Adidas Looks to Harness Instagram Fans to Maintain Its Momentumby
Liedtke plans to stay after being passed over for CEO role
Exec doesn’t rule out parting with struggling Reebok brand
Passed over for the top job, Adidas AG’s global brands director Eric Liedtke plans to stick around under his new boss and has fresh marching orders -- translate the sporting-goods maker’s digital street cred into sales.
Liedtke, who lost out to former Henkel AG leader Kasper Rorsted in a race to succeed Chief Executive Officer Herbert Hainer, is now turning his attention to a different battle as he seeks to make it easier for Instagram and Snapchat followers to buy popular sneaker styles. His end goal is to make sure the resurgent company’s products and partnerships keep fueling one of the biggest corporate turnarounds of the year.
“Adidas is my life’s work and I’m not ready to run away from it because I didn’t win,” Liedtke, an American-born Adidas lifer, said in an interview. “My job is to keep it sustainable. If you think the analysts are nervous about it being sustainable then you’re discounting my sleepless nights.”
Adidas’s recent history shows why Liedtke has cause for anxiety. Less than two years ago, the company was in the midst of a slump as it scrapped financial targets and lost market share to main rival Nike Inc. Its shares fell 38 percent in 2014, though since then they have more than doubled as the company revived some classic sneaker lines and collaborated with Kanye West on “Yeezy” branded gear.
To help sustain the turnaround, the company will introduce versions of its retro-cool Stan Smith and Superstar sneakers in the next two months that incorporate Adidas’s bouncy Boost technical sole, Liedtke said.
Potentially the biggest opportunity lies in converting Adidas’s throngs of social media followers into paying customers. The Adidas Originals brand has 14 million Instagram followers and more than 28 million likes on Facebook. To assess the possibilities, Liedtke just spent six weeks in the U.S., including one in a Bay Area rental car calling on Apple Inc., Facebook Inc., Google and Tesla Motors Inc.
“I’d call it a roadshow with key Silicon Valley companies we want to work with,” said the executive, who started at Adidas in 1994 and turns 50 this year.
He’s talking to Pokemon Go developer Niantic Inc. about applying virtual-reality gaming technology to the sport-shoe world.
Digital savvy and the introduction of models including the futuristic looking NMD have given Adidas appeal among millennials, according to Neil Schwartz, an analyst at Sports One Source.
“Adidas didn’t have awareness or cache among millennials and now they do,” he said.
The company is regaining ground in the U.S. and leapfrogged Under Armour Inc. to reclaim its No. 2 position there, according to Sports One Source. The shares are up 62 percent this year, by far the best performance among Germany’s benchmark DAX index.
Maintaining the momentum will be no sure thing at a time when growth is coming from casual sneakers whose fashion-oriented buyers can change brands on a whim. Two-thirds of Adidas’ growth is coming from the Originals and Neo brands, according to investment bank Citigroup.
Profit is also an issue. Adidas’ projected 7.5 percent operating margin this year is still about half of Nike’s, and it’ll be a challenge for Rorsted to cut costs at a time when the price of sports marketing is soaring. Adidas just stumped up 200 million euros ($224 million) to extend its sponsorship of Germany’s national soccer team.
“If the margin stays this level for the next three years then the shares are probably overvalued today,” said Ingo Speich, portfolio manager at Frankfurt’s Union Investment, which holds Adidas shares. He would like to see Rorsted wring more value from the struggling Reebok brand -- possibly by putting it up for sale -- and tackle costs in Adidas’s sprawling store network.
Then there’s the question of how much value Adidas can reap from its on-the-block golf business after Nike said it’s exiting the business entirely. Nike’s decision potentially hurts Adidas golf’s value, Liedtke said. And he isn’t ruling out life without Reebok.
“The more experience I have, the more I realize editing is the critical thing,” he said. “And it could allow us to be more profitable too. If Kasper wants to come in and reshape the group, that’s why we hired the man.”