The Adidas Group has replaced its management in Western Europe, due to unspecified distribution issues that apparently caused it to slow down more rapidly than anticipated in the company's second-largest regional market in the second quarter.
Arthur Hoeld, who previously helped to build up Originals for the Adidas brand, was appointed as managing director for Western Europe at the start of July. He takes over from Alain Pourcelot, who had held the job since May 2017. The group said that Pourcelot has become global business unit manager for training.
The change was announced as the Adidas Group reported its quarterly performance, as detailed above. The turnover of the Adidas and Reebok brands in Western Europe was down by 0.9 percent to €1,420 million in the quarter, with a tiny decline of 0.1 percent in constant currencies. The regional turnover for the first half of the year reached €3,023 million, an increase of 1.8 percent in reported terms and 2.4 percent in constant currencies. The Adidas brand raised its sales by 2 percent to €2,776 million for the half-year in Western Europe, up by 3 percent without exchange rate changes, while the Reebok brand's turnover declined to €247 million, off by 4 percent in euros and constant currencies.
As a reminder, Western Europe is somewhat of a misnomer here since the regional unit in the Adidas group encompasses nearly all of Europe. The gross profit margin for Western Europe increased by 2.1 percentage points to 46.9 percent for the six months, and the area's operating margin inched up by 0.4 percentage points to 21.3 percent.
Kasper Rorsted, chief executive at the Adidas Group, pointed out in a conference call with journalists last week that the deceleration comes after the region delivered an average annual sales increase of 15 percent in constant currencies for the last three years. In absolute terms, it generated more than €2 billion in extra sales over the period, while adding no less than 2.5 percentage points to its operating margin – all of this in a relatively mature market.
That was one of the reasons for the group's initial projection that its sales increase for the Adidas and Reebok brands in Western Europe would slow down to about 5 percent in constant currencies this year. The company made some distribution cuts in Europe as well. But Rorsted acknowledged that the “normalization” of the sales trend in the region had been somewhat more pronounced than anticipated in the second quarter.
This was blamed on questionable decisions in terms of distribution for product launches, mistakes in terms of timing, underwhelming marketing campaigns – and perhaps a touch of complacency, Rorsted suggested in a call with analysts. The company predicts that the trend from the second quarter will be largely unchanged for the second half, as it sticks to its disciplined approach.
Hoeld has been with Adidas since 1998, when he joined as advertising manager. He subsequently held global positions in advertising, brand communication and brand marketing, both in the global and Western European organization at Adidas. Hoeld led the Adidas Originals business for six years until 2017, helping to diversify its franchises and distribution. He went on to head up global brand strategy and business development for the Adidas brand. Meanwhile, his leadership of the Originals business was taken over in February 2017 by Torben Schumacher, who joined the group in 2014 and most recently worked as vice president of product for Originals.
Pourcelot has been with the Adidas group since 2015, most recently working as managing director in France and then senior vice president of direct to consumer sales in Europe. He was appointed in May 2017 to take the over the European leadership from Gil Steyaert, who became the board member in charge of global operations.