The NBA intends on banning players from wearing Adidas’ Kanye West basketball sneaker during league games, over concerns surrounding the shoe’s design; the league believes the sneaker’s “gleaming, reflective material heel” would be distracting to fans both in the arena and to those watching at home. The 2018-2019 season will mark the first NBA season where players are not required to wear sneakers that match their team uniform, but 3M (the reflective material) remains on the leagues footwear color restriction list. Several Adidas endorsees had planned to wear the Yeezy basketball sneaker during the ’18-’19 season.
Howie Long-Short: The NBA’s decision to ban players from wearing Yeezy’s won’t impact sales, but Adidas’ decision to sell the label’s products in mass will. The company’s latest Kanye drop (a mass release of the Yeezy Boost 350 V2 “Triple White” on September 21st) “still has not sold out” and the “resale price is barely above MSRP” ($230 is lowest ask on Stock X). That’s not necessarily unexpected, celebrity collaborations historically fail with commercial releases (see: Jay-Z, 50-Cent, Pharrell Williams). As we wrote last week, the paid endorser model is broken in the U.S.
The reason West’s label has always been highly sought after is because its products “could be flipped for multiple times the initial price” (due to their limited availability), not because the consumer wanted to wear them. As Matt Powell, NPD Group retail analyst explained, “if the reason people are buying this shoe is to flip it, and now you can’t flip it, are you ever going to come back and buy another (pair)?” The answer is no, you’re not. That’s a problem for Adidas because as we’ve seen with Jordan Brand, “it’s a long process to build back that credibility.”
Adidas (ADDYY) issued Q2 earnings back on August 9th, reporting sales rose 10% YoY (to $6 billion) during the most recent quarter; North America (+16%), Greater China (+27%) and the e-commerce sector drove the growth. ADDYY’s has managed to grow the top line without resorting to discounts to sell shoes, reporting gross margins rose +2.2% (to 52.3%) in Q2 ‘18. Shares are up +11% (to $123.02) since the company reported.
Fan Marino: The league’s decision has nothing to do with Kanye’s bizarre SNL appearance last weekend. In fact, the league hadn’t even formally reviewed the sneaker as of Monday’s initial ESPN report; assumptions were made based on photos West posted of the sneaker on the Instagram. If Adidas were to redesign the shoe (removing the reflective material), it’s likely the league would approve the design and it’s possible NBA players could still wear them this season.
While possible Adidas basketball stars could wear Yeezy’s in an NBA game this season, it won’t happen before December. That’s because the league reviews new sneaker models 2x/year, once in August (for the start of the season) and again in December (for the balance).
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