Adidas CEO to Step Down in 2023; Replacement Search Under Way
(Bloomberg) – Adidas AG announced the surprise departure of CEO Kasper Rorsted next year, forcing a search for a new executive as the German sporting goods company has been rocked by years of lockdowns and consumer boycotts in China.
According to a statement on Monday, the Adidas board and Rorsted have “mutually agreed” that he will step down from the top post over the course of the next year. Rorsted, whose contract was extended by five years in 2020, will remain CEO until a successor is appointed to ensure a smooth transition.
When Rorsted took over in 2016, investors welcomed the choice as the Danish-born manager had a strong track record of increasing yields and streamlining the portfolio at consumer goods company Henkel AG. At Adidas, Rorsted managed to close the gap with arch-rival Nike Inc. while selling long-time underperformer Reebok, despite difficult conditions over the last few years as the coronavirus shut down retail stores and production around the world, particularly in key ones Asian markets.
“After three challenging years marked by the economic fallout of the Covid-19 pandemic and geopolitical tensions, now is the right time to initiate a CEO change and pave the way for a fresh start,” the statement said the company’s announcement of Rorsted’s departure.
Adidas shares are down around 37% this year, making them among the worst performers in the 50-piece Euro Stoxx 50 index. After the announced change in the management board in Frankfurt, the share even fell by 6.9 euros or 4.2% to 158.7 euros.
During his tenure at Adidas, Rorsted oversaw a steady rise in the stock, valuing the company at more than €67 billion at this time last year. Since then, the stock has returned to levels similar to when he took office in 2016. Conversely, Nike and Puma stocks have risen over the same period.
Rorsted’s departure was a joint decision of the supervisory board and the CEO after confidential discussions, said people close to him. Rorsted felt exhausted after leading Adidas through the pandemic when he drew public criticism for skipping rent payments on Adidas stores, said the people, who asked not to be identified to discuss private consultations .
Adidas declined to comment beyond the press statement.
Alongside the pandemic slump, Rorsted has had to deal with criticism that the company has done too little to encourage diversity. In June 2020, Adidas chief of human resources Karen Parkin, a company veteran with more than two decades of experience, resigned after acknowledging that she was not the right person to lead efforts to create a more diverse workplace, particularly after black people employees had been criticized.
New leadership
While Rorsted had made significant strides in modernizing and streamlining the Adidas business model, the company now needs a CEO “with product, marketing and/or merchandising experience from related industries to sporting goods,” said Piral Dadhania and Richard Chamberlain, analyst at RBC Europe in a note to clients.
“This should better allow the company to fill gaps in its portfolio in areas like lifestyle footwear and better commercialize successful products,” the analysts said.
Adidas is the latest major sporting goods manufacturer to herald the changes. Foot Locker, the sporting goods retailer, is banking its revival plans on Mary Dillon, who is owned by Ulta Beauty Inc.
The German company, known for its three-stripe logo, credits Rorsted with helping accelerate the brand’s digital transformation, specifically focusing on direct-to-consumer sales and doubling sales in North America, the world’s largest sporting goods market.
Adidas, which is based in the same Bavarian town of Herzogenaurach as German rival Puma, surprised investors with a profit warning in July after the company’s recovery in Greater China was slower than expected.
Mass testing and lockdowns in China have impacted traffic to malls and stores, hurting sales for most retailers. Foreign brands are also struggling to keep China as a key growth driver amid consumer boycotts and preferential treatment for domestic companies including Anta Sports Products Ltd. and Li Ning Co. This was a particular challenge for Adidas, which replaced the head of its Chinese operations in March, promoting an executive who had already managed a local brand in China.
Now, even the lowered guidance is seen as ambitious by some analysts, as Adidas needs to grow second-half sales outside of China by more than 20%. That’s something that will require “significant market share gains,” Jefferies analysts led by James Grzinic said in a note last month. “At this point, investors are unlikely to agree with Adidas when in doubt.”
(Updates with board discussions from the seventh paragraph)
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