Adidas Says It Will Revive Performance and North America. Its Opening Line Is a White Hoodie

Everything the company wants to say is riding on this hoodie: serious performance and everyday wear, technology and fashion. But can it have all of it?

At 7 p.m. Eastern time on August 30, more than 300 people lined up outside 550 Washington Street in Manhattan and filed in. Adidas had summoned media from around the world to launch a new category called adidas Athletics — in its Chinese marketing copy, the "Sport Style Series."

The huge white hall, Skylight Clarkson SQ, is one of the largest event spaces in New York, more than 5,500 square meters. Eight concept installations showed how a handful of sponsored athletes keep their focus before a game. Beside them, a showroom displayed the first season of Athletics products.

Adidas spared no effort promoting the line. A New York staffer handing out white hoodies at the door told QDaily that the event was originally meant for New York only, then "somehow" grew into a global guest list of 300. Along with reporters from several countries came the city's fashionable set and popular bloggers, plus a crowd of Adidas executives and staff.

Adidas insisted the line was "designed for athletes." The star item it pushed hardest was a white hoodie.

The hoodie costs $100. Its full name is the Z.N.E (zero negative energy) Hoodie. It claims to block noise, cut visual distraction and keep the wearer comfortable, so athletes can stay focused. The hood fits over-ear headphones, "thoughtfully accommodating athletes' habit of listening to music before a game."

In the press materials Adidas sent out the same day, NBA star James Harden wore that hoodie. Harden was said to be coming that night. He never showed. The interview schedule was rearranged on the spot, the party music took over, and the drinks were unlimited.

Adidas has let both performance and the U.S. market go to seed for a long time, and it opens its return with a line of athletic outerwear. Kate Ridley, vice president of the training category for Adidas North America, told QDaily that the line serves trend and function at once. "We can't say which one matters more to the customer, because consumers today don't compromise. A high-performance product can't be ugly. It has to look good and work."

Adidas has paid more attention to Ridley's training category in recent years, but the category is still a jumble: men's and women's training gear, women's sports bras and assorted other athletic clothing. Even so, you can barely find a door into it on the Adidas website — it sits in small gray type behind basketball, soccer and the other main entries. You can barely find out when it was created, either. Inside Adidas, it seems never to have been a star.

To "get out of training's sprawl," Athletics was set up as its own line, though it still reports into training. Ridley stressed to QDaily: "We have two different brands for different people. Originals is about street fashion and street culture; we — training — are about sport. So Athletics is designed around helping athletes perform."

The athlete Ridley has in mind is, by Adidas's definition, almost anyone. "Even if you run only once a week, you are an athlete," Sigrid Buehrle, global senior product director for the Athletics category, told QDaily. "If you want to call yourself the kind of athlete who runs once a week, fine — this line lets you show that side of yourself."

Nike, Adidas's main rival, says something similar; it calls ordinary shoppers "everyday athletes." But when Nike talks about how professional its products are, it never brings ordinary people into it. It talks about serving professional athletes.

Launching in New York with a hoodie, the German company was widely read as "trying to revive the U.S. market." Apparel makes up 41% of Adidas's revenue, a little less than footwear, and it grows at less than half footwear's rate. Adidas's North American revenue fell to €2.21 billion (about $2.46 billion) in 2014 and rose to €2.75 billion (about $3.07 billion) in 2015. Nike's home advantage is obvious by comparison: $13.74 billion in North America in 2015.

The United States is Adidas's biggest market (China and Russia come next) and the ground every sportswear brand has to fight for. It accounts for nearly half of all sneakers and athletic clothing sold worldwide, it has the thickest sneaker culture, and it is where new sports trends start.

The hoodie also means something in America it means nowhere else. Besides being where it was born, it stands for cool and for rebellion. Hide an athlete's set face under a hood, shoot it in one flat tone, and the picture nearly always gives off performance and cool at the same time — Nike shot the lookbook for its high-end sportswear line last fall and winter almost exactly this way.

Over the following week, Adidas hoped that mood would spread fast across the world. On September 10, some 20,000 athletes were to post photos on social media in their own countries, all wearing the white hoodie, like an enormous online gang showing off its weapons. Ridley said the company had never tried anything of this kind or this size before.

Many of those athletes were probably signed only in the past two years. Earlier in 2016 Adidas said that by 2020 it would raise the number of NFL players it sponsors from 95 to 250, and its NBA players from 70 to 100. Enough athletes, and influential enough ones, are the base on which a sportswear brand does any later marketing in the United States.

On the day Athletics launched, Adidas announced it had signed legendary quarterback Tim Tebow, who was switching to baseball. The executives, Ridley among them, seemed delighted. "You know, we've been picking people lately. Every one of us is carrying a long shortlist, but my memory is so bad I can hardly keep their names straight."

There was a certain drama to the timing. While Athletics was launching in New York, Adidas's 62-year-old chief executive, Herbert Hainer, was in Russia on business about the 2018 World Cup. It was his last month in the job.

He told The Wall Street Journal that Adidas had finally found the trick to changing itself: "We give brand managers more authority and more responsibility. They now run everything from design to development to the finished product, and they handle the whole supply chain. The old system was a bit more... let's say, 'feudal.'"

Adidas ran the conservative, "Germanized" way for far too long. Its growth stopped dead in 2012, and its market value sank at one point to a fifth of Nike's. In May 2015, Eric Liedtke, now Adidas's global brand chief and a board member, told reporters that young athletes no longer chase Adidas the way they did ten or twenty years ago. "A lot of the time I think we're not even in the running. That's what makes me sad."

From 2015 on, Adidas made a run of big personnel changes that touched 40,000 of its 54,000 employees worldwide, rebuilt the org chart and cut as many as 30 vice-president posts. Liedtke was one of the lucky ones, promoted ahead of schedule; 16 people now report to him directly. "I've got exactly one person whose job is to win soccer," he said. "If he can't do it in 18 months, I have to replace him. Sorry, guys, this company runs on performance now."

The adidas X KANYE WEST brand, announced not long before, and the adidas Athletics line may be the two big projects those newly freed brand managers have managed to ship.

In the United States, Adidas has always been tied to hip-hop. After the rap group Run-DMC put out "My adidas" in 1986, track jackets and shell-toe Superstars took off, and in 2002 the company split its apparel division into performance and fashion. For an Adidas now losing share, athleisure has become the lifeline.

Last year, with Yeezys at their peak, Hainer explained: "I think you can say that sport has risen into fashion, lifestyle and streetwear. My guess is 80% of basketball shoes have never been on a court. People wear them to show an attitude and look cool. Sport really is bound up with lifestyle, and of course at Adidas we want to profit from that."

Adidas's numbers have indeed started to lift. Anyone who follows fashion knows what happened over these 18 months: Stan Smiths everywhere on the street, Yeezys resold at absurd prices, people queueing like lunatics for NMDs. Anyone who follows the company kept hearing that Adidas had built some new thing somewhere — the Speed Factory back in Germany, or the new studio in Brooklyn — and that its launches were more and more often held in New York: the Yeezy line, the new Ultra Boost, and now Athletics.

For a company that sells itself on performance, though, its non-sport lines may be stealing the show. In its latest results Adidas reported net profit up 99% for a third straight quarter, with revenue for the quarter up 21% to €4.4 billion. Most of that profit still came from lifestyle and footwear: adidas Originals grew 36%, sportswear only 10%.

Hardly anyone now knows that the three stripes came out of a technical fix by founder Adi Dassler in 1948: three strips on the side of the shoe to make it hold an athlete's foot better. This spring's hit, the NMD, already carries the two most advanced technologies in Adidas footwear, the Boost sole and the Primeknit upper. Don't expect that to remind anyone that Adidas is a technical company, because almost nobody plays streetball in NMDs or Yeezy Boosts.

NPD Group once found that only 25% of Americans who buy sneakers actually use them for sport. The sports business is like the off-road vehicle business: performance is what licenses the purchase. But follow Wall Street's wishes and the market's noise too faithfully and you may raise revenue this year and miss the future.

Some analysts had already said Adidas was pushing Originals too hard. John Horan, founder of the Sporting Goods think tank, reached for beer when he talked about Adidas's hit products: "Picture a glass of beer. Your fashion business is the foam; performance is the beer. They have a lot of foam and not enough beer."

The line that traveled furthest came from Matt Powell, sports industry analyst and vice president at NPD Group: "You have to pick a lane and decide who you want to be."

Judging by what came out of the launch, Adidas still cannot explain its own technology. Asked how she planned to sell product technology to shoppers, Ridley said: "If our product has a technology in it, like Climacool, we put a tag on the garment." The whole sportswear industry, Adidas included, has been doing that for at least ten years.

"After a while, I think we worked out how to do it in America," Hainer told The Wall Street Journal. Over 18 months the company changed how it was run. In early 2016 the Adidas board asked him to leave in September, six months before his contract ran out. He thought that was unfair.

(Charts by Wu Lingwei)