BERLIN – German sportswear manufacturer Adidas AG plans to sell or outsource its underperforming Reebok brand 15 years after buying the US fitness label in order to compete with arch-rival Nike Inc.
Adidas announced on Tuesday (February 16) that it had decided to initiate a formal process to divest Reebok as part of a five-year strategy to be unveiled on March 10, when the company will also release results for 2020. Reebok will be reported as a discontinued operation from the first quarter of 2021.
According to a bank, the company could be worth around 1 billion euros.
“Reebok and Adidas will be in a position to realize their growth potential significantly better independently of each other,” said CEO Kasper Rorsted in a statement.
The company bought Boston-based Reebok in 2006 for $ 3.8 billion (S $ 5 billion). However, the poor performance resulted in repeated calls from investors to sell the brand.
Meanwhile, Adidas managed to strengthen Nike’s dominance in the US with its core brand, supported by partnerships with celebrities such as Kanye West, Beyonce and Pharrell Williams.
After Rorsted took over as CEO in 2016, he embarked on a turnaround plan for Reebok that helped get it back to profitability. However, the performance continued to lag behind that of the core brand Adidas and was then hit by the Covid-19 pandemic.
Reebok’s net sales declined 7 percent to 403 million euros in the third quarter of 2020, after having dropped 44 percent in the previous quarter. In 2019, Adidas cut the book value of Reebok by almost half compared to 2018, to 842 million euros.
Options for Adidas include spinning off Reebok as a standalone public company or selling the brand to private equity, another major sports retailer, or a multi-brand player like VF Corp.
According to analysts, Reebok’s recent collaboration with celebrities like Cardi B and a renewed focus on womenswear has moved the brand to a better place.
Adidas anticipated a decline in total sales for late 2020 in November as the reintroduction of locks in Europe offset a return to growth in China and strong demand for Beyonce-developed suspensions and products.
