Reebok International is the second biggest giant in the $7 billion athletic footwear jungle, but it's still struggling to make the necessary adaptations to battle Nike, which by all accounts is having its strongest year in history.
But Reebok's most immediate concern is about not getting meaner but getting leaner. This week, Reebok executives will tell the Wall Street investment community how it plans to cut $60 million from its selling, general and administrative costs, which were up 18.6% to 28.5% of sales on $935 million in first quarter '95.
Reebok has already laid off 150 employees this year, most of them in Europe, a company spokesman said.
Wall Street analysts and industry observers expect that Mr. Paul Fireman, Reebok's chairman and CEO, will complete his cost-cutting with another round of layoffs and changes in distribution. Reebok executives say the company's $70 million ad budget will remain untouched.
But the Wall Street toughs will have some additional questions for Reebok executives when they meet this week. Like how management is responding to the abrupt departures of two key executives in two months. And how Reebok's recent $9.5 million payment to the Federal Trade Commission to settle a price-fixing lawsuit will impact the bottom line.
"Let's just say I expect the meeting to be well-attended," said Faye Landes, an analyst for Smith Barney, New York.
Reebok's stock price has ping-ponged between $30 and $40 the past year. While sales were up 9.1% in first quarter '95, key areas like branded footwear performed below what had been projected. Sluggish second and third quarters are being predicted by the respected industry trade SportsStyle.
Meanwhile, Ms. Landes and other observers note that Nike is having a banner year. When Nike's fiscal year ends next spring, sales are expected to reach $6 billion, Chairman Phil Knight's oft-stated goal.
Nike and Reebok were neck and neck in 1988, with Reebok booming because of women's fitness and the aerobics phenomenon. But that was the same year Nike unveiled its "Just Do It" campaign and began to pull away thanks to Bo Jackson and the cross-training category.
Then in 1992 Michael Jordan led the Chicago Bulls to their second National Basketball Association title and soared to a gold medal with the rest of the Dream Teamers in the Barcelona Olympics, boosting Nike's basketball line to a gonzo $600 million in sales and close to a 60% market share.
Meanwhile, Reebok struggled to position itself as a performance brand.
Nonetheless, consumers have been seeing a more aggressive Reebok in recent months. Product design, which has long been Reebok's Achille's heel in the performance area, has improved. Last fall's flashy, graphic Kamikaze Mid basketball shoe was a breakthrough.
Recent advertising from Leo Burnett USA, Chicago, has been more focused and fun. Marquee endorser Shaquille O'Neal generated extra exposure for the brand by getting to the NBA finals.
Reebok executives believe the momentum will be maintained even without Roberto Muller, who resigned as Reebok co-president last month. Mr. Muller was in charge of repositioning to a Nike-level performance brand, an effort that began four years ago. His resignation followed that of co-president John Duerden in March. Both cited personal reasons for leaving.
They have been succeeded by a trio of well-respected VPs: Pat Hambrick, Dan Hanrahan and Peter Moore.
"Anytime you have layoffs and restructuring, questions are raised and morale dips," said Mr. Moore. "But we quickly refocused and we believe we can continue our momentum."
Reebok will use the 1996 Summer Olympics to trumpet its repositioning. More than 3,000 athletes will wear Reebok footwear and apparel.
The company will tie into the promotions executed by Olympic sponsors, including McDonald's Corp., and will have ad exclusivity in the athletic footwear category during NBC's broadcasts of the games.
Reebok will also use the Olympic platform to introduce a new ad tagline, said to be "This is my planet," an attempt to personalize its "Planet Reebok" marketing concept.
Neither Mr. Moore nor a Reebok spokesman would comment on the tagline change.
Next March, Reebok will unveil Mobius, a family of footwear and apparel products, cutting across all performance categories, that will boast stark black and white designs.
The Mobius program addresses a variety of Reebok concerns: cutting-edge design, a more conspicuous brand presence at retail, and updating product on a more frequent basis.
"We're focusing on how we come across as a completely integrated brand at retail," said Mr. Moore. "We're not marketing vertically. We're thinking thematic packages." An entirely new program will replace Mobius in the second half of 1996.
The few industry observers and retailers who know about the Mobius program are impressed by it. But they also say that these initiatives need to feed the bottom line, especially in light of the Federal Trade Commission settlement over alleged price-fixing.
"What Reebok needs to focus on," said Ms. Landes, "is execution, and to quit missing opportunities."
Headquarters: Stoughton, Mass.
Leadership: Paul Fireman, chairman-CEO; Kenneth Watchmaker, exec VP and chief financial officer; Paul Duncan, exec VP-chief operating officer-Reebok brand division; Dan Hanrahan, group VP-men's footwear; Pat Hambrick, group VP-women's footwear; and Peter Moore, senior VP-Reebok footwear.
1994 sales: $2.8 billion worldwide, up 13.4% from 1993.
Recent successes: The Kamikaze Mid represented a breakthough in product design and marketing for Reebok and was one of the industry's best selling basketball shoes last fall. The Reebok Sports Club opened in New York this spring; an adjoining concept store, Planet Reebok, opened last week. Reebok's upcoming line of NFL-licensed apparel is getting raves from retailers.
Challenges for 1995: First, cut $60 million in costs. Then, having successfully transformed positioning from a fashionable "athleisure" brand to a credible athletic performance brand, create product and marketing programs of consistent quality to will drive sales and take market share.
Source: Advertising Age and company reports