The opinions expressed in this article do not reflect any of the opinions of my previous or current employers. All of the information I have obtained for this article is sourced and publicly available through global news sources.
For adidas, 2014 was a particularly rough year; the stock price plummeted from €91.89 Euros on December 27th in 2013 to €54.64 on October 17th in 2014. Issues with Taylormade inventory hindered profits and the falling Ruble erased the previous gains seen in Russia. With its valuation cut almost in half, investors started to get nervous, and in early 2015 the search began for someone new to lead the brand to follow the planned retirement of Herbert Hainer in 2016.
adidas announced on Monday, January 18th that the sportswear maker had found its new CEO, and investor’s first reactions could hardly have been more positive. The stock gained 6.5% on the day of the announcement, increasing the company’s market capitalization by almost €2 billion in time for closing on the 19th. So who is this new leader and why did his appointment as CEO lead to the largest two day change in the adidas stock price since the company split its stock in 2006?
Kasper Rorsted, a man with a wealth of experience in the world of soap.
Rorsted, a Dane living in Germany, brings an incredible track record in building brands and turning that awareness into shareholder value. If the price changes of both adidas and Henkel’s stock on Monday were any indication, then there is a belief that Rorsted will be the white knight that adidas has been searching for since the planned retirement of long time boss Hainer.
Hainer tripled adidas’ net income over his reign and quadrupled its worldwide employee base. His career saw the growth of adidas to the giant it is today. However, there is a new kid on the block. The new king of the trefoil is a 53 year old that was fired from Hewett-Packard in 2004 for failing to meet targets as the head of the EMEA region.
A lot has changed for the Dane since his departure from the computer giant in 2004. In his reign heading Henkel, a multinational laundry, homecare, beauty and adhesive company, he tripled its share price, and fiercely attacked the lucrative American market with measured success.
His experience in North America working with multiple brands and categories should help him to put the adidas Group in a very exciting position and the next few years will be very interesting to watch for adidas. I’ve made a few predictions below on what I think might happen, based on my experience, my reading, and my gut feel. So without further ado:
Reebok Will Be Sold to the Highest Bidder
There seems to be a rumour every few years that adidas is shopping its Reebok brand (with the most recent rumour coming in late 2014). The rumours have always been denied by the brand, so it’s difficult to recognize the validity of the claims, but since its acquisition by Herbert Hainer and his team in 2005, the Reebok brand has never really lived up to expectations. In 2006, the brand outfitted the NFL, the CFL, the NHL, the NBA, and they were the official footwear supplier of the MLB. After the purchase, Reebok began to lose lucrative league wide apparel contracts and in 2014 it was rebranded exclusively as “the fitness brand” simplifying its product range. Some of those league apparel deals were picked up by adidas which kept them within the adidas Group, but it still lowered the brand equity of Reebok.
Now that Reebok only has fitness goods, UFC products, and the Classics brands under its umbrella I expect Rorsted will wipe the slate clean and finally let Reebok go to the highest bidder. Hainer was quoted saying the brand was “on the mend” in late 2015, but it will be up to Rorsted to decide if he shares that sentiment. The Reebok business has seemingly begun its preparations for the sale as its competitive ice hockey business began its transition to adidas in 2015 with adidas winning the NHL contract for jerseys and the brand beginning its exit from hard goods by putting CCM up for sale in late 2015. Rorsted shed 800 non-core brands in his time leading Henkel, so I won’t be overly shocked to see him move away from a brand that is represented by the delta rather than the trefoil.
A Continued Emphasis Will Be Placed on Winning the US Market
The USA has been and likely always will be the sporting goods capital of the world. The retail sporting goods industry is predicted to reach $266 billion by 2017 with 40% of that coming from the US. Competing brands (and especially Nike) know this very well. The realization that there needed to be a larger emphasis on the USA was brought home for adidas when it was passed by Skechers in the American footwear market in late 2015. adidas created a plan in early 2015 to win back its valuable market share as it recognized the need for growth well before the industry noted Skechers’ growth.
Rorsted’s experience taking brands into the competitive USA retail space is one of the most desirable things on his impressive resume. His experience breaking into the USA is one that adidas needs as it attempts to re-enter the ever important consideration set for American consumers. At Henkel, Rorsted was lauded for replacing German managers with American managers in the USA, so I wouldn’t be surprised to see Mark King surrounded with more American-born managers in the coming years. adidas has always prided itself on its international and diverse workforce, but Rorsted may see the need to put managers into environments they are natively familiar with. Time will tell how successful he will be, but if he is to flourish as the CEO then he will need to crack the USA. I’m expecting him to continue on with the plan that’s in place as it seems to be working and the market is responding well.
Beyond that, Nothing is Going to Happen for a While
For the next couple months, Rorsted will likely be focused on gathering information. His first big moves need to be practical and decisive to gain the trust of over 50,000 employees. The brand needs to be agile and ready for change as he implements his learnings at a high level, and the shareholders need to let him get his bearings before any major decisions are made. The German sportswear giant has seen a few different leaders over the years and faced much scarier external conflicts than unhappy shareholders or a leader without experience in sporting goods. I think there will be some changes and I truly believe he will help grow the global brand, but only time will tell if Rorsted is to have the same outsized impact on the trefoil as his predecessor Herbert Hainer.
I can be found on Twitter under the username of @Grand_Champion1. Give me a follow if you want to learn more about my thoughts on the sporting goods industry or if you get the joke in my bio.
(Image courtesy of adidas)