Adidas Outpaces Nike with Samba and Gazelle Comeback

The success of Adidas' Samba and Gazelle sneakers, combined with weak Nike sales, is set to boost Adidas' Q2 profits significantly. Analysts expect a focus on trendy, limited-edition products to continue bolstering Adidas, while Nike struggles with decreased innovation and increased competition.

The success of Adidas' low-rise multi-colored Samba and Gazelle sneakers, coupled with weaker sales at rival Nike, is expected to bolster the German sportswear brand's second-quarter sales and result in its highest profit margin in three years. Nike, on the other hand, predicted a surprise drop in annual sales at the end of June, heightening investor concerns about the sportswear giant's standing among both long-established and new competitors.

Nike shares plummeted by as much as 20% following the announcement, whereas Adidas shares remained stable. This disparity indicates that investors perceive Nike's struggle as an opportunity for Adidas. Simon Irwin, a retail and sporting goods analyst at Tanyard Advisory, noted, "Nike, in terms of product and message, is very much off its game, and Adidas is having a bit of a moment."

Analysts believe Adidas will report a profit margin of 51.4% for the second quarter, its highest in three years, with quarterly revenue expected to rise by 4.5% to 5.6 billion euros ($6.1 billion). However, experts caution against assuming a return to the "golden days of very high margins" due to weaker demand in China and escalating competition from emerging brands like Hoka, Lululemon, and New Balance. Adidas CEO Bjorn Gulden's strategy of strengthening relationships with wholesalers contrasts with Nike's direct-to-consumer focus, potentially setting the stage for a management shake-up at Nike before its investor day this fall.

(With inputs from agencies.)