Sports Business/11/14/2017

Adidas CEO Kasper Rorsted targets US market and remains committed to Reebok

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Adidas CEO Kasper Rorsted explains how he wants to compete with Nike on the US market. He also made a commitment to daughter brand Reebok.

Adidas CEO Kasper Rorsted wants to engage in the US market.
Adidas CEO Kasper Rorsted wants to engage in the US market.

Adidas CEO Kasper Rorsted targets Nike. In an interview with Manager Magazin, Rorsted explained how Adidas is going to attack the world market leader in the US market.

"We need to be significantly larger and more profitable in North America. The region accounts for around 20 percent of our sales. However, North America's share of the global sports market is 37 percent. So there's still a lot of potential", said Rorsted about Adidas' biggest weakness at the moment.

Kasper Rorsted: That's why the US isthe most profitable market

While Adidas has a neck-and-neck race with Nike everywhere else, Nike still has a lead in the USA: "Our backlog on Nike is almost entirely due to the market share gap in North America. The complexity there is much less complex than in Europe, for example, with four or five major retail chains covering the entire country in the USA. That's why the US is also the most profitable market in the world."

Compared to his time at Henkel, Rorsted does not want to achieve his goals at Adidas with major cost-cutting measures: "You can't compare that. Henkel grew by between three and five percent a year, with double-digit growth at Adidas. It's enough to keep costs under control, and profitability increases, even without staff cuts."

Reebok still part of Adidas at the end of 2018

Rorsted has set a margin target of around eleven percent by 2020. Currently, Adidas stands at 7.5 to 7.7 percent.

However, Rorsted refuses to sell Reebok as a profitable measure: "I consider Reebok to be remediable. The brand could become a profit maker." In addition, a sale would create a new competitor. While there is an upper limit to investment in a Reebok turnaround, Rorsted's patience "is sufficient as long as Reebok meets its quarterly targets".

Whereas third-quarter Adidas sales grew 13 percent at constant exchange rates, Reebok grew by a modest 0.6 percent. While the brand is growing in the rest of the world, Reebok's home market, the USA, is experiencing a decline in sales.

Observers had expected Rorsted to resign Reebok immediately after his inauguration in 2016. In his new interview, Rorsted "absolutely believes" that Reebok still belongs to Adidas at the end of 2018.