Published:  12:32 AM, 14 March 2019

Production bottlenecks to hobble Adidas in 2019

Production bottlenecks to hobble Adidas in 2019

German sporting goods maker Adidas said Wednesday it booked vaulting profits in 2018, but crimped its expectations for this year as it runs into limits on production capacity.Net profit at the Herzogenaurach-based group leaped 45 percent year-on-year, to 1.7 billion euros ($1.9 billion), Adidas said. The firm booked an 3.0-percent increase in revenues to a record 21.9 billion euros last year, a figure it aims to lift by "between five and eight percent" in 2019.

But while Adidas claimed in a statement to see a "strong increase in demand" for its clothing, "supply chain shortages" mean it will not manage to keep up. "Growth is expected to be negatively impacted, particularly in North America during the first half of the year," it added. The region had been one of the "strategic growth drivers" contributing double-digit expansion to 2018's result alongside China and the group's growing e-commerce operation, chief executive Kasper Rorsted said.

Across the world, Adidas' flagship three-stripe brand saw sales grow 9.0 percent adjusted for currency effects. But subsidiary Reebok's turnover fell 3.0 percent, continuing a struggle for growth that has persisted since Adidas took it over in 2005. Looking ahead to 2019, Asia will defend its title as the Adidas group's sales powerhouse with double-digit expansion, while North America and emerging markets are expected to add high single-digit figures.

Meanwhile the firm hopes to "return to growth" in Europe after a 6.0-percent decline in sales in the final quarter of 2018, forecasting "a slight increase" in currency-adjusted revenues. Adidas aims for a bottom line between 10 and 14 percent higher than 2018, at up to 1.95 billion euros.

And it said it would offer investors a dividend of 3.35 euros per share for last year, up 29 percent on 2017. But the higher payout failed to impress the market, with the group's stock falling 5.6 percent to 198.15 euros by 9:15 am in Frankfurt (0815 GMT), trailing the DAX index of blue-chip shares. The company expects sales growth of just 3-4 percent in the first half of the year, speeding up in the second half as it ramps up supplies by reallocating factory capacity and prioritizing the U.S. market.

"The overall outlook is very solid for 2019, although top line growth will be rather back-end-loaded and this might be a temporary drag on Adidas shares," wrote Macquarie analysts. orsted declined to comment on whether the supply chain issues resulted in the removal of Gil Steyaert as global operations head after just over a year in the role, and his replacement with Martin Shankland last month.

---AFP, Frankfurt Am Main

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