Herzogenaurach The new Adidas boss Björn Gulden has prepared investors for a difficult transition year 2023 with possible losses. “We have to reduce inventories and reduce discounts,” said the Norwegian on Wednesday when presenting the balance sheet for the past year, for which his predecessor Kasper Rorsted, who had passed away with a lavish severance payment, was still responsible. In 2024 one could then “start building a profitable business again”.
But internally, the ex-Puma boss has already suddenly turned the mood. According to employees, during one of his first internal appearances, he emphasized that Adidas was his “first love”. After all, he had started his management career there after his football career. “I would have been the biggest fool on this planet if I hadn’t taken the chance,” he said now.
With a newly formed board, he wants to lead the traditional group to its old strength.
Predecessor Rorsted led in a rather authoritarian manner and focused management heavily on financial figures. Gulden, who recently cycled across the Adidas campus with a Chinese business partner, is very present and listens intently, says an Adidas manager. He also lets himself be seen spontaneously at design meetings and discusses at eye level.
Rorsted, on the other hand, emphasized in an interview with the Handelsblatt: “I never got involved in the creative process or influenced the development of a shoe.” inhibited creativity.
Adidas slashes dividend
Also in supervisory board circles one sees the chance for a real new beginning. Gulden has shown at Puma that he can lead operationally and create a family feeling.
Internally, it is expected that Gulden will once again give priority to specialist dealers over its own online shops. He is convinced that sports-oriented customers want to compare several brands. His goal is likely to continue to be to bring new products to market more quickly, including in China, where sales in 2022 fell by another 36 percent.
The numbers show how serious the situation is. As previously published, Adidas sales for the full year 2022 rose much weaker than originally expected by just one percent to 22.5 billion euros. Profit from continuing operations fell to 254 million euros from a loss in the fourth quarter from 1.5 billion euros. The dividend will be cut from 3.30 euros to 70 cents.
For 2023, Gulden expects a drop in sales in the high single-digit percentage range, also due to high inventories at all manufacturers, and a loss of up to 700 million euros in operating profit is possible.
Ex-boss Kasper Rorsted receives high dividend
In view of the numerous construction sites, Rorsted had to leave early last year. He received a severance payment of a good twelve million euros, according to the annual report. His contract would have run until 2026. He gets another 200,000 euros per month in the year and a half in which he is not allowed to switch to a competitor.
According to estimates in industry circles, Gulden will not catch up with Puma’s confidants. But the board of directors is being restructured. Head of Sales Roland Auschel leaves the group after 33 years.
“Roland has celebrated many successes over the past three decades and made an increasingly important contribution to the development of Adidas,” said Thomas Rabe, Chairman of the Supervisory Board. His successor will be Arthur Hoeld, who last headed the Greater Europe region.
Brian Grevy, who is responsible for the Global Brands department, is also leaving. Gulden takes on his tasks himself. By managing the sales and marketing activities, he can “ensure the necessary quick decisions across all business units and departments”. CFO Harm Ohlmeyer, who worked with Gulden at Adidas in the 1990s, is still part of the team and his contract has been extended until early 2028.
As the world number two, Adidas currently has a problem. The distance to Nike, which should actually be reduced, has increased significantly. In the first half of the 2022/23 financial year, the Americans increased sales by ten percent to $26 billion. So instead of coming within sight of the world market leader, the number three is getting closer. Competitor Puma was able to increase sales in 2022 by almost 19 percent to 8.5 billion euros for the first time.
The new boss should now judge it. “The expectations of Gulden are immense,” says Michael Lichtinger, Director at the management consultancy Atreus. The Norwegian has to deliver quickly at Adidas and can’t afford any major mistakes: “Too much just went wrong in Herzogenaurach recently.”
“Yeezy” products may prove unsellable
One of Adidas’ main problems remains the end of the partnership with US rapper Kanye West, who, among other things, attracted attention with anti-Semitic statements. Adidas stopped the collaboration.
The company now has a larger inventory of “Yeezy” products that West designed with the company. Planned sales of 1.2 billion euros are missing this year alone, and there is a risk of write-downs of 500 million euros on the stock of goods that have already been produced.
If the products are still sold, they will not be relabeled for reasons of honesty and some of the proceeds will benefit those affected by West’s tirades, said Gulden. It is also an option to destroy the goods. However, this is problematic for reasons of sustainability. According to the annual report, the group estimates the chances of still selling the “Yeezy” products at 15 to 30 percent.
The collection produced with rapper Kanye West is threatening to prove unsaleable.
(Photo: Reuters)
Adidas has initiated arbitration proceedings against West, which now also calls itself Ye, in which it is claiming damages, among other things. “In this context, the defendants in turn raised claims against Adidas by way of a counterclaim,” says the annual report.
The separation from West could also be an opportunity for Gulden, believes Andreas Föller, founder of the personnel consultancy Comites. Gulden could motivate the team by emphasizing that it was not the employees but West’s escapades that caused them to go astray.
Brand strength has suffered
One of Gulden’s main tasks is to bring the brand back to its former strengths. According to industry experts, Nike has been ahead for some time. The innovation pipeline at Adidas is not broad enough compared to the competition, says management consultant Lichtinger. This allows new competitors like Li Ning from China, but also On Running and Hoke in Europe to gain market share.
Thomas Jökel, portfolio manager at Union Investment, says that Gulden has successfully repositioned Puma as a sports brand in the narrower sense. “He should also strengthen the attractiveness of the brand at Adidas.” With the help of new products, business success must also be placed on a broader basis in order to reduce dependence on individual cooperations such as with West.
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