Adidas’ Acquisition of Reebok Was a ‘Failure From the Start’ — Who Could Be Its New Owner?

As Adidas considers offloading Reebok, the future of the brand is coming into question.

It’s been nearly 15 years since the Germany-based sportswear giant snapped up the retro athletic label in a $3.8 billion deal that was followed by a period of decreasing revenues and expired licensing contracts with the NFL and NBA.

When he joined Adidas four years ago, CEO Kasper Rorsted helped launch a new business strategy for Reebok — with the goal of returning it to profitability by 2020. (The company shared yesterday that the turnaround plan allowed Reebok to return to profit in 2018 — two years ahead of schedule.) Through its renewed focus on women’s footwear and the resurgence of the ’90s as well as enlisting influencers like rap star Cardi B, the label has managed to reintroduce itself to a hipper generation of consumers.

However, the coronavirus pandemic has thrown a wrench in those revitalization plans: In the first nine months of 2020, Reebok’s currency-neutral revenues were down 20%. (The Adidas brand fell 18%.) It has a “lower exposure” to the running and outdoor categories, which is predominantly where the sportswear business has seen growth in recent months, Rorsted said during the company’s third-quarter conference call. What’s more, Reebok has a “high exposure” to North America — a market that has recovered more slowly than Europe.

Thus, Adidas’ decision to put Reebok up for sale did not come as a surprise to some analysts — with some sources adding that the brand could fetch only about $1 billion in a deal today.

“The Adidas-Reebok acquisition was a failure from the start,” said Matt Powell, senior industry advisor of sports at The NPD Group. “The then-Adidas management did not understand the Reebok business model, which lead to years of decline, [but] Reebok remains a great brand that can thrive with patience.”

One player speculated to be in the running for Reebok ownership is Authentic Brands Group LLC. Last summer, the brand management firm’s CEO expressed a desire to adopt Boston-based Reebok into its growing portfolio, which over the past year has added luxury department store Barneys New York, fast-fashion giant Forever 21, denim purveyor Lucky Brand and storied menswear clothier Brooks Brothers.

In an interview with FN’s sister publication WWD at the time, Jamie Salter shared, “My partner [Shaquille O’Neal] beat me to the punch in mentioning it a few weeks ago: I’d love to buy Reebok. Maybe one day Adidas will let it go.”

The quote from O’Neal went, “We [ABG] just bought Sports Illustrated, but I would love to purchase Reebok.” He also criticized Adidas for having “diluted [the brand] so much to where it’s almost gone,” adding that “if they don’t want it, let me have it. I want to bring [Reebok] back to basketball and to fitness.”

ABG and the NBA legend have been partnered since 2015, when he sold the brand rights to his future entrepreneurial endeavors to the firm. But O’Neal’s history with Reebok goes deeper: The basketball star has been aligned with the sportswear company since 1992, when he signed a multiyear deal worth $15 million. If ABG ends up snagging the brand, O’Neal — a shareholder in the firm — would, by extension, have a stake in Reebok.

Media reports have also suggested that Vans and Timberland parent VF Corp. as well as Fila owner Anta International Group Holdings Ltd. could potentially throw their hats in the ring for Reebok.

According to Adidas, a decision on Reebok is expected to be announced on March 10, when it presents its new five-year strategy. If Adidas does end up closing a sale for Reebok, Jessica Ramirez, retail research analyst at Jane Hali & Associates, said the brand’s new owner will need to invest in digital and innovation in order to be successful.

“[There is a lot of conversation] about the strength of digital [at Reebok and Adidas] compared with other activewear brands like Nike and Lululemon, and [we believe] Adidas lacks that digital [strength] in the activewear market,” she said. “Also, when you look at true athleisure and activewear, Reebok is lacking the cutting-edge technology in their fabrics.”

Still, she noted that Reebok overall remains “in good shape.”

“Whoever inherits Reebok is going to have to maintain that going forward, and it has to be a company that understands digital and data,” she added. “It needs [an owner] that can really continue to milk what it does because it could already be in the early stages of a full revival.”

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