Is There More to Reebok’s Woes? – NIKE, Inc. (NKE)

The last twelve months have been really difficult for footwear industry players, especially Adidas (NASDAQOTH:ADDYY). Along with problems of low demand, high costs and a dull holiday season the company’s Reebok brand saw a major fraud in its Indian operations. Additionally, a 10 year American football contract came to an end. The German sportswear giant posted a dull fourth quarter mainly because of goodwill impairment charges and lower sales for the Reebok brand.

NIKE Inc. (NKE)

Troubles to continue

For the fourth quarter the company reported a net loss of $353 million compared to a positive bottom line last year. The goodwill impairment loss, due to Reebok, amounted to $334 million. The previous year results have been restated because of irregularities discovered at Reebok India Co.

Number two in sales of sporting good, Adidas has also dropped the plan of selling its hockey business since the offers weren’t good. The footwear retailer did not do well in most of the geographic regions. The only place where the company seems to be doing well is China. The company has more than 7000 outlets there and plans to expand it further. The reason could be that the consumers want to break from the monotony of NIKE, Inc. (NYSE:NKE)’s products. It also means that the consumers are demanding variations from a different retailer and the demand hasn’t slowed down. A few innovations can help Adidas gain greater momentum.

Hitting a bump…

Taking a deeper look will help us understand that Reebok is shutting stores in India. Adidas’ Reebok outlets are providing huge discounts on existing inventory and are eventually closing down. The existing stores haven’t got fresh supplies in the last 5 months. Till date, a total of 200 stores have already been closed in India. This has fueled speculation that it may be the end of the road for Reebok in India. However, the management does not intend to scale down operations in India and wants to keep the brand active.

The other side

Though the company’s muscle tone products failed to create demand in American markets, Adidas recently launched shoes called “Energy Boost” are going to compete with NIKE, Inc. (NYSE:NKE)’s Flyknit. NIKE, Inc. (NYSE:NKE), on the other hand, has been increasingly active on the innovation front and does not leave a single opportunity to lure customers. It has a range of new product offerings from Flyknit to NIKE, Inc. (NYSE:NKE) Free. Even Nike+ is enjoying a successful run and customers are willing to pay more for the product.

What lies ahead?

Despite various problems, the management of Adidas announced a 35% increase in dividend and stuck to a viewpoint of earnings improvement for 2013. The company has to bring a something new to the table to gain consumers’ attention. But the question is “Can they take risk?” From an investor point of view the company has a number of internal problems to deal with before getting things straight. A little time should be provided to let the company’s restructuring to settle down and for rebranding of Reebok. As of now there are better stocks to invest in the footwear industry.

The article Is There More to Reebok’s Woes? originally appeared on Fool.com and is written by Pratik Thacker.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!