Adidas to begin formal process to divest long-struggling Reebok

Adidas has decided to divest long-struggling US fitness brand Reebok. The German sportswear is now about to begin the formal process for the same. The decision has been taken following a review of the business. The company in a statement said that it will present in detail the new strategy on March 10. The apparel makers had hinted about the decision in December last year by stating that it is weighing all options for Reebok. Adidas had acquired the fitness brand 15 years ago for USD 3.8 billion. At that time, the US company had apparel deals with the National Football League (NFL) and the National Basketball Association (NBA).

Adidas CEO Kasper Rorsted said that both companies will be in a better position to realize their growth potential when they will start working independently of each other. “We will work in a diligent way to make sure that the Reebok brand and the team of brilliant people behind it have a better future.” The decision is part of a new five-year strategy that the company has made to focus on products that are profit making. Reports suggest that Reebok may attract the interest of rival companies. Prominent among those are from Asia.

Reebok has been an underperformer in recent years and lost a considerable amount of maker share. According to financial statements, the sales of Adidas now only have 7 per cent of contribution from Reebok. This is a significant drop from 18 per cent in 2010. Rorsted, who took over as the chief executive officer of the company in 2016, chalked a turnaround plan. This brought back Reebok to profitability within two years. The company also grabbed some endorsement deals with celebrities like Cardi B and Ariana Grande. But the coronavirus pandemic and failure to cash in an increase in demand of athleisure wear resulted in a downfall in sales last year. Keeping all this in mind, Adidas has decided to focus on strengthening its own brand in the global market. Analysts feel that there is a huge opportunity in the sporting goods market. Adidas could either sell the brand or spin Reebok off as a separate company.