Adidas, the German sportswear giant, is reportedly planning to divest its struggling subsidiary brand Reebok. This move comes as no surprise, as the brand has been struggling for the past few years, with declining sales and a lack of clear direction. In this article, we will take a closer look at the reasons behind this decision, the impact it will have on Adidas, and what could be next for Reebok.

Reasons for Divestment

Adidas acquired Reebok in 2006 with high hopes of expanding its market share in the US, but the brand failed to turn a profit in the following years. In recent years, Reebok has attempted to rebrand itself as a fitness-focused company, but this strategy has not paid off. The brand's sales have been in decline, with revenues dropping by about 40% between 2011 and 2019. This has led to Adidas taking a hard look at its subsidiary and deciding that it is time to cut its losses and move on.

Impact on Adidas

Although Reebok's sales currently make up only a small fraction of Adidas's overall revenue, the divestment will still have an impact on the company. In the short term, the sale of Reebok could generate some much-needed cash for Adidas, which could be used for investments in other areas. In the long term, however, Adidas will lose a segment of the market that it had hoped to capture with the acquisition of Reebok. This could lead to increased competition with other sportswear giants, such as Nike and Under Armour.

Future of Reebok

As for Reebok, its future is uncertain. It is unclear if the brand will be sold in its entirety or broken up and sold to various buyers. There have been rumors that Authentic Brands Group, the parent company of brands such as Nine West and Juicy Couture, is interested in purchasing Reebok. Other potential buyers could include private equity firms or even a consortium of Reebok executives. Regardless of who ends up purchasing the brand, it will be a challenge to turn its fortunes around and make it profitable again.

Conclusion

Adidas's decision to divest Reebok is a clear indication that the brand is struggling and that the parent company is looking to focus on other areas. The impact on Adidas could be significant in the long term, as it loses a segment of the market it had hoped to capture. As for Reebok, its future is uncertain, but one thing is for sure - it will be a challenging road ahead for anyone who decides to take on the brand.