Adidas, Puma expected to hike sportswear prices following Nike as US tariffs hit

Following Nike's announcement of price increases up to $10 on shoes over $150 due to U.S. tariffs, analysts anticipate Adidas and Puma will follow suit in raising prices for sportswear in the United States. The decision comes as the industry grapples with a 10% tariff on all imports and the potential for a 46% tariff on goods from Vietnam, a key manufacturing hub, however, brands must also consider weakening U.S. consumer sentiment which may limit pricing power, particularly for Puma whose U.S. sales have been slowing.

Analysis

The U.S. sportswear market faces imminent price adjustments, with Adidas and Puma anticipated to emulate Nike's recently announced price increases of up to $10 on footwear exceeding $150. This industry-wide response is primarily driven by escalating import costs stemming from a 10% blanket U.S. tariff on all imports and a higher 30% tariff on Chinese goods, compounded by the looming threat of a steep 46% tariff on products from Vietnam, a critical manufacturing hub, potentially returning in July. While Nike, the market leader by sales and market capitalization, characterized its price hikes as part of normal seasonal planning without directly citing tariffs, analysts widely perceive this as a necessary reaction to cost pressures, setting a precedent for competitors. Both Adidas and Puma had indicated they would not be first-movers. The capacity to implement these price increases varies; Adidas, benefiting from a surge in sales of trendy vintage shoes such as the $100 Samba and $120 Gazelle, appears better positioned to pass on costs. Conversely, Puma, which has seen slowing sales in the U.S. and whose $100 Speedcat sneaker sales have been slower than expected, may possess less pricing flexibility. This pricing strategy confronts a significant headwind in the form of deteriorating U.S. consumer sentiment, which slumped further in May alongside surging one-year inflation expectations. This weakening consumer outlook may limit the extent of price pass-through and necessitates careful inventory management by all players to avert potential oversupply and subsequent discounting. Even other brands like running-focused On, with sneakers priced at $130 and up, plan price increases, citing ambitions for premium positioning rather than direct tariff reactions.

Key Decisions for Investors

• Investors should assess the differential impact on sportswear companies, recognizing that Adidas, with its current strong product momentum, may possess greater pricing power and ability to absorb tariff-related costs compared to Puma, which is experiencing slowing U.S. sales.
• Closely monitor U.S. consumer sentiment and retail sales data, as sustained weakness could significantly undermine the sector's ability to pass on increased costs, potentially leading to margin pressure and the need for promotional activity.
• Maintain vigilance regarding U.S. trade policy developments, particularly the status of tariffs on goods from Vietnam, and scrutinize companies' inventory management strategies in light of potential demand elasticity to price hikes.