German sportswear giant Adidas AG is exploring strategic options for its subsidiary brand, Reebok, including the possibility of a sale. Adidas acquired Reebok in 2005 with hopes of challenging its main competitor, Nike, in the US market. However, Reebok has struggled to generate profits since the acquisition, leading investors to urge Adidas to divest the brand.

The decision regarding Reebok’s future will be announced on March 10th, coinciding with Adidas’ official presentation of its new strategy. The company is considering various alternatives, including selling Reebok or keeping it as part of the company. One potential scenario is a private equity firm or a smaller sports retailer purchasing Reebok and using it as a way to enter the competitive US marketplace, following Adidas’ example.

Investor opinions on the potential sale of Reebok are mixed. While some see it as an attractive asset for a private equity firm or another sports retailer, others remain skeptical. Colin Wong, a portfolio manager at Mawer Investment Management, a Nike shareholder, suggests that no action may be taken regarding Reebok.

If Adidas chooses to sell Reebok, there are several options available. One option is creating a separate public company for Reebok, separating it from Adidas. Another possibility is selling the brand to a private equity firm, a major sports retailer, or a multi-brand player like VF Corp.

Reebok’s financial performance has been disappointing in recent months. In the third quarter of 2020, the brand’s net sales dropped by 7% to 403 million euros, following a significant decline of up to 44% in the previous quarter. In 2019, Adidas wrote down almost half of Reebok’s book value compared to the previous year, indicating the brand’s struggles.

Despite these challenges, Reebok has made efforts to improve its performance. Collaborations with influential celebrities like Cardi B and a renewed focus on women’s apparel have enhanced the brand’s reputation. Analysts see potential in Reebok as an attractive proposition for potential buyers, as it is in a better position than before.

Adidas as a whole has faced challenges in 2020 due to lockdown measures. The company predicts a decline in overall sales for the final quarter of the year. However, Adidas remains optimistic about its prospects in China, where there is strong demand for running gear and products endorsed by popular singer Beyoncé.

To conclude, Adidas is actively exploring options, including a potential sale, for its subsidiary brand Reebok. The final decision will be announced in March alongside the company’s new strategy. Reebok’s struggles have prompted investor calls for divestment, but recent collaborations and a focus on women’s apparel have improved the brand’s position. The potential sale offers various possibilities, from a stand-alone public company to a sale to a private equity firm or another sports retailer.

Useful links:
1. Adidas Investor Relations
2. Reebok Official Website