Adidas muddles through supply chain mess in Q3

Global supply-chain issues dampened the German sportswear giant Adidas’s third quarter results, with the company revising down its estimated gross profit margin for the year on Wednesday.

The company “performed well in an environment characterised by severe challenges on both the supply and demand side,” Adidas CEO Kasper Rorsted said in a statement.

Difficult market conditions in China and lockdowns in the Asia-Pacific region, leading to the closure of factories in Vietnam for several weeks, as well as global supply chain disruptions, reduced revenues in the third quarter by 600 million euros ($694 million), the group estimated.

Revenues between July and September reached 5.8 billion euros, up by three percent on the same period last year and with the brand still on course to increase their overall sales by 20 percent in 2021.

Growth in revenues, as well as net profit and the company’s operating margin, a measure closely watched by investors, would “come in at the lower end” of the company’s estimates for the year on the back of disruptions.

At the same time, Adidas lowered its gross profit margin expectations to between 50.5 and 51 percent from 52 percent previously “due to significantly higher supply chain costs as well as a less favourable market mix”.

In August, Adidas agreed the sale of the ailing sportswear maker Reebok to the American company Authentic Brands Group for 2.1 billion euros.

The German group recorded a one-off positive effect of 402 million euros following the deal, bumping its total net profit to 960 million euros for the quarter.

The Reebok sale to one side, Adidas booked a net profit of 479 million euros in the third quarter on its continuing operations, down 10.4 percent on a 535 million euro profit in the same period last year.