Daily Management Review

Adidas Group to revive Reebok


One of the world's largest sportswear manufacturers, Adidas Group, will reflect costs of 30 million euros ($ 33.4 million) in the report for the second half of the year. The spending is associated with restructuring of troubled brand Reebok, said the German company in a statement. This measure will help retain the brand, which is developing slowly, and make it more independent from Adidas, told the company’s General Director Kasper Rorsted to The Wall Street Journal.

Rorsted took lead over Adidas Group in October 2016 after eight years in German concern Henkel. Investors are looking forward to his first strategic steps in management of the German sports clothing manufacturer.

Adidas Group acquired Reebok brand in 2005. For a long time, sales of the brand had fallen, and the company had to constantly invest in its development. Reebok’s sales have been growing during last 14 quarters, Rorsted said during a conference call with investors. However, he also made it clear that the brand’s sales will grow more slowly than those of Adidas and its competitors. For example, he said, Reebok has not shown any growth in North America in the past three years, and profitability of the brand is significantly lower than the average for the group. "It's time to get back to square one and make twice the effort against Reebok», - said Rorsted.

Purpose of the brand reconstruction is to accelerate sales growth and increase profit, told Rorsted. «Reebok is an important member of our team. But, just like in sports, everyone should contribute to success, this is what we expect from Reebok», - he said. According to Rorsted, Reebok is a well-positioned fitness brand.

To hit the target, Adidas Group will create a special team especially for Reebok brand. Thus, the company intends to cut the number of Reebok stores in half and close some Reebok FitHub stores in the US. By the end of 2016, the company will close 20 stores and nearly half of Reebok Reebok FitHubs, said Chief Financial Officer of Adidas Robin Stalker during teleconference with investors. Instead, the company will focus on wholesale of Reebok.

Net profit attributable to shareholders of German sports clothing and accessories manufacturer Adidas AG for the first nine months of 2016 increased by 1.5 times compared to the same period last year, and amounted to 1.027 billion euros, according to the company’s press release.

Diluted earnings per share for January-September rose to 5.01 euros from 3.54 euros. The company's revenue on annual basis also increased by 14.6% to 14.604 billion euros.

Net income in the third quarter increased by 24.2% over the same period last year, and amounted to 386 million euros. Diluted earnings per share were 1.88 euros against 1.67 euros a year earlier. Quarterly revenue increased by 13.8% compared to the same period last year, to 5.413 billion euros.

"The strong growth in all major markets is demonstrating strength of our strategy as it is increasing attractiveness of our brands around the world" – commented Kasper Rorsted.

source: wsj.com