- € 1 billion in sales in Q4 and Q1 2022
- Long delays in shipments from Asia
- Equities down 5%
BERLIN, Nov. 10 (Reuters) – German sportswear company Adidas (ADSGn.DE) on Wednesday warned of € 1 billion ($ 1.2 billion) in sales due to plant closures in Vietnam affected by COVID and supply chain bottlenecks that are expected to affect business in the next year.
The company’s shares fell more than 5% as it became the latest multinational to report manufacturing disruptions and shipping delays as the global economy rebounds from the worst effects of the pandemic.
Factory closures in Vietnam from July to September and a gradual reopening since October meant that Adidas lost 100 million items in the second half of 2021, CFO Harm Ohlmeyer told reporters.
This was exacerbated by delays in transporting containers to ports of origin and destination, with a third of shipments leaving Asia with significant delays, Ohlmeyer added.
The lost capacity will wipe out € 1 billion from total sales in the fourth quarter of 2021 and the first quarter of 2022, even after mitigation measures, with the supply network expected to return largely to normal by the end of this year, said Adidas.
Rival Puma (PUMG.DE) also warned that supply bottlenecks will lead to a shortage of its products in 2022. read more
Vietnam typically accounts for 28% of Adidas’ supply, and its factories primarily manufacture footwear for the company.
Adidas has succeeded in moving production to China and Indonesia for 30 million units, Ohlmeyer said, and is redeploying inventory from Asian markets currently affected by the lockdowns, as well as using more air cargo to move goods. products to customers on time.
The company also plans to reduce the number of discounted products it offers and increase prices by around 5% by 2022.
Adidas expects “flattened” sales in the fourth quarter, which means sales growth of around 17-18% for the full year, said managing director Kasper Rorsted. The company expects sales growth of at least 8-10% for 2022, Ohlmeyer said.
Third-quarter revenue grew 3% currency-free to € 5.752 billion while operating profit fell 8.5% to € 672 million, missing analysts’ average forecast .
Sales fell 15% in Greater China due to renewed pandemic restrictions as well as the ongoing fallout from the consumer boycott that Adidas has faced in the country since March.
Western brands have been criticized in China for saying they will not source cotton from Xinjiang after reports of human rights abuses against Uyghur Muslims. Beijing denies any abuse.
Adidas has launched an action plan to try to revive its fortunes in China, long its most important growth market. She set up a dedicated studio to generate faster marketing and increase her product creation only for the Chinese market.
($ 1 = € 0.8648)
Reporting by Emma Thomasson Editing by David Goodman and Mark Potter
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