Adidas' profits surge by 151.3% until March, yet tariffs threaten to increase costs.
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In a candid chat, Adidas' CEO Bjørn Gulden shared that although exports from China to the US have dwindled, the company is still vulnerable to the current high tariffs. He made these remarks while presenting the brand's financial state.
Gulden further explained that due to the limitations in producing most of their products in the US, a rise in tariffs would inevitably escalate the costs of their product line for the American market, along with prices, although he refrained from providing precise figures just yet.
Boasting an impressive 81.5% year-on-year increase in operating profit, to a sum of 610 million euros in the first three months of the year, Adidas is off to a solid start. The boost was primarily due to product cost reductions and fewer discounts.
Sales for the same timeframe surged to 6.153 billion euros, marking a 12.7% like-for-like growth. This uptick in demand was driven predominantly by sports footwear, but apparel and accessories also saw a significant boost.
Except for North America, all regions observed double-digit percentage growth in revenue.
Gulden admitted that in an ideal scenario, the company would adjust its full-year revenue and profit forecasts upward following such a robust quarter and a promising order intake. However, the looming uncertainties surrounding US tariffs put a damper on any upward revisions at the moment.
Interested readers might also find it intriguing to know that Adidas incurred a loss of 764 million euros in 2024, but has since bounced back substantially [4].
In the larger picture, the potential consequences of U.S. tariffs on Adidas' operations and financial health stem primarily from uncertainty and potential cost increases. Despite a commendable 155% rise in net income in the first quarter of 2025, Adidas remains wary of the trade landscape, particularly the impact of tariffs on goods from countries like Vietnam and Cambodia [1][2].
Some key aspects to consider include:
- Price Rises: With higher tariffs, Adidas anticipates increased costs for their U.S. market products, which may lead to price hikes [2][3].
- Uncertainty: The company treads cautiously due to the unclear future tariff rates and their possible effects on consumer demand [2][3].
- Manufacturing Locations: Adidas has expanded its manufacturing locations to countries like Vietnam, but these regions too face hefty tariffs if agreements fail to materialize [2][3].
- Financial Outlook: While Adidas' financial health presents strength, the potential fallout from tariffs could cap revenue and profit growth projections [3].
In essence, while Adidas is currently flourishing financially, the specter of increased tariffs looms as a formidable challenge for its future business in the U.S. market.
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Overall: The impact of U.S. tariffs on Adidas' operations and financial well-being largely stems from uncertainty and potential cost increases. Adidas reaffirmed its 2025 outlook after announcing a robust increase in first-quarter profits but raised concerns about the trade landscape, particularly regarding tariffs affecting goods from countries such as Vietnam and Cambodia [1][3]. Here are some crucial aspects to ponder:
- Price Hikes: Adidas predicts higher tariffs will elevate the costs of their U.S. market products, potentially resulting in price increases [2][3].
- Uncertainty: The company is cautious due to the unpredictable final tariff rates and their potential influence on consumer demand [2][3].
- Manufacturing Locations: Adidas has diversified its manufacturing, including countries like Vietnam, but these areas are also facing substantial tariffs if agreements are not reached [2][3].
- Financial Projections: Although Adidas' financial performance has been impressive, the potential repercussions of tariffs may limit future revenue and profit growth forecasts [3].
[1] Adidas warns of higher costs for U.S. market due to tariffs. Reuters, 26 May 2025.[2] AdidasExpects Higher Costs From U.S. Tariffs To Affect Profit Margin. Bloomberg, 26 May 2025.[3] Adidas Expresses Concern Over U.S. Tariffs Impact. Financial Times, 26 May 2025.[4] Adidas Goes from a Loss of 764 Million Euros in 2024 – Investor's Business Daily, 20 Feb 2025.
- In response to higher tariffs, Adidas anticipates a somewhat increased cost for their footwear products in the US market, potentially leading to price rises.
- The CEO of Adidas, Bjørn Gulden, refrained from providing precise figures for the cost increases due to tariffs, as the future tariff rates remain uncertain.
- Despite the company's impressive financial performance and a significant boost in product sales, the potential impact of tariffs on their business in countries like Vietnam and Cambodia presents a challenge for Adidas' future financial outlook.
- In the realm of business and finance, Adidas is presenting a cautious financial outlook due to the unclear implications of U.S. tariffs on their operations, particularly regarding potential cost increases and consumer demand.
