Adidas in Crisis: How Kanye West, China, and Russia Led to a 54% Share Drop

From Toxic Culture to External Shocks: The Inside Story of Adidas' Struggles and the Hurdles Ahead for Incoming CEO Björn Gulden

Welcome to this edition of The Economic Elder.

Today we're going to take a deep dive into the current state of Adidas, the German sportswear giant that has seen its shares plummet by 54% in the past year. This crises has many wondering what the future holds for the company.

First, let's talk about the end of Adidas' partnership with Kanye West. As many of you know, the rapper and fashion designer sparked outrage with his anti-Semitic remarks, leading to the end of the lucrative partnership. But according to former managers, the relationship with Kanye had already been rocky for some time. They claim that he was prone to misbehaving and changing his mind, often causing delays and not respecting Adidas' timelines.

The end of the partnership with Kanye is expected to erase half of the company's 2022 earnings, a significant blow for Adidas. But it's not the only crisis the company is facing. It has also seen a sales decline in China, a market that had previously been a major profit pool for the company.

To make matters worse, Adidas has also withdrawn from Russia, another important market for the company. As one senior manager put it, "We have lost three profit pools in one year."

So what's behind these crises? Some former executives blame poor decision-making and a toxic leadership culture at the company. They claim that outgoing CEO Kasper Rørsted and his board positioned Adidas poorly to weather the storm, firing key personnel and becoming over-reliant on the Kanye franchise. They also allege that Rørsted's "management by fear" has led to an exodus of talent and traumatized staff.

However, others within the company defend Rørsted's tenure, attributing the problems to external shocks. It's worth noting that the sporting goods industry is known for its cyclical ups and downs, and some insiders point out that Adidas' product line was already experiencing slow growth pre-pandemic.

Some believe that part of the problem for Adidas is that it hasn't kept up with changing consumer preferences. In recent years, there has been a shift towards more casual, comfortable clothing, and some believe that Adidas hasn't adapted as well as its competitors. The company has also faced criticism for its lack of diversity in its marketing campaigns, which may have turned off some consumers.

Regardless of the reasons behind the company's struggles, The new incoming CEO Björn Gulden has a tough task ahead of him. Gulden, a former professional footballer and the former head of Puma, is widely credited with turning around that company. But he's inheriting a company whose shares are still trading at a six-year low, and some analysts believe a "brand reset" may be necessary to address the company's issues.

But it's not all doom and gloom for Adidas. The company has a strong brand and a loyal customer base, and it has made efforts to adapt to the changing market. It has introduced new products and collaborations, such as its partnership with Beyonce, and it has made a push into sustainable fashion with its Parley line of clothing made from recycled materials.

The Incoming CEO Björn Gulden will have to navigate these challenges and find a way to position the company for success in the future. It won't be an easy task, but if anyone is up to the challenge, it's Gulden. His successful turnaround at Puma shows that he has the skills and experience needed to lead Adidas through these difficult times.

That's it for this edition. Thanks for listening.