German apparel company Adidas is preparing to offload its struggling Reebok brand, the firm announced Tuesday.
Adidas acquired Reebok in 2006 for roughly $3.8 billion in an attempt to better compete with Nike, but the brand has posted disappointing sales figures in recent years. Adidas said Tuesday that it has begun a formal process to divest from Reebok, pivoting to focus on its core brand.
“After careful consideration, we have come to the conclusion that Reebok and adidas will be able to significantly better realize their growth potential independently of each other,” Adidas CEO Kasper Rorsted said in a statement. “We will work diligently in the coming months to ensure a successful future for the Reebok brand and the team behind it.”
In the meantime, Adidas managed to eat into Nike’s dominance in the United States with its core brand, helped by partnership with celebrities like Kanye West, Beyonce and Pharrell Williams.
After Rorsted took over as CEO in 2016, he launched a turnaround plan for Reebok, which helped it return to profitability, but its performance continued to lag that of the core Adidas brand and it was then hit by the COVID-19 Pandemic.
Reebok’s net sales fell 7% in the third quarter of 2020 to 403 million euros ($488 million), after falling as much as 44% the preceding quarter. In 2019, Adidas wrote down Reebok’s book value by nearly half, compared with 2018, to 842 million euros.
Options for Adidas include spinning Reebok off as a stand-alone public company, or selling the brand to private equity, another major sports retailer or a multi-brand player like VF Corp. Reebok’s recent collaborations with celebrities like Cardi B and a refreshed focus on women’s apparel have put the brand in a better place, analysts say.