Why Adidas Stock Soared Today

What happened

Shares of Adidas (ADDYY 25.05%) skyrocketed upon learning that the sportswear giant was in talks to make a Puma executive its next CEO, giving investors new hope for turnaround.

The stock gained 25% on the report.

So what

Confirming media reports, Adidas said it was in talks to make outgoing Puma CEO Bjorn Gulden its next chief executive. The company said in August that current CEO Kasper Rorsted would step down next year, before his contract expires in 2026, as Adidas struggled, faced weak sales, controversy over its relationship with Kanye West and poor performance in China.

This move also represents something of a coup, as Puma is Adidas’ long-time rival. In fact, the founders of each company are brothers. Gulden had recently said he would step down as CEO at the end of the year, but did not give a reason.

Due to a non-compete clause in his contract, Gulden would not immediately be able to take over as CEO, meaning Adidas chief financial officer Harm Ohlmeyer would likely take the top spot in the interval.

Now what

A new CEO could breathe much-needed life into Adidas, and Gulden is well-regarded for executing a turnaround at Puma.

Even after today’s gains, shares of Adidas are down more than two-thirds from their peak a year ago, and performance has been weak. In its third-quarter earnings report, the company reported currency-neutral revenue growth of just 4% and cut its full-year revenue growth forecast to mid-single digits.

Adidas is expected to face significant depreciation after its relationship with Kanye West ends, and will no longer sell Yeezy products.

A turnaround won’t be easy, but the arrival of new leaders is a start, and it seems like the right time to give the company a new face.

Jeremy Bowman has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

James T. Quintero