Adidas' Samba and Puma's Speedcat Are Slowing Down

Mint

a day ago

(Bloomberg Opinion) -- Do US tariffs spell the end of the Adidas Samba's winning streak?
Adidas AG, which has transformed the humble three-striped sneaker into a global phenomenon, on Wednesday reported weaker-than-expected sales growth in the three months to June 30, triggering a 10% decline in its shares. That echoes the bleak performance at fellow German sportswear maker Puma SE, which dropped as much as 21% last week after warning of lackluster demand, as well as the financial cost of US levies that it estimates will wipe about €80 million ($92 million) off gross profit this year.
Adidas Chief Executive Officer Bjorn Gulden also cited tariffs, which are expected to cost the company as much as €200 million. He maintained his outlook for the current fiscal year for operating profit to increase to between €1.7 billon and €1.8 billion from €1.3 billion in 2024, which is below analysts' expectations of €2 billion and breaks with Gulden's habit of raising guidance. While it's managed to retain most Chinese-made products for sale in the country, Adidas still faces extra costs on sneakers and clothing made in its main producing regions, such as Vietnam, where 30% of Adidas's US imports are manufactured
And it's not just the direct impact of tariffs weighing on the outlook; Gulden said he was most worried about higher inflation curbing US consumer spending.
While US sales held up for Adidas in the second quarter, European revenue was hurt by hot weather in June and the comparison with a year ago when Germany hosted the UEFA Euro 2024 tournament. But the deceleration, and more cautious outlook, raises questions about whether Adidas can continue its remarkable run, built primarily on so-called terrace styles, led by the Samba but also including the Gazelle and Handball Spezial sneakers. Puma's Speedcat brand, meantime, hasn't caught the imagination of footwear afficianados.
Just glancing at peoples' feet provides a clue. Whereas for the past two years the majority were shod in Adidas, now retro Nike Inc. styles including the Killshot and Cortez are cropping up. Also increasing in popularity are Asics Corp's Onitsuka Tiger. In the hairdressing salon on Saturday, women wearing the premium Japanese sneaker were sat on either side of me. That's reminiscent of the Samba in its heyday. Little wonder shares in Asics Corp., listed in Japan, have outperformed rivals this year. Vans are also due for a revival; shares in parent VF Corp. rose as much as 24% on Wednesday after signs that its turnaround was working.
Gulden acknowledged that Sambas were selling more slowly. But that reflects the fact that a couple of years ago, Adidas struggled to produce enough to meet the demand. There are markets, he said, where the style is still increasing in popularity, while it also gets a jolt when it arrives in novel finishes, such as metallics or animal prints.
But the broader slowdown, as well as increased discounting by Adidas in the US according to analysis by Stacey Widlitz at SW Retail Advisors, give cause for concern.
There's another shift that might be working against Adidas. While sneakers have been driven by fashion trends for the past decade or so, now sport itself is having a bigger influence, hence the rise of brands such as On Holding AG. This shift has also undermined Puma's turnaround efforts. To make matters worse, helping athletes run faster or jump higher is the centerpiece of Nike CEO Elliott Hill's strategic blueprint. Nike is still grappling with a pile of unsold fashion sneakers, but there are some positive signs from the company becoming more obsessed with sport once more. For example, the latest iteration of the Vomero running shoe generated $100 million of sales since its launch in February.
So Guiden has two tasks to stay ahead.
First, he must ensure that when it comes to fashion trends, he has the styles to take over from the Samba. Here, he's on strong ground, relaunching the Superstar for example, and building on the popularity of low-rise sneakers with their heritage in martial arts. Gulden said some low-profile models such as the Taekwondo had been slower to take off, but were now gaining traction, particularly in Japan and South Korea, and could be even bigger next year. After rebooting the Samba and Superstar, the next classic to get an upgrade will be the Stan Smith, the white tennis shoe that first gained popularity more than four decades ago.
But Gulden also has to translate some of the buzz surrounding the Adidas brand, in parallel with the success of its shoes worn by serious runners. Sales in the firm's running unit climbed 25% in the second quarter, leading to to a struggle to stock enough popular styles; it still needs to create the type of comfortable running shoes that can be worn on or off the track, where On and Deckers Outdoor Corp.'s Hoka lead. New models will arrive next year. The ideal scenario is that one of these becomes a huge fashion hit too. There are some encouraging signs here, for example, the trend for wearing football boots on the street, which of course Adidas is on top of.
Gulden has an almost instinctive feel for product – just witness the legions of Oasis fans wearing apparel from the band's collaboration with Adidas. But he faces a host of challenges, including the impact of tariffs and Nike's nascent comeback. Next year's World Cup in North America should help, but it's on Nike's home turf and more of Hill's products will be on the market by then.
Puma's stock has more than halved this year; Adidas shares have lost more than 30% since February, while Nike has rallied more than 40% from its April low on hopes that it's finally found its form once more. To keep Nike and the plethora of nimbler rivals at bay, Gulden needs to come up with a new Dad sneaker: Comfortable footwear that your father would actually wear.
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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.
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