Adidas might sell its struggling Reebok brand, potentially taking advantage of the strength of athletic goods, which have been a bright spot in apparel during the Covid-19 crisis.
On Monday, Adidas (ticker: ADDYY) said it was reviewing Reebok’s future, which could include a sale. The news comes ahead of the company’s five-year blueprint, which it is set to present in March, although the German athletic giant said it could ultimately decide to keep the brand.
Adidas purchased Reebok for $3.6 billion (A$4.76 billion) in 2006, as it looked to extend its reach in the U.S. But the process wasn’t a smooth one, and Adidas Chief Executive Kasper Rørsted announced a turnaround plan for Reebok shortly after he took the helm in 2016. On the one hand, that has been a success in that Reebok once again became profitable, two years ahead of schedule, and last year increased U.S. sales by double digits.
In another sense, though, Reebok remains a weak point in Adidas’s portfolio. It has lagged behind during the pandemic, with third-quarter sales falling 12.3%, nearly double the flagship brand’s 6.7% decline. Some analysts estimate that Reebok could sell for as little as $2.3 billion (A$3.04 billion), well under what Adidas paid for it.
While many investors have called on Adidas to divest itself of the brand before, now could be a particularly auspicious time for such a move. The pandemic has decimated demand for clothing and accessories in general, as people work and learn at home, but athleisure has bucked that trend.
Companies such as Nike (NKE) and Lululemon Athletica (LULU) have seen sales shrink much less dramatically than peers this year, and have been rewarded with rallies of 34.5% and 52%, respectively. Partner and third-party retailers, including Foot Locker (FL) and Nordstrom (JWN), have highlighted strength in fitness categories, as well, in recent earnings reports.
Athleisure isn’t a new trend, but consumers’ renewed focus on health and comfort during Covid has been a major tailwind. That has led for renewed calls for other companies to sell their outperforming fitness-focused labels, such as Gap’s (GPS) Athleta, although Gap said it plans to hold on to the brand.
That means that if Adidas were to sell Reebok in the near future, it could fetch a higher price, especially if it can continue to show improvement throughout the holiday season.
That would be welcome news for the stock. Compared with Nike and Lululemon, Adidas hasn’t done as well. Its American depositary receipts are up just over 7% year to date, and the European shares have been laggards.
Following the devastation of recent flooding, experts are urging government intervention to drive the cessation of building in areas at risk.
When people talk about making a seachange, chances are this is the kind of property on the NSW South Coast that they have in mind.
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On the lower floor at street level, there are three bedrooms and two bathrooms, including a family bathroom and an ensuite in the master suite. A fourth bedroom is on the upper floor, along with the main living area, and is serviced by its own bathroom.
While this would make a spectacular holiday home, it is well equipped for day-to-day living, with a spacious gourmet kitchen and butler’s pantry set into the articulated open plan living area on the first floor. A separate media room to the street side of the property on this level provides additional living space.
Every aspect of this property has been considered to take in the light and views, with high ceilings internally and spacious, north facing decks on both levels to take in views of rolling waves. If the pull of the ocean is irresistible, it’s just a 100m walk to feel the sand between your toes.
The house is complemented by a Mediterranean, coastal-style garden, while the garage has room for a workshop and two car spaces.
An easy walk to Bulli village, the property is a 20 minute drive from the major hub of Wollongong and just over an hour to Sydney.
Open: Saturday August 6 2pm-3pm Auction: Saturday September 3 Price guide: N/A but expected to exceed $5.3m paid in March for 1 Alroy Street
Contact: McGrath Thirroul – Vanessa Denison-Pender, 0488 443 174