The investor day held in Herzogenaurach three weeks ago enabled the company to push forward two new executive board members. Herbert Hainer, the Adidas Group's chief executive, who has been under some pressure since the company's profit warning last year, made it clear a few weeks ago that he will leave Adidas in two years' time at the latest. He apparently avoided taking center-stage at the investor day, leaving more time for a new leadership duo to provide insights into the group's intended strategy for the coming years.
Eric Liedtke, the board member in charge of global brands since March 2014, clearly outlined the global strategy behind the company's “Creating the New” program. Roland Auschel, board member in charge of global sales since October 2013, set ambitious targets as part of a sales strategy that now more clearly covers the wholesale and retail sectors.
The investor day positioned both of them as potential successors to Hainer. The event in Herzogenaurach underlined the complementary skills of the two board members. They appeared to form a cohesive duo and the strategic plan integrated the sales and marketing aspects more clearly than in previous years. But the presentations also highlighted the contrasting personalities and approaches of the two executives.
Liedtke trained as a journalist in Wisconsin and started off in advertising. When he joined Adidas America in the mid-nineties, the company was still young and energized by some of the people who worked around Rob Strasser, a larger-than-life executive who helped to build up Nike in the early days and then switched to Adidas. Perhaps that is when Liedtke acquired a taste for sharp formulas and marketing that works.
With several years at the head office in Herzogenaurach, from 2006, the 48-year-old American citizen has also gained the international insights required to navigate the group.
The 51-year-old Auschel rose through the ranks as part of a group of German managers around Hainer and Erich Stamminger, former board member in charge of global brands. He is appreciated by key retailers as well as regional managers and has an ample international network within the Adidas group.
The duo and its strategy made a generally favorable impression on analysts, who have mixed opinions about Hainer's legacy so far. The chief executive himself pointed out that, when the Adidas group's current strategic plan ends this year, it should have generated a sales increase of nearly €4 billion for the five-year period – adding that this was more than the entire turnover of Puma, the third-largest brand in the market. Hainer has been lauded for the group's steadfast investments in emerging markets, such as Russia and China. He is also credited within the group for an inclusive approach – with an eye on all stakeholders, employees and the environment.
However, there has been a latent disaffection with Adidas' management among some investors since the acquisition of Reebok International, particularly due to the high price that was paid for the company. Some argue that, under Hainer's leadership, the Adidas group has failed to radically improve its cost structure and that the returns are underwhelming for a company with such a formidable asset as the Adidas brand.
Some questions arose at the meeting about other strategic choices, such as the decision not to sell TaylorMade Adidas Golf at the time when the brand and the golf market were still thriving. Even the gutsy investments made by the group in emerging markets occasionally backfired, as in the case of Russia.
Under the circumstances, several analysts were disappointed that the company's strategic presentation again put strong emphasis on lifting sales and that managers apparently did not want to be bound to a specific target for operating profit. One investor has worked out that the Adidas group's operating profit could still land at three to four percentage points below Nike at the end of the five-year plan.
An item of concern for investors is the level of shareholder returns for the Adidas Group compared with Nike. The German group argues that the returns in terms of share price alone had been in fact comparable for both companies in the last years, until Adidas shares plunged in July, on the back of events that were mostly beyond its control such as the Russian crisis and the declining golf market.
With regard to the group's, several analysts found it odd or worrying that Adidas has worked out a strategic plan for the next five years, although it has already been decided that the current CEO will not see it through. The future CEO may not be held accountable for the plan – unless he is one of the two board members who have clearly endorsed it. Then again, some analysts favor an outsider who might bring about more radical change.
