The outgoing chief executive of Adidas presented results on Thursday that show the German sportswear company is making a comeback on its home turf of western Europe and in soccer, but still with much to do to catch Nike.
Herbert Hainer is handing over to Henkel’s Kasper Rorsted in October after the longest-serving boss of a German blue-chip company came under pressure from investors for failing to keep pace with bigger U.S. rival Nike.
Adidas has fallen into third place in the key U.S. market behind Nike and fast-growing Under Armour and seen Nike threaten its dominance in soccer and western Europe.
In response, Adidas has closed stores in Russia, put its troubled golf business up for possible sale and hiked marketing spending by more than a fifth, particularly in U.S. sports but also by ousting Nike as a kit supplier to soccer clubs including Manchester United.
“We realigned and reorganized our business, rolled up our sleeves and set to work. The result is a textbook example of a perfect comeback in sport,” Hainer told journalists, with a flourish.
Adidas said its fourth-quarter net loss narrowed to 44 million euros on sales up 15% to 4.167 billion euros ($4.53 billion), broadly meeting average analyst forecasts after the company published provisional results last month.
Adidas shares, which hit a new record high earlier this week, were down 0.4% at 10:42 GMT, compared to a flat German blue-chip index.
Sales of the core Adidas brand grew a currency-neutral 16%, accelerating in particular in western Europe and North America to 31% and 12% respectively, driven by strong demand for soccer and lifestyle products.
Hainer expects another year of double-digit growth in both regions, as well as in greater China in 2016, helped by the European and Copa America soccer tournaments and the Olympics.
“Our order books are full across all major performance and lifestyle categories. And our brands are set to shine at this year’s major sporting events,” Hainer said.
CHASING NIKE
Overall, Adidas forecasts currency neutral sales and net income to both increase between 10% and 12% this year, compared to last year’s rise of 10% for sales and 12% for net profit.
Nike is growing even faster, boosted by strong demand in North America and China. Nike orders for delivery from December through April rose 20%, excluding currency effects.
On Wednesday, Adidas proposed board seats for two new influential shareholders, raising the prospect of more pressure for change at the world’s second biggest sportswear group. Adidas is asking shareholders to approve a plan to increase the company’s supervisory board to 16 members from the current roster of 12. The German company has nominated Egyptian billionaire Nassef Sawiris and Ian Gallienne, co-CEO of Belgian investment group GB. The other two seats would be elected by employees of Adidas. The vote is to be held at the company’s annual meeting on May 12.
The appointments show that Adidas is giving a more active voice to two important shareholders. Sawiris obtained a 6% stake in the company in October, while Gallienne is the son-in-law of Belgium’s richest man Albert Frere, who founded GBL (which also took a stake in Adidas last year.) They would also bring much-needed regional diversity to Adidas’ supervisory board, which now is represented by 11 Germans and only one French-born representative. In the past, Adidas has been criticized for a board that doesn’t have as strong of a vision as top rival Nike (NKE). The U.S. company’s board notably includes Apple CEO Tim Cook, as well as Nike co-founder Phil Knight.
Hainer on Thursday said he expects to conclude a review of the golf unit, including a possible sale, by the end of the first quarter and predicted “significant margin and profitability improvements” for the business in 2016.
Some investors hope that Rorsted will also consider selling long-struggling fitness brand Reebok, which has seen its performance improve in recent years but still far lags the core Adidas brand, with fourth-quarter sales up 5%.
“A sale of Reebok would offer Adidas short term gain with easy liquidity and the opportunity for Adidas to focus on its core brand,” said Euromonitor analyst Natasha Cazin.
($1 = 0.9196 euros)
(Editing by Victoria Bryan and Keith Weir)
