SBD/April 12, 2011/Marketing and Sponsorship

Reebok Looks To Toning Shoes, Retro Sneakers To Match Profits With Parent Adidas

Reebok hopes the $100 RealFlex and EasyTone shoes will help profit margins
adidas AG's Reebok brand “aims to get profitability closer to the level of its parent company in the next five years as it adds toning shoes and retro sneakers to capitalize on growth in personal-fitness spending,” according to Holger Elfes of BLOOMBERG NEWS. Reebok President & CEO Uli Becker said that “products such as $100 RealFlex running shoes will help margins” at Reebok move closer to adidas, which “it has lagged behind since being acquired” in ’06. Reebok's “gross margin widened by 4 percentage points to 35.9 percent last year," compared with 47.8% for the adidas group. Becker said Reebok will have “positive news” on margins in ’11. Elfes reported Reebok is “counting on products such as $100 EasyTone sneakers and $75 ZigTech Lite jackets to continue a revival.” The brand’s revenue increased 12% in ’10, “ending three years of decline that followed its acquisition.” Becker: “We are at the beginning of the turnaround. It is true that Adidas’s investment in Reebok was a burden in the first years. It has been a study by Adidas from the beginning as a long-term investment.” Reebok plans to introduce clothing “under the RealFlex label next year.” Becker notes that the brand also has a partnership with CrossFit gyms in the U.S. that “will help to promote the Reebok brand.” Elfes noted Reebok has “started selling apparel through the website for the CrossFit Games and will sponsor the event, which is held in California in July.” The brand also “cooperated with the Fitness First gym chain in Germany, which has 280,000 members in the country.” Fitness First’s 4,500 German workers, including trainers, will be “outfitted with Reebok gear and the gyms will organize events for its members to promote new Reebok shoes and apparel” (BLOOMBERG NEWS, 4/11).

BOUNCING BACK: Bloomberg Contributing Editor and former Reebok President Jay Margolis said adidas has "done a great job recently" in trying to revitalize the Reebok brand. Margolis said, "We worked so hard at building the cool factor because at the end of the day that's what this young consumer is purchasing. We signed a deal for the exclusive rights for the NFL, NBA, NHL. We signed rappers. ... It was an amazing time to try to create that but we were doing it through association. So when adidas came along and bought the company ... I'm not sure they bought what they thought. It was not a cool company. It was being discounted ... and it's been a long process to get them back to really being a credible company and a credible player." Margolis said adidas hasn't been able to make their money back from Reebok because "they paid a huge amount for the company," and Reebok at that time "started fading, it started going in a different direction" ("In The Loop," Bloomberg TV, 4/12).
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