Adidas (ADDDF) has confirmed that it might sell US fitness brand Reebok as part of a strategy overhaul to be unveiled in 2021.
The German sportswear company said in a statement on Monday that it is assessing “strategic alternatives” for Reebok as it develops a new five-year strategy. These include “both a potential sale of Reebok as well as Reebok remaining a part of the company,” the statement added. A decision will be announced on March 10.
Adidas bought Reebok for $3.8 billion in 2005 in a bid to expand its reach in Nike’s (NKE) home market. Reebok at the time had apparel deals with the National Basketball Association (NBA) and the National Football League (NFL).
But the brand has “chronically underperformed,” falling from an estimated low double-digit share of US athletic footwear in the early 2000s to around 1% today, analysts at Baird Equity Research said in a note on Monday.
Store closures, cost reductions and endorsement deals with celebrities such as Ariana Grande and Cardi B helped Reebok turn a profit in 2018 and drive double digit sales growth in North America last year. But then the coronavirus pandemic hit, shutting the majority of Adidas and Reebok’s global stores in the early part of the year.
Reebok also failed to capitalize on a surge in demand for athleisure wear during the pandemic, despite a strong online presence, losing out to rivals such as Lululemon (LULU) and Gap’s (GPS) Athleta. Sales fell 20% during the first nine months of this year compared to the same period in 2019, in line with the decline at Adidas (ADDDF).
In the aftermath of losing its NBA and NFL deals, Reebok focused on fitness and cross training apparel. The narrower emphasis caused it to lose out on a global boom in the broader sportswear market, which has grown at a faster clip than the overall apparel and footwear industry, according to Euromonitor.
Reebok now accounts for just 7% of Adidas’ sales, down from 20% in 2006. Adidas remains smaller than Nike globally, but posted a bigger increase in North America sales than its rival in 2019 when taking Reebok into account.
Analysts say that potential buyers for Reebok could include VF Corp (VFC), the parent company of Vans and The North Face, which recently bought streetwear brand Supreme for $2.1 billion.
Authentic Brands Group (ABG) and China’s Anta Sports could also be potential suitors. ABG owns the rights to basketball great Shaquille O’Neal’s business endeavors. O’Neal reportedly said in 2019 that he would love to be a part owner of Reebok.