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From soap to shoes: Adidas hires its CEO from Germany’s Henkel AG

January 18, 2016 11:12 AM
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(Bloomberg)—Adidas AG appointed Kasper Rorsted as chief executive officer to succeed Herbert Hainer,charging the head of Dial soap maker Henkel AG & Co. with restoring growth to the German sportswear company.

Rorsted, 53, will join the Adidas board on Aug. 1 and take over as CEO two months later, the Herzogenaurach, Germany-based company said Monday. Like Hainer, he is stepping down early from his role, sending Adidas shares soaring and Henkel slumping.

“This is a significant positive for Adidas and the investment case,” Graham Renwick, an analyst at Exane BNP Paribas, said in a note, describing Rorsted as “a perfect fit.”

The new CEO faces a tough task to revive growth at Adidas, No. 54 in the Internet Retailer 2015 Europe 500, which has been losing ground to industry leader Nike Inc., No. 61 in the Internet Retailer 2015 Top 500 Guide and No. 107 in the Europe 500, as well as newer competitors like Under Armour Inc., No. 121 in the Top 500 and No. 265 in the Europe 500. Rorsted’s record in almost eight years in charge of Henkel provides grounds for optimism: Under his leadership, the company’s shares have tripled, while the operating profit margin has widened to record levels.

The appointment ends a near yearlong search for a successor to Hainer, the longest-serving CEO in Germany’s benchmark DAX Index. Hainer has presided over a series of forecast cuts, hurt by the shrinking golf market and the ruble’s slump, which eroded the value of its business in Russia.

Rorsted will satisfy calls from some Adidas investors including Southeastern Asset Management Inc. and Union Investment for an external appointment. Hainer, 61, has led the company since 2001 and had vowed to stay until the end of his contract in March 2017.

At Adidas, Rorsted will need to revive growth that has faltered in recent years as Nike makes inroads in Europe and Adidas’s U.S. business weakens.

Rorsted’s push into North America with brands such as Persil detergent and Schwarzkopf shampoo was key to Dusseldorf-based Henkel’s strategy to catch some of the company’s biggest competitors in the consumer goods market.

He also brings tech-industry experience to Adidas, which may serve him well as the company seeks to quadruple e-commerce sales by 2020 and invests in robot-equipped factories to bring some production back to Europe from Asia, and eventually into stores. Adidas AG had 2014 web sales of about $495 million, according to Top500Guide.com data.

The executive worked at PC maker Compaq in the 1990s and early 2000s, then stayed on two more years after Hewlett-Packard acquired it in 2002.

Danish-born Rorsted said as recently as November that Henkel’s growth ambitions would keep him at the helm of the company until the end of 2017. The manager, who took the reins at Henkel in 2008, has regularly been cited by the German press as a candidate for CEO jobs at other German companies such as Adidas and industrial gas giant Linde AG.

Henkel earlier today named the head of its beauty care business, Hans Van Bylen, as Rorsted’s successor.

One of Rorsted’s main challenges will be to close a gap in profitability between Adidas and Nike. Adidas’ operating margin, a measure of what a company keeps of sales after production and labor costs, has run at about 7% the past year, compared with 14% for Nike.

The difference in profitability “is Adidas’s main weakness,” Volker Bosse, an analyst at Helvea Baader Bank, said in a note.

“We welcome the naming of Rorsted as Hainer’s successor and hope that with this the long dry spell of profitability at Adidas comes to an end,” said Ingo Speich, a portfolio manager at Union Investment in Frankfurt. “The stock reaction speaks clearly.”

 

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