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No matter how Germany fares during Euro 2024 over the coming three weeks, an era of sorts will end for the host country\u2019s football team and one of its best-known brands: Die Mannschaft will play its last European championship tournament match in Adidas<\/a> uniforms.<\/p>\n Adidas AG\u2019s loss of such a prominent sponsorship to archrival Nike<\/a> Inc., announced\u00a0earlier this year<\/a>, would\u2019ve been unthinkable not long ago, when the team and the sportswear maker were bound together by what Chief Executive Officer Bjorn Gulden once described as an almost \u201cemotionally inseparable,\u201d seven-decade relationship.<\/p>\n Yet setbacks and stumbles piled up for Adidas before Gulden arrived last year, ranging from a boycott of Western brands in China to the demise of the company\u2019s\u00a0partnership<\/a>\u00a0with rapper Ye after his anti-Semitic comments. Under the new CEO\u2019s watch, other headaches have occurred, including a flap over numbers on the German football uniforms that were said to resemble the Nazi SS insignia and, just this month, allegations of\u00a0corruption<\/a>\u00a0in China.<\/p>\n In his first 18 months, Gulden has been able to ride out these problems, propelled by the Samba shoe\u2019s hot sales streak. The stock has more than doubled from when he was announced as the new boss. But investors are increasingly wondering how far Gulden\u2019s reliance on gut instinct, which has led to some smart choices with regard to the product lineup already, will carry the company or whether it could create new vulnerabilities in the future.<\/p>\n \u201cHe\u2019s managing it in a more intuitive way; it\u2019s hard to see any long-term strategic plan,\u201d said Ingo Speich, a portfolio manager with Deka Investment in Frankfurt. \u201cTime will show if that\u2019s enough going forward or if maybe he has to announce further details about where growth is going to come from.\u201d<\/p>\n The Norwegian boss offers a marked contrast to his Danish predecessor Kasper Rorsted, a numbers-driven executive who watched his intricately crafted strategy to juice profits unravel in the face of crises inside and outside the company.<\/p>\n Arriving in January 2023 from smaller rival Puma<\/a> SE, Gulden \u2014 who declined to be interviewed for this story \u2014 set out to restore optimism to the beleaguered business. He\u2019s sped up the introduction of new footwear and apparel lines, rebuilt relationships with retail partners and hammed it up with celebrities and top athletes, both on the company\u2019s campus and on his\u00a0Instagram feed<\/a>.<\/p>\n \u201cBjorn was the right person at the right time,\u201d says Justin Hance, a partner at Harris Associates LP in Chicago, a top shareholder. Hance lauds Gulden\u2019s efforts to focus less on financial targets for now, and more on the fast-changing desires of consumers and retailers. \u201cIt\u2019s hard to imagine someone coming in and having done much better in this period of time.\u201d<\/p>\n From his first days at Adidas, Gulden insisted that the company hadn\u2019t stopped coming up with appealing products during the dark days. He pointed to recent collaborations with luxury partners including Gucci, Moncler and Balenciaga \u2014 even though the brand had failed to capitalize commercially on the buzz around them.<\/p>\n Gulden\u00a0accelerated<\/a>\u00a0the rollout of the classic Samba shoes, which had been\u00a0appearing<\/a>\u00a0on the feet of celebrities including Bella Hadid and Kendall Jenner. Within months, it was clear that the footwear \u2014 along with similar \u201cTerrace-style\u201d shoes like the Gazelle and Spezial \u2014 would take off.<\/p>\n The Samba craze has helped Gulden make progress with another of his early objectives \u2014 returning Adidas to working with retail partners. The previous strategy focused on Adidas\u2019s digital and direct-to-consumer sales channels, where it doesn\u2019t have to share profits with middlemen. Frustrated retailers, which couldn\u2019t get their hands on enough of Adidas\u2019s best products, turned to smaller brands including On Holding AG and Deckers Outdoor<\/a> Corp.\u2019s Hoka.<\/p>\n \u201cIf you went to Dick\u2019s Sporting Goods like six months or a year ago, they didn\u2019t really have that much Adidas,\u201d said Cristina Fernandez, an analyst at Tesley Advisory Group in New York. \u201cAs the trends started to pick up last year, the retailers felt more comfortable ordering and thinking, like, with the footwear doing better, that was going to drive apparel sales\u201d too.<\/p>\n What\u2019s more, after Gulden\u00a0initially warned<\/a>\u00a0investors that Adidas might have to write off its $1.3 billion inventory of Yeezy footwear, much of it has been sold, helping him\u00a0repeatedly<\/a>\u00a0exceed his conservative financial targets. Adidas currently forecasts an operating profit of \u20ac700 million ($749 million) this year, after upgrading guidance from \u20ac500 million\u00a0in April<\/a>. Yet analysts are expecting the figure to exceed \u20ac1 billion.<\/p>\n In the first quarter, sales jumped by 8% overall, and 5% excluding the diminishing Yeezy stockpile.\u00a0<\/p>\n Gulden has suggested that this momentum will pick up, yet has also asked investors to show patience. He\u2019s repeatedly suggested \u2014 though without putting a firm date on it \u2014 that Adidas should be able to achieve double-digit sales growth and operating profit margins of at least 10%.\u00a0<\/p>\n China is one potential speed bump. Consumer anger over western brands\u2019 concerns about cotton from Xinjiang, the province where China is accused of human-rights violations against the Uyghur minority, has bubbled for several years. Separately, Adidas this past week\u00a0said it was investigating<\/a>allegations of corruption among some marketing staff in the country.\u00a0<\/p>\n Homegrown brands like Anta Sports Products Ltd. and luxury names including Dior have gained market share. Adidas has said it\u2019s speeding up its supply chain in the country to cater to fast-changing customer tastes.<\/p>\n \u201cWhen I was in middle school, I thought brands like Nike and Adidas were very nice \u2014 it\u2019s like a tag of being fashionable,\u201d said Chen Jingfang, founder of an influential Weibo<\/a> account with more than 3 million followers. Now, she\u2019s more likely to buy a pair from On or LuluLemon Athletica Inc., she said.<\/p>\n There\u2019s also the question of how and when Adidas will attempt to follow up on its current sneaker hits and keep its fashion buzz. Gulden\u00a0suggested earlier this year<\/a>\u00a0the return of its retro Superstar basketball shoes would have to wait, because of rising demand for the football-inspired Samba.<\/p>\n Globally, Gulden\u00a0wants<\/a>\u00a0to reinstate Adidas as the world\u2019s \u201cbest sports brand,\u201d with the name visible in most Olympic sports and prominent in areas where he succeeded with Puma, including cricket and Formula 1 auto racing. But there\u2019s still work to be done in the three key categories of running, basketball and football.<\/p>\n Adidas scored a\u00a0clear winner<\/a>\u00a0at the top end of the running market with its Adizero Adios Pro Evo 1, a 138-gram racing shoe that costs $500 and is designed to be worn for as little as one race. Adidas released the footwear in September \u2014 two years ahead of the original schedule \u2014 and within days, Ethiopia\u2019s Tigst Assefa\u00a0wore them<\/a>\u00a0in Berlin while smashing the women\u2019s marathon world record. Yet everyday runners have\u00a0embraced<\/a>\u00a0shoes from the likes of On, Hoka and Brooks.<\/p>\n Then there\u2019s basketball, where Nike has dominated for decades. Adidas is currently benefiting from its hottest-selling product in years with the\u00a0Anthony Edwards<\/a>\u00a0signature shoe, which Foot Locker<\/a> Inc. has\u00a0highlighted<\/a>\u00a0as a top seller.<\/p>\n When it comes to football, the deeper-pocketed Nike has used its heft to buy up sponsorships. On the loss of the German national tie-up, Gulden has made clear his head overuled his sport-loving heart, saying the US rival\u2019s $100 million-a-year reported commitment far exceeded what his business considered smart.<\/p>\n \u201cYou just have to accept that sometimes some people pay too much,\u201d he told shareholders at Adidas\u2019 annual meeting in May. His firm will run out its existing contract, he said, \u201cand then we\u2019ll laugh.\u201d<\/p>\n Poonam Goyal, an analyst at Bloomberg Intelligence, pointed to other big clubs like Chelsea FC that once played in Adidas and are now wearing Nike. France has also switched. \u201cWhile they could win some of them back, they have to pay for them. And if Nike shows interest in the teams that they\u2019re trying to win back, I just think Nike will pay more.\u201d<\/p>\n Nike pulled away from Adidas as the world\u2019s biggest sports brand in the 1990s and last year boasted about twice as much total revenue. Gulden may have a rare opportunity to close the gap. The US company is struggling to bring out new products and cut reliance on its Jordan brand, and has\u00a0resorted to staff cuts<\/a>.<\/p>\n \u201cGulden can use this weakness of Nike to get closer, so that they are getting larger and can pay bigger contracts,\u201d said Thomas Joekel, a portfolio manager at Union Investment in Frankfurt, a top-10 investor. \u201cGulden knows that scale matters in this industry and he probably will try to seize this chance.\u201d<\/p>\n<\/div>\n\nSamba Craze<\/h3>\n
China Concerns<\/h3>\n