Is Adidas playing the perfect game when it comes to footwear?
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Is Adidas playing the perfect game when it comes to footwear?

In February, leading athleisure brand Adidas, famous for its sneakers, held a celebration. During the NBA’s All-Star Weekend in Los Angeles, the company rented a space next to the arena, and played host to tens of thousands of people. They came to make use of the full-sized basketball court, check out the pop-up design studio, and patronize the food stations and “sneaker pickup” point. Celebrities were in attendance, the likes of Kanye West (who gave an impromptu performance) and James Harden (of Housten Rockets fame).

Adidas’ share price has appreciated by 22% so far this year

graph 0905 adidas

SOURCE: Yahoo Finance

Mark King, the company’s president of North America, said: “Fifteen or 20 hip-hop bands and athletes and basketball. … It was a celebration.” And the company certainly has reason to celebrate: since King took over in 2014, the company has more than doubled its North American market share, and its stock has increased globally by a factor of (almost) four. Sensibly, Adidas took this opportunity to release a dozen of its new shoes.

Adidas is a German brand that lost out to Nike decades ago – when the latter unexpectedly poached iconic basketball star Michael Jordan’s sponsorship deal. Adidas has been playing catch up ever since, but there are signs in 2017 that the company is making headway. In March, the company released its annual report for 2017, showing 27% revenue growth in North America, year-on-year.

King is not the only factor in play to explain Adidas’ success last year. The company also moved some 200 people from its German headquarters to the U.S., invested millions, launches a shoe design hub in Brooklyn, and a robotic “speedfactory” in Atlanta. Perhaps most importantly, it has plans to expand its North American headquarters in Portland. Yu_Ming Wu, who publishes Sneaker News, said: “they’re still in growth move. Last I heard, they had employees sitting in hallways.”

One of the people Adidas brought over from Germany was lead designer Paul Gaudio, and he thinks the company’s impressive 2017 growth can be attributed, in part, to its new Boost midsole technology, which increases comfort and energy transfer to create a sneaker that is both more comfortable, and provides better performance. Gaudio says: “Boost checks the boxes from an innovation standpoint. You just need to let [consumers] know it’s out there and why they should care.”

With a great 2017 behind them, Adidas is looking to replicate that success this year. Speaking about how well the last 12 months have gone, King said: “I’m a dreamer. I had high hopes. But I didn’t know all this was going to happen.”

Disclosure

Dominion holds Adidas in its Global Trends Luxury Fund.


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