Recent developments in the respective worlds of the sneaker giants point to a couple of emerging themes. Direct-to-Consumer, brand presentation with key brick-and-mortar partners and expanded reaches into women’s will be key battlegrounds in determining who advances reach, sales and profitability. And who does not.
Adidas and Nike are prepared to “Take it to the Max” in North America. Will Under Armour have the firepower and, more importantly, the products to keep pace? What also bears watching is whether Nike has the ability, or even the desire, to swing the sport fashion pendulum back toward performance. The betting here is that Nike doesn’t abandon its sport performance message. It simply makes traditional performance-oriented products less clunky and more fashion-forward.
While I haven’t had the opportunity to meet him personally, adidas Group CEO Kasper Rorsted came across as a confident, but hardly a boastful senior executive in his presentation during the German company’s investor day last week. His principal brand generated 30 percent sales growth in North America in 2016, fueled by the 80 percent sales growth of its fashion-forward Originals Collection. But Rorsted wasn’t wildly exuberant or brashly predicting a blitzkrieg on his principal competitors in 2017 and beyond. Instead, the former Heckel executive, who took the Adidas helm from Herbert Hainer last fall, was blunt.
Adidas must do more in the important North American market and in building its digital business if it wants to top the $5 billion revenue mark in the region by 2020. But the approach will be measured and steady.
"We will [adidas], over the next three years, articulate a very clear roadmap. We will hold ourselves accountable… It will not be a completely smooth ride from here to 2020."
“We shall not try to get to a quick resolution,” Rorsted said, pointing out (without uttering “Nike”) that the company’s principal rival is 50 percent larger in annual revenue with 45-50 percent of that advantage in the U.S. He made it clear that a proper digital approach by Adidas will be crucial for the brand’s long-term success.
Rorsted went on: “We will, over the next three years, articulate a very clear roadmap. We will hold ourselves accountable… It will not be a completely smooth ride from here to 2020.”
Further growth in North America and e-commerce, to $4 billion in 2020 from $2 billion last year, are vital if the Three Stripes is to meet its overall topline objective of 25-27 billion euros in annual revenues in short order.
Nike, which reports third quarter results this week, is poised to show improving North American trends only days before the crucial launch of its Air VaporMax products on March 26. Some circles suggest a ramped-up Swoosh marketing machine behind the concept, which also may be customized through the brand’s iD program, will work overtime to tug the fashion rope back its way this spring.
Even with Adidas’ huge North American gains in 2016, Nike still owns 66 percent of the nearly $22.9 billion that the “Big Three” generated in North American market revenues (footwear, apparel, equipment, accessories) last year, according to data taken from their public filings. Nike’s annual North American revenues of nearly $15.1 million for the 12 months ended Nov. 30 accounted for 66 percent of the total. Adidas North American revenues grew 24 percent in 2016 to 3,412 million euros, or $3.78 billion when converted to U.S. dollars at an average annual rate for the euro of .90372. That figure represents 16.5 percent of the $22.9 billion, but it trailed Under Armour’s 2016 North American sales of $4.01 billion, or 17.5 percent of the total. The increased penetration of the Adidas brand this year in places such as Foot Locker and Dick’s new and improved footwear decks will likely see Adidas and UA reverse pole positions behind Nike.
Even with Adidas’ huge North American gains in 2016, Nike still owns 66 percent of the nearly $22.9 billion that the “Big Three” generated in North American market revenues
For those who don’t have a long history in the sneaker biz, consider the last time Nike did not own the dominant position in the North American athletic shoe business was 29 years ago when Reebok owned a 26.7 percent share and The Swoosh had 23.3 percent in a $4.5 billion market. The following year in 1989, Nike recaptured the top slot with a newfound emphasis on fashion and products such as the Alpha Force, Air Force STS and Air Jordan IV. Complex would later name seven Nike styles from 1989 on its list of the “100 Best Nikes of All Time.”
As for Under Armour, last week the company hired Clay Dean, a 20-year veteran of General Motors who most recently led the company’s advanced design organization and spearheaded the development of some of its concept cars, as Chief Innovation Officer. Dean will oversee UA’s global vision and strategy for innovation. Also, last week, retailer DSW, joined Kohl’s in announcing a brand partnership with Under Armour that will see the brand distributed in its men’s departments.