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Adidas CEO flags delays and higher costs from Red Sea disruption, ET Retail

LONDON: Adidas deliveries to retailers are being delayed by Red Sea shipping disruptions, the CEO of the sportswear company told analysts on Thursday, adding that soaring freight rates are weighing on gross margins.

Shipments are currently delayed by about three weeks, CEO Bjorn Gulden said, and that is causing some delivery issues, especially to Europe.

“The irony is we actually have products right now where the sell-through is so good with certain retailers that we can’t deliver (them),” Gulden said on the analyst call after the company reported full-year results.

“When we suddenly have product lines that are high in demand and higher than the supply and you get a three weeks delay, that is a hiccup. That is, in my opinion, worse than the higher (freight) rates right now.”

Freight companies are avoiding the Suez Canal because of attacks on shipping in the Red Sea and rerouting around the southern tip of Africa, delaying the arrival of clothes and shoes in Europe from factories in Asia.

“The spot rates are exploding again,” Gulden said of prices for shipping.

“We have contracts that go through the summer but if we need to ship more than what the contract says or we need to accelerate something, that now has a pretty high premium.”

Gulden added that he does not expect the disruption to continue for a long time and that the impact on margins will not be huge.

Adidas did not specify its estimate of the financial impact but said it factored into the company’s 2024 profit forecast published late on Wednesday.

  • Published On Feb 2, 2024 at 01:45 PM IST

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