What happened
Shares of Adidas (ADDYY +0.52%) soared on news that the sportswear giant is in talks to make a Puma executive its next CEO, giving investors new hope for a turnaround.
The stock gained 25% on the report.
OTC: ADDYY
Key Data Points
So what
Confirming media reports, Adidas said that is in talks to make outgoing Puma CEO Bjorn Gulden its next chief executive. The company had said in August that current CEO Kasper Rorsted would step down next year, ahead of the 2026 end of his contract, coming as Adidas has struggled, faced weak sales, controversy over its relationship with Kanye West, and poor performance in China.
The move also represents something of a coup as Puma is Adidas' longtime rival. In fact, the founders of each company are brothers. Gulden had said recently that he would step down as CEO at the end of the year, but had not given a reason.
Due to a non-compete clause in his contract, Gulden wouldn't immediately be able to take over as CEO, meaning Adidas CFO Harm Ohlmeyer would likely take over the top spot in the interim.
Now what
A new CEO could breathe some much-needed life into Adidas, and Gulden is well regarded for executing a turnaround at Puma.
Even after today's gains, Adidas shares are down more than two-thirds from their peak last year, and performance has been weak. In its third-quarter earnings report, the company reported currency-neutral revenue growth of just 4% and cut its revenue-growth guidance for the full year to mid-single digits.
Adidas is likely to face a significant write-down after ending its relationship with Kanye West, and it will no longer sell Yeezy products.
A turnaround won't be easy, but bringing in new leadership is a start, and this seems like the right time to put a new face on the company.
