After years of efforts to make Reebok profitable again, Adidas AG Chief Executive Officer Kasper Rorsted said he’s ready for the next hurdle — getting more people to actually buy its products.
The German company has closed under-performing Reebok stores and allowed some licensing deals to expire, cutting sales at the long unloved sporting brand. Meanwhile, it’s spent more on marketing, relative to the division’s size, than it has for the Adidas label, according to Rorsted. The result: while Reebok’s revenue fell 3 per cent in 2018, its costs came down even more, and management expects the business to finally start expanding.
“We only have a reason now to grow again,” Adidas Chief Financial Officer Harm Ohlmeyer said at a press conference after the company forecast a slowdown in overall sales growth that prompted a share slide. “We needed to grow the profitability, otherwise we were just digging a deeper hole.”
More than a decade after its US$3.8 billion acquisition of Reebok, Adidas as recently as a year ago was contemplating divesting the brand if it underperformed. Now it’s sticking with it, hoping new footwear lines like the CrossFit Nano and the FloatRide Run spur sales.
“We need to make sure that the brand heat is based on real products, and that’s something we’re pushing,” Rorsted said.
Growth won’t come easily. While the brand’s fashion-focused “classics” line posted double-digit sales gains last year, that momentum was overwhelmed by a decline in the sports segment. Earlier this week, Dick’s Sporting Goods Inc. said it’s ending a licensing deal with Reebok.
Rorsted batted back the notion that Reebok is a distraction for Adidas, or that the company’s management team can’t devote enough energy to both brands to make them thrive.
“You love your children equally,” he said. “It’s how you position your brand and how you execute with that brand. This is a business challenge that all multi-brand companies have.”