On October 1st, a major shift in management will take place at Adidas when the transfer of power gets handed over to Kasper Rorsted, former head of Henkel, and he is said to be ready to start by going head to head with rival sportswear brand Nike.
Investors are hoping for sweeping changes
Investors are hoping for sweeping changes throughout the company, looking at his last gig at Henkel for signs. While working for the German consumer goods brand, Rorsted cut costs and consolidated 80 percent of the company’s brands, opting to focus on the products that sell.
Under the leadership of outgoing Adidas CEO Herbert Hainer, Adidas has been able to slowly regain market share in some areas, raising sales by two-thirds in the last ten years, but the company’s operating margins have laid flat. The biggest criticism though has been the purchase of Reebok in 2005 for $3.8 billion, which has failed to provide any return.
With Rorsted coming in, investors are very optimistic. Since announcing his appointment in January, share prices of Adidas have risen by two-thirds.
Rorsted, who spent time working for Compaq and HP early in his career, has investors also hoping that he will be better suited to revive the Adidas brand in the U.S., where the company has fallen behind rivals Nike and Under Armor. During his stint at Henkel, Rorsted proved his strength in the U.S. when he successfully overhauled the brands American business.
Going head to head with Nike is an obvious necessity, but it wont come easy. The sports brand, based in the U.S., has a very good grasp of the American market and has had time to perfect their business model to continuously boost sales and profit margins.
“I expect small measures rather than a bombshell”
While the task will be difficult, Rorsted appears to be the company’s best bet for making some sweeping changes, some of which are expected to be moves directly from Nike’s playbook, including a radical overhaul of its physical and online retail presence.
The more drastic changes wont come overnight, but as one top investor, Ingo Speich, put it, “I expect small measures rather than a bombshell. But in 12-18 months, if the margin is still where it is now it will be difficult for the shares”.
Rorsted has been shadowing the outgoing CEO since August so that when he takes over the place on October 1st, he’ll be ready to hit the ground running.