Adidas Gots a New CEO

Adidas is on the rise, with recent sales and earnings growth far outpacing its rivals. While most of this recent growth is attributed to longtime CEO Herbert Hainer, bullish investors are looking for new growth to come from his successor, Kasper Rorsted. Officially taking the reins on Oct. 1, Rorsted has already been shadowing Hainer for a few months and begins his tenure poised to continue Adidas' momentum. Here's what we know now, and what to watch going forward.


Adidas regains some competitiveness

Adidas has been around for 65 years. It has become a dominant force in worldwide sports during that time, but after losing its position as largest sports-apparel company in the world to Nike more than two decades ago, and then slipping to third place in the U.S. behind Under Armour in 2014, the company has been seen by many analysts as on a slow descent.

However, over the last year, Adidas has started to surge once more. So far in 2016, the company has reported great sales growth and even more impressive earnings growth. During the most recent quarter, Adidas posted sales up 13% year over year and earnings per share up 98%.

To reignite earnings following its sluggish last decade, Adidas has started to kick into high gear using individual athletes like Denver Broncos player Von Miller, as well as non-athlete celebrities like musical artists Kanye West and Pharrell Williams, to market its gear on and off the field. Both of these strategies have been successful in their own right, and we've even seen examples of strategy crossing, such as this image of Von Miller showing off Adidas cleats codesigned by Kanye West.

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Investors get excited for Rorsted's tenure

Adidas revealed in January that Hainer would be stepping down. The announcement that Rorsted would be taking over immediately drove speculation and interest from bullish investors excited to see what this new change in leadership would bring. Rorsted is the former CEO of consumer brands company Henkel , where he successfully divested around 80% of the company's nonperforming segments and brands to focus only on those driving earnings growth.

Investors are excited about the prospect of Rorsted working to cull those parts of Adidas that make the company bloated without providing much earnings potential, something Adidas already said it wants to do with the planned divestiture of its golf business. Another reason investors are looking forward to Rorsted, a Danish citizen now leading the German company, is that he has spent ample time working for companies in the U.S. like Compaq, Oracle, and Hewlett-Packard; many investors believe this should help Adidas focus more on the U.S. market, where it recently passed Under Armour to take back its second-place spot behind Nike.

The news was enough to send the company’s shares over 5% higher on a day when the DAX overall was (yet again) falling heavily under concerns about the strength of the world economy. Investors had hoped for an outsider to succeed Hainer, thinking that he would take a more radical approach to, or even sell, some of the group’s less successful operations like its Reebok fitness brand or the TaylorMade golf business.

At Henkel, which sells products from Schwartzkopff shampoo and Loctite glue to Persil detergent, Rorsted has experience of the same kind of challenge that he will face at Adidas: specifically, competing with entrenched and well-funded U.S. giants. Under him, Henkel’s share price had more than doubled from its pre-crisis peak by the end of last year–and the news of his departure made it the worst performing big stock in Frankfurt Monday.

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