THE END: Once Pitted Against Nike, Adidas To Finally Sell-Off Reebok
At last, Reebok’s journey with the German brand, Adidas, has come to an end after the deal to sell the ill-fated US brand has finally taken off, reported a German magazine.
According to Germany’s manager magazin, the deal is expected to be completed by March 2021. The report said that interested parties include America’s VF Corp., which owns the Timberland and North Face brands, and China’s Anta International Group Holdings.
The news of the sale was followed by a 3.3% jump in Adidas’ shares reflecting the mood of the investors who were demanding Adidas to dispose-off the loss-making business for a long time now.
Adidas has written down the book value of Reebok to by nearly half to 842 million euros ($995 million) since 2018, said the report.
In the early 2000s, Reebok was among the top three sporting goods manufacturer in the world trailing only after Nike and Adidas. Adidas bought Reebok in 2005 for $3.8 billion as a competitor for its American rival, Nike.
However, after the takeover, Reebok sales steadily decreased for the next three years. In a bid to turn around the brand, Reebok brought back its 1980s market strength — selling aerobic shoes to women. However, that didn’t work for long.
According to a Reuters report, in 2017, Adidas’s chief rejected calls from its investors to dispose-off the brand at the Annual General Meeting of the company instilling hope that he had plans to turnaround the brand and make it profitable.
“We are not going to sell Reebok because we are still very confident of the strategic position of the brand,” Chief Executive Kasper Rorsted said at the meeting. “We are convinced the measures we are taking are going to be successful.”
Rorsted succeded Herbert Hainer under whom Reebok was acquired by Adidas in 2005.
According to the report, in the 2017 meeting, Rorsted announced plans to overhaul Reebok, making it independent of the core Adidas brand, moving 650 staff to a new location in Boston, cutting 150 jobs and expediting store closures.
The following year, after closing down several Reebok stores and expiration of licensing deals in order to bring down costs, Rorsted reiterated his belief in the brand saying that while Reebok’s revenue fell 3 percent in 2018, its costs came down even more, and management expects the business to finally start expanding.
“We need to make sure that the brand heat is based on real products, and that’s something we’re pushing.”
Meanwhile, analysts started to believe that Reebok was just a distraction for Adidas and that the company cannot devote its energy and resources to both the brands.
However, Rorsted fought back saying: “You love your children equally. It’s how you position your brand and how you execute with that brand. This is a business challenge that all multi-brand companies have.”
It is safe to say that Rorsted fought tooth and nail to give Reebok one last chance but its decline seemed inevitable. It didn’t go the way Rorsted expected and now finally the investors are getting what they have been demanding for years: Reebok’s exit from Adidas.