How Reebok Lost Its Groove

Reebok Lost Its Groove

Reebok has endured an unrelenting jog into oblivion from the pumped-up days of 1989. That was the year Tom Petty released Full Moon Fever, the Detroit Pistons swept the Los Angeles Lakers in the NBA Finals, and Reebok introduced its first inflatable shoe.

The ’80s ended with Reebok just barely sustaining a three-year streak as America’s best-selling sneaker brand, notching $1.8 billion in sales, but Nike took over the footwear crown to start the new decade and never looked back.

Reebok proceeded to stumble its way to a 2006 acquisition by Adidas for $3.8 billion.

The head of German sportswear company Adidas rejected calls from some shareholders on Thursday to sell the loss-making Reebok brand, saying he was confident that a restructuring plan would restore it to profitability.

“We are not going to sell Reebok because we are still very confident of the strategic position of the brand,” Rorsted told the meeting. “We are convinced the measures we are taking are going to be successful.”

Chief Executive Kasper Rorsted made the comments at the Adidas annual meeting after two shareholders asked how much more time the company would give the struggling brand.

Rorsted was installed to replace long-serving former boss Herbert Hainer – who bought in Reebok in 2005 – after activist shareholders took stakes in Adidas, and after several investors called on the company to sell more non-core businesses.

Rorsted, who took over as CEO in October, announced plans in November to overhaul Reebok, making it independent of the core Adidas brand, moving 650 staff to a new location in Boston, cutting 150 jobs and accelerating store closures.

Adidas reported a rebound at Reebok in the first quarter with a 13 percent increase in sales, but said it did not expect it to keep up that pace for the full year as the period had been helped by early product launches and new stores.

“I would ask myself whether it is high time to sell Reebok,”

Ines Straubinger, vice president of Germany’s DSW association for private investors, told the Adidas AGM on Thursday.

Gerhard Jaeger, spokesman for the SdK investor association, noted that Reebok sales continued to fall in the U.S. market in the first quarter. “Mr Rorsted, how much patience do you still have with Reebok?” he asked.

Rorsted admitted that Reebok was still not profitable but said he was sure restructuring measures would turn it around, adding his plan was for three to four years.

On Wednesday, Adidas announced the sale of its golf equipment business to private equity firm KPS Capital Partners for $425 million.

Rorsted said on Thursday there are also several interested parties for Adidas’ ice hockey brand CCM, although the process was still in its initial stages.