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Sometimes it’s best to just admit that you can’t make something work.
Adidas announced on Monday that it has put up for sale its struggling Reebok footwear business. The move, which analysts have been waiting for months, is part of the German sportswear company’s assessment of “strategic alternatives” for Reebok, a brand that reached its cultural peak in the 1980s.
Adidas bought Reebok for $ 3.8 billion in 2005, hoping that this would help the company to assume Nike more effective in the US market, thanks to Reebok’s long-standing credibility with basketball aficionados and its licensing agreement with the National Basketball Association. (Nike obtained this license from Reebok a few years ago.) Additionally, Reebok’s pop culture reputation has been bolstered by products like a shoe line partnered with rapper 50 Cent.
But Reebok is in a long decline. And Adidas, facing not only longtime rivals like Nike, but also emerging players like Under Armor and Lululemon Athletica, struggled to reverse that trend: In 2007, Reebok generated nearly a quarter of the figure. Adidas’ overall business, but by the first nine months of 2020 that figure had fallen to 6.9%.
Part of that percentage drop is due to the healthier growth of the namesake Adidas brand. Still, it’s hard to deny that Reebok has struggled for too long, fleeting improvements in 2019 aside.
Despite efforts like the relaunch of Reebok Classics a few years ago, the brand has never regained much of its cool, retro or other aura. The collaborations haven’t changed her overall trajectory either: she’s worked with big names like Cardi B and Kendrick Lamar in recent years. No more than couture: Reebok is currently selling an Insta-Pump Maison Margiela shoe at Bergdorf Goodman for $ 1500.
Reflecting the brand’s decline, media in October suggested Reebok could make around $ 2 billion, barely half of what Adidas paid fifteen years ago.
In addition to reducing financial losses, removing the brand should reduce distractions for the business. The sale of Reebok “will allow it (Adidas) to focus more on the eponymous main brand, which must accelerate its momentum to narrow its revenue gap with Nike” in North America, analysts at Bloomberg Intelligence recently wrote.
And it is true that Adidas has seen growth in the United States, but its position in North America is comparatively weaker than it is in other markets. According to Euromonitor, Nike and Adidas are virtually tied in terms of market share in Western Europe (both around 16%) and China (21%). But in North America, Nike is almost three times the size of Adidas.
As if to echo the wisdom of letting go of brands acquired in misguided mergers and acquisitions long ago, Bed bath and beyond announced Monday that she was selling her chain of 243 Cost Plus World Market stores, which she bought just eight years ago. The decision to be part of the company’s goal of refocusing on its core brand, an effort that has including ditching excess baggage like his Christmas tree shopping and fixing his finances.
And just like with Adidas and Reebok, the Bed Bath & Beyond deal “will allow management to focus on core business without being distracted by smaller divisions,” GlobalData wrote in a research note.
The retail landscape is littered with businesses bogged down in repairing brands they bought with the belief that businesses could be revived with relative ease. Tapestry with Kate Spade, Men’s Wearhouse and most miserable of all, the now bankrupt Ascena takes over Ann Taylor. But if no one likes to admit defeat, in the case of Adidas, Bed Bath & Beyond – and maybe others – it makes sense to cut losses and focus on the winning main brand.
More to read absolutely retail cover of Fortune:
- Could Biden finally get the national minimum wage at $ 15?
- Inside the cottage industry tries to revive Aunt Jemima and other brands with racist roots
- How the pandemic drove PepsiCo to create Cheetos Mac ‘n Cheese
- Shipping times for the holidays for FedEx, UPSand the postal service
- Shopify is ready for the holiday season. Don’t call it “anti-Amazon”
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