Commentary

Adidas Leaps Forward With Retro Look, Strong World Cup Sales

Adidas is kicking butt in the wake of its World Cup tie-ins but that’s not the most exciting news emerging out of yesterday’s second-quarter earnings announcement, which boasts an overall sales gain of 4%, with a 16% surge in combined sales of Adidas and Reebok in North America.

“Millennials Are Making Dad Shoes Cool Again, Says Adidas CEO,” reads the hed on Footwear News’ coverage of CEO Kasper Rorsted’s appearance on CNBC’s “Squawk Box Europe” yesterday.

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“The newest trend you are seeing in the high street is the mock-ups or the new models from what we had in the ’90s, so the big clunky shoes are now coming in — which aren’t for everybody’s taste, but that’s the new taste,” Rorsted said, Samantha McDonald reports.

“And it’s not just ’90s-style kicks that are getting a second life. Rorsted cited the resurgence of the Adidas Continental 80, a sneaker created in the ’80s that recently returned to the shoe scene, thanks to its hype among younger shoppers,” McDonald continues, adding that “street-style stars such as model Hailey Baldwin have also contributed to its popularity.”

Baldwin recently expanded her role with Adidas and its partnership with the UK’s JD Sports, becoming the brands’ “first-ever style creator,” as Amy de Klerk reported for Harper’s Bazaar last month.

“In her new role, Baldwin will be the lead creative voice across select Adidas Originals women’s campaigns at JD for autumn/winter 2018. Fans will also have the opportunity to see the process behind the scenes on JD social channels and online as she collaborates on these campaigns,” de Klerk writes.

As far as those Dad shoes go, you aging Gen Xers better not dilly-dally if you want to look trendy with those Nike Air Force Ones or Adidas Forums collecting dustballs in the back of your closet. 

“You are seeing shorter product lifecycles now so the consumer is becoming more fickle. He or she will look upon a product or cycle for six or nine months and they will change,” CEO Rorsted said, CNBC’s Sam Meredith reports. “That's on one side an opportunity, but also a threat because you can be in one day and you can be out on the next and that's why our relationship with a creator farm in Brooklyn or Kanye West or Stella McCartney is so fundamental to ensure that we are right in front all the time.” 

Well, it’s not quite in front in market share yet, but it’s certainly making strides on these shores.

“While Nike is making turtle-like progress in North America — reversing a three-quarter stretch of negative sales this spring — Adidas, which owns the Reebok brand, is making big strides in gaining market share in the largest sneaker market in the world,” writes Lisa Fickenscher for the New York Post. “The gap between Nike and Adidas is not as large as it used to be,” NPD sports industry analyst Matt Powell tells her.

The recently concluded World Cup proved to be a boon.

“We delivered another strong quarter on the back of a successful World Cup activation. Our profitable growth was once again driven by our strategic focus areas, North America, Greater China and e-commerce, while we continued to invest into the desirability of our brands and the scalability of our business,” is the highlighted quote from Rorsted in the Adidas Q2 earnings release.

“Teams supported by rival Nike Inc. — including winner France and runner-up Croatia — dominated the World Cup. But [Adidas] still sold record numbers of jerseys linked to the event. That fueled a 10% rise in its shares on Thursday, the biggest since March,” writes Richard Weiss for Bloomberg.

“The company’s shirt sales topped the 8 million sold in connection with the tournament in Brazil four years ago, [Rorsted] said on a call with reporters, making good on his June prediction. That’s even though Germany and Adidas-sponsored Spain and Argentina all exited early,” Weiss continues.

“Most of the jerseys are sold before and during the tournament,” Rorsted said. “Who is in the final has no commercial impact.’’

What’s more, “Adidas isn’t resorting to discounts to keep its top-line growth pumping,” Stephen Wilmot points out for the Wall Street Journal.

“It is hard to justify why Adidas shares trade at a discount to Nike’s, which have shot higher as evidence of a U.S. turnaround has emerged. Adidas is growing sales and profits faster than Nike, yet even after today’s share-price jump the German stock trades on 23 times prospective earnings, compared with 29 times for Nike. Adidas isn’t facing potentially costly questions from the #MeToo movement either; its U.S. rival last month announced pay adjustments for 10% of its global staff following an executive purge, Wilmot continues. 

His conclusion: “It’s getting harder to find discount Adidas sneakers. Bargain hunters should consider its stock instead.”

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