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.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!