The $14 billion US running shoe market is a big target area for most sportswear companies. NIKE, Inc. (NYSE:NKE) dominates this with 60% market share. Adidas has around 10% market share, while Under Armour Inc (NYSE:UA) has 2%. However, Adidas is hoping to gain share with its newly launched Energy Boost sneakers. Nike is countering the challenge with its FlyKnit sneakers, and Under Armour Inc (NYSE:UA) is pushing its Spine Venom running sneakers.
Energy Boost has received an excellent response in both the US and other countries. The demand is so strong that Adidas cannot supply enough, and the company is looking solve this by getting BASF, which makes the shoe’s cushioning foam, to increase production. Adidas has also signed on fashion designer Rick Owens to make designer running shoes priced between $400 and $500.
In basketball the focus is on North America, which saw 45% sales growth in the first quarter. The company may make a basketball shoe based on Energy boost technology.
For outdoors the fastest growing markets are Greater China, Brazil and South Korea, and there is good momentum in the Terrex Fast R and Swift Solo product lines.
Reebok is a wildcard
Adidas acquired Reebok in 2005 to combine forces against Nike. But this never happened – on the contrary, Reebok has been more of a problem child for Adidas.
Within a span of one year Reebok faced as many as three burning issues. It lost its big contract with NFL, faced fraud at its India division, and suffered from the strike in US Ice Hockey League. But Reebok’s story is far from over. Adidas senses considerable opportunities left in the brand, particularly stemming from its CrossFit range, which saw a 13% sales gain in the first quarter.
CrossFit Inc’s fitness programs are incredibly popular in the US and Europe, and Reebok is currently the only brand that is producing CrossFit-specific products. Adidas is making Reebok’s CrossFit logo the symbol of the fitness brand.
Apart from fitness, Reebok is also focusing on dance and yoga. With such concentrated efforts to revive the brand, Reebok carries good potential.
Last word
Adidas has done a great job in introducing exciting new products and backing them up with big promotions and increased e-commerce activities. Its global reach allows it to leverage the benefits of both matured and new markets. The company is making excellent margins and growing its earnings at a good pace. The turnaround in Reebok can be an added catalyst for growth.
Eshna De has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Eshna is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article This German Retailer Is Sure to Grow originally appeared on Fool.com is written by Eshna De.
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