Adidas' U.S. Boss Talks Amazon, Retail Strategies, And Kanye's Real Impact

Now that the haze of nostalgia is starting to settle, it’s becoming clearer that Adidas ‘ ( ADDYY ) American resurgence isn’t just a one-off fad built on the back of fashion geeks, but perhaps a more permanent comeback to the spotlight.

[ibd-display-video id=2553787 width=50 float=left autostart=true]Adidas’ currency-neutral revenue rose 12% to 5.677 billion euros, missing estimates for 5.86 billion and sending shares down 4.55% Thursday. But the company earned 526 million euros ($610 million) in Q3, topping views for 512 million, according to Thomson Reuters, and reaffirmed full-year guidance.

Where Nike ( NKE ) and Under Armour ( UAA ) have recently struggled , Adidas is tearing through North America, growing currency-neutral revenue 23% to 1.1 billion euros in the quarter.

“In all, Adidas continues to outperform in key markets like (North America) and Greater China despite a slowdown in (Western) Europe,” wrote Wedbush analyst Christopher Svezia, who has a neutral rating on and 195 euro price target on the stock.

Comeback Kid

“It was another very good quarter for us,” Adidas’ head of North America, Mark King, told Investor’s Business Daily ahead of the late Wednesday earnings release. “And I think it was driven, really, in multiple categories, which is really, I think, one of the exciting things about the progress of our business here in North America.”

Originals, the segment that includes the now-cool-again Superstar and Stan Smith footwear, did “a lot of the heavy lifting” in 2016 and continues to sell well this year, he said. The NMD, Tubular and EQT lines are ”just really, really good franchises for us in ’17.”

But Adidas has also more than doubled its U.S. footwear market share in running over the last year, thanks to its UltraBoost, PureBoost and AlphaBounce collections, said King, who’s been at the helm of the region since 2014. Growth in the training apparel category merited a shout-out, too; he noted the push to get more products on display in Dick’s Sporting Goods ( DKS ) stores.

According to Matt Powell, NPD Group’s sports industry analyst, Adidas leapfrogged Nike’s Jordan Brand over the summer to reach the No. 2 spot domestically, less than a year after reclaiming its lead over once-impressive Under Armour.

Adidas has overtaken Jordan as the #2 brand in U.S. sport footwear. This is an achievement I never thought I would see in my lifetime.

– Matt Powell (@NPDMattPowell) September 18, 2017

Year-to-date, Adidas’ U.S.-shares are still well ahead of the game, up 36.5% through Wednesday. That’s much better than Nike, which is up 10%, and Under Armour, which has plunged 59%.

The New Difference Between Nike And Adidas

Like Adidas, Nike is looking to differentiate itself at the retail level with special in-store displays and strategic partnerships. Both companies are focusing on their own direct-to-consumer shops both online and off, as they look to keep pace with the way modern consumers shop. And both are directing their energies at certain major cities. Adidas announced late Wednesday the opening of a 31,000-square-foot office and “open source collaboration hub” in downtown Los Angeles.

But Nike, the world’s No. 1 athletic apparel player, has promised to trim and curate its inventory, indicating that it would pull back from stores that don’t highlight its gear in favor of featuring products only on Nike.com and investing in same-day deliveries in certain cities.

“Undifferentiated, mediocre retail won’t survive,” said Nike Brand President Trevor Edwards at its investor day conference late last month.

King’s remarks pointed to a different strategy, however, one that segments Adidas products by type of retailer - sports performance products at Dick’s, for example, and more fashion, running and Originals at the mall - which offers up a whiff of exclusivity.

“In terms of bringing it (exclusively) to our own retail stores – probably not. I don’t see that,” he said. “I see us telling branded stories, with really new exciting products at our retail stores.”

Similarly, Adidas’ attitude toward Amazon ( AMZN ) splits with the Swoosh. Nike only recently announced a test run to sell its products directly through the e-commerce behemoth. But Adidas is three years into its relationship with Amazon in the U.S., calling it “a very good customer of ours,” even as Amazon reportedly develops a private-label sportswear collection of its own.

King appeared to throw a little shade Nike’s way.

“We’re looking and exploring opportunities not only with them but (with) everybody,” he said, “so any announcement by anyone else to me is a little strange, to be honest, because I don’t know how you would do business and not include Amazon.”

IBD’S TAKE : Amazon is moving in on traditional retail’s turf, in more ways than one. Read our recent cover story on how e-commerce giant’s private label lines  are giving clothing kings a run for their money.

Kanye West: Kingmaker?

Lastly, for those with a score to settle, there’s this.

NPD analyst Powell, which GQ recently called ” the best-credentialed Yeezy hater in the sneaker world ,” has repeatedly brushed off the idea that rapper Kanye West or any other celebrity is the force behind Adidas’ current momentum, a notion that infuriates sneakerheads  in the Twittersphere.

Lucky for Adidas that neither are that important to success

– Matt Powell (@NPDMattPowell) November 9, 2017

So we asked King to weigh in.

“My take is this: I think if you really understand what’s happened to the brand in North America, it’s honestly quite remarkable, and to point to any one thing would be a mistake,” he said.

Adidas’ products in North America are “much better than they were in ’14,” said King, highlighting Adidas’ investments in retail and professional sports.

“You throw on top of that the impact of Kanye West a couple of years ago, the Yeezy, wearing the UltraBoost – did it help? Absolutely, it helped,” he said. “Did it create what we have today? I don’t think so.”

West’s influence is “just one piece of many things that we’ve been able to do successfully over the last three years,” he said.

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