Reebok president Matt O’Toole, like many of his peers in leadership, has had to steer the company through treacherous seas in 2020.
The executive has had to lean into remote work, facilitate uncomfortable conversations around racial equity and corporate complicity and make difficult decisions about layoffs and furloughs as the global health crisis forced temporary store closures.
However, unlike his counterparts, O’Toole faced an added challenge last year: Following months of speculation, Reebok’s parent company Adidas announced in December that it was assessing strategic alternatives for Reebok, including a possible sale. In February, Adidas said it had finished its assessment and would begin a formal process to sell the company.
A deal has yet to be announced.
The events of the past 12 months have all conspired to create what O’Toole — who joined the brand in 2008 and ascended to the top post in 2014 — describes as his toughest yet most rewarding professional year to date.
“We’ve had the kinds of conversations and the kinds of vulnerability and honesty in our work environment that I haven’t experienced before and, in a lot of ways, it’s strengthened our bond,” O’Toole explained of how the brand worked with employees to traverse coronavirus fears and issues related to racial unrest. “It has shown me that our organization is incredibly resilient. I am really impressed with people’s willingness to take it upon themselves to learn to be open and curious and not be rigid in past assumptions and beliefs.”’
Indeed, as Reebok shoulders a constant stream of speculation regarding who might take up its ownership mantle — rumors hinted that a deal would come this month — O’Toole has had to be a steady hand and voice encouraging teams and fortifying morale as the tides of uncertainty wash in and out.
“It’s really important to paint a clear vision of the future for Reebok and [I believe] the future of Reebok is extremely bright but I [have to] make sure that in moments of uncertainty and change — and we’re all naturally going to have a certain level of anxiety — people can see what the possibilities are,” he said.
Possibilities, said Reebok’s leader, include an opportunity to grab market share as pandemic-induced changes push more and more consumers into a space Reebok has long identified with: “sporty lifestyle.”
“Reebok is one of these brands that sits at the intersection of active and sporty life, but also lifestyle, and I think that the trends in the marketplace are good for the whole industry but are uniquely suited for Reebok — particularly the growth of women’s participation in sports as well as purchasing habits of sportswear, the continued growth of health and wellness, and the fact that ultimately this is what people want and how we dress [nowadays],” O’Toole explained.
A significant portion of Reebok’s growth in key product categories in 2020 came from its women’s offerings, O’Toole noted, boosted by superstar endorsers like Cardi B and Teyana Taylor as well as the brand’s accessible pricing, which has been a boon in pandemic times.
Owning the Market
Various expert tallies put the price tag for Reebok at $2.4 billion, a decent drop from the $3.8 billion Adidas paid for the label in 2005.
And, to the amateur eye, news of a brand divestiture — and a sale price that nearly halves the original — would indicate that the entity being offloaded isn’t in great shape. To the trained eye, though, Adidas’ acquisition of Reebok may have been ill-advised from the start and a separation could be just what the doctor ordered.
The latter, is a perspective not completely lost on O’Toole.
“New ownership poses some bigger opportunities for Reebok to be a strong, independent company going forward,” he said. “Yes, Adidas ownership had some real benefits for Reebok but even [Adidas chairman and CEO] Kasper Rorsted has said that we’re definitely going to be stronger as two separate companies. And a lot of that strength comes from having a focused team on Reebok.”
He continued, “We’ve been sharing most of our efforts around the world, whether that sales or sourcing or IT with Adidas. And I think in a lot of those environments, the right decision was made [in the best interest of] Adidas shareholders. But it hasn’t always been the perfect decision for Reebok.”
(In an email exchange with FN, Adidas confirmed Rorsted’s comments that “Reebok and Adidas will be able to significantly better realize their growth potential independently of each other,” but declined to comment on O’Toole’s other statements.)
For years, industry insiders had bemoaned purported product missteps at Reebok — most notably criticizing the fact that it hadn’t significantly tapped into its vault of retro styles.
“Reebok has a tremendous vault of retro product to bring back and, being a smaller brand, I think this gives them some room to do smaller releases, have them sell out — creating some interest on the part of the consumer — and continue to build on that platform,” said Matt Powell, VP and senior industry advisor for The NPD Group.
He added, “It’s very clear that performance running is going to make a comeback and Reebok with its ‘Nano’ [training shoes] should be a part of that — we’re seeing a lot of new entrants in the performance running category and they’re not looking for pinnacle product. They’re looking for [shoes] like the Nano, which are moderately priced.”
O’Toole said he’s moving forward with plans to “push the tentpole higher on our iconic models,” including its Club C franchise which he said is “performing extremely well right now.” Specifically, the sales for Club C product were up 84% over 2019, he said.
Overall, Reebok saw its third-quarter sales dip 7% mostly stemming from COVID-19 induced setbacks. But it had recently hit a significant financial milestone when it returned to growth in 2019, with currency-neutral revenues up 2% to $1.7 billion.
Taking Care of Home
Following a year marked by the triple pandemics of COVID-19, economic recession, and racial injustice — coupled with ongoing macroeconomic disruption — some might say there couldn’t be a worse time to march toward the unfamiliar.
But O’Toole said he’s found a well of confidence that keeps him stepping toward what he views as a bright — even if some details are unclear — future for Reebok. Externally, that confidence is reinforced by the promising reads on some of the brand’s key product offerings, attractive price points and a proven “digital ecosystem.”
Internally, the executive said the company is making strides on the diversity and inclusion front and is embracing flexible work styles as it seeks to map out the right mix of remote vs. in-person work.
“Like most of the rest of America, we really had our own awakening in the last year, and particularly around the murders of Breonna Taylor and George Floyd,” O’Toole said of the brand’s D&I efforts, which are currently emphasizing its own employees more than external stakeholders. “[Those moments] created an incredible dialogue in our organization and a lot of vulnerability — but also a challenge to all of us as leaders, including myself, to address what has been consistent feelings of not belonging in our organization and how do we really get at the root of that.” (In addition to its internal efforts, Reebok has committed to supporting certain minority-focused organizations but O’Toole said the brand is looking to “take care of home” before over-indexing on external D&I.)
In late September, Reebok named Kerby Jean-Raymond, the singular force behind his own Pyer Moss label, to the role of VP of creative direction. In addition to providing creative leadership across all design disciplines for the brand, Jean-Raymond, a prolific racial equality activist, is at the forefront of the brand’s anti-racism program, “Product with Purpose.”
Looking ahead, O’Toole said he views Reebok as “ocean front property” and that the right owner will need to appreciate its potential as much as its hard-won heritage.
“Anyone who is going to make a commitment to purchase Reebok and the investment required, we want them to share our passion and enthusiasm for not only the Reebok brand, but Reebok’s true potential, and I think the ideal owner will see it the way that we see it,” he said. “I’m really excited about that and I know there’s an organization of several thousand people who are [also] excited to go on journey with the new owner.”
Regarding a date for the Reebok sale, in a statement to FN, Adidas reinforced its CEO’s comments in a previous interview where he indicated that while he hoped the Reebok sale would be finalized by the year-end, it “would not be rushed.”