Adidas is doing samba on Nike high-top sneakers

Nike Inc. on Thursday lowered its sales outlook for the current fiscal year, blaming a drop in demand for its best-selling sneakers, such as the Air Force 1 and Air Jordan 1. It's no coincidence that these styles have fallen out of favor among fashion lovers, who prefer low-rise models from Adidas AG, led by Samba.

This change of dress seems to be really starting to hurt Nike. It is unusual for the market leader to be so defensive.

Nike chief executive John Donahoe is trying to spark a revival with a raft of new products, but these are largely focused on performance: helping runners run faster, footballers kick harder and yoga enthusiasts stretch more comfortably. Nike and Adidas are also fashion brands; their most successful periods come when their products are riding the crest of a wave of popularity.

Until last year, Nike's chunky styles, including the Dunk produced in nearly endless colorways, were ubiquitous. Now, Adidas's most stylish models, which also include the Handball Spezial, SL 72 and Gazelle, adorn the feet of the fitters.

As well as improving Nike's performance offering (where it is also under pressure from rivals such as Swiss newcomer On Holding AG), Donahoe needs to find some new hits in the more fashion-oriented lifestyle category if he is to regain Adidas' momentum.

Underscoring the turnaround for the two companies, Nike said that after enjoying double-digit growth in recent years, sales at its lifestyle business fell across men's and women's products and its Jordan brand in the three months to May 31. This weighed on its online sales, which fell 10% in the quarter. Weak demand for its earlier performance products has continued in April, May and June, a period for which Adidas is expected to report solid growth.

Nike wants to reduce sales of its best-selling products (one of the reasons it expects its revenue to fall by a mid-single-digit percentage in the year to May 2025) to make room for new models. But now this has more urgency.

While Adidas is leading the way on the low-rise retro trend, Nike isn’t entirely far behind. Donahoe recognizes the need to revitalize the more style-oriented selection; Nike’s Cortez sneaker is gaining traction, and the company recently reissued several models, such as an all-white leather version favored by The Bear star Jeremy Allen White and the red, white, and blue Forrest Gump model.

Meanwhile, Killshot and Field General are selling well and Nike plans to ramp them up. It aims to nearly triple its retroactive business by the end of this fiscal year, compared to the start of fiscal 2024.

This shows that Nike can still be agile, but it needs to go further. Its product archives, which Donahoe described as a unique asset, offer opportunities. He also recognizes that the company needs to be faster to market, speeding up the design and production process so it can respond more quickly to changing consumer tastes.

And while there are green shoots elsewhere, including the excitement around the futuristic new version of the Air Max sneaker, the development of successful new products won't be instantaneous. It could take about a year to achieve top sellers like the Air Force 1.

Meanwhile, Adidas CEO Bjorn Gulden shows no signs of slowing down. The product-obsessed former professional footballer is already trying to anticipate what comes next after Samba and delaying some launches to prevent the market from overheating. He is trying to make the clothes worn by athletes more modern, and the sporting summer is a perfect platform to show it off.

It's no surprise that Nike's stock, which fell 15% in premarket trading, has underperformed Adidas this year.

Still, fashion is notoriously fickle. The Nike Dunk quickly exploded five years ago. The Adidas Yeezy collaboration with Kanye West imploded after the musician known as Ye made anti-Semitic comments in 2022.

For Nike to get back in the game, it not only needs to perform well on the field, but also look good doing it.