Adidas set to take whopping $2 billion hit after delaying Reebok sale by 4 years

On Tuesday, German apparel company Adidas announced plans to sell its underperforming US subsidiary, Reebok, by March 2021. Adidas bought Reebok in 2005 for roughly $3.8 billion in an attempt to better compete with rivals, Nike, but the brand has posted rather underwhelming sales figures in recent years. Reports claim that Reebok is expected to be sold for a reported $1.2 billion as the brand has struggled despite the trend for sports clothing and athleisure having accelerated during the coronavirus pandemic. This could mean that Adidas might take more than a $2 billion hit on the sale.

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Adidas Reebok sale: German sportswear giants to divest underperforming Reebok

Earlier on Tuesday, Adidas confirmed plans to sell its Reebok brand after 15 years of ownership. In a statement, Adidas CEO Kasper Rorsted said, "After careful consideration, we have come to the conclusion that Reebok and Adidas will be able to significantly better realise their growth potential independently of each other." 

Adidas did not specify in detail the reason to part ways, nor did it say whether it would look to spin Reebok off into an independent company or look to sell it outright. However, the German firm has reportedly developed a new five-year strategy that involves "further strengthening the leading position of the Adidas brand in the global sporting goods market." However, reports from The Guardian suggest that Reebok is now likely to attract interest from rival sporting goods companies, especially in Asia, as well as private equity suitors.

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UFC news: Reebok failed to extend deal with UFC leading to lack of revenue

In recent years, Reebok attempted to position itself as a go-to for highly athletic individuals with high-profile partnerships in UFC and Crossfit but to no avail. In 2017, Rorsted had defended parent Adidas' decision to not sell the brand despite the massive dip in sales. 

In July 2020, the UFC announced that it will not be renewing its six-year-old outfit deal with Reebok. Instead, the global leader in MMA opted to sign a new deal with Venum, which will make the brand the official outfit and apparel partner of the UFC starting in April 2021. Reebok had signed a six-year sponsorship deal with UFC in December 2014.

Reebok India: Reebok brand ambassadors and effect on the market in India

Reebok shot to fame in India when Rahul Dravid endorsed it during his early cricketing days. The moment he burst upon the scene, Reebok made the move to engage the batsman, who had technical proficiency and stylish stroke play. Endorsing his bat was the first step by Reebok and it made huge waves in the market.

In 2019, Reebok roped in actors Varun Dhawan and Katrina Kaif as its brand ambassadors. However, at the time, fans slammed Reebok's decision to use actors rather than sports stars as brand ambassadors. 

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Rumours that Adidas and Reebok were set to part ways have been circulating since last year. In November 2020, Adidas revealed that Reebok sales fell by 20% in the nine months leading to September 30, a slightly faster pace than the group’s core brand, as the company was forced to close its stores during the lockdown. 

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Image Credits - AP