Adidas Explores Sale of Reebok
December 14 2020 - 1:37PM
Dow Jones News
By Ruth Bender
BERLIN -- Adidas AG Monday said it was reviewing the future of
Reebok and might sell the U.S. fitness brand -- a business it had
spent years trying to revamp and that could now fetch several
billion dollars, according to analysts.
Adidas said a sale was one of the options it was considering as
part of a five-year strategy plan it is set to present March 10,
2021. It may also decide to keep the business, the German sports
retail group said.
Adidas, the world's second-largest sportswear maker after Nike
Inc., bought Reebok in 2006 for roughly EUR3 billion, equivalent to
$3.6 billion, as part of a bid to expand in the U.S. and challenge
its bigger rival on its home turf. Reebok at the time was a sponsor
of the National Basketball Association. But the plan has
disappointed, analysts say.
Adidas managed to improve the Reebok business but sales have
lagged behind those of Adidas itself and dragged down the group's
profits. In 2016, Adidas Chief Executive Kasper Rorsted launched a
turnaround plan for Reebok shortly after taking on the job. He cut
costs by closing down dozens of Reebok stores in the U.S. and aimed
to make the unit's management more independent from Adidas.
Mr. Rorsted repeatedly opposed calls from some shareholders to
ditch Reebok, arguing that the revamp, not a sale, was the
answer.
The CEO's "muscle up" plan led to some success. In 2018, Reebok
returned to a profit, two years ahead of schedule, Adidas said
Monday in announcing the strategic review of the business.
In 2019, Reebok sales grew 3.6% to EUR1.75 billion, driven by
double-digit growth in the U.S., its home market. Sales at the
Adidas brand, however, grew 8.3% to EUR21.51 billion.
"Returning to profit was a good step but driving the top line is
something else," said Piral Dadhania, an analyst with RBC Capital
Markets, who estimated that Reebok could fetch somewhere between
EUR1.9 billion and EUR3.6 billion.
Mr. Dadhania said investors had lost faith in a turnaround and
thought a disposal would free up time for management to focus on
its core brand.
Adidas shares rose 1.8% in a broadly higher market Monday.
Investors had anticipated the news after Germany's Manager Magazin
in October reported about a possible Reebok disposal.
On a call to reporters for third-quarter earnings in November,
Mr. Rorsted defended Reebok's turnaround, saying he was happy with
the progress made.
A sale would come as Adidas, like other retailers, is struggling
to rebound from the impact of the Covid-19 pandemic.
Reebok has underperformed compared with the Adidas brand during
the pandemic, which hurt overall sales as governments shut down
stores around the world to combat a surge in the new virus.
In the third quarter, Reebok sales fell 12.3% while Adidas sales
fell 6.7%. Mr. Rorsted said Reebok was hit harder because the brand
was less present in the outdoor and running segment, where
consumers made more purchases during the pandemic. Reebok's larger
exposure to the U.S. also turned out a disadvantage as sales
recovered there slower than in Europe this fall.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
December 14, 2020 13:22 ET (18:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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