What to take away from Bjørn Gulden’s first earnings call as Adidas CEO
After almost a decade commenting on Puma's financial results, as CEO of the German sport apparel and equipment brand, Bjørn Gulden is still based in Herzogenaurach, Germany, but has now joined Puma’s sibling rival, Adidas. On March 8, Norway-born Gulden took part in the earnings call to present Adidas's annual results. A first for him, and under close scrutiny.
“I guess it's strange listening to me on an Adidas call, but that's how the world is,” began Gulden. “And I have to tell you that these have been seven or eight very busy weeks, trying to understand where the business is and examining what resources and opportunities we have. I would like to say that I’m proud to be here. This may seem strange after what I used to tell you when I was at Puma. But I just quickly want to repeat to you that I was nine years [at Puma], and I think I had a very good time. I have close friends there. And I think it's fair to say that after nine years, after fulfilling my contract, it was time to do something different. The plan was definitely not to do it with [Adidas], but the way things developed, and very quickly so, it became an option I just had to say yes to,” Gulden said.
He did not add much more on how Adidas, a group with an annual revenue of €22 billion, won him over.
"You will see us invest more in smaller sports, broaden our portfolio”
Gulden instead concentrated on enumerating Adidas's strengths. “I think we all have to agree that [Adidas] has signed some very good [football] teams. For me, it's an achievement to get Italy and Arsenal back. You know, I was part of divesting from them at Puma. Now, they are back. Arsenal is actually performing well, and let's hope that Italy will do better than [at the last World Cup]. We have all the teams we need in order to have a very, very good image and do extremely good business in both professional sports and college sports, and of course also on the license market. The same goes for athletes. I mean, we have talented athletes in every possible sport. And I’d also like to say that you will be seeing us invest more in smaller sports, and widen our portfolio. I think the DNA of Adidas has always been to develop products for all kinds of sports. There have even been Olympic Games in which we had shoes for all the spots one could participate in. I'm not sure we'll be going that far now, but I think that from the point of view of design and development, we can't limit ourselves to just the major sports.”
In the past, Adidas had decided to withdraw from many sports deemed unprofitable, including sports featured in the Olympic Games, for which national federations would struggle to find kit and equipment suppliers. Adidas’s new CEO seems keen to reconnect with this broadened competition philosophy. To do so, Gulden intends to rely on the Adidas group's R&D and manufacturing resources.
Adidas can also tap its experience in outdoor sports. “The Terrex brand was a very, very good initiative. I think the idea of putting all the outdoor products under one umbrella brand has worked very well. Those of you who know me are aware I'm a mountain freak, both in summer and winter. I can tell you that the [Terrex] products are excellent. And it’s a business currently worth about half a billion euros. We all know that the outdoor activity [market] is growing, and we have all the ingredients to be part of it, both in winter and summer,” said Gulden. Gulden is also seeing strong growth prospects for Adidas in golf, and is insistently looking towards winter sports.
He landed a major coup with Rihanna at Puma in 2015, and is keen to exploit Adidas’s potential also in terms of fashion and lifestyle products. “Adidas has been criticised in the past for not generating enough brand heat. But look at the collaboration partners Adidas has had in the last 18 to 24 months: Moncler, Prada, Gucci and Balenciaga. It’s impossible to have hotter partners than these! We can discuss the fact that there may have been too many collaborations in a short period of time. But I think that is because many were delayed, and then had to go to market at the same time. When I see the list of brands that want to work with us, I get the feeling we are in great shape. And if you look at famous names like Pharrell, Beyoncé, Bad Bunny and now also Jenna Ortega, we have unique partners that connect us to street culture,” said Gulden. He adopted a gracefully diplomatic attitude towards his predecessor, and especially the staff at Adidas, currently under fire because of the Yeezy affair, an issue for the group in the wake of the Kanye West controversy.
Gulden was quick to point out ways in which the group can progress, for example streamlining the number of models (or franchises) on the market: “too many, and with too many promotions,” he said. He mentioned difficulties in China and heavy inventory in Europe. He wrapped up the Yeezy issue saying: “We have lost it.” He then indicated that the most dynamic franchises are currently the Gazelle, the Samba and the Spezial, and cleverly opted to focus on a strong name with exhilarating prospects, Pharrell Williams, an Adidas brand ambassador and also a partner, with his Human made range. “Pharrell, who is also LVHM's lead menswear designer, is probably the most fashionable designer or creative person around at the moment. The fact that he is moving to Paris and drawing closer to us is obviously highly important to us. And I think Jenna [Ortega] is probably the most sought-after female celebrity one could sign. After two weeks, their impact has been very, very, very strong,” he said.
Adidas to produce footwear in Europe?
Adidas, like all sportswear industry players, is faced with another major issue: manufacturing. In 2019, the group shelved the Speedfactory project for robotised shoe production, but its new boss, in his first few weeks of tenure, has dared to address the question of Europe-based sourcing. “What is absolutely unique is that we have a shoe factory in Europe, in Germany, 40 minutes from here, in Scheinfeld [near Frankfurt], where we have the capability to manufacture a number of different shoes, like the Copa Mundial. I think we will start to exploit this even more than we have done so far. European manufacturing and European expansion, especially when there are collaborations with artists, and also because being made in Germany and made in Europe makes sense, is a unique asset we have not yet utilised to the full. And because I'm a product maniac, I think we'll use it more than ever. And don't forget that footwear competence in Europe is not so easy to find and develop. We could use this factory as a training centre and make sure we never lose sight of product expertise, especially in footwear,” said Gulden.
This is the challenge facing Gulden: turning a globalised giant like Adidas into a group with local capabilities. Undoubtedly, this will not happen immediately, as far as manufacturing is concerned. But Gulden set the tone for what will follow: “The world is not becoming more centralised or more globalised. It's very, very hard to find products that are doing well in all regions and all markets. The business months are also different. We have design centres in Tokyo, Shanghai, the USA, and now also in India and Europe, and we will become more localised.”
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