Adidas Business

Adidas had been on a tear, one it had every intention of staying on. The German sportswear maker had seen its US sales surge 31% in the first quarter, during which time it nearly doubled its market share. That news, however, had been offset by the news that sales of its classics—which had driven much of Adidas’ growth in North America—had peaked.

Business competition between Nike and AdidasMark King, Adidas’ head of North America was nonplussed. He said at the time, one of the company’s strengths was that it had a process in place that allowed it to see trends as they were emerging, rather than after they’d already surfaced.

He said the company had made “a strong pivot” two years earlier when it realized the only way to stay ahead of societal and marketplace trends was to really listen to the consumer.

Apparently, it worked. According to new August data released by NPD Group on Monday, Adidas just leapfrogged Jordan to become the second-biggest sports footwear seller in the US, a day many felt would never come.

At least part of the story is that US sales are riding the wave of an overall resurgence in North America. In August, Adidas’ North American sales were up 50% compared with the same month a year ago, and its footwear share nearly doubled to 13%, according to NPD data.

On the flip side, Jordan continues to struggle. In a note, analysts at Morgan Stanley described Jordan’s performance as much worse than expected, and wondered if they were seeing the previously unthinkable; that Nike had a problem with its Jordan brand.

There were other signs as well. Jordan has been struggling amid an industry-wide demand shift that’s favoring low-top sneakers like the Adidas Superstar over the chunkier looks of basketball shoes that tend to clash with skinny jeans and joggers.

In an attempt to regain its balance, Nike has been releasing more and more Jordan shoes, but they’re not immediate sell-outs like past releases have been. The net effect has not been a resurgence of the Jordan brand but an erosion in its value.

It’s put the number one sportswear maker in the world in a precarious position. As growth at Nike has stagnated, growth at Adidas has remained at record highs. While Nike still rides atop the US sportswear market, garnering a 44% share. Adidas’ share has nearly doubled compared to a year ago, and much of that growth seems to have come from consumers turning away from facing Nike products.

Citing industry sources, analysts at Canaccord Genuity wrote in a Monday note to investors, that the situation has Nike staffers freaking out. They say that many Nike products have required brand-diluting discounts to move off the shelves in this quarter.

Those same analysts say investors are concerned about Nike’s new product development efforts. The brand’s innovation pipeline seems to be running dry. Nike can no doubt afford a misstep or two, but eventually investors patience will run out.

http://www.adidas.com/us/