Adidas can't outrun the troubles at Reebok

Fraud allegations, a lost NFL contract and missteps in the fitness market were among Reebok's issues that led to a surprise loss for its parent.

By Bruce Kennedy Mar 7, 2013 3:36PM

Reebok shoes at the Adidas headquarters in Herzogenaurach, Germany, on March 2, 2011 (© Christof Stache/AFP/Getty Images)If it were a relay race, you could say Reebok dropped the baton. Adidas (ADDYY) bought Reebok in 2005 for $3.8 billion in an effort to catch up with sports-apparel front-runner Nike (NKE). But setbacks at the Reebok brand in both the U.S. and Latin America have been cited in Adidas' unexpectedly weak fourth-quarter performance, announced on Thursday.


Adidas had a fourth-quarter operating loss of $310.9 million (€239 million). Analysts had been expecting a profit of around $37.2 million (€28.6 million).


The company made a goodwill write-down of $344.7 million (€265 million) on Reebok at the end of the year. That charge is linked to several serious missteps at Reebok in 2012. Its attempt to expand into the fitness market, particularly muscle-toning footwear, didn't fare well.


Then there was the discovery of what Adidas calls "commercial irregularities" at Reebok's Indian unit. And along with those fraud allegations came the loss of Reebok's decade-long National Football League contract to Nike and the months-long National Hockey League labor dispute that nearly canceled the North American pro hockey season.


The company's ice hockey line, Reebok-CCM Hockey, reported an 18% drop in sales during the fourth-quarter, apparently due to the NHL lockout. But CEO Herbert Hainer says Adidas has dropped plans to sell off its hockey business because, according to Reuters, "potential buyers did not make offers interesting enough for the German sports apparel company."


It's not all bad news, however. The Wall Street Journal says Adidas had a 12% rise in its fourth-quarter sales in China -- part of a 27% increase there for the year. And Adidas expects its overall sales to increase at a "mid-single-digit rate" in 2013 with earnings per share growth  a rate of 12% to 16%.


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1Comment
Mar 7, 2013 8:45PM
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Didn't remember that Adidas owned Reebok...
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