Saturday September 22, 2012
Adidas cuts struggling Reebok’s 2015 sales target
FRANKFURT: Adidas has cut the 2015 sales target for its struggling Reebok brand by a third to 2 billion euros (US$2.6bil) after a torrid year in which it lost a major American football contract and fraud was discovered at its Indian operation.
The German company, the world's second-largest sports apparel firm, bought Reebok in August 2005 for US$3.8bil to try to close the gap on market leader Nike in the United States. It enjoyed initial success with a range of toning shoes, but has since struggled to find its feet.
Sales at Reebok slumped 26% in the second quarter and annual revenue is expected to fall from 2011's 1.96 billion euros.
Its performance contrasts sharply with the rest of the Adidas group, which expects overall sales to rise nearly 10% to about 14.5 billion euros in 2012.
Adidas chief executive Herbert Hainer has said that Reebok needed to come up with new products and would focus on fitness categories such as keep-fit trend Crossfit, running, gym, yoga and dance.
Reebok will also restrict sales growth in less lucrative markets such as India and Latin America and instead focus on improving its profit.
“While we have seen some good progress from the brand ... we cannot claim that we are on the path to sustainable global success just yet,” Hainer told investors in California.
Shares in Adidas, which have gained 30% this year and touched a record high of 65.76 euros on Wednesday, were down 1.5% at 64.56 euros at 0830 GMT, making them the biggest faller on Germany's Dax index of leading shares.
The reduced target for Reebok is a rare spot of bad news for Adidas, which has managed to perform better than Nike and Puma this year in Europe and China, where consumer spending has slowed.
Adidas kept an overall target to increase group sales to 17 billion euros by 2015, with faster than expected growth at its Adidas brand and golf business offsetting the weakness at Reebok.
Sales for the Adidas brand are now expected to reach 12.8 billion euros in 2015, up 5% from the previous target of 12.2 billion euros. Reuters