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North American Supply Chain Woes Curb Growth at Adidas

Adidas AG said Wednesday that troubles in its North American apparel supply chain will impact the company’s full year growth rate in 2019 by an expected 1 to 2 percentage points, or about 200 million to 400 million euros ($226 million to $452 million).

The company said this will be “followed by a sequential acceleration during the second half of the year as the company will be able to scale the respective supply over time.”

“The volume grew quicker than anticipated and obviously we didn’t respond quickly enough to that demand signal,” CEO Kasper Rorsted told a news conference in Germany focused on the company’s annual results. “That brought us into a situation which is not one we are satisfied with.”

Rorsted said Adidas has doubled its sales in North America in the last three years. The company reported that combined sales of the Adidas and Reebok brands grew 15 percent in North America.

“While the company is experiencing a strong increase in demand for mid-priced apparel, Adidas will not be able to immediately cover this demand in full due to supply chain shortages,” the company said. “Consequently, growth is expected to be negatively impacted, particularly in North America during the first half of the year.”

Adidas said it expects sales growth of just 3 percent to 4 percent in the first half of the year in North America, which will accelerate in the second half as it ramps up supplies by reallocating factory capacity.

At the press conference, Rorsted didn’t offer much detail on the situation, but said, “Right now we have delivery problem and it’s one we are very unhappy with.”

He noted, however, that the issues were unrelated to U.S. trade tensions with China. He also declined to comment on whether the supply chain issues were related to the recent appointment of Martin Shankland to the executive board as board member responsible for Global Operations, succeeding Gil Steyaert.

For fiscal 2018, Adidas reported that revenue grew 3 percent to 21.92 billion euros ($24.78 billion). Net income increased 45 percent to 1.7 billion euros ($1.92 billion).