Adidas to raise prices as US tariffs cost €200m

Adidas announced it will raise prices for US customers due to an additional €200 million cost from new US tariffs, specifically 20% on Vietnamese and 19% on Indonesian goods, which account for nearly half its production. Despite these headwinds, the sportswear giant reported robust first-half results, with sales up 7.3% to €12.1 billion and pre-tax profit nearly doubling to €1 billion. This move highlights the broader impact of US tariffs, which have also significantly affected other European manufacturers like Mercedes-Benz, which saw Q2 profit drop 70% due to tariff costs.

Analysis

Adidas is confronting a significant margin headwind, forecasting an additional €200 million in costs for the remainder of the year stemming from new US tariffs. The company plans to directly mitigate this impact by increasing prices for its American customers. The tariffs, targeting key manufacturing hubs with a 20% levy on goods from Vietnam and 19% on those from Indonesia, affect nearly half of Adidas's total product sourcing. This introduces a critical uncertainty regarding consumer demand elasticity, a risk explicitly acknowledged by CEO Bjorn Gulden. Despite this geopolitical pressure, the company's operational performance remains strong, evidenced by a 7.3% increase in first-half sales to €12.1 billion and a near-doubling of pre-tax profit to €1 billion. This tariff issue is not isolated, reflecting a broader systemic risk for European exporters, as seen in the automotive sector where Mercedes-Benz attributed a nearly 70% fall in Q2 profit to tariff costs and Stellantis reported a €300 million impact.

Key Decisions for Investors

• Investors must weigh the company's robust underlying sales momentum, particularly the 9% growth in footwear and 17% in clothing, against the direct margin pressure and demand uncertainty posed by the new US tariffs.
• Monitor US sales figures in subsequent quarters to assess the real-world impact of the announced price hikes on consumer behavior, which management has identified as a key variable.
• It is prudent to evaluate Adidas's supply chain concentration in Vietnam and Indonesia relative to competitors, as peers with more diversified manufacturing footprints may be better insulated from these specific tariffs.
• Recognize this as a broader trade policy risk affecting European exporters, evidenced by the severe impact on automakers, and consider the potential for wider portfolio exposure to ongoing US-EU trade friction.