In his first public speech after taking the helm of the company on Oct. 1, Adidas' new chief executive, Kasper Rorsted, took the opportunity of the group's strong third-quarter results to give an insight into his plans for the group.
While confirming the planned divestiture of TaylorMade, Adams and Ashworth, for which he expects to reach an agreement with a buyer before the end of this year, Rorsted announced a major reorganization at Reebok in the U.S., leading to an assumption that this brand may be put up for sale as well if the brand doesn't accelerate its growth and raise its margins.
Reebok's gross margin is still eight to nine percentage points below that of the Adidas brand, dragging down the profitability of the whole Adidas Group. The brand, which Adidas bought in 2006 to boost U.S. sales, hasn't grown in North America in the past three years, so it is “time to go back to the gym and redouble our efforts,” Rorsted said during a conference call with journalists.
As part of the new restructuring measures, about 150 Reebok employees will lose their jobs and the remaining 650 will be moved to new headquarters in Boston during 2017. Other functions not associated with Reebok in Boston will be moved to other group locations outside the city.
The wholesale channel will be given more preferential treatment by cutting back the 40 percent share taken by the direct-to-consumer channel. The number of Reebok factory outlets in the U.S. will be cut by almost half, and the number of Fit Hub stores will be limited.
One-third of the costs associated with the reorganization of Reebok, expected to total around €30 million, were accounted for in the third quarter, and the balance will be booked in the fourth quarter. Meanwhile, the group's long-planned exit from the golf equipment market will trigger a loss that will likely hit fourth-quarter earnings, but will not change underlying profitability.
Reebok, which grew by 7 percent on a currency-neutral basis in the quarter, will continue to be positioned as a fitness-centered brand. While it grew by only 2 percent in the U.S. during the period, thanks to strong placements in the wholesale channel, it enjoyed double-digit gains in most of the other regions of the world, with strength in training, running and Classics.
The 6 percent sales increase recorded by TaylorMade-Adidas Golf included a 13 percent increase for the TaylorMade brand alone, driven by strong sales of metalwoods and putters. The Adidas Golf business grew by 6 percent, indicating weaker sales for the other golf brands of the group.
Rorsted said he visited all the important locations from which the group operates, including Boston, since he joined the group. He also introduced himself to key clients such as Foot Locker, Intersport, Sports Direct, JD Sports Fashion, Zalando, Tue Yuen and Belle International. He met key sports marketing partners at Fifa and other organizations. He also saw the group's largest suppliers at a meeting in Herzogenaurach. He saw them in China and he will soon visit some Vietnamese factories.