Adidas earmarks underperforming Reebok for potential sale

Adidas earmarks underperforming Reebok for potential sale

German sportswear group Adidas has signalled it is ready to sell Reebok, after years of attempting to turn round the underperforming US brand which it acquired in an ill-fated $3.8bn deal.

The rival of Nike said on Monday it has “begun to assess strategic alternatives for Reebok”, with divestment being one option.

However Adidas stressed no final decision has been made and that it may choose to retain control of the Boston-based brand. “A decision will be announced on March 10 2021, when the company’s new strategy is officially presented,” it said.

Shares in Adidas closed 1.5 per cent higher at €287.50 in Frankfurt on Monday.

The German group bought Reebok in 2005 in an attempt to take on arch rival Nike in its home market. But high hopes for the label failed to materialise and years of sluggish sales and losses followed. Despite a series of restructuring plans and strategic rejigs, Adidas repeatedly wrote down Reebok’s book value which was €842m ($1bn) in 2019.

The FT reported last month that private equity firms including Permira and Triton were circling the brand which last year generated €1.74bn in sales — less than 8 per cent of Adidas’ overall revenue.

In the latest turnround plan, dubbed “Muscle Up”, chief executive Kasper Rorsted has tried to reposition Reebok as a brand dedicated to fitness and slashed expenses by closing underperforming stores and letting some licensing deals expire.

Adidas does not disclose the detailed financial performance of its individual brands but according to Mr Rorsted, Reebok returned to profitability in 2018 and continued to be profitable last year. However its revenue only rose 2 per cent last year, compared with a group-wide increase of more than three times that much.

Reebok sales fell 12 per cent year on year in the third quarter, compared with a drop of just 7 per cent at the Adidas brand.

Source link

Leave a Reply