NEW YORK — After Adidas AG stated last week it is considering a potential sale of its Rockport brand, analysts said the move reflects the company’s focus on the core business.
“I’m sure they are looking at other areas in the portfolio that create opportunities to either enhance the margin or drive better efficiency and profitability,” said Christopher Svezia, an analyst with Susquehanna Financial Group.
Paul Swinand, an analyst at Morningstar, said that divesting Rockport makes sense, given Adidas’ strong athletic image.
“It’s a little funny that both Nike and Adidas dabbled in the brown shoe market,” Swinand said, referring to Nike’s previous ownership of Cole Haan.
On a conference call with analysts and investors following the company’s first-quarter report, Adidas CEO Herbert Hainer confirmed rumors that the firm has appointed investment bank Guggenheim Partners to “analyze the market” and explore off-loading the Rockport brand.
“We are listening to offers,” Hainer said during the call. (Adidas obtained Rockport as part of its Reebok acquisition in 2006.)
Market watchers are predicting a stronger second half of 2014 for Adidas after the German company reported soft results for the first quarter, driven by adverse currency movements and weakness in North America.
“By channel, continued store network expansion supported stronger-than-expected growth in retail [during the first quarter], while wholesale and other businesses were both a touch below,” said UBS analyst Fred Speirs.
While Adidas’ U.S. business was weaker during the period, Hainer said running sales remain strong.
“We had a good start to the year, with sales in the category up 7 percent, driven by strong double-digit growth in Western Europe, emerging markets and Japan,” the CEO said on the call.
On the outlook for sales in North America, Hainer added, “I expect Adidas and Reebok to reverse the negative trend from the first quarter and to grow in North America for the full year.”
Mitch Kummetz, an analyst at Baird Equity Research, also expects the firm’s momentum to improve, particularly with the upcoming World Cup.
“Mindful that the company’s results and outlook are being impacted by transitory issues, we remain positive on the underlying fundamentals and we like the setup behind the World Cup 2014 catalyst this summer,” he wrote in a note to clients.