LONDON — Bigger is meant to be better for the freshly minted Adidas Group.
The German company on Tuesday outlined plans for Reebok, which it acquired this year for $3.8 billion, with a focus on beefing up the branded apparel offerings, buying back distribution and sharpening the brand's image.
Partly because of the Reebok acquisition, Adidas Group is projecting net income to increase by double-digits for each of the next three years — 20 percent in 2007. In that same span, the group, which has combined sales of $11 billion, also anticipates high-single-digit sales growth.
"I called the Reebok acquisition a ‘once-in-a-lifetime opportunity' and I hold firm to this statement," Herbert Hainer, chief executive and chairman of Adidas Group, said during a press conference at the Cumberland Hotel here. "Nothing is going to stop us from turning the opportunity into even greater things for the Adidas Group."
Hainer didn't waste any time, announcing that Adidas had replaced Reebok as the official apparel supplier to the National Basketball Association starting with the 2006-07 season. The 11-year global merchandising partnership with the NBA also allows Adidas to design, manufacture and market NBA apparel and footwear in the U.S., Canada, Europe and Asia.
"At first glance, the NBA deal may look like a loss for Reebok, but it's not," Hainer said. "It caters to the group on a worldwide level and we now have to look at how we can get the best benefits for the group."
The major motive for purchasing Reebok was to help Adidas make inroads in the U.S., where Nike still dominates. Industry analysts had speculated that Adidas would take over some of Reebok's league sponsorships. More than 50 percent of the Reebok business is generated in North America, and the company is known for pioneering lucrative deals with professional sports leagues such as the NBA, the National Football League and the National Hockey League.
Some industry watchers were skeptical Tuesday about new plans for the brand.
"Reebok sales are still down pretty sharply in the U.S.," said Matt Powell, an athletic industry analyst at Princeton Retail Analysis. "I didn't hear anything that reassured me that that was going to change. In my opinion, product and marketing need to be changed before sales will start improving. This is a real turnaround situation for Adidas and it's not going to get fixed in a couple of quarters. It's going to take a lot of time and energy."
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