Adidas Overhaul To Focus On Reebok Brand

The new boss of Adidas (ADS) announced overhaul plans on Thursday that includes changes to struggling fitness brand Reebok. Chief executive Kasper Rorsted, who took over last month, said Adidas will take one-time costs of around $33 million for restructuring at Reebok to strengthen future growth. Rorsted said on a conference call with investors and analysts, “We’re not going to have eternal patience for seeing results.”

Some investors have suggested that Rorsted should consider selling Reebok. Reebok has weighed on Adidas during the decade since it was acquired. Reebok’s growth and profitability are well below the group’s average and accounts for about 10 percent of the group’s sales.

Rorsted first major decision was to make Reebok independent of the core Adidas brand. North America President Mark King is no longer responsible for Reebok. The plans will move 650 staff to a new location in Boston, cut 150 jobs and accelerate store closures.

The move would be one of Boston’s biggest corporate relocations in years. Reebok president Matt O’Toole said that the company is still reviewing a few sites in Boston, but declined to name the locations under consideration. A decision will be made by the end of the year and the move should be completed by the end of September 2017.

Rorsted said that the new structure should help the main Adidas brand focus on extending its recent revival in North America. Third-quarter sales rose 20 percent in North America, down from 26 percent in the second quarter. He will give more details on the firm’s turnaround strategy with full-year results on March 8 and at an investor day on March 14.

For the first time in quite some time, Adidas reported quarterly numbers that did not beat market expectations. Net profit in three months ended September rose 15 percent to €386 million from €311 million a year earlier. Adjusted for currency effects, sales rose 17 percent to €5.4 billion. Adidas reiterated its forecast that 2016 currency-adjusted sales would grow at a rate in the high teens. The company raised its 2016 outlook four times after soaring demand for Superstar sneakers and Ultra Boost running shoes put it on course for a record year. Underlying net income is expected to be at the upper end of guidance for 975 million to 1 billion euros.

Rorsted said growth would slow next year as does not expect Adidas to reproduce the same revenue and profit growth. The likely sale of its golf business at a loss could hit fourth-quarter earnings. The speech dampened expectations for the company for 2017. Adidas shares fell more than 8 percent after the announcement. The shares had risen two-thirds this year.


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