Adidas Is Counting on Incoming CEO to Captain a Comeback
Kasper Rorsted, taking over in October, energized consumer-products giant Henkel with his aggressive approach
HERZOGENAURACH, Germany— Kasper Rorsted spent the past year hawking German laundry detergent to American shoppers. Now Adidas AG thinks he can help the sportswear company get its U.S. game back.
Mr. Rorsted, the departing chief executive of consumer-products giant Henkel AG, a year ago scored a marketing coup when Wal-Mart Stores Inc. agreed to stock Henkel’s European best seller, premium-priced Persil laundry detergent, next to Procter & Gamble Co.’s Tide.
The sports-obsessed Dane’s recent naming as the next boss of Adidas sparked hope among investors of similar wins to come for the faded icon. Adidas’s share price jumped 6% on the day of the announcement.
“The U.S. mentality, which is a bit more competitive (than the European), was set in me at an early age,” said Mr. Rorsted in a recent interview. As a teenager, he attended sports summer camps in the U.S. He held senior positions at American tech firms Compaq and Hewlett-Packard and attended executive programs at Harvard Business School. While leading Henkel he visited the U.S. at least monthly.
Adidas on Thursday reported its best results in years, recovering from weakened sales and profits in 2013 and 2014. The company posted a 2015 net profit of €634 million ($689 million), up 29% from the year before. Its full-year sales rose 16% to €17 billion.
But some analysts worry the upswing is more a sign of health in the broader sportswear industry than a turnaround at Adidas. This summer’s Olympic Games and UEFA European soccer championship have boosted wholesale demand for Adidas products, but analysts question whether retail demand will follow.
This could force Mr. Rorsted to reset some of Adidas’s short-term targets, said John Guy, an analyst at Mainfirst Bank.
Longer term, Adidas has been losing market share in its core Western European market, and analysts expect its margins to suffer from the dollar’s strength against the euro and rising costs for raw materials and labor.
Adidas has fallen to third place in North America—the world’s biggest and most influential sporting-goods market—losing out to competitors Nike Inc. and Under Armour Inc. Its turnaround efforts have so far yielded only modest results.
The situation at Henkel during Mr. Rorsted’s eight years is almost the inverse. Its stock price has tripled as its sales and profits improved. Bigger rivals including Procter & Gamble and Unilever PLC have posted weaker growth over the period.
Mr. Rorsted has become a star of the Frankfurt DAX-30 blue chip index. Research firm Unicepta in 2014 said media coverage suggested he had the best image among DAX CEOs that year.
Investors believe Mr. Rorsted’s Henkel approach—cutting costs, shaking up hierarchies and giving an old-line company a Silicon Valley ethos—could turn around the famed but wavering sportswear company.
“He is like an American CEO in Germany,” said Mr. Guy. “Let’s hope he can de-layer some of the fat that has built up in Adidas.”
Mr. Rorsted needs to cut costs and boost efficiency while addressing whether Adidas’s brands can recover in North America, analysts say.
“Adidas wants to close the margin gap with Nike,” said Berenberg analyst Zuzanna Pusz. Mr. Rorsted “may have what Adidas needs, although it looks like a pretty tough job.”
When taking over as Henkel’s CEO in 2008, Mr. Rorsted announced a margin-improvement target that many company insiders and analysts thought was unattainable. Almost immediately, the global financial crisis hit.
Instead of scrapping the targets, Mr. Rorsted pledged to double managers’ bonuses if Henkel reached his goals.
“At the time it felt incredibly tough, and he didn’t even know what the exact steps were to get there,” said Ian Parish, a former Henkel manager who worked closely with Mr. Rorsted until last spring.
Mr. Rorsted said his first months at Henkel were particularly trying because he had to make controversial decisions without a track record to justify them. He started culling the company’s stable of more than 1,000 beauty-care, home-care, and adhesives brands, killing lines seen as having little growth potential. During his tenure, he shed 80% of them.
To cut costs, he fired thousands of employees, streamlined operations and opened back-office centers abroad. He also adopted a new appraisal system for managers, modeled on General Electric Co.’s reviews, that promoted and rewarded top performers.
“His mission was higher-higher, faster-faster,” said Jens Plinke, a former Henkel manager. Mr. Plinke said some employees, accustomed to positive feedback and Henkel’s traditionally egalitarian approach, bristled at the sudden changes. Several decided to leave, he said.
In 2012, Henkel announced it had reached all Mr. Rorsted’s targets.
In 2014, after the company’s U.S. sales slumped, Mr. Rorsted launched a major overhaul of its business there. He replaced 80% of Henkel’s North American managers and acquired several businesses to strengthen its market position.
Henkel last month reported its best yearly results ever, despite global headwinds. Its North American sales were up 2.3%.