Adidas goes retro, racks up big increases in U.S., Asia

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While Nike and Reebok International continue their longtime rivalry with humorous commercials, Germany-based Adidas-Salomon is making noticeable gains in the sneaker and sports-apparel industry sparked by its retro line of clothing and shoes.

Final full-year results from 2002 will not be released until March 11, but based on preliminary figures Adidas-Salomon's total sales will have reached almost $7 billion worldwide, a 7.7% increase from 2001 and a record for the company. Contributing to the rise are double-digit sales increases in both the North American and Asian markets.

By contrast, Nike has sales of $10 billion worldwide in footwear alone. Nike is the leader in athletic footwear and apparel, controlling about 35% of the market both globally and in the U.S., according to the Sporting Goods Manufacturers Association. Reebok is a strong second in the U.S., trailed by New Balance and Adidas, but Adidas is the No. 2 footwear and apparel company worldwide behind Nike.

a u.s. niche

"Look, nobody is going to catch Nike," said one sports marketing executive who has clients and relationships with all the major sneaker companies. "But Adidas is really getting into a nice little niche in the U.S. Reebok is so concentrated on Nike that they should be looking over their shoulder once in a while."

The gains in Asia were to be expected. Adidas is a huge player on the global soccer scene and the 2002 World Cup was played in Japan and South Korea, with Adidas sponsoring the Japanese team. But the gains in the North American market were key indicators of Adidas' success.

"We made important strategic progress as a group with the development of new technological innovations and improved positioning in key markets," Adidas-Salomon CEO Herbert Hainer said in statement Jan. 30 tied to preliminary earnings.

The Adidas group consists of three distinct divisions. Adidas Sport Performance houses the current footwear and apparel lines and accounts for 80% of the business; Adidas Sport Heritage is the retro division that puts out the classic, old-style sneakers and apparel that targets an urban audience; and Adidas Sports Style was introduced Feb. 5 as an upscale sportswear collection to be sold in 150 retailers, including Barney's, New York, where the launch was held.

Though accounting for just 20% of Adidas' sales last year, the Sport Heritage division seems to be making the most progress. The company opened its first Adidas Originals Store in New York last August, joining shops in Berlin and Tokyo. The look harks back an entire generation when Adidas was immortalized by the pioneering rap group Run-DMC, who wore the clothing, the three-striped original sneakers from the 1970s and `80s, and even recorded a rap called "My Adidas."

Twin ad campaigns from Omnicom Group's TBWA/Chiat/Day, Playa del Rey, Calif., and 180, Amsterdam, highlight both Adidas' retro styles as well as its current marquee endorser, National Basketball Association star Tracy McGrady. The campaign to market the retro look initially met with pessimism within Adidas, executives said, but Adidas was able to capitalize on the fact that it was a market leader in the 1970s before Nike and Michael Jordan burst on the scene.

"It's a story driven by the product," said Uli Becker, Adidas' director-global brand communications. "Consumers are all globally connected and they like an authentic story. All the brands that capitalize on a market trend are companies that have a story to tell. Consumer groups pick up on brands they can relate to."

more stars needed

Still, the company is driven by its current sneaker and apparel sales, and Adidas suffered a blow last year when its most important endorser, Kobe Bryant of the Los Angeles Lakers, bought out his contract. Mr. Bryant is expected to sign with either Nike or Reebok later this spring. While Mr. McGrady is a popular NBA player, he plays for a losing team and a small market in Orlando, Fla.

"That's obviously a sports-marketing story, and you do need the `characters' you want to associate your brand with," Mr. Becker conceded. "You need more stars."

To that end, Adidas this week announced the signing of another NBA superstar, reigning league Most Valuable Player Tim Duncan. Mr. Duncan, however, plays for San Antonio Spurs in another small market in San Antonio, Texas. When asked about Adidas' reported courtship of high school superstar LeBron James, expected to be the No.1 pick in June's NBA draft, another Adidas executive said only to "keep an eye on us down the road."

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