NEW YORK — Reebok International Ltd. has fallen out of love with president and chief operating officer Jay Margolis, who has resigned.
Margolis, once expected to succeed chairman and chief executive Paul Fireman at the top of the firm, fell out of favor as a result of the company’s lagging apparel business and slow growth overseas, especially in Asia. Fireman said Thursday that he will return to running day-to-day operations of the company and will eventually look within the ranks to find his own successor.
The news came as Reebok International Ltd. reported a 30 percent surge in third-quarter earnings and a 12 percent jump in sales.
“Jay has done a good job, but I think I am the best person to lead the company now,” Fireman told WWD Thursday. “There are things we need to improve on, and for a lot of reasons, he is not the best person to be my successor. We have very good people in this organization and hopefully within the next three to five years, we can find the right successor from within who has the culture and the understanding of this company.”
Fireman also said that branded apparel, an area Margolis had vast experience with at other companies before joining Reebok, continues to be a disappointment. “Our strategy for branded apparel has to change,” he said. “It is not doing well and it has to be elevated.”
He declined to give specifics of how it will change, but said the company is putting a new strategy in place.
In the third quarter ended Sept. 30, the firm’s worldwide apparel sales slipped 2 percent to $204 million, all of which is attributable to the Reebok branded apparel business, Ken Watchmaker, executive vice president and chief financial officer, said on a conference call Thursday. “As we have discussed in previous calls, branded apparel has been repositioned for longer-term profitable growth beginning in 2005,” Watchmaker said.
Margolis, 55, joined Reebok when Fireman was experiencing health problems which resulted in coronary bypass surgery two years ago. Fireman, 60, is now healthy and has committed to a new long-term employment contract. Margolis couldn’t be reached for comment Thursday, but said in a statement, “Paul is the heart and soul of Reebok. We have discussed the future of the company and are in agreement that his stepping back in to directly run the business is the best decision for the company and its shareholders at this time.”
Margolis was handsomely paid at Reebok, receiving total compensation in 2003 of $2.5 million, making him the 13th highest-paid executive in the fashion industry last year. An industry veteran, he joined Reebok in 2001 after holding executive posts at Tommy Hilfiger and Esprit. Margolis also spent nine years at Liz Claiborne Inc., where he held several executive posts, including vice chairman, president of Liz Claiborne sportswear and president of Claiborne men’s wear. He was initially hired as president of Reebok’s specialty business group, overseeing its Rockport, Ralph Lauren footwear and Greg Norman collections, and was promoted later that year to president and chief operating officer of the company.
Under his leadership, Reebok evolved in a number of ways. It purchased The Hockey Co., opened flagships in such cities as London, Los Angeles and Tokyo, and expanded its Rbk division, which targets younger consumers via collaborative deals with musicians and athletes. In February, Reebok brand president and chief executive officer Martin Coles resigned, and his responsibilities were taken over by Margolis.
Margolis does not have any specific plans at this point, a Reebok spokeswoman said, but will stay on at the company through the end of November in a transitional period.
Despite the management shake-up, the Canton, Mass.-based athletic giant had a stellar quarter. Profits rose to $81.8 million, or $1.36 a share, from $63 million, or 96 cents a share, and handily beat Wall Street expectations of $1.18 a share. Sales gained 12 percent to $1.16 billion from $1.04 billion in last year’s third quarter, driven in part by its acquisition of The Hockey Co., as well as foreign currency exchange fluctuations. On a constant-dollar basis, sales grew 9 percent.
“We were able to increase our revenues and improve our operating margins despite some challenging retail conditions in many of our key markets around the world,” Fireman said in a statement. “We achieved the largest sales and earnings per share results in the history of our company.”
Following the news, the company’s shares rose 2.13 percent to $36.37 Thursday on the New York Stock Exchange.
Worldwide sales in the Reebok brand rose 12 percent to $1 billion, up from $832 million, although much of that increase is due to the inclusion of The Hockey Co. In the U.S., Reebok brand sales rose 4 percent over last year’s third quarter, and third-quarter sales of its other brands were $162 million in the quarter, an increase of 9 percent.