Lowers profit forcast
To repair the damage, Adidas has pledged to put at least $63 million behind Reebok in 2007 -- at least $50 million more than it spends this year. The promise came from company CEO Herber Hainer as the company lowered its 2007 profit forecast last week due to costs related to the acquisition of Reebok.
Since the German company acquired Canton, Mass.-based Reebok in August 2005 (the deal became official in late January of this year), Reebok orders have plunged 14%. And the company's $250 million exclusive apparel deal with the National Basketball Association was transferred to Adidas.
Mr. Hainer said in a conference call that Adidas' earnings will increase 15% next year, below the original projection of 20%. "Obviously, there is more work to do at Reebok," he said, noting that the company's primary objective for 2007 is to strengthen the Reebok brand with an additional $63 million. Adidas has spent only $7 million in measured media on the Reebok brand through the first six months of this year, according to TNS Media Intelligence.
Adidas is the No. 2 sports shoe and apparel maker in the world behind Nike. Adidas' shops are TBWA and 180, Amsterdam; Reebok is handled By McGarry Bowen.
Eyes international markets
Analysts said the acquisition has hurt Adidas' bottom line because profit margins for Reebok are narrower in its main market, North America. Mr. Hainer said he anticipates doing a better job of branding Reebok in key international markets, including China, Russia and India.
Yet despite the slide, Reebok is making money. "We will be profitable in 2006 and, obviously, also in 2007,"said Chief Financial Officer Robin Stalker.
Adidas' other two companies -- the Adidas brand itself and TaylorMade Golf -- saw net profit rise a combined 21.5% through the first nine months of September compared with 2005.