Adidas Sells Reebok at a LossBy Cinthya Alaniz Salazar | Mon, 08/16/2021 - 11:30
As part of a strategic overhaul, German company Adidas will be divesting Reebok to US conglomerate Authentic Brands Group (ABG) for US$2.4 billion, down US$1.3 billion from what it had originally paid in 2006, when the brand had deals with the NBA and NFL.
“Reebok has been a valued part of Adidas, and we are grateful for the contributions the brand and the team behind it have made to our company. With this change in ownership, we believe the Reebok brand will be well-positioned for long-term success,” read the Adidas press release.
When the transaction finalizes in 1Q2022, ABG will pay Adidas the majority of the agreed upon figure in cash. Reebok is one of the many struggling brands ABG has picked up recently including bankrupt brands: Brooks Brothers, Aeropostale and Forever 21. The company, which makes most of its revenue from licensing the brands it owns, plans to go public soon after filing in July, targeting a US$10 billion IPO valuation.
Adidas had originally bought Rebook to expand its reach in the US market and take on its competitor Nike in its home market, but the brand has underperformed in recent years after it failed to capitalize on consumers gravitation towards athleisure wear. According to financial statements, Rebook only accounted for 7 percent of Adidas’ sales at the end of 2020, down from 18 percent in 2010. This comes after making positive gains in 2019 when it managed to increase its market share in emerging economies, like Mexico, from 3 to 14 percent, representing between US$184 million and US$200 million dollars. Nevertheless, the company reasoned it was best to sell as a way to focus on strengthening its own brand in the global sportswear market.
"Part of the issue was a lack of clarity around what Adidas wanted Reebok to be. As a result, it was neither seen as the go-to brand for sporting professionals nor for those looking for athleisure fashion and style," Neil Saunders, Managing Director of GlobalData Retail, said in note to clients Thursday.
According to Saunders, this is not the end for Reebok as it now has the potential to grow under ABG by finding its unique offering to consumers and developing a strong distribution strategy at its owns stores and through retailers, rather than focusing solely on competing with Nike.