By Helen Reid
LONDON (Reuters) – As Adidas (OTC:) looks to build on strong demand for its three-striped white and black Samba and multi-colored Gazelle sneakers, it is also taking steps to prevent the shoes from becoming victims of their own success.
The German sportswear giant ramped up production of sneakers known as “terrace shoes” and inspired by the shoes of football fans from the 1970s and 1980s. Sales then rose from a few hundred thousand pairs per month early last year to millions of pairs per month, according to CEO Bjorn Gulden, with Adidas now looking to further increase their popularity.
The company said sales of patio shoes contributed to the strong first-quarter performance, without providing detailed figures for the Samba, Gazelle and Spezial. The shoes cost around $90 and up, while limited edition collaborations cost up to $350.
Investors and analysts are watching closely for signs that Adidas is becoming too reliant on the shoes, with the abrupt end of its highly profitable Yeezy business still fresh in people’s minds. Adidas made a loss for the first time in 30 years last year after the split with American rapper and producer Kanye West put an end to the trendy sneaker line.
The Adidas Samba won Footwear News’ 2023 ‘Shoe of the Year’ award, the first win for the brand since the Yeezy Boost 350 in 2015.
Bernstein analyst Aneesha Sherman estimates the patio shoes will generate 1.5 billion euros ($1.61 billion) in sales this year, about 7% of Adidas’ total sales and close to the 1.7 billion euros that Yeezy raked in at its peak .
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She predicts that patio shoe sales will likely peak in all regions this year.
“It is clear that this trend will not last forever,” said Thomas Joekel, portfolio manager at Frankfurt-based asset manager Union Investment, which owns shares of Adidas.
‘Ultimately the consumer decides, and companies like that Nike (NYSE:) or Adidas must be agile to respond to these trends.”
When British Prime Minister Rishi Sunak was seen sporting Sambas in a video posted to Instagram earlier this month, some Britons felt he had dealt a blow to the shoe’s reputation. Sunak later jokingly apologized to “the Samba community”, but CEO Gulden said Sunak’s fondness for the shoe had not affected sales.
LIMITED EDITIONS
Broader trend cycles could be a bruiser for the big sportswear manufacturers. In 2018, Adidas sales fell in Europe, its largest market, as its minimalist white Stan Smith shoes went out of fashion. And Nike is currently reducing supply of its classic Air Jordan 1 shoes due to weaker demand.
So Adidas is trying to spread its bets. The chunkier Campus skater-style shoes are becoming increasingly popular and are outselling the Samba in some markets, Gulden said. Adidas also plans to ramp up marketing of its classic Superstar shoe to drive a renewed trend for it next year.
It recently launched a $200 version of the shoe with a waved sole with designer Edison Chen. Gulden said Adidas has been working to clear the market of seasonal colors of the Superstar, focusing only on the classic black and white, to ensure the market is “fresh” for new launches later this year and beyond year.
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“We will maintain the current franchises and then time the Superstar activation as we and the retailers need,” Gulden said. “We will not market it in large volumes worldwide. We will hold it back and let the consumer decide when he or she wants the Superstar.”
Releasing more expensive, limited-edition versions in collaboration with designers, such as the $350 Y-3 Gazelle with Japanese fashion designer Yohji Yamamoto, is one way to keep a product in fashion.
“What Adidas and Nike are doing with some of their products is trying to follow the luxury playbook – premiumization, exclusivity, limiting supply, making it all more desirable so you can have bigger margins and a halo effect for the brand,” says Matt Clark, retail expert at consultancy AlixPartners in London.
For retailer JD (NASDAQ:) Sports, new variations of the Samba shoe in different colors and materials help maintain shopper engagement, CEO Regis (NASDAQ:) Schultz said in its recent results. Retailer Foot Locker (NYSE:) also noted “strong demand” for Adidas patio styles.
“Gulden is very aware of the fact that you shouldn’t overdo what you do to maintain the model – to keep the brand and the model hot,” says Cedric Lecasble, analyst at Stifel.
“If they distributed tens of millions of Samba in the same year, they would probably sell it, but they would also probably end the Samba dynamic,” he said.
($1 = 0.9338 euros)
