NEW YORK — Reebok International Inc.'s earnings surged 70.2 percent in the second quarter, and the athletic giant revealed that it has started selling footwear at Target under its LogoAthletic brand.
The company, which expects overall profit gains of 30 percent this year, has aggressive plans to grow its business at Target.
“The sales and profit contribution of the Logo initiative during 2005 will be minimal; however, we believe that this represents a long-term growth opportunity for our company beginning in 2006 and beyond,” Ken Watchmaker, Reebok’s executive vice president and chief financial officer, said on a conference call Thursday. Reebok bought LogoAthletic in 2001, and uses it primarily to make jerseys and other apparel for the NFL, NBA and NHL pro leagues, which it sponsors.
At Target, Reebok is initially selling footwear for men and boys in the basketball category that is cobranded with LogoAthletic and the NBA. Footwear for women and girls is to be launched later this year, and apparel is planned for late 2006, the company said. A Reebok spokesman said the products will eventually be sold in all Target stores and marked the company’s first time selling in that chain.
The Reebok-Target deal reflects a growing trend in the athletic arena as brands seek growth in the mass channel. Nike Inc. recently started selling in Wal-Mart through its Starter subsidiary, and other athletic brands such as Danskin and Champion also have programs in the mass arena.
Reebok, based in Canton, Mass., said profits in the quarter ended June 30 climbed to $37.1 million, or 60 cents a share, from $21.8 million, or 35 cents, in the year-ago period, and were ahead of analysts’ expectations, although last year’s results included a $7 million charge.
Results this year were helped by increased operating margins and sales of performance footwear, including Reebok’s new Pump 2.0 technology, Paul Fireman, chairman and chief operating officer, said in a statement.
Sales grew 7.6 percent to $876.2 million from $813.6 million, and were aided by sales of The Hockey Co., which contributed $48 million in the quarter. Worldwide apparel sales in the quarter rose 7.9 percent to $248.5 million, driven by gains in the U.S. market, while footwear sales increased 9.1 percent to $491.6 million.While apparel sales continued to show momentum in the U.S., the category is driven by licensed apparel such as the NFL products, and not the Reebok brand, company executives said on the call Thursday.
“Sales during the quarter in Reebok’s U.S. branded apparel business were about the same as in the prior year’s second quarter,” Watchmaker said. “While this portion of our U.S. apparel business continues to be a challenge, it remains a significant long-term growth opportunity.”
Technical styles are driving much of the action in footwear, and Reebok’s Classic footwear products had a sales decline in the U.S., the company said.
“We are clearly seeing a shift to more technical performance products, particularly in the U.S. market,” Fireman said. “During the quarter, Reebok sales of performance footwear products increased 24 percent on a worldwide basis.”
The company’s new multimillion-dollar advertising and marketing campaign is also helping drive brand awareness, Fireman said. Launched in February, the “I Am What I Am” campaign features athletes, celebrities and musicians, including Christina Ricci, Allen Iverson and Lucy Liu.
For the sixth-month period, earnings grew 27.7 percent to $80.3 million, or $1.29, from $62.9 million, or 98 cents. Sales edged up 9.5 percent to $1.8 billion from $1.65 billion.
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