NEW YORK — As he prepares to officially leave Reebok International at the end of November, president and chief operating officer Jay Margolis said the company is taking key steps to fix its branded apparel business, which has been a notable disappointment.
“The frustration of not fixing branded apparel is there,” Margolis said in an interview with WWD. “But we have cleaned it up and upgraded the quality. We are doing a better job telling apparel stories and focusing on collections, and not just items. I believe this business is on its way.”
Margolis resigned from the athletic giant last week, and his position is being taken over by chairman and chief executive officer Paul Fireman after a transitional period through the end of November. Margolis asserted that the decision for him to leave was mutual, and that it was precipitated by Fireman’s interest in overseeing the company he started 25 years ago.
“Paul wanted to reengage in running the day-to-day operations of the business, and that was not the initial plan when I joined the business,” Margolis said. “I am 55 and I didn’t want to wait five more years for this kind of opportunity.
“Paul is the best person to run the company,” he added. “He is an owner, an entrepreneur and a visionary. He can cut through any politics and get things done.”
Reebok has seen a number of high-profile executive shifts in recent years, and the firm is known for fast turnover among the top brass. “Four years is actually a long time to be in that position at Reebok or anywhere else these days,” noted athletic analyst Matt Powell of Princeton Retail Analysis. Through a spokeswoman, Fireman declined to comment, but he told WWD last week that he was looking to groom a successor from within the firm.
Looking ahead, Margolis said he does not have a new position yet and is keeping his options open. Nonetheless, he is looking to run a fashion company and is exploring a number of opportunities. “I want to get involved in a company where I can help them focus on their product,” he said. “I am looking at men’s and women’s firms. I wouldn’t mind running a conglomerate.”
John Shanley, an analyst with Susquehanna Financial Group, said he thought Margolis did a good job as Reebok’s president, evidenced by the firm’s strong financial performance in recent quarters. “He was a valuable asset in terms of building relationships with retailers,” Shanley said.
Reflecting on his accomplishments at Reebok, Margolis cited the company’s store openings in international cities such as Beijing and Shanghai. He also pointed out the fast growth of the two-year-old Rbk division, which targets youth and houses the company’s collaborations with music stars Pharrell Williams, 50 Cent and Jay-Z.
Margolis said he believes the current fashion push among other activewear firms is good for the industry and has helped fuel apparel sales in the sector. Adidas now has collaborative deals with designers such as Yohji Yamamoto and Stella McCartney, while Puma has pushed into more lifestyle offerings and streetwear.
“The offerings have to be fashion right,” Margolis noted. “When I first got to Reebok, we would talk about the great technology of the sneaker and I would note the color was ugly. You need the technology, but it also has to look good. There is a whole fashion side to the athletic business that you have to have now.”
Reebok has struggled with its branded offerings at a time when the company’s overall sales and earnings have continued to climb. In the recent third quarter, U.S. apparel sales for the Reebok brand fell 2 percent to $204 million, with the decline due to branded apparel, while the licensed apparel business continues to grow. The firm’s total sales were $1.16 billion, a 12 percent rise over last year’s third quarter.
Another problem may be with its apparel pricing, according to Wall Street analysts.
Shanley also noted the company is lagging behind in its international business, despite recent sales surges in that area. International sales of Reebok branded products were $497 million, an increase of 23 percent, in the recent quarter, although most of that increase was from the Hockey Co., which Reebok purchased earlier this year.
Margolis, who has a long track record in the fashion industry at firms such as Liz Claiborne and Esprit, joined Reebok at a time when its sales were $2.9 billion, and the company was beginning to come out of a difficult period. Just four years earlier, in 1995, sales were $3.48 billion. But the company has had a dramatic financial turnaround in recent years.
Margolis was initially hired in January 2001 as president of Reebok’s specialty business segment, which includes Rockport, as well as the Greg Norman and Ralph Lauren lines, and he oversaw the company’s entrance into the licensed apparel arena through deals with the National Basketball Association and the National Football League. He became president and chief operating officer of the entire company one year later, and then earlier this year, he also took over running the Reebok brand following the departure of Martin Coles. Margolis said he feels confident he is leaving at a time when the company is poised for solid growth.
“There is a strong team in place now and I have a lot of faith in the company and the management,” he added.