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Fortune
Fortune
Business
Christiaan Hetzner

5 challenges facing Adidas' incoming CEO from Kanye West to the World Cup

Bjørn Gulden (Credit: Daniel Karmann—picture alliance via Getty Images)

After Adidas decided to not renew the contract of CEO Kasper Rorsted, some feared that the company would be rudderless. But its decision to poach the head of smaller shoe rival Puma has put an end to that immediate risk.

Bjørn Gulden, a Danish national, is the second Scandinavian in a row to lead the world’s second-largest sportswear maker.

He's well acquainted with Adidas and is set for something of a homecoming, having served at the company in the 1990s before later moving to Puma, where he became CEO in 2013. 

Before his time at Adidas, Gulden even played professional football in Germany, where Adidas is based, lacing up his boots for the local Nürnberg team affectionately known in the Bundesliga simply as “The Club.” 

Although it may have nabbed a new CEO, Adidas has a whole slew of issues to contend with, some shared by rivals like Nike, others more homegrown.

Kanye West

The scandal over Kanye West, who now goes by the name Ye, has been a nightmare for Adidas. The Yeezy line of footwear has been a bright spot for its fashion line, so the rapper's anti-Semitic comments have been a public relations disaster.

The low point was reached when West crowed he could say whatever anti-Semitic things he wanted, and Adidas would accept it—forcing the company’s hand. The last thing any global brand from Germany wants is being associated with anti-Semitism.

Financially the end of the partnership with West will be a major sore point that Gulden will have to address. Last month Adidas said the decision to end its Yeezy business with immediate effect will cost it up to €250 million in net profit this year, adding that more information will be made available when it presents quarterly results on Wednesday.

Bloated inventories

One of the worst outcomes for many consumer goods brands has been the ongoing headaches from supply chains, in particular in China, where shipping delays have meant goods arriving just at a time when demand is ebbing, or the next season is just around the corner. 

It’s no secret that athletic wear companies like Adidas and Nike have the bulk of their goods manufactured in China, which has been struggling to contain COVID outbreaks by instituting lockdowns.

Both big name brands now are facing deep discounting to clear inventory. The incoming CEO will have to judge just how much of a margin he is willing to sacrifice to move product.

Metaverse dalliance

Former CEO Kasper Rorsted decided to jump on the non-fungible token (NFT) trend. Not only did Adidas purchase its very own Bored Ape NFT in order to develop its own line of branded clothing, it also bought a plot of virtual land inside the Sandbox, a platform for a virtual world. 

Unfortunately the hype around the metaverse has dramatically cooled off, with the NFT industry suffering a collapse in demand.

Where Gulden takes Adidas’s metaverse plans next is anyone’s guess at this point.

Local rivalry

Adidas and Puma cultivate a deep rivalry that goes back to a feud that saw Rudolf Dassler break with his own brother Adolf “Adi” Dassler in 1948 to launch his own sports shoe company with Puma in the very same sleepy Bavarian town. 

With both companies headquartered in Herzogenaurach, news travels fast, and when one is enjoying solid quarterly results and the other is not, it does not sit well for very long among staff. 

After three difficult years with Rorsted at the helm, Adidas said in August the time was right to “pave the way for a restart.” Gulden’s task will be to reestablish Adidas’s commercial and financial dominance over its smaller rival. Puma celebrated record sales and operating profit in the last quarter.

FIFA World Cup

What should be a bright spot on Adidas’s calendar is anything but. Traditionally football’s most important tournament has served as a stage for the sport’s greatest heroes to emerge, whether it was Brazil’s Pele dazzling Swedish crowds in 1958 or Zinedine Zidane playing to the home fans in his native France 40 years later.

Adidas itself emerged as a famous brand thanks to Adi Dassler’s idea for removable and exchangeable metal cleats that helped the 1954 German team beat Ferenc Puskas’s heavily favored Hungarian side on a slick pitch in what became known as “The Miracle of Bern.” 

Instead of the usual enthusiasm that sees fans rushing to snap up their national team’s kit or walk out with an official replica of the tournament ball, the mood this year is sombre. 

With the monthlong tournament about to launch on Nov. 20, when the football-loving Northern Hemisphere is experiencing wintry temperatures, excitement is at its lowest level in memory.

Moreover, with the host nation, Qatar, asking fans not to engage in any behavior the Muslim nation might find offensive, including openly displaying gay pride, advocacy groups and even some brands like Brewdog are calling for a boycott

This will no doubt leave a sizable dent in the bottom line for Adidas, which has long relied on a World Cup bump to juice its financial results every four years. 

In short, Gulden has a lot of balls to juggle when he finally starts in January. 

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