Current track

Title

Artist

Current show

Non-Stop Music!

06:00 10:00


Sportswear giant Adidas looks set to end its unhappy ownership of Reebok

Written by on 22/10/2020

Sportswear giant Adidas finally looks set to end its unhappy ownership of the Reebok brand.

German news magazine Manager-Magazin, which has a strong track record in reporting corporate developments in the country, reported on Thursday that Adidas aims to complete a sale of Reebok by March next year.

It added that Adidas had written down the book value of Reebok by almost half, to €842m (£760m), as a precursor to a sale.

The publication speculated that VF Corp, the American clothing giant whose brands include The North Face, Timberland and Dickies, could be among interested buyers.

Anta Sports, the Chinese company that has become the world’s third-largest sportswear company through shrewd endorsements such as that of the boxing legend Manny Pacquiao, is another suggested buyer.

A sale would end an ill-fated venture which began when, in 2006, Adidas paid $3.8bn (£2.9bn) for Reebok in an attempt to build more of a presence in the crucial US home market of its deadly rival Nike.

Kasper Rorsted, chairman of German sporting goods maker Adidas, speaks during his company's annual press conference on March 13, 2019 in Herzogenaurach, southern Germany. - Adidas said it booked vaulting profits in 2018, but crimped its expectations for this year as it runs into limits on production capacity. (Photo by Daniel Karmann / dpa / AFP) / Germany OUT (Photo credit should read DANIEL KARMANN/DPA/AFP via Getty Images)
Image: Chief executive Kasper Rorsted has faced repeated calls from shareholders to sell Reebok since he joined in October 2016

It has not worked out as planned – but the decision to offload Reebok would still suggest a significant change of heart on the part of Adidas.

More from Business

The company’s chief executive, Kasper Rorsted, has received repeated calls from shareholders to sell the business since he joined in October 2016 from the consumer goods and chemicals giant Henkel.

At the company’s annual meeting, in May 2017, he explained in detail why Reebok was not for sale.

Mr Rorsted told investors: “We are still convinced of the strategic positioning of the brand and its relevance in the market. Reebok focuses exclusively on fitness consumers. Its goal is to become the best fitness brand in the world. Fitness is an important growth market because more and more people want to be and need to be healthy and fit.

“We also want to be the innovation leader in fitness. Reebok is a pioneer in terms of new fitness activities and development of new technologies and products. So Reebok does have lots of opportunities for the future, and we are confident about this brand’s future, although we do know that we have to do a certain amount of homework, especially as far as the profitability of this brand is concerned and its growth in its home market, the US.”

That appeared to put an end to the matter and, in subsequent interviews, Danish-born Mr Rorsted indicated he expected to complete a turnaround of Reebok during the subsequent four years.

By 2020, he said, he expected Reebok to be achieving margins in line with the parent company.

NEW YORK, NY - DECEMBER 07: Gigi Hadid leads a Self Defense Workout at Reebok And Gigi Hadid Present #PerfectNever Revolution, celebrating the next stage of the brand's #PerfectNever message which inspires women to challenge the notion of perfection as part of its Be More Human campaign on December 7, 2016 at Skylight at Clarkson Square in New York City. (Photo by Getty Images for Reebok)
Image: Model Gigi Hadid was signed as a brand ambassador with a view to boosting the Rebook brand’s popularity with female consumers

Mr Rorsted, a noted turnaround specialist, certainly gave the Reebok brand plenty of support and money.

The website was relaunched and partnerships were established with the likes of Huntsman, the upmarket UK tailor and later with Victoria Beckham, the designer.

The Game of Thrones actor Nathalie Emmanuel, the models Gal Gadot and Gigi Hadid and the singers Cardi B and Ariana Grande were all signed as brand ambassadors with a view to boosting the brand’s popularity with female consumers in particular.

Initially, the strategy, called ‘Muscle Up’, appeared to pay off. After having lost more than €150m in 2016 alone, Reebok returned to profitability in 2018, two years ahead of target.

In 2019, the brand continued to grow, thanks partly to the launch of a loyalty programme aimed at competing more effectively with rival suppliers such as Lululemon and Under Armour.

Adidas Shares in 2020

Then came COVID-19. During the second quarter of the year, as stores were closed around the world, Adidas group sales fell by 35% – but at Reebok, thanks partly to its bigger share of the US market, they were down by 42%.

It seems that, as a result, Mr Rorsted has lost patience with the business. Manager-Magazin reported that, prior to the pandemic, he would have sought at least €2bn for Reebok. Now, it said, he will accept less.

Any buyer of Reebok will be acquiring a business with an illustrious history and which can claim to have invented the trainer.

Reebok shoes are displayed on the sidelines of the Adidas balance press conference at the company's headquarters in Herzogenaurach, southern Germany, on March 2, 2011. The world's second biggest sportswear and equipment group, Adidas, published solid 2010 results owing to a strong rebound of major markets. Adidas said net profit more than doubled to 567 million euros ($780 million) from 245 million in 2009. AFP PHOTO / CHRISTOF STACHE (Photo by Christof STACHE / AFP) (Photo by CHRISTOF STACHE/AFP via Getty Images)
Image: Reebok shoes displayed at the company’s headquarters in Herzogenaurach, southern Germany

The business was founded in Bolton in 1895 by Joseph William Foster, a cobbler, who was also a keen amateur runner. Frustrated at the footwear available, he improvised by adding spikes to his shoes, quickly attracting interest from other runners.

Within a decade, Foster’s Running Pumps were being sold around the world, with the company going on to supply the entire Great Britain team during the 1924 Olympics that was later made famous by the film Chariots of Fire.

Mr Foster’s grandsons, Joe and Jeff, set up a sister company in 1958, named Reebok after a breed of African gazelle, which eventually absorbed the original business.

The business expanded into the US in 1979 when an entrepreneur called Paul Fireman persuaded the family to give him the US distribution rights.

Within five years, he had bought out the family, going on to float the business on the stock market in 1985.

The company never forgot where it came from, though, as shown by the little Union Jack on its shoes.

BOLTON, ENGLAND - MARCH 19: General view of the University of Bolton Stadium, home of Bolton Wanderers on March 19, 2020 in Bolton, England. (Photo by Gareth Copley/Getty Images)
Image: University of Bolton Stadium opened in 1997 and was originally named the Reebok Stadium

It went on to sponsor firstly Bolton Wanderers football club and then later, during the club’s glory years when it was owned by the businessman Eddie Davies, its new stadium.

Few dispute that, under Adidas, Reebok lost its way. The German company does not have a good track record with acquisitions – witness the way the ski brand Salomon floundered under its ownership – and Reebok has been eclipsed in key areas by Nike.

That said, it is possible to see how it can grow again, not just because of its strong position in fitness. The brand enjoys an edgy cachet thanks to its prominence in emerging sports like mixed martial arts.

There is a platform for further growth there for those who look closely enough.

 Sky News

© Sky News 2020

Tagged as