REEBOK MAKES FIRST MAJOR PROFIT IN YEARS AFTER BEING SOLD BY ADIDAS
The UK arm of sportswear giant Reebok made its first substantial profit since 2014 as it was sold by Adidas for €1.6bn.
The Altrincham-based business reported a pre-tax profit of €57.6m for the 14 months to February 28, 2022, compared to a €22.2m loss in 2020. The last time Reebok UK made a profit was the near €5m it posted in 2018. Its last substantial profit was the €76.3m it achieved four years earlier.
Since the 2014 profit, the company has racked up pre-tax losses of over €160m. Its latest results were helped by Reebok’s UK turnover rising from €171.1m to €253.9m.
The average number of people employed by Reebok in the UK fell from 187 to 134 during the period.
Reebok was founded in Bolton in 1958 and become a public company in 1985. It was acquired by Adidas in 2005 and now has its global headquarters in Boston, Massachusetts.
On February 28, 2022, Reebok was sold by Adidas to New York-headquartered Authentic Brands Group for over €1.6bn. An additional payment of up to €500m will be made if Reebok meets certain performance criteria from March 1, 2022 to December 31, 2031.
Authentic Brands Group’s portfolio includes the likes of Brooks Brothers and Forever21. It also owns the likeness rights to David Beckham, Muhammad Ali, Elvis Presley, and Marilyn Monroe.
A statement signed off by Reebok’s UK board said: “Following a significant loss in 2020 reflecting the impact of lockdowns and the closure of physical retail as part of worldwide measures to combat the spread of Covid-19, the Reebok business bounced back in 2021, more than recovering the lost sales of the previous year and benefitting from retained cost efficiencies and favourable exchange rates applicable to its overhead base.
Global brand sales upon which the company receives most of its royalty income recovered by 25% from 2020 but royalty income increased by more as a result of higher royalty rates reflecting additional design and development cost also taken on and a significant advance achieved in royalty income from licensing third parties products.”
It added: “These various factors combined to enable the company to report its first substantial profit since the launch of the brand’s ‘Muscle Up’ profit improvement project at the end of 2016.
The company’s UK retail business of seven multi-branded Reebok Adidas outlet stores also traded satisfactorily until transferred to Adidas.”
Reebok’s global sales increased over the 14-month period to €2.1bn compared to €1.4bn in 2020 and €1.7bn in 2019.
The company commented further: “One feature of the ‘Muscle Up’ project in recent years to improve profitability was the elimination of unprofitable lines of business.
This in turn created an underlying drag on achieving growth in the brand’s global net sales. The directors believe that process to have been completed. The directors also consider that the results for the period finally accomplish the planned long-term turnaround in reported profitability from ‘Muscle Up’.”
Reebok added that another major contributor to its turnaround was an increase in royalty income from licensing of third party products from €25m in 2020 to €49m in the 14 months to February 28, 2022.
The results come after the Stockport-based UK arm of Adidas reportedly achieved its highest ever sales as the division emerged from the Covid-19 pandemic
