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Adidas Mulls Reebok Sale: Strategic Alternatives

Adidas speculates Reebok for sale?

Adidas confirmed on Monday that it’s considering the sale of the smaller brand; Reebok. Speculation attributes that Reebok could potentially be subject to “strategic alternatives” that might include Reebok staying with the company.

  • After speculation earlier this year, Reebok could be sold off, Adidas confirmed on Monday. Addidas is considering a sale of the smaller brand, along with other “strategic alternatives”.
  • The potential sale comes as part of the retailer’s development of its five-year strategy. Adidas will announce its strategy and decision about the sale of Reebok on March 10, according to a company press release.
  • Adidas acquired Reebok in 2006 and has been working on turning it around for years.
  • A 2016 turnaround plan helped to “significantly improve its profitability” and returned Reebok to positive profits in 2018, the retailer said.

Reebok returned to profitability two years earlier than planned, but that still might not be enough for Adidas. In 2019, Reebok recorded double-digit growth in North America and sales grew by 2% over the prior year. Executives expected a higher growth percentage from the retailer, therefore looking for strategic alternatives.

Strategic Alternatives

“Overall as a company, we are not happy with the 2% growth in 2019,”  Harm Ohlmeyer, the head of finance for Adidas, said on a conference call. The call took place at the end of the retailer’s fourth quarter that year, according to a Seeking Alpha Transcript.”That is not according to our ambitions. So it’s a mixed bag. We’re happy with the progress given Muscle Up. We’re happy in North America, but overall 2% is not what the industry should expect from Reebok. And that’s what we are working on towards 2020.”

Like many retailers, Adidas took a blow from the pandemic, which has hit both Adidas and Reebok. In its latest quarter, Adidas sales fell 2%, while Reebok’s declined by 7%. An improvement from the second quarter, when sales fell by 33% and 42% respectively. Executives in Q3 pointed to Reebok’s higher exposure in North America, which was not recovering as quickly as Europe from the impacts of the pandemic, as a reason for the steeper decline at that brand.

In recent years, Reebok has worked to improve various aspects of the business, including a revamped digital strategy that included a new website and a more personalized e-commerce experience, as well as efforts to make the site more welcoming to women. In 2019, the retailer also launched a maternity line aimed at new and expecting mothers, and extended sizing to include sizes 1X to 3X.

Interested in sales and acquisitions of retailers? Check out our article on Harry’s Acquisition.

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