Supply chain restrictions related to the pandemic could cost Adidas 500 million euros in sales this year

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Adidas AG update

Adidas warned that by the end of this year, supply chain restrictions caused by the pandemic could cost it up to 500 million euros in sales.

Its chief financial officer Harm Ohlmeyer told reporters on Thursday that the outage means that the world’s largest sportswear manufacturer cannot produce enough clothing and shoes to meet demand.

Nevertheless, after sales in the second quarter increased by 52% year-on-year to 5.08 billion euros, Adidas raised its outlook for 2021 for the second time this year.

The company said that the sales in the first half of the year, excluding Reebok, which is currently on sale, were slightly higher than the level of 2019 before the pandemic broke out.

If there are no supply chain delays, the recovery will be faster. Due to the impact on production, the company expects to lose more than 500 million euros in sales by the end of this year—more than 2% of analysts’ forecasts for 2021 sales.

CEO Kasper Rorsted said: “The expected impact has been incorporated into our full-year guidance.” He added that this year’s revenue will increase by 20%, and the earlier guidance was for “teens.” [growth] Speed.” He also said that net income from continuing operations will be between 1.4 billion and 1.5 billion euros, higher than the previously expected 1.25 billion to 1.45 billion euros.

In Frankfurt midday trading on Thursday, Adidas’ shares fell by about 4%.

Since mid-July, the company has been hit by the government’s blockade of its factories in Vietnam, which is the main producer of Adidas shoes.

“We expect the situation in Vietnam will start to improve later this month, thereby establishing a major operational procurement network by the end of the third quarter,” Rorsted said.

Although Adidas is moving production to other countries, “the current interruption will have a negative impact on our business in the second half of the year because we will not be able to fully meet the strong demand for our products,” he added.

Roster said that the closure of the Vietnam factory was based on existing logistics problems. “Long-term epidemicThis resulted in a significant reduction in the capacity of ships and containers,” he said, adding that the result was increased freight rates and delays.

“With sports regaining focus this summer, we achieved a very successful quarter,” Rorsted said, noting that sales in the football and outdoor categories are growing at a triple-digit rate.

Operating profit in the second quarter increased to 543 million euros, compared with an operating loss of 263 million euros a year ago, when retailers around the world were forced to close during the first wave of pandemic. Revenue and operating profit in the second quarter were better than analysts expected.

Excluding currency effects, sales in Europe and North America almost doubled in the second quarter. However, in China, Adidas dropped 16% year-on-year from April to June. Western brands, including Adidas, have been criticized in China for their previous remarks about infringing on the human rights of Uyghur Muslims, but Beijing denied it.

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