Berlin—Dec. 10, 2015—Adidas expects a big jump in the cost of sourcing products over the next five years due to rising labor and material costs, but should be able to compensate by lifting prices, cutting its range and shifting production from China.
The German sportswear firm said higher input costs and currency effects would push down its gross margin by 50 to 100 basis points in 2016, although it reiterated its operating margin should stay stable as it cuts operating expenses as a percentage of sales.
John McNamara, head of global sourcing, told an investor workshop that he expected labor costs to keep rising by 11 to 15 percent a year, while the price of materials like cotton and nylon could go up 1 to 4 percent a year.
McNamara said Adidas would cut the amount of clothes and shoes it sources from China, while increasing orders to Indonesia, Vietnam, Cambodia and Myanmar, with the latter accounting for 4 percent of Adidas shoe production by 2020.
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