Adidas Targets Basketball, Soccer to Drive Post-Yeezy Rebound

The German sportswear brand said it has recently spent hundreds of millions of dollars on a newly opened facility in Los Angeles, where it will base its basketball product team, and on upgrades to its main U.S. hub in Portland, Ore. The company also plans to open more U.S. stores and forge new partnerships with athletes and has recently renewed a longtime partnership with Major League Soccer.

The heightened focus on basketball and soccer in the U.S. comes as new Adidas Chief Executive Officer Bjørn Gulden, a former professional soccer player, seeks to play to the brand’s strengths in sports to recover from recent difficulties. 

Adidas is smarting from the failure of some of its most high-profile celebrity ventures, including the loss of its lucrative Yeezy partnership with rapper Kanye West, while having also suffered setbacks in Russia and China. 

“We have to be focusing on sports—that’s where the root of Adidas is,” said Mr. Campbell.

Sales of the company’s sportswear and equipment grew last year, while its fashion sales declined as its celebrity partnerships struggled to deliver.

Adidas terminated its Yeezy collaboration with Mr. West, who is now known as Ye, in October over his antisemitic remarks. The demise of the partnership—estimated by analysts to account for about 8% of the company’s annual revenue—pushed Adidas into the red in the final quarter of 2022. 

PHOTOS | The Rise and Fall of Kanye West’s Business Empire

Meanwhile, Adidas and pop star Beyoncé are due to end their Ivy Park collaboration later this year after sales fell short of the company’s targets, The Wall Street Journal has reported.

Another marquee collaboration with Pharrell Williams’s Humanrace fashion label has underwhelmed, with sales last year down roughly 70% compared with their peak five years earlier, according to people familiar with the venture’s performance.

Mr. Williams’s recent appointment as Louis Vuitton’s creative director for menswear could provide a springboard for Adidas to reignite the partnership, Mr. Gulden has said. Adidas declined to comment on the sales data. Humanrace didn’t respond to a request for comment.

While Adidas will continue to work with celebrity partners, sports is now front and center for the company’s U.S. business, Mr. Campbell said.

Breaking Inc.’s stranglehold over the U.S. market—especially in basketball, where Nike’s dominance is well established—has long been a challenge for Adidas and gaining ground is likely to require significant investment. 

Last year, the company’s North American revenue came in at the equivalent of around $7 billion—roughly one-third that of Nike. In recent years, Adidas has tussled with Under Armour Inc., which hasn’t yet published its 2022 results, for the No. 2 spot in the U.S. sportswear market. 

That relatively low base gives Adidas room to grow, according to Mr. Campbell. “Our share of basketball is this,” he said, making a minuscule gesture with his thumb and forefinger. “So we believe there is an opportunity there.”

Adidas was the official supplier to the National Basketball Association until 2017, when Nike took over as the supplier of NBA uniforms.

Moving the company’s basketball group to Los Angeles should help Adidas make inroads into that key market, Mr. Campbell said. Having a base in the city, which he described as a heartland of basketball culture, enables the company to be closer to its target customer, he added.

Adidas said the new location would get real-time insights from a diverse consumer base and work more closely with grass roots programs, such as Los Angeles’ pro-am basketball competition Drew League, helping it create new products. The Los Angeles office will also manage celebrity collaborations.

The company already has partnerships with NBA stars including Portland Trail Blazers’ Damian Lillard and Cleveland Cavaliers’ Donovan Mitchell. In April, basketball website Slam named Adidas’s Harden No. 7—developed with Philadelphia 76ers star James Harden—as the best basketball sneaker of the 2022-23 season. 

In football, a partnership with Patrick Mahomes, the Kansas City Chiefs quarterback, is the company’s prize asset, Mr. Campbell said. Adidas launched its Mahomes range of shoes and other products in 2021.

Adidas is also targeting the booming U.S. soccer market, Mr. Campbell said, having recently extended its partnership with Major League Soccer through 2030. Under the deal, the company is the official supplier of jerseys and other equipment to all the league’s clubs.

Since this season’s MLS jerseys were launched in February, sales of soccer products are up 50% on last year, Mr. Campbell said. The company expects demand for soccer products to grow further with the U.S. due to co-host the next World Cup in three years’ time.

However, Adidas isn’t expanding in all sports. The company will end its deal with the National Hockey League in 2024 after seven years as its jersey partner. U.S. online sports retailer Fanatics Inc. is taking over on a 10-year deal. Adidas declined to elaborate on the reasons for its split with the NHL.

If Adidas has underperformed in the U.S. in the past, now is the time for the company to perform in the world’s biggest sporting-goods market, said Mr. Campbell. “We have to show our credentials in this space,” he said. 

Write to Trefor Moss at [email protected]