Adidas intends to sell the struggling brand Reebok

Fifteen years after it purchased the U.S. fitness label to better compete with arch-rival Nike Inc., German sportswear manufacturer Adidas AG plans to sell or spin-off the underperforming Reebok brand. On Tuesday, Adidas announced it had agreed to launch a systematic process aimed at divesting Reebok as part of a five-year strategy that it expects to present on March 10, when the firm will also report results for 2020. As of the first quarter of 2021, Reebok will be reported as a discontinued service. The company may be worth about EUR 1 billion ($1.2 billion), a banking source said.

“Reebok and Adidas will be able to greatly better realize their growth potential independently of each other,” said Chief Executive Officer Kasper Rorsted in a statement.

The corporation purchased Reebok headquartered in Boston for $3.8 billion in 2006, but its slow success led to repeated demands from investors to dispose of the business.

Until then, Adidas continued to absorb Nike’s domination in the United States of its core brand, aided by an alliance with celebrities like Kanye West, Beyonce, and Pharrell Williams.

He launched a restructuring strategy for Reebok after Rorsted took over as CEO in 2016, which helped it return to profitability, but its success appeared to lag behind that of the core Adidas brand and it was then struck by the COVID-19 pandemic.

In the third quarter of 2020, Reebok’s net revenues fell 7 percent to EUR 403 million ($488 million), after dropping by as much as 44 percent in the previous quarter. Adidas wrote down the book value of Reebok by about half in 2019, to 842 million euros relative to 2018.

Reebok’s latest deals with celebrities like Cardi B and a refreshing emphasis on women’s wear have made the company a happier location, analysts claim.

Adidas said in November that it was anticipating a decrease in total revenue by the end of 2020 as the re-imposition of lockdowns in Europe balances the return to growth in China and the high demand for Beyonce-designed running gear and goods.

365 K