Adidas and Puma bet on 'terrace' sneaker trend in tough market
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[July 25, 2023] By
Helen Reid and Linda Pasquini
LONDON (Reuters) - The trend for low-rise rubber-soled "terrace"
sneakers could give Adidas and Puma an advantage over Nike this summer,
but may not offset weakening U.S. and Chinese demand.
German sportswear giants Adidas and Puma have trawled their archives to
re-release old styles in new colors, driving renewed interest in the
shoes from the 1970s and 1980s named after the standing section at
soccer stadiums.
The number of searches for "Adidas Samba", one of the brand's main
terrace styles, has surged worldwide over the past year and hit a peak
in mid-June, Google Trends data shows.
Puma is likely to benefit less from the trend than Adidas because its
terrace range doesn't have as much name recognition, said Adam Cochrane,
analyst at Deutsche Bank. But it's certainly an area where the brand can
compete.
"If there's a loser from this it's Nike, which doesn't have the track
record from the 80s so you don't have the historic shoes to fall back on
and the back catalogue to revisit," he said. Nike is more known for
chunky basketball shoes, like the hugely successful Jordan range.
Still, while terrace shoe sales are growing, they're a small fraction of
the overall business. Investors will be pushing Puma and Adidas on
broader strategies to navigate weak consumer demand at second-quarter
results on July 26 and Aug. 3 respectively.
"We believe the U.S. market is now (following on from China) at the
heart of the worries 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
U.S. consumer. Weak GDP figures from China last week also raised alarm
about the world's second-biggest economy.
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The Adidas logo is pictured during
celebrations for German sports apparel maker Adidas' 70th
anniversary at the company's headquarters in Herzogenaurach,
Germany, August 9, 2019. REUTERS/Andreas Gebert/File Photo
Adidas, however, has got a big boost from selling some of its stock
of discontinued Yeezy shoes. On Monday it slashed its expected 2023
operating loss to 450 million euros from 700 million euros, citing
unexpectedly strong Yeezy sales.
Adidas, led by ex-Puma CEO Bjorn Gulden since the start of the year,
said in May it would donate proceeds from Yeezy stock sales to
non-governmental organizations including the Anti-Defamation League
but has not yet said what share of the proceeds will go to NGOs.
Puma, whose shares have lagged Nike and Adidas over the past year,
should update investors on strategy as the brand aims to up its game
in performance sportswear after what some saw as an over-emphasis on
lifestyle.
Sportswear has the potential to grow further with a "casualization"
of fashion and consumers' increased focus on health and fitness,
said Edouard Aubin, analyst at Morgan Stanley.
"However, the cost to compete for sportswear brands is very high,
and barriers to entry are low, making retailers quite vulnerable to
'boom and bust' cycles as trends change," said Aubin.
($1 = 0.9028 euros)
(Reporting by Helen Reid in London and Linda Pasquini in Gdansk;
Editing by Susan Fenton)
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