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The trend of low-rise rubber-soled terrace sneakers could give Adidas and Puma an edge over Nike this summer.
German sportswear giants Adidas and Puma have trawled their archives to re-release old styles in new colors, sparking renewed interest in the 1970s and 1980s shoes named after the standing sections of football stadiums.
Google Trends data shows that the number of searches for “adidas samba,” one of the brand’s main terse styles, has increased worldwide in the past year and reached its peak in mid-June.
Deutsche Bank analyst Adam Cochrane said Puma is likely to benefit less from the trend than Adidas because its Terrace range hasn’t gained as much recognition. But it’s definitely an area where the brand can compete.
“The only loser in this is Nike, who don’t have a track record going back to the ’80s, so you don’t have historic shoes to go back and back catalog to revisit,” he said. Nike is known for thick basketball shoes like the hugely successful Jordan range.
Still, although sales of rooftop shoes are growing, they represent a small portion of the total business. Investors will focus on Puma and Adidas’ broader strategies to combat weak consumer demand when they report second-quarter results on July 26 and August 3, respectively.
“We believe the US market (after China) is now at the center of concerns for investors in adidas and Puma,” said Robert Schramm-Fuchs, portfolio manager at Janus Henderson, which holds shares in adidas.
Nike last month reported its slowest sales growth in four quarters in North America, its biggest market, highlighting a weaker-than-expected US consumer. Weak GDP data from China last week also raised concerns about the world’s second-largest economy.
However, Adidas got a big boost from selling off some of its stock of discontinued Yeezy shoes. On Monday it cut its expected 2023 operating loss from 700 million euros to 450 million euros, citing unexpectedly strong Yeezy sales.
Adidas, led by Bjorn Gulden, Puma’s former CEO since the beginning of the year, said in May it would donate proceeds from Yeezy stock sales to nongovernmental organizations including the Anti-Defamation League, but has not yet said how much of the proceeds will go to the NGO.
Puma, whose shares have lagged behind Nike and Adidas over the past year, should update investors on strategy as the brand aims to up its game in performance sports, which some saw as an excessive emphasis on lifestyle.
With the “casualization” of fashion and consumers’ increasing focus on health and fitness, sportswear has the potential to grow further, said Morgan Stanley analyst Edouard Aubin.
“However, the cost of competing for sportswear brands is high, and the barriers to entry are low, making retailers quite vulnerable to ‘boom and recession’ cycles as trends change,” Aubin said.
Source: Reuters