The brand with three stripes has a new CEO in town, Bjørn Gulden. It is not an entrance into a padded throne however. He has a lot of challenges in front of him.

Adidas’ market value has dropped to €25 billion, or one-seventh that of Nike. Investors appear to be more confident in Puma, Adidas’s smaller local rival, than in the swoosh. As a result, Adidas’s board poached Mr Gulden from Puma, after he helped turn around Puma into a profitable company.

Adidas’ cramps are caused by forces outside its control. Inflation increased supply-chain costs. As Russia’s warmongering president, Vladimir Putin, ordered tanks into Ukraine in February 2022, causing an exodus of Western corporations from the Russian market, the company was forced to wind down its sizable operation there. And Mr West’s increasingly erratic behavior, including anti-Semitic outbursts, prompted Adidas to sever ties with him in October of last year. This left it with millions of unsold Yeezys. Unless these are somehow repurposed, the company will most likely end 2023 with its first annual operating loss in over 3 decades.

Nevertheless, misfortune is not the entire story. The previous CEO, Mr. Rorsted, put a huge emphasis on efficiency and cost. While desirable in some areas of the brand, this focus came at a cost. He neglected Adidas’ retail partners, preferring to sell straight to consumers through the company’s own stores. He also failed to make investments in innovation. He made a lot of financially sound decisions, but these decisions which avoided risk led to losses because of an overly tame strategy, which allowed Adidas to lose market dominance.

A challenge for Mr. Gulden right as he steps into office is Adidas’ losing position in China, one of the key markets for sports brands. Its Chinese sales have been overtaken by those of Anta, a fast-charging local rival. Now it risks losing the number-three position to another, Li Ning. The brand with three stripes is in a tricky situation in such a pivotal moment.

Mr. Gulden has a lot to do to smooth the path to rebuilding a profitable business in 2024. He plans to cut the dividend, reduce discounts on unsold kit, mend relations with retailers, and invest more in products and in the Adidas brand.