To the cheers of the financial market, Adidas AG yesterday replaced Herbert Hainer ahead of his scheduled 2017 departure and named the journeyed and well-regarded Kasper Rorsted — currently head of Henkel AG — to join its executive board starting in August and to take over as its CEO in October.
“The news was enough to send the company’s shares over 5% higher on a day when the [German stock index DAX] overall was (yet again) falling heavily under concerns about the strength of the world economy,” writes Geoffrey Smith for Fortune. “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.”
Henkel, on the other hand, was the worst-performing stock on the DAX yesterday.
Rorsted isn’t just any outsider. The 53-year old Dane, who also has executive positions at Oracle, Compaq and Hewlett-Packard, “has an almost cult-like following to the extent that we would suggest that some investors were less invested in Henkel and more in him,” Exane BNP Paribas analyst Jeff Stent wrote in a note cited by Bloomberg’s Matthew Boyle. Rorsted has been at Henkel for eight years.
“Investors imagined Rorsted working some of the same magic at Adidas that he employed to boost sales and profit margins at Henkel, a 140-year-old company that’s twice the size of Rorsted’s new home in terms of market value,” Boyle suggests.
But, some suggest, those imaginations may be outpacing the realities of the marketplace, which is driven as much by fashion as it is by performance.
“A big uncertainty is whether Mr. Rorsted’s packaged-goods acumen can help Adidas once again set trends and be ‘cool’ among young adults. Nike briefly hired a data-focused former consumer-products executive to its top post, but his two-year tenure is widely considered a failure,” writes Ellen Emmerentze Jervell for the Wall Street Journal.
Rorsted is known to have an acquisitive nature, having bought “numerous U.S. companies, including thermal management firm Bergquist Co. and several professional hair-care brands” in recent years, Emmerentze Jervell reports. “Henkel currently holds the No. 8 spot in the U.S. home-care market and the No. 15 spot in beauty care, according to data provided by Euromonitor.”
“It’s a very, very good decision,” Ingo Speich, a portfolio manager at Adidas’ shareholder Union Investment tells the Financial Times’ James Shotter. “Coming from Henkel, Mr. Rorsted has experience of the consumer goods business. He has worked internationally, but speaks German, which is a perfect combination. And he is personally pretty dynamic, which you need if you are going to embody a sports brand like Adidas.”
Adidas sales have more than doubled under Hainer, who has been CEO since 2001, “but they have failed to match Nike, which forecasts revenue will rise another 63% to $50 billion by 2020, compared to the Adidas target of $24 billion,” writes Reuters’ Emma Thomasson.
“Hainer has also struggled to improve profitability, with the Adidas operating margin of 6.6% in 2014 still half that of Nike. In contrast, Henkel's adjusted operating margin rose to almost 16% in 2014 from 10% in 2008,” Thomasson observes.
Indeed, “the main challenge he has is just to instill a sense of urgency and a sense of dissatisfaction. I look at the best companies out there and I’d describe it as, they’re permanently dissatisfied,” says Sam Poser, managing director of institutional equities at Stern Agee, in a piece for Fox Business by Thomas Barrabi. “Everybody’s got their fingers crossed that they can keep it going for more than six months, a year, 18 months, and they don’t just take that deep breath [and relax].”
Henkel, meanwhile, appointed Hans Van Bylen, who is currently EVP of Henkel’s beauty care business, to succeed Rorsted on May 1, the day after the latter departs, Georgina Caldwell reports for Global Cosmetics News. Van Bylen, a Belgian who has worked at Henkel since 1984, has headed its beauty care business since 2005, according to Thomasson.
“Van Bylen is an excellent choice as he has long-standing, international experience in managing brands and markets as well as [being] a management board member at Henkel,” says Simone Bagel-Trah, chairwoman of the supervisory board and shareholder’s committee at Henkel, in a release.
Henkel, a consumer-products giant in Europe, gained a U.S. foothold with its 2004 acquisition of Dial Corp., Russ Wiles of the Arizona Republicwrote in a look at the company’s operations in Scottsdale, Ariz., last November and, in particular, its launch in the U.S. of Persil laundry detergent, Henkel's flagship global product.