Adidas says it can sell Reebok

The German sportswear company said in a statement Monday that it is assessing “strategic alternatives” to Reebok in developing a new five-year strategy. These include “both a possible sale of Reebok and Reebok remaining part of the company,” the statement said. A decision will be announced on 10 March.
Adidas bought Reebok for $ 3.8 billion in 2005 in a bid to expand its reach Nike’s (NKE) home market. At the time, Reebok had clothing deals with the National Basketball Association (NBA) and the National Football League (NFL).

But the brand has “underperformed chronically”, falling from an estimated share of low double-digit American athletic footwear in the early 2000s to about 1% today, analysts at Baird Equity Research said in a note on Monday.

Store closings, cost cuts, and approval deals with celebrities such as Ariana Grande and Cardi B helped Reebok turn a profit in 2018 and drive double-digit sales growth in North America last year. But then the coronavirus pandemic struck, closing the majority of Adidas and Reebok’s global stores at the start of the year.

Reebok also failed to capitalize on the surge in demand for sportswear during the pandemic, despite a strong online presence, losing to rivals such as Lululemon (LULU) and Gap’s (GPS) Athleta. Sales decreased by 20% during the first nine months of this year compared to the same period in 2019, in line with the decrease in Adidas (ADDDF).

In the wake of losing his NBA and NFL deals, Reebok turned to fitness and cross-training apparel. The narrower emphasis caused the country to lose to a global boom in the broader sportswear market, which Euromonitor says has grown faster than the overall apparel and footwear industry.

Reebok now accounts for only 7% of Adidas sales, up from 20% in 2006. Adidas remains smaller than Nike globally, but posted a bigger increase in sales in North America than its rival in 2019 when we consider Reebok .

Analysts say potential buyers could be for Reebok VF Corp (VFC), the parent company of Vans and The North Face, which recently bought streetwear brand Supreme for $ 2.1 billion.

Authentic Brands Group (ABG) and China’s Anta Sports could also be potential suitors. ABG owns the rights to Shaquille O’Neal’s business endeavors. O’Neal reportedly said in 2019 that he would be happy to co-own Reebok.

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