How Will Your Favorite Sneaker Brand Perform in 2018? | adidas AG ADR ($ADDYY)

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Originally posted on ARCH-USA

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Source: adidas AG ADR

adidas $ADDYY

Current Share $101.06

2017 Recap:  2017 was adidas’ year. Well actually from late 2016 to late 2017 was adidas’ year until Nike’s Investor’s Day laid out Nike’s forecast for how they would continue their growth heading towards their goal of 50 Billion/year. What many analysts assume is that Nike’s CDO and focus on Nike Plus Memberships as well as their goal of reaching 80% control of selling their footwear is why adidas has taken a slide back at the end of 2017.

Note: adidas has seen amazing growth and their Q4 hasn’t been released yet so there isn’t any way for me to verify that they’ve taken a step back until that report is dropped. What I’m using as evidence is the recent promo with adidas footwear. Around September of 2017 adidas NMD, one of the brands hottest shoes began showing up in outlets and by November the brand was being discounted at Foot Locker stores and going into deep discount on Stan Smith and Superstars; the shoes that led to their amazing resurgence.

What has to be stated though is that the Three Stripes started the year at $76/share. At their peak during 2017 they were at $118.98/share!!! People are going nuts over bitcoin, but adidas was the bitcoin of sneakers this year. Like bitcoin though $ADDYY has come back to earth. I predicted as much, but I was wrong about why until I began looking at the issues for adidas that were capped off with the release of the Prophere in December. This post below gives you a bit of backstory of how I’ve looked at adidas throughout the year. There is much more on the site, but this is a good start.

This post below on the Prophere explains why I think adidas is missing the mark late in 2017 and it will affect the brand throughout the spring if the design elements remain the same. I wrote the following article based on pictures. Now that I’ve had a chance to actually hold the Prophere I have to ask why would adidas create a shoe that might be the heaviest model they’ve created in years? The Prophere has a lot of marketing, but the marketing is so unlike what adidas created as they grew in popularity it’s been frustrating for me to analyze:

As much as I like the “Calling all Creators” campaign it goes against the counterculture element that made me excited about the Trefoil and also resonated with fans.

2018 Analysis: adidas’ growth has been so strong it will be hard to see their shortcomings heading into 2018. That doesn’t mean that they won’t show serious chinks in the armour in North America. adidas in the international market, like Nike in the North American Market, is synonymous with futbol. This brand cache around the world will always be what adidas can fall back on. Their growth in North America has always been shaky. The catalog of retro footwear for adidas is three models primarily, Stan Smith, Superstar and Pro Model. This three headed monster was supported by NMD and EQT, but sales have slowed there and that’s because adidas priced itself out of the market with far too many high end sneakers. More important they pulled a Jordan Brand and introduced way too many colorways of the NMD R1. I thought they would correct this with the NMD R2, but they changed the midsole so drastically that it didn’t resonate with the R1 crowd which then forced adidas to adopt the shoe shape to everything they’ve released which has led to a feeling of ‘sameness’. It doesn’t help that none of the adidas basketball models are going to make a splash this year. The Harden Volume 1 was an admirable performer last year. This year the shoe looks very similar to an… NMD and I think that’s a big mistake. There aren’t any of the elements of the Volume 1. The Rose line is dead. The Lillard isn’t as street ready as the previous models and remains a shoe that feels like an afterthought and the Porzingis led Crazy Explosive barely has any shelf space (which makes sense since people aren’t rocking basketball kicks as casual).

I guess this reads like doom and gloom, but it doesn’t. adidas has some serious bright spots. If they can begin to create shoes similar to the Day One UltraBOOST the brand can reinspire the emotion and passion they’ve found over the course of the last year. If they take the time and place as much emphasis on Avenue A (the women’s subscription service) they have a leg up on the other brands. If they can create some powerful campaigns and put the money behind them instead of allowing the campaigns to simply disappear I think they have a chance to nail the women’s market better than the other big players:

2018 Prediction: With all of this said what is my prediction for adidas in 2018? adidas’ stock and share price will be shaken by the decrease in margins due to the promotional market in North America. While their growth is big enough to mask the issues I think adidas like Under Armour is in an identity crisis. The brand doesn’t know if it is counter culture, fashion or sport. Hence the United Nations of athletes in the Calling All Creators campaign. Last year adidas had about 10 different occasions where their marketing hinged on the art community. There were pop up shops, art shows and their beautifully created retail experiences connected art and commerce masterfully… In the last two months that hasn’t happened and I’m afraid if they don’t figure it out they will lose ground to a machine that will occupy a lot of social media and marketing real estate with the NBA and NFL backed by Nike. I know performance isn’t the driver of emotional connection, but out of sight is out of mind in North America and adidas is losing its edge of cool. The fix is easy though and my final thought is that adidas will gain ground in women’s and this will offset what I see as a promotional environment for the multiple overpriced releases in Primeknit NMD and the lackluster performance of the bulky NMD inspired Prophere.

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Chris B. is the founder of ARCH.

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