Adidas group's CEO Kasper Rorsted defends first results of 'Muscle Up' plan for Reebok

By

Olivier Guyot

Translated by
Nicola Mira

Published
Mar 27, 2018

The giant-sized figures '+400' appear on the mega screen in the media room of the Adidas group in Herzogenaurach, Germany, where Kasper Rorsted, the CEO of Adidas since 2016, has been talking comfortably with the financial press. To broach the subject of Reebok, Rorsted instead went out of his way to deliver a strong message. '+400' is the increase recorded by the German group's second brand in terms of gross margin, which in 2017 was 40.7%, for a revenue of €1.843 billion, up 4% compared to 2016.

While Adidas's performance is consistently positive, for some time Reebok's has been a complex issue. "In the last 8-9 years, we failed to do what needed to be done," said Kasper Rorsted to the journalists. He then proceeded to defend his 'Muscle Up' plan, deployed in the last 18 months to assert Reebok's positioning as a brand dedicated to fitness, and especially to improve Reebok's profitability. The strategy is straightforward. "We consolidated Reebok by establishing a single Boston-based organisation, putting together in one single site the team that would develop the Reebok of the future," said Rorsted, who added he was "very aggressive" with the strategy. The plan envisages in fact the closure of nearly half of the brand's stores in North America. In 2017, Reebok closed down nearly 40 of its less profitable stores, and it continued to do so at the start of 2018.

Owing to this downsizing, and the troubled situation of US retailing in general, Reebok's American sales in 2017 fell by 15%, down to €432 million. Instead, the brand performed strongly in China (+25%), with double-digit increases in the Training, Running and Classics categories. Sales in China are still relatively limited in size for Reebok, at €82 million, but the market is a major growth opportunity for the brand. On the other hand, the 24% increase in sales in Western Europe, up to €496 million, was a fine result, with the Classics category notably growing strongly. In Russia and neighbouring countries, Reebok's sales fell by 2% to €182 million. Latin America grew by nearly 10%, reaching €235 million, Japan was worth €101 million and the Middle East-Africa-Asia region was worth €304 million, with the Training category predominant.

The group underlined how it is overhauling Reebok’s product development and marketing operations in order to improve margins. Specifically, it is focusing on Reebok’s digital business and on offering "the right product, at the right price and at the right time," according to Rorsted. While cutting back on marketing investment, Reebok is more active in the area of collaborations. After announcing a line with Victoria Beckham, the brand has recently unveiled a series of looks featuring actress Gal Gadot, emphasizing its fitness positioning. According to Kasper Rorsted, these innovations and assets will allow Reebok to get back on the growth track in North America in 2018.