Nike’s biggest competitor is picking up wins as the Swoosh struggles to regain momentum.
In a Friday note to investors, Wedbush analyst Tom Nikic said that Nike’s recent pitfalls “could be a major opportunity for Adidas,” which has only recently started recovering from its own challenges after the fallout of its Yeezy business in 2022.
“With industry leader Nike struggling deeply and preparing themselves for significant revenue declines over the next six to 12 months, this could be a major opportunity for Adidas,” Nikic wrote, adding that the Three Stripes is already “starting to regain momentum” from the recent success of its retro styles like the Samba and Gazelle.
Nike last week cut its outlook for the upcoming fiscal year of 2025 after it reported a sales miss in Q4. The sportswear giant said that declines in lifestyle sales, foreign exchange headwinds and macroeconomic uncertainty have contributed to slower sales trends, which could persist throughout the next year as it scales back distribution for popular models like Jordans and Dunks. And according to analysts, it’s unclear if Nike will be able to achieve even its revised outlook as it seeks to overcome an innovation lag and increased competition from other brands in crucial categories like running.
Meanwhile, Adidas is on the upswing. In April, the brand raised its guidance for the year after it reported better-than-expected preliminary results for the first quarter of 2024. Adidas also noted that it continued to shed its existing Yeezy stock in Q1, with the latest drop generating revenues of around 150 million euros and an operating profit of around 50 million euros in the period.
As Nikic pointed out, Adidas now stands to win over more consumers who will not be able to spend as much on Nike amid planned product reductions from the brand.
“Given that Nike will be pulling back distribution of the styles that cater to the shoe-obsessed ‘sneakerhead’ community (a customer sub-segment [Adidas] struggled to address ex-Yeezy), [Adidas] could potentially pick up wallet share among these consumers now that Nike’s Jordan and Dunk styles are declining,” Nikic wrote in his note.
Analysts have previously noted how Nike’s challenges could spell positive signs for its biggest rival. In April, Morgan Stanley analysts said in a note that Adidas could stand to benefit specifically from Nike’s slowdown in the innovation department and its distribution scale back.
“We see scope for Adidas to opportunistically benefit from the current lull in Nike’s product innovation, as well as benefiting from a more rational pricing approach as Nike looks set to return to more of a scarcity model with key franchise products,” read the note from analysts, which included Edouard Aubin and Grace Smalley.
And in a June 19 note, Williams Trading analyst Sam Poser said that Adidas’ upcoming planned launches in running and basketball for 2024 will be ” well-received” and that its retro products are also performing well.
“While Nike regroups, Adidas is getting its act together,” Poser wrote. “Adidas is now beginning to strategically redeploy its Originals (the Samba, Campus, Superstar, Gazelle, Stan Smith, and others) in, what appears to be, a strategic manner.”
That’s a stark contract to rival Nike, which has been largely criticized for its lack of innovation.
“Unlike Adidas, which allowed its heritage Originals to become stagnant and is now reviving them, Nike is pulling back on core heritage product, and does not have much compelling new product in its pipeline,” Poser wrote.
