Adidas has discovered the next Samba. Watch out, Nike.

(Bloomberg Opinion) — Adidas AG is rising to the top with samba.

The popularity of the company’s retro sneakers, Gazelle, Campus and handball special shoes was a key factor in last week’s upward revision of its full-year operating profit forecast from 500 million euros to about 700 million euros ($745.4 million).

But Adidas shouldn’t rely too much on low-rise sneakers with rubber soles — certainly not with Kanye West’s Yeezy line. Dr. Martens’ profit warning and the resignation of its chief executive, Kenny Wilson, last week were a salutary lesson in what happens when shoppers move on from a signature style.

Adidas seems to be in a similar predicament for some time to come. Of the €200 million profit increase, around €50 million was due to the sale of remaining Yeezy inventory. This means the rest is driven by demand for core Adidas products, led by so-called terrace shoes, which represent their adoption by soccer fans in the 1980s. In fact, analysts estimate that Yeezy and non-currency sales growth for the three months to the end of February was about 5%, while Nike Inc.’s brand growth was 2%. This is reflected in Adidas stock being at its highest level in two years.

Analysts at RBC Capital Markets say cycles in which either Nike or Adidas dominate typically last three to five years. Assuming that Adidas’ growth will overtake Nike for the first time in five years in 2024, it will remain at the top for several more years.

But there are signs that Adidas CEO Björn Gulden’s strategy to maximize Samba sales may be starting to impact its popularity.

From January to April 17, the supply of samba to retailers’ websites in the US and UK increased by 354% compared to 2023, according to retail intelligence firm Edited. However, the percentage of most sizes and variations sold out decreased by 17 points to 51%. This isn’t a disaster, given the amount of inventory Adidas is pumping into the market and likely struggled to keep up with demand over the last year, but it’s a warning that this style could become ubiquitous. .

Mr. Gruden appears to already be aware of the risks. For example, handball spezial has emerged as the most popular terrace style in recent months. Adidas seems to be following Samba’s strategy and ramping up production. According to EDITED, deliveries are up 300% so far this year, while sell-out rates rose 6 points to 56%, demonstrating continued consumer appetite.

Still, Gruden will have to look to balance adjustments to Nike and his former employer Puma SE, which offers terrace-style shoes.

Nike appears to be more focused on regaining its footing in the athletic footwear space, unveiling new versions of its Alphafly and Pegasus shoes in Paris last week. The company is also expected to receive support from college basketball star Caitlin Clark, and is stepping up its efforts in women’s sportswear.

In fact, retro low-rise sneakers tend to cost just over or under $100, making them less profitable than basketball or running shoes. But if it can capitalize on the trend and produce in enough quantities and colors, it could help Nike rebuild the brand buzz it sorely needs.

That may be why Nike has already re-released a variety of styles, including the all-white leather Cortez worn by Bear star Jeremy Allen White and Field General. But the company needs to go further. For example, the all-white Cortez sold out in most sizes within a month of its release, according to EDITED.

Gruden isn’t the only leader who will need to stick to trends in the coming months.

Michel Gass, CEO of Levi Strauss & Co., is seeing sales increase as the company shifts from the slim-fit jeans that have been the norm for more than a decade to wide-leg pants. Men’s and women’s baggy styles increased by 40% in the first quarter. However, there is a resurgence of interest in the skinny fit. Fortunately for Gus, the jeans giant’s transformation takes time. She can stay ahead of the curve even when her silhouette narrows.

One way to deal with the risk of your star product losing popularity is to have plenty of other options. Mr. Gruden seems to be looking ahead and planning where trends will go next. Not only does he have a penchant for Spezials, but he also runs a reissue SL72 (which, according to EDITED, is also selling well), as well as an archive of other low-rise styles called “Low Profile.” I’m digging into it.

And he’s trying to replicate the success of the Three Stripes, a key part of the terrace trend, in clothing. After Blake Lively was spotted wearing a red Adidas tracksuit alongside Taylor Swift at the Super Bowl, the company is offering a variety of fits in 12 colors.

Similarly, Gus is capitalizing on the strong demand for denim to create non-denim items such as denim skirts, dresses, jumpsuits, and tops, as well as non-denim categories such as T-shirts that consumers tend to restock more frequently. We are selling more.

Both should learn from Dr. Martens. We also sell sandals and clogs, but our main product is chunky boots. They had a moment of popularity three or four years ago (around the time the company listed in London), but their popularity has now waned, leading to a series of profit cuts.

Mr. Gruden appears to be on the opposite trajectory of under-promising and over-delivering. However, as the terrace look matures and competition intensifies, the samba-wearing man must do his best to get Adidas’ profit and stock price recovery back on track.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer goods and retail industries. Previously, he was a reporter for the Financial Times.

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