Adidas, the prominent sportswear brand, announced on Tuesday that the tariffs imposed by U.S. President Donald Trump would lead to increased prices for all of its products sold in the United States.
The company acknowledged that while it is still determining the exact price adjustments, the ongoing global trade tensions are hindering its ability to revise its full-year projections, even in light of a significant surge in first-quarter profits.
“Higher tariffs will eventually cause higher costs for all our products for the US market,” Adidas stated in an official release.
Adidas indicated that it is “somewhat exposed” to the existing U.S. tariffs on goods imported from China, which currently stand at an effective rate of 145%. The company has minimized its exports of products manufactured in China to the U.S. However, it emphasized that the broader impact mainly arises from the overall increase in tariffs on products from other countries, which are presently maintained at 10% as trade negotiations continue.
“Given the uncertainty around the negotiations between the US and the different exporting countries, we do not know what the final tariffs will be,” the statement elaborated.
Adidas further noted, “Therefore, we cannot make any ‘final’ decisions on what to do. Cost increases due to higher tariffs will eventually lead to price increases, not just within our industry, and it is currently impossible to quantify or assess the potential impact on consumer demand for our products.”
The company also reported that it is currently unable to manufacture the majority of its goods domestically in the U.S.
Best known for its footwear lines such as the Superstar, Samba, Stan Smith, and Gazelle, Adidas uses factories located in countries like Vietnam and Cambodia, which are facing U.S. tariffs that could exceed 40% if trade agreements are not reached.
This situation regarding potential price increases and their effects on consumer demand is a challenge that many retailers servicing the U.S. market are grappling with, spanning from budget e-commerce platforms like Temu to luxury brands such as Hermès.
Positive Earnings Report
In the absence of tariff-related concerns, Adidas would have adjusted its full-year revenue and operating profit projections upward due to a strong order pipeline and favorable brand perception. Nevertheless, the company has reaffirmed its existing outlook while acknowledging that the extent of potential outcomes has expanded.
Pre-released financial results indicated that net income from continuing operations soared by 155% in the first quarter, reaching 436 million euros ($496.5 million), surpassing the anticipated 383 million euro mark as per consensus estimates compiled by LSEG. Additionally, net sales increased by 12.7% to 6.15 billion euros, while its operating margin improved by 3.8 percentage points to 9.9%.
Adidas has finally moved on from the complications resulting from its collaboration with the artist Ye, ending its association with him in 2022 due to his antisemitic remarks. The company reported last month that it had successfully sold off its remaining Yeezy inventory.
In a note released on Tuesday, analysts at Deutsche Bank hailed Adidas for delivering solid results and noted advancements across all sectors despite the prevailing uncertainty.
Analyst Mamta Valechha from Quilter Cheviot highlighted that this year, Adidas is experiencing double-digit growth in sales across all regions and channels, with wholesale operations outpacing direct-to-consumer sales.
“Footwear remains a strong segment, with consumers also gravitating towards lifestyle apparel, while performance-focused products continue to do well. Adidas hopes these trends will persist despite the economic uncertainty engendered by the tariffs in the U.S., but the full impact remains to be seen,” Valechha concluded.
