Trailing the Stoxx Europe 600 index this morning were Danish jeweler Pandora, German sportswear brothers Adidas and Puma, and Swiss computer peripherals designer Logitech. What do they have in common? Sourcing in Asia to sell in Western markets, notably the USA. Shares in Nike (-7%), Lululemon (-11%) and Deckers (-12%) suffered the same treatment in the US after trading hours.
The cause? The tariffs announced yesterday by the United States, which hit dozens of countries, particularly the world's Asian workshops such as Vietnam, Indonesia and China. Vietnam has been hit with a 46% tariff, Cambodia with 49%, Bangladesh with 37% and Indonesia with 32%, while duties on China have been raised by 34 percentage points... on top of the 20% previously applied!
For Felix Dennl, analyst at Metzler in Frankfurt, these measures could erode the sector's margins by over ten percentage points and weigh on sales, as inflation worries dampen consumption. "Sporting goods companies are likely to respond with price hikes in the US", he believes.
In 2024, Nike produced half of its footwear and 28% of its apparel in Vietnam. Adidas, meanwhile, made 39% of its footwear and 18% of its apparel there last year. Indonesia and Cambodia are also major production centers for Adidas, with respectively 32% of its footwear and 23% of its apparel coming from these two countries.
Adidas sourcing (Screenshot 2024 annual report, page 70). Reading: 39% of Adidas footwear is produced in Vietnam.
Other retailers sourcing in Asia have also been hit. The stock of Sweden's Hennes & Mauritz, which sources mainly from China and Bangladesh, has come under attack, as has that of Inditex, the parent company of Zara.
Another example: Pandora supply chain (Screenshot Transparency Report 2024, page 6).
