Confected or not the recent round of international football fixtures was coloured by outrage over two major kit makers. With Nike (NKE:NYSE) in the firing line thanks to its ‘playful’ update of the St George’s Cross on the latest England jersey.

For its part Adidas (ADS:ETR) was caught up in controversy over Die Mannschaft switching allegiance to its aforementioned US rival, ending a 77-year association with the German football team.

While small beer in terms of their impact on the bottom line, these crises do hint at a wider malaise for both companies. For decades this pair represented an unrivalled duopoly in the sportswear market. In 2023 analysis by Euromonitor suggested the two had a combined 26.1% share of this market – with Nike accounting for around two-thirds of this share. To put this in context the next largest position was held by Puma (PUM:ETR) at 2.5%.

Of late though there have been some cracks in the artifice and that’s been reflected in the more recent share price performance of both firms. On a 10-year total returns basis Nike and Adidas have chalked up a healthy enough 179% and 189% respectively versus 92.3% for the FTSE All-World index. However, on a three-year view total returns are -27.2% for Nike and -18.7% for Adidas respectively.

Both companies have been victims of circumstance as they faced supply chain issues and rising costs coming out of the pandemic, while cost-of-living pressures have constrained consumers’ will and ability to spend big money on a pair of trainers.

However, some of the company’s recent wounds have been self-inflicted. Adidas’ decision to collaborate with Ye (also known as Kanye West) could have been identified as a clear risk even without the benefit of hindsight given the rapper’s history of unpredictable and controversial statements predates the start of the partnership in 2015.

Adidas finally broke with Ye in October 2022 after his highly publicised antisemitic comments but not before inflicting damage on its finances and prestige.

Nike meanwhile has suffered from problems in core growth market China as well as uninspiring marketing and a lack of innovation which has left the company vulnerable to competition.

Smaller more agile specialist brands like Hoka and On Running and heritage brands like New Balance have been nibbling away at market share and Nike’s reliance on its Jordan brand and basketball shoes in general may mean it has taken its eye off the ball elsewhere.

These remain really outstanding brands – the iconic swoosh and three-stripe motifs are among the most identifiable in the world.

This confers a decent amount of pricing power on both companies and both businesses’ push into direct-to-consumer sales could help boost profitability. However, they need to demonstrate they can get their act together fast or Adidas CEO Bjorn Gulden and Nike chief executive John Donahoe, appointed in 2023 and 2020, may find themselves under mounting pressure from the market.

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