Reebok’s New Dad Says the Shoe Must Go On
(Bloomberg Opinion) -- Reebok may not be the old man shoe for long.
Adidas AG said on Thursday that it had agreed to sell the brand —the maker of the Reebok classic that was briefly the most in-demand “Dad” sneaker around — to Forever 21 owner Authentic Brands Group Inc. The price could end up being 2.1 billion euros (close to $2.5 billion).
The sale was likely helped by the trend toward more casual wardrobes and comfortable shoes. L Catterton, the private equity group backed by LVMH Moet Hennessy Louis Vuitton SE founder Bernard Arnault, bought a majority stake in Birkenstock in February, valuing the clumpy sandal maker at about 4 billion euros. Dr. Martens Plc, which listed in London at around the same, has a market capitalization of about 4 billion pounds ($5.5 billion).
But Authentic Brands may also have other plans for Reebok. Could it be the next Gen Z retro fashion dream?
Adidas Chief Executive Officer Kasper Rorsted looks to have got a decent price for a business that, after its short period as a millennial fashion favorite a few years ago, has failed to thrive. Reebok had sales of 1.4 billion euros in the year to Dec. 31, 2020. Adidas bought the business for $3.8 billion in 2005.
Reebok had returned to sales growth and profitability before the pandemic but Rorsted never got it firing on all cylinders. He sought to position Reebok as a fitness and athleisure brand, rather than a more fashion-focused label. The latter is where Adidas has had more success, with its Originals collection, its Yeezy collaboration with Kanye West and, more recently, its Ivy Park tie-up with Beyonce.
Authentic Brands, which recently filed for an initial public offering in the U.S., has the opportunity to make more of the intersection between style and sport, with an established if parental brand. Reebok became popular in the 1980s with the rise of aerobics and has an extensive back catalogue, which the owner of Frye boots and Juicy Couture can mine. Authentic Brands dropped hints, hailing Reebok’s “rich and storied fitness heritage” and its “deep ties to professional sports and pop culture.” Not too hard to see where this is going.
Jamie Salter, Authentic founder and chief executive, said he’s had his eye on Reebok for many years. The group generated revenue of almost $500 million in 2020 and achieved an earnings before interest, tax, depreciation and amortization margin of over 70%, so he has plenty of firepower. There may be opportunities too for Reebok to collaborate with the more than 30 brands within the Authentic portfolio. The danger for Adidas is that Reebok — with the right star designer and a couple of new successful styles — may become a competitor with some of its shoe brands. Stan Smith and Superstar are already facing nimble rivals such as French vegan sneaker maker Veja.
Rorsted could have shared in any potential upside by retaining a minority stake in Reebok. Still, with a sale of the entire business, he gets out for a respectable price and should receive the majority of proceeds in the first quarter of next year, which will be returned to shareholders. He can also focus on more immediate challenges, particularly factories disrupted by pandemic restrictions in Vietnam.
To compete with a rejuvenated Reebok or anyone else, first you need to make the shoes.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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