – have had an impact on the North American market.
In its 2018 annual report, Adidas said it expected a 5% to 8% growth in top-line apparel, but said it “will not be able to immediately cover this demand in full due to supply chain shortages,” which it said would hamper growth, especially in North America, for the first half of 2019.
To assure investors, Rorsted also said: “We’ve gone through all of our suppliers and understood where we can get additional capacity,” including the increased use of overtime “where it makes sense.”
“We have taken all the steps necessary that we can take to mitigate” further damage, Rorsted said. “As of 2020, we have contracts in place that ensures us that we will have no supply constraint as of 2020.” He further characterized the supply-chain delays as a “temporary setback.”2 - Readers Like This Post