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In a competitive market, Adidas and Puma bet on the terrace trainer trend

Published: July 31, 2023
Author: Fashion Value Chain

This summer, the popularity of low-rise, rubber-soled terrace trainers might put Adidas and Puma ahead of Nike, but it might not be enough to make up for declining demand in the United States and China.

German sportswear giants Adidas and Puma have revived interest in the 1970s and 1980s trainers called after the standing area at football stadiums by digging through their archives to re-release classic versions in new hues.

According to Google Trends data, searches for “Adidas Samba,” one of the brand’s primary patio designs, have increased significantly over the previous year and peaked in mid-June.

Because its terrace range doesn’t have as much brand awareness as Adidas’, Puma is likely to gain from the trend less than Adidas, according to Adam Cochrane, analyst at Deutsche Bank. But the brand can surely compete in that market.

If anyone lost out from this, it was Nike, he added. “Nike doesn’t have the track record from the 80s so you don’t have the historical shoes to fall back on and the back catalogue to revisit.” Nike is better recognised for its large basketball sneakers, such as the wildly popular Jordan line.

Even while terrace shoe sales are expanding, they still represent a small portion of the entire industry. At their second-quarter results on July 26 and August 3, respectively, investors will be pressing Puma and Adidas to present broader initiatives to deal with the lacklustre consumer demand.

Robert Schramm-Fuchs, portfolio manager at Janus Henderson, which owns shares in Adidas, stated that “we believe the U.S. market is now (following on from China) at the centre of the worries for investors in Adidas and Puma.”

Nike’s main region, North America, saw its worst sales rise in four quarters last month, underscoring a weaker-than-expected American consumer. Concerns about the world’s second-largest economy were further stoked by last week’s disappointing GDP data from China.

However, Adidas has greatly benefited from the sale of part of its stock of Yeezy trainers that have been withdrawn. On Monday, it reduced its anticipated operational loss for 2023 from 700 million euros to 450 million euros, citing surprisingly robust Yeezy sales.

Puma, whose stock has underperformed Nike and Adidas over the past year, needs to provide investors with an update on its business plan as it looks to improve its performance sportswear offering following what some have perceived as an excessive emphasis on lifestyle.

According to Morgan Stanley analyst Edouard Aubin, the “casualization” of fashion and consumers’ greater attention to fitness and health have the potential to boost the market for sportswear.

Aubin pointed out that retailers are particularly susceptible to “boom and bust” cycles when fashions change because it is very expensive to compete for sportswear brands and there are few obstacles to entry.

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