Reebok Sales Slump Hurts Adidas, New Plan to be Announced (ADDYY.PK)

Includes: ADDYY, NKE
by: Andrea Wasserman

Women's Wear Daily reports that Adidas' (OTCQX:ADDYY) Q4 losses may have much to do with its new acquisition, Reebok, which saw a 22% drop in sales during that period:

"[An] issue that has impacted Reebok's performance in the last two quarters has been a misperception among some retail partners that Reebok positioning would be dramatically changed or taken downstream as part of the acquisition," said Adidas chief executive officer Herbert Hainer. "While all along we were clear that Reebok is and will remain a performance brand within the Adidas Group, we have reached out through our sales team to reinforce and answer any concerns."

Without revealing many specifics, Hainer said the company is also taking steps to improve the styling of Reebok's products using Adidas technology and will limit distribution of key Reebok products.

Adidas said it will make a major strategic announcement about Reebok on April 11 in London, according to Women's Wear Daily.

Women's Wear Daily goes on to quote John Shanley, an analyst with Susquehanna Research Group, who said in a research report Friday that Adidas' plan to turn Reebok around will be a "difficult task to accomplish":

"The company's recent purchase of Reebok could negatively impact Adidas in the long run, especially if Reebok's classic footwear business continues to decline in terms of both consumer demand and retailer interest levels, particularly in the important U.S. marketplace," Shanley wrote.

Comment: The Reebok brand doesn't have anywhere near the cache of Adidas or Nike (ticker: NKE). Adidas would be smart to shift Reebok downmarket to compete with Nike's Starter brand, a move which would still help Adidas gain the US foothold that it wanted by acquiring Reebok.

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