Yeezy Just Jumped Over Jumpman

Feb. 08, 2016 5:25 PM ETadidas AG (ADDYY), NKEUAA29 Comments
Detroit Bear profile picture
Detroit Bear


  • Adidas recently signed Kanye West, and he's creating tremendous buzz around the brand.
  • I think we'll see some convergence between the Nike's and Adidas's valuations as North American performance improves for the latter.
  • In a tough market, I think long Adidas/short Nike is an interesting pair trade.

For the first time since the days of Tracy McGrady's signature sneaker, Adidas (OTCQX:ADDYY) seems to have stolen the thunder from Nike (NYSE:NKE) and its signature Jordan line. In my view, it's due almost entirely to one man: Kanye West. While this change could be short-lived, trends indicate that now may be the beginning of the end of Nike's unquestioned dominance in the US athletic apparel space. As such, I suspect the valuations of Adidas and Nike to converge over the next 6 months.

Kanye's move to Adidas is just starting to yield results

When Kanye West left Nike for Adidas, the general reaction was a question of why he left Nike rather than excitement over his Adidas line. Some speculated that the success of Kanye West's Nike collaborations where equally dependent upon the brand cache of Nike as the popularity of Kanye West. However, Kanye's position as the biggest star in music and influencer in fashion was clearly underrated.

Kanye's Yeezy Season 1 clothing line has sold exceptionally well in limited distribution at places like Barney's New York and independent boutiques. More importantly, his Yeezy Boost shoes have sold out immediately and garnered prices 3-5x the retail MSRP on eBay (EBAY) and other secondary marketplaces. In fact, tastemakers are so infatuated with Kanye that even his wearing of any Adidas shoe will almost insure a sellout and healthy resale market. Adidas is applying Nike's long-time strategy of limiting distribution to drive exclusivity and brand excitement, and I believe it is working exceptionally well.

Meanwhile, though still selling exceptionally well, Jordan Brand's newer reissues like the Jordan VIII Aqua, the Jordan V, and the Jordan II have sat on shelves-with the exception being Jordan's collaboration with popular Chicago designer Don C. As I've noted previously in my Finish Line (

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Detroit Bear profile picture
A bear out in the woods.

Disclosure: I am/we are long FINL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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