Thursday November 30, 2023

Adidas Slows Its Pace Due to Supply Chain Disruptions

  • Adidas was hit by supply chain disruptions, causing a year-over-year drop in operating income and a lower full-year guidance.
  • The company also ramped up its marketing spending.
Adidas/Design: Alex Brooks
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Supply chain issues have caught up to Adidas, as the shoe and apparel maker reported a drop in third-quarter operating income and lowered its full-year forecast.

The Germany-based company’s revenue grew 3.4% year-over-year to $6.6 billion, but operating income dropped 8.5% to $776.7 million.

Adidas now expects its 2021 net income to be at the low end of its previously forecast range of between $1.6 billion and $1.7 billion.

  • Adidas said its revenue growth dropped by $693.5 million in the quarter, citing “the challenging market environment in Greater China, extensive COVID-related lockdowns in Asia-Pacific, as well as industry-wide supply chain disruptions.”
  • Factory closures and workforce shortages in Vietnam caused a several-month production lag over the summer. Vietnam typically makes around 28% of Adidas’ shoes and apparel.
  • Adidas faced boycotts in China after saying it would not source cotton from the Xinjiang region due to reports of human rights abuses against the Uyghur Muslim population.

In addition to supply chain issues, Adidas “leveraged major sporting events to drive brand heat,” ramping up marketing and point-of-sale spending by 25% to $779 million.

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