The Kicks You Wear, Vol. 420 — A damper on Adidas
It'd be all good if not for those darn tariffs.
Goooood morning, friends! Welcome back to the Kicks You Wear. Thanks so much for rocking with me today. Appreciate you for giving me some of your time.
Can y’all believe it’s May already? It feels like this year is just flying by. Bring on the summer. I cannot wait.
Let’s jump in.
Adidas’ tariff warning
Remember when I told you to hold your applause after Adidas’ preliminary results for the first quarter dropped? Well, I was right. There was something off. Now, we know what it is.
What’s happening: Bjorn Gulden issued a bit of a warning to consumers during Tuesday’s earnings call.
Gulden detailed the numbers we’d already received, but then added a pretty alarming caveat about the adverse impact President Donald Trump’s tariffs would have on the company’s business.
What he said:
“In a ‘normal world’ with this strong quarter, the strong order book and in general a very positive attitude towards adidas, we would have increased our outlook for the full year both for revenues and operating profit,” Gulden said. “The uncertainty regarding the US tariffs has currently put a stop to this.”
Gulden added that tariffs will “eventually cause price increases” for Adidas, putting a damper on what would’ve been a good news day for the brand.
Where things stand: The Trump administration is currently applying a 145 percent tariff rate on China, which is a significant source for the biggest companies in the footwear industry. Outside of that, a 10 percent additional tariff rate is applied to all other countries. While that isn’t 145 percent (which is absurd and self-mutilating from the United States’ standpoint), it’s still fairly significant.
Why that matters: Gulden pointed out that, while Adidas has shifted some of its China exports away from its business in the United States, it’s still a key part of the brand’s overall operation. Very little of Adi’s production in the U.S.
Only 12 of the 385 factories Adidas uses as primary suppliers are in the United States, according to the brand’s global factory list. None of them deal with footwear.
A majority of the brand’s footwear suppliers are from China and Vietnam.
Adidas’ operations aren’t built to bring its manufacturing to the United States. The company’s main headquarters isn’t even in America — it’s in Germany. It’s impossible for this company to acquiesce completely to any Made in America edict coming from the powers that be in this country. At least in the next few years.
The big picture: Gulden’s warning here reminded me of what Matt Priest shared with the Kicks You Wear a few weeks ago in our interview. He said:
“Business really loves good news. Business doesn’t like bad news. Business hates instability. You can plan for the first two — you can’t plan for the third. I think that’s the environment we’ve found ourselves in.”
This is what trying to deal with instability looks like. Despite having a stellar quarter, Adidas lacks confidence in its outlook due to these tariffs. That lack of confidence trickles down to investors and, eventually, it’ll impact the consumer.
It’s not just Adidas. Nike’s executives cited President Donald Trump’s tariff policy as one reason the brand is facing headwinds so far in 2025. More will be coming.
The Trump administration’s decision to grind the American economy to COVID-19 levels is a decision that will impact not just this company or this industry, but multiple sectors.
Gulden’s messaging here might be sobering. But it’s also the reality. Expect more in the near future.
Shifting to America isn’t easy
Speaking of shifting manufacturing operations, we now have a prominent example of exactly how hard that is.
The skinny: Nike made a significant effort to shift its manufacturing operations from Asia to North America as labor costs overseas began to increase, according to a report from the Wall Street Journal.
Nike worked with an American manufacturing company called Flex to try to establish a North American system.
The company spent millions attempting to build a high-tech manufacturing facility in Guadalajara, Mexico, with the plan of having it produce millions of sneakers by 2023.
The facility was partially automated. It would require thousands of human workers, but fewer than usual in a regular factory setting.
Yes, but: This didn’t work. There were problems. The robots struggled to handle the softer parts of the shoe in the manufacturing process. That’s essential in the process, considering the number of fabrics and rubbers used.
That’d be a cinch for a human worker to take care of. But a robot? Nah. That’s not so easy.
The big picture: This story is a manifestation of every problem that comes along with rushing companies to manufacture in the United States.
Let’s say, hypothetically, that a company does try to bring a bulk of its process to North America. This is what that looks like:
It cost Nike millions of dollars to open this factory, which remained open for only a handful of years before closing in 2019. That’s a waste of resources.
The manufacturing jobs that proponents of these re-shoring strategies promise will inevitably be taken over by robots, as Nike attempted to do with its failed Guadalajara facility. The benefits for regular folks won’t be there. Brands will try to save as much as possible on labor.
That won’t work. When those robots inevitably fail to do the job, companies will have to hire human workers. Those human workers will inevitably cost more in North America than they would in China or Vietnam, which eventually brings the brands back to square one.
The process isn’t as easy as it seems. Nike’s failed Guadalajara experiment is proof.
.Swoosh’s anti-beater AF1
This might be .Swoosh’s most interesting project yet.
What’s happening: Nike’s .Swoosh is selling what they’re calling the “Dirty Triple White” Air Force 1. It’s a play on the meme of the dirty Air Force 1s that everyone seemed so obsessed with a couple of years ago.
The twist: These shoes arrive dirty. But the more you wear them, the cleaner they get. I’m honestly not sure how that works, but it does.
Here’s Complex’s Brendan Dunne demonstrating:
This trick is fascinating. But what I find even more fascinating is .Swoosh’s pivot.
Did you notice? Dunne mentioned that .Swoosh “does drops related to gaming and internet culture,” which is why we see Nike playing up a meme here.
This is something more along the lines of what a brand like MSCHF has done. It pulls internet stunts and capitalizes on meme culture in a way brands are usually afraid of. It seems Nike’s .Swoosh enterprise is heading in that direction these days.
But that’s not what .Swoosh was originally. Remember, it was essentially Nike’s NFT wing before. It worked with RTFKT to produce projects like CryptoKicks and the Genesis Dunks before shutting down its NFT arm down in late 2024.
Why this matters: The biggest question following Nike’s pivot away from RTFKT, NFTs and the crypto market, overall, was what would happen to .Swoosh? Would it fold, too? Or would Nike transform it into something different?
We seem to have an answer here. It’s pivoting to memes and internet culture. Is that a strong enough subject matter to make this work? We’ll see.
Ronnie x Walt “Clyde” Frazier
Seeing Ronnie Fieg interview Walt “Clyde” Frazier might be the highlight of my week. This is so awesome.
For those of you who don’t know Clyde, he’s a New York Knicks legend for several reasons — he was a Hall of Fame NBA player for the team once upon a time and is now the most colorful color commentary broadcast analyst in the sport.
I should also mention that this is the dude the Puma “Clyde” is named after. He’s one of the first signature athletes ever.
He dives into all that and more in this podcast with Kith and Fieg.
This is well worth your time if you’ve got 30 minutes to spare today.
Shoutout to the Knicks for advancing to the second round of the playoffs last night, too. Go New York.
#TheKicksWeWear
Y’ALL KNOW WHAT TIME IT IS!!!! LET’S GO.
Gotta start off with a big shoutout to the homie Killa Kow! A bundle of joy on the way with these baby AJ12s! Love to see it, man.
The homie Sha Lo came through with the Uchiha Crocs and, I ain’t gonna lie to y’all……………..I’d wear these! *hides*
The homie Rube popped out with a BUNCH of heat. Those RTJ Dunks, man. Beautiful.
The homie Rhe came through with the Ugly Duckling Maxes and this is SUCH a fantastic shoe. My goodness.
Then the homie Mark closed us out with the Bronson 990v6s. WOW these are awesome, man. What a sneaker.
SMOKED IT. Y’all are incredible. Thank you for sharing.
That’s a wrap, folks. Thanks so much for reading. I appreciate you. Have a fantastic weekend.
If you have any questions, comments or concerns, feel free to hit me at mikedsykes@gmail.com or shoot me a message here via Substack.
Peace and love. Be safe, be easy, be kind. We out.
-Sykes 💯
"Shoutout to the Knicks for advancing to the second round of the playoffs last night, too. Go New York."
LFGK INDEED