Adidas Is Off And Running

But can a new line of sneakers get on track in the U.S.?

When Steffi Graf stormed to victory at the U.S. Open tennis tournament in September, she commanded the court with a pair of jazzy new Adidas sneakers on her feet. The star's showing gave a high-profile boost to the German sportswear maker's latest high-end line--"Feet You Wear."

The venue was important, too. After restoring robust profits to Europe's largest maker of athletic gear, Adidas Chairman Robert Louis-Dreyfus wants to turn up the heat on Nike and Reebok International on their home court. The strategy is a cornerstone of his goal to regain the strength Adidas enjoyed during the 1970s. "We would like one day to get back to No.1," says the 50-year-old Louis-Dreyfus, who took control of the company in 1993 after a successful stint running British ad agency Saatchi & Saatchi.

That's a lofty ambition. According to Sporting Goods Intelligence, powerhouse Nike has 28% of the $14 billion world market in athletic footwear and an even stronger lead in the U.S. The company shows no sign of slowing down. "They're doing a fantastic job," concedes Louis-Dreyfus. Adidas is No.3 overall. Although tops in Europe, U.S. sales of Adidas' sneakers and apparel are $650 million a year, behind Reebok and Nike.

HIP STRIPES. But Louis-Dreyfus does get high marks for bringing Adidas back from the brink. When he and several partners bought the company three years ago, Adidas was suffering from high costs, big losses, and ill-focused marketing. Louis-Dreyfus, an executive who often walks around his Herzogenaurach headquarters in jeans and T-shirt, was anything but laid-back in his strategy. He closed all factories in high-wage Germany except one and shifted production to Eastern Europe and Asia. Unprofitable product lines such as Le Coq Sportif apparel got the ax. The number of suppliers was halved.

Perhaps most important, he freshened up the footwear line. And to update Adidas' image, he shrewdly started sponsoring tournaments in "streetball," a street version of basketball played with teams of three. Young Europeans like the change. "These Adidas streetball sneakers just look the best," says Stefan, a 15-year-old shopping at the Sports Arena on Berlin's Alexanderplatz. In European nightclubs, many of the hip patrons wear the company's three-stripe sportswear. Profits have quickly followed these efforts, with net income going from $9 million in 1993 to $163 million last year on sales of $3.4 billion.

Adidas' once-abysmal position in the U.S. has improved, too, with its market share in sporting goods rising from 2% to about 5%. "Whoever has been doing the retooling at Adidas has done well," says Burton Holland, footwear buyer for Paragon Sporting Goods in New York. Holland reports sales of Adidas running shoes and other footwear rising at a double-digit rate. Adidas apparel, especially training suits, is selling briskly in the U.S. and Europe.

Now, by aggressively launching Feet You Wear in the U.S. as well as Europe, Louis-Dreyfus hopes to accelerate the comeback. In August, Adidas kicked off a $20 million U.S. ad campaign extolling the line, which offers a molded, snug-fitting upper and rounded soles that give the shoe an offbeat, bumpy contour. Retail prices for the shoes go as high as $100 in the U.S. and $130 in Europe. The ads for Feet You Wear constitute the first nationwide TV campaign Adidas has run in the U.S.

HOOP DREAMS. Although Feet You Wear shoes are available for tennis, hiking, and training, long-term success in the U.S. sneaker market is tied to basketball. With established hoop stars such as Michael Jordan already endorsing other brands, Adidas has signed up promising rookies such as Los Angeles Lakers sensation Kobe Bryant and Boston Celtics draft pick Antoine Walker. Louis-Dreyfus hopes these youngsters will become tomorrow's stars and so lure Nike fans into the Adidas camp.

Boosting sales in the basketball line will be tough. Josh Goldstein, a 16-year-old New Yorker who wears Nike Air basketball shoes, says the look of Feet You Wear is "weird--you look down at your shoes, and they have these strange bulges." He also associates Adidas with tennis, not basketball. One buyer at an East Coast footwear chain says the Feet You Wear basketball line is doing just "fair." Adds Bruce Nevins, senior vice-president for international operations at Reebok: "I don't know what the [shoes'] true benefits are."

The company says that building a position for the new line requires patience. "This is an incremental effort," says Steve Wynne, president of Adidas America. He says professional athletes love the shoes and that their enthusiasm will slowly but surely push sales higher. Louis-Dreyfus knows this is a game that's won by constant marketing. So watch for Adidas to keep elbowing its way onto the court.

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