Adidas is closing in on Nike's athletic footwear dominance

Dive Brief:

Adidas, which in recent years conceded its number two spot in sportswear to Under Armour, is now closing in on Nike's dominance in athletic footwear, according to a new report from Jefferies analyst Randal Konik, CNBC reports
Adidas had 13 of the 60 top-selling shoes at Foot Locker in October, up significantly from the two that made September's list, according to the report. Six Nike shoes dropped off the list in October, but 46 hung on. Under Armour went from having one shoe on the list in September to none this month, CNBC reports.
When it comes to basketball shoes, however, Nike’s business broadened its lead this month, with 53 of the top 60 shoes on Footlocker.com, up from 51 in September, according to Jefferies. Adidas had six shoes on that list, up one from September, while Under Armour went from four to one in October.

Dive Insight:

Adidas announced a three-pillar turnaround strategy last year after five bad years in the United States: Speed, Key Cities and Open Source. The company gave further details of that strategy in July as it reported that North American sales rose in the first quarter this year, after dropping the same amount a year ago, outpacing growth at competitors Under Armour and Nike.

The company is working on a comeback after losing its No. 2 athletic apparel retailer spot to Under Armour in 2014. This summer, Mark King, CEO of Adidas’s U.S. unit, trash-talked Under Armour, telling Yahoo Finance that its rival’s roster of athletes are “milquetoast” and that, by contrast, Adidas-sponsored athletes are not just superb at their games, but also have unique and compelling personalities.

Adidas is staking its comeback on its partnership with not just athletes, but creatives like Kanye West. The retailer announced in June it is expanding its relationship with the hip-hop star and fashion designer with a co-branded effort dubbed “Adidas + KANYE WEST” that the company calls “a Yeezy branded entity creating footwear, apparel and accessories for all genders across street and sport.” The German sportswear giant described the deal as "the most significant partnership ever created between a non-athlete and an athletic brand.”

The move to occupy more space in non-sports footwear is paying off for Adidas, according to Cowen & Co. analyst John Kernan. Kernan raised his estimates for Adidas' second half and fiscal 2017 sales and earnings per share, citing the brand's momentum in North America and opportunity to boost margins, according to CNBC. "As consumer tastes and preferences have shifted over the last year to a more retro and casual aesthetic, Adidas has led the way," he said.

But while Nike and especially Under Armour may both be vulnerable, Nike remains a stalwart in footwear. Nike’s latest quarter provided its "highest revenue quarter ever for our performance running category," Trevor Edwards, Nike brand president, said last month on a Q1 2017 earnings call. Adidas reported footwear sales of 8.4 billion Euros ($9.3 billion) in its latest fiscal year, compared to Nike's $19.8 billion.