Herbert Hainer

Adidas Chief's Final Kick Off

AdidasHainer-DPA
What next for Herbert Hainer?
  • Why it matters

    Why it matters

    Adidas has stabilized after a rocky 2014, but the company still needs to deal with its ailing shoe maker Reebok, and ensure it does not cede more ground to rivals.

  • Facts

    Facts

    • Herbert Hainer will step down as chief executive of Adidas this fall after 15 years in charge.
    • He has nearly tripled both revenues and profits during his tenure and shares have risen 600 percent.
    • But the company is still losing ground to its main rival Nike
  • Audio

    Audio

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Herbert Hainer was 46 when he took over the top job at Adidas in 2001. Back then he had a moustache, which he has since shaved off, but otherwise the manager has not changed much. The 61-year-old was as slim and dynamic-looking as ever as he presented the sports company’s annual figures on Thursday for the last time.

Mr. Hainer only referred in passing to his departure, which is planned for the fall, when he spoke to the press at Adidas headquarters in Herzogenaurach, in Bavaria.

He saw fit to clarify one thing: “As a business we are stronger and in better form today than ever before.”

After a weak 2014, he has steered Adidas, Europe’s biggest sports shoe manufacturer, back on course. Better still, Adidas will see strong growth this year and be on track for the future.

Industry leader Nike has surged away from the pack during Mr. Hainer’s time in charge.

That new chapter begins on October 1, when Kasper Rorsted will become chairman of the board. Currently the boss of Henkel, the Düsseldorf-based manufacturer of chemicals and detergents, Mr. Rorsted is reportedly joining the Adidas management team in the summer and will manage the business after a brief period spent learning the ropes.

The Dane is not the only new face in Herzogenaurach. At the annual general meeting in May, two major shareholders will be joining the supervisory board, and it is possible the changes they bring about will be no less fundamental than those Mr. Rorsted has in mind: One of the new supervisory board members is the billionaire Nassef Sawiris. The Egyptian joined Adidas last year.

The other additional supervisory board member will be Ian Gallienne, joint boss of the “Groupe Bruxelles Lambert,” owned by the Belgian investor Albert Frère. Mr. Sawiris owns 6 percent of Adidas’ stock, and Mr. Frère holds 5 percent, according to the Adidas homepage. That makes them the biggest stockholders after the Blackrock fund company. And they are particularly known for being hands-on investors.

Experts therefore assume that the trio will address the issue of selling off Reebok. Mr. Hainer bought the U.S. label for around €3 billion ($3.3 billion), exactly 10 years ago. But Reebok has been shrinking for years, and today is not nearly as profitable as the core brand Adidas.

There is no improvement in sight, said Hartmut Heinrich from management consultants Misstresstech in Hamburg: “It will be very difficult to make real progress there.”

That is why he expects Adidas, under the leadership of Mr. Rorsted, to put Reebok up for sale soon. The Boston-based company generates around 10 percent of Adidas’revenues.

Mr. Hainer is adamantly opposed to a sale. “Reebok can look back at 11 consecutive quarters of growth,” he emphasized on Thursday. He claimed this was proof of the company’s successful realignment with a focus on fitness.

But parting with Reebok could still be a good move, said sports industry specialist Mr. Heinrich. Because without Reebok, Adidas would only have to promote one name and could employ its marketing billions more effectively. World market leader Nike has had outstanding success by concentrating almost exclusively on its core brand for years.

 

Adidas-Hainer era 01 Nike Puma earnings brands

 

Adidas boss Mr. Hainer can look back on an impressive performance: He has nearly tripled both revenues and profits in his 15 years in charge. And just as important for stockholders: The stock exchange value has risen by 600 percent.

Mr. Hainer, who still plays soccer in his spare time, has been able to keep at bay long-standing competitors like local rival Puma and running shoe specialists, Asics. And the up-and-coming U.S. competitor Under Armour is still a long way behind Adidas, despite enormous growth rates.

However, industry leader Nike has literally surged away from the pack during Mr. Hainer’s time in charge. Like Adidas, the Americans have also tripled their revenues, but at a much higher level. The Nike brand is now nearly twice as big as Adidas.

Worse still, Nike is much more profitable and recently generated nearly €3 billion in profit, nearly 5 times that of Adidas. That means that Nike makes more profit in one single quarter than Adidas turned in a whole year. That is also reflected in their respective stock exchange values: Nike is worth around €93 billion, compared with Adidas’ €20 billion.

What do Mr.Rorsted and his new supervisory board members plan to do next? That is a conundrum for the entire sports industry. “We don‘t know what the change in leadership means for us,” said Hans-Hermann Deters, managing director of the buying association Sport 2000.

It cannot be denied that Adidas is doing well: 2015 revenues increased by 16 percent to the record level of €16.9 billion.

Specialized retailers fear that Adidas will expand its own sales operation still further, both online and with new retail outlets. Today, Adidas has 2,700 of its own retail outlets worldwide, and there are 11,000 so-called mono-brand stores run by franchise operations.

It has not been particularly friendly toward specialist retailers in recent times, said Mr. Deters. There has indeed been a lot of conflict: Discount conditions and limited supplies have been recent bones of contention between Adidas and its retailers.

The only thing that is clear is that a decision will be made in the next few weeks about the future of loss-making golf brand Taylor Made. Mr. Hainer wants to make an announcement in the first quarter about what will happen to the business, which is based in California. Perhaps it will be sold.

Nevertheless, it cannot be denied that Adidas is doing well. In 2015 revenues increased by 16 percent to the record level of €16.9 billion, or $18.55 billion, due to good sales of soccer kits and strong demand in western Europe and China.

Making adjustments for currency fluctuations there was a plus of 10 percent. Profits increased by about 30 percent to €640 million. At €1.60 per share stockholders can also look forward to a €0.10 higher dividend in 2015 than last year.

And it is set to continue in that vein: Taking into account currency fluctuations, revenues and profits are both expected to increase this year by between 10 and 12 percent.

And what about Mr.Hainer himself? He will not commit himself about plans for the next few years. On the evening before the balance sheet press conference he watched this season’s first defeat of soccer club FC Bayern, sitting in the main stands next to former FC Bayern president, Uli Hoeness, who had just been released from prison for tax fraud.

Mr. Hainer is a supervisory board member of the soccer club – a job he is also thinking about at Adidas. “After a two-year cooling-off period I could well imagine joining the supervisory board.” But first of all, he is off to New Zealand with his wife.

 

Joachim Hofer covers the high-tech industry and IT sector for Handelsblatt. hofer@handelsblatt.com

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