The popularity of its retro sneakers, as well as the Gazelle, Campus and Handball Spezial shoes, led Adidas to upgrade its full-year operating profit forecast to about 700 million euros ($745.4 million) from 500 million euro.
At the back of ex-footballer and head of No.2 sportswear market player Bjørn Gulden’s mind, however, is the notion that Adidas shouldn’t depend solely on low-top sneakers with rubber soles – certainly not as it was done with Kanye West’s Yeezy line.
Dr Martens Plc’s profit warning last week, and the departure of its chief executive Kenny Wilson, is an instructive lesson in what can happen when consumers – particularly the Gen Z dynamic – move away from a signature style.
Yeezy’s role and imprint on Nike
For Adidas, however, it does not seem that there is a similar scary scenario on the horizon. Of the €200 million profit upgrade, around €50 million came from the sale of remaining Yeezy inventory.
That means the rest comes from demand for Adidas’ staples, clearly defined by the so-called ‘Terrace shoes’, a reference to their adoption by football fans in the 1980s.
Indeed, analysts estimate that sales growth excluding Yeezys and currency changes will come in at around 5%, compared to 2% for Nike Inc’s brand. the three months to the end of February. This is reflected in Adidas shares, which are currently at their highest level in two years.
Cycles dominated by Nike or Adidas typically last three to five years, according to analysts at RBC Capital Markets. Assuming, according to Bloomberg, Adidas’ growth overtakes Nike’s for the first time in five years in 2024, then that would mean a few more years at the top.
The example of the Samba model
But there are signs that Adidas CEO Bjorn Gulden’s strategy to maximize sales of the Samba model may be starting to take a toll on its popularity.
The availability of the legendary Sambas in US and UK e-shops between January and April increased by 354% from 2023, according to retail intelligence firm EDITED. However, the out-of-stock percentage in the majority of sizes and variants decreased by 17 percentage points to 51%.
Regardless of how this sounds, it’s not a disaster given the amount of inventory Adidas is pumping into the market and that it probably struggled to keep up with demand last year – but it remains a warning that this particular retro style could overwhelm the market and be found everywhere.
Gulden seems to already be aware of the danger. For example, the Handball Spezial has emerged as the most sought-after Terrace style in recent months, so the company is following the Samba playbook by ramping up production. Arrivals are up 300% so far this year, according to EDITED, but sales are up 6 percentage points to 56%, revealing consumers still want to buy it.
Nike’s competition – Puma’s wedge
Even so, Gulden is wary of any rebalancing to Nike or his former employer, Puma SE, which sells a line of Terrace-style shoes.
Nike appears to be more focused on reclaiming its sneaker supremacy, with new versions of the Alphafly and Pegasus – its running mainstay – unveiled in Paris last week. It’s also ramping up its efforts in women’s sportswear, with the expected endorsement of rising college basketball star Caitlin Clark.
Indeed, retro low sneakers tend to be cheaper—with an average retail price of $100—and therefore less profitable than basketball or running shoes. But they could help rebuild the brand’s reputation – something Nike urgently needs – if they can be produced quickly enough, and in sufficient quantities and colors, to capitalize on the trend.
That might be why Nike is already re-releasing a number of older styles, including an all-white leather Cortez, favored by The Bear star Jeremy Allen White, and the Field General.
The best sellers
One way to deal with the risk of the “studded” products that sell like crazy falling out of favor is to have lots of other options. Gulden seems to be thinking about the day ahead, planning for where the retro trend might go next.
Not only is he leaning towards the Spezial, but he’s taking the Terrace trend to the run, with a reissue of the SL72 – which is also selling out according to EDITED – while digging through Adidas history to find other low-top styles, dubbed ‘Lo Profile’.
And it doesn’t stop here. He is stepping up his efforts to bring the success of the iconic three stripes – a Terrace staple – to clothing. After spotting Blake Lively alongside Taylor Swift in a red Adidas tracksuit at the Superbowl, the company borrowed from that success, creating one in 12 different colors.
Source: OT
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