Fifteen years after Adidas AG bought Reebok to help compete with arch-rival Nike Inc., the German sportswear maker has disclosed that plans had been concluded to sell or spin-off its underperforming U.S. fitness label brand.
The company said that it had begun a formal process aimed at divesting Reebok as contained in its five-year strategy that would be made public on March 10 when the company will also publish 2020 results.
Adidas Chief Executive, Kasper Rorsted, said that the company also plans to report Reebok as a discontinued operation from the first quarter of 2021.
“Reebok and Adidas will be able to significantly better realize their growth potential independently of each other,” Rorsted said in a statement.
The company bought Boston-based Reebok for $3.8 billion in 2006, but its sluggish performance led to repeated calls from investors to dispose of the brand.
In the meantime, Adidas managed to eat into Nike’s dominance in the United States with its core brand, helped by a partnership with celebrities like Kanye West, Beyonce, and Pharrell Williams.
It would be recalled that after Rorsted took over as CEO in 2016, he launched a turnaround plan for Reebok, which helped it return to profitability.
Despite his efforts, the company’s performance continued to lag behind core Adidas brand before the outbreak of coronavirus that affects businesses globally.
Reebok’s net sales fell 7% in the third quarter of 2020 to 403 million euros ($488 million), after falling as much as 44% the preceding quarter. In 2019, Adidas wrote down Reebok’s book value by nearly half, compared with 2018, to 842 million euros.
Options for Adidas include spinning Reebok off as a stand-alone public company, or selling the brand to private equity, another major sports retailer or a multi-brand player like VF Corp.
Reebok’s recent collaborations with celebrities like Cardi B and a refreshed focus on women’s apparel have put the brand in a better place, analysts say.
Adidas said in November that it was expecting a drop in overall sales for the end of 2020 as the reimposition of lockdowns in Europe offset a return to growth in China and strong demand for running gear and products designed by Beyonce.