6 ms·

Adidas ends Reebok era with $2.5B sale to Authentic Brands

70 points by keiferski 5y ago

admn2 5y ago
Does anyone know much about Authentic Brands? They own all these stagnant or struggling brands like Brooks Brothers, Barney's, Sports Illustrated, Lucky Brand, Prince, etc., but I can't tell what they actually do with the IP or existing business?
- mattlondon 5y ago
  I think (don't know) that they license the brand name out to various people. So now you'll start to see "Reebok" branded stuff being made and sold by random stores that wouldn't usually sell "real" sports gear. So you'll see it being made and sold by the Walmart/Tescos of the world etc. People will vaguely recognise the brand for years/decades to come.
  - admn2 5y ago
    I think this is definitely true for some of their other brands especially, they own the right to use all these celebs: Elvis, Marilyn Monroe, Shaq, etc. However, it does look like many of their other brands continue operating - Forever 21, Brooks Brothers, Aeropostal (maybe?), Lucky Brand
- moolcool 5y ago
  They own some brands which are still quite prominent as well, like Forever 21, Eddie Bauer, and Volcom
  - lowkey_ 5y ago
    I'm unfamiliar with Volcom, but both Forever 21 and Eddie Bauer can be classified as stagnant or struggling along with the rest mentioned in the prior comment. (Additionally, both companies have also gone through bankruptcy proceedings).
- gnicholas 5y ago
  As part of the acquisition, the buyers (Authentic Brands and Simon Malls) agreed to continue operating Brooks Brothers stores across the country. Not sure what they've done in other cases. https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purchase-deal-with-retailer-sparc.html https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purch...
  - CobaltFire 5y ago
    Interesting note here is that as of last year the US manufacturing of Brooks Brothers was closed. They had been the manufacturer of the top quality of Naval Dress Uniforms (optional), but now it’s only what’s left in stock due to uniform items not being authorized for wear unless they meet a bunch of requirements (Berry Amendment), of which made in the US is one.
- deleted 5y ago
  [deleted]
- peytoncasper 5y ago
  I think they do what other private equity groups do with medium sized tech businesses. These companies are usually profitable to some degree, but don’t really have a pathway to growth. This generally makes the unattractive to most investors. However, companies pick up these brands, remove redundancies by combining core aspects of different businesses, try to increase profit margin and just ride it out. Rinse and repeat and you build a portfolio. Once one dries up, you pick up another. A bit like combining good and bad loans together. As a package the good ones can support the bad ones to a degree.
  - CPLX 5y ago
    That’s a highly charitable take on what private equity actually does with legacy businesses. In reality they feast on them like bloodsucking leaches. The usual playbook is to load the companies down with as much debt as they possibly can, and use the loan proceeds to pay themselves lucrative fees and dividends. Then they cut expenses to the core and demolish the quality of the product or service and see how long it takes people who aren’t paying attention to realize that the 100 year old brand with a reputation for quality doesn’t really exist any more. Once that’s done they leave the loan underwriters and current employees holding the bag and abscond to a vacation destination of their choice with the money and discuss their next target over Aperol spritzers.
    - tehjoker 5y ago
      Can you clarify something that I never understood about this process, are they literally using the loan money to pay themselves?
    - peytoncasper 5y ago
      I don't technically disagree with you, but I do think this is just a bit hyperbolic. If you just spent $2B on a company, you probably did it to make money at the end of the day. After all, business is rarely charitable. The company you just acquired likely has a declining and unhealthy cash flow and little to no cash reserves. You're unlikely to go and then infuse it with more of your capital. As a result, you're going to turn to outside capital to finance whatever plans you have. These plans are used as justification to creditors with which to take out these loans at whatever interest rate they deem appropriate. Additionally, you're likely going to reward yourself for any profits or turn around that does happen at the company. After all, you do have $2B tied up in this company. I agree, these companies are now more than likely walking corpses. As an employee, I probably wouldn't want to be stuck there as there is likely going to be little spent on employee retention and growth. However, it also does provide extended life to these brands that with a declining cash flow and no outside leadership change would likely meet the same fate and likely much quicker at that. As with everything, there is a spectrum. There are likely examples that did exactly what you just said. And there are also probably examples where the business turned around and went public again some day. The vast majority are going to sit in the middle, with no sinister plan and slowly fade away as the last customers stop giving them money. I think it's unfair to paint the companies being acquired as perfect companies. They have likely already lost customer confidence and as I mentioned in my first post can't find a path to growth. After all, that is why they are in this position to begin with. The morality of this process can certainly be debated, but I think it's fair to say that most people don't invest a lot of money into a business just to run it into the ground as quickly as possible. It does exist, no doubt, but running a firesale is far from the most profitable way earn money on your investment.
- lotsofpulp 5y ago
  They bet they can cut costs (and hence quality) faster than customers lose trust in the brand.
- icegreentea2 5y ago
  Lucky for you, they just filed for IPO, so you can read their prospectus! https://www.sec.gov/Archives/edgar/data/0001666054/000110465921089494/tm2114913-5_s1.htm#tPRSU https://www.sec.gov/Archives/edgar/data/0001666054/000110465... I think their strategy is right there on page one: ABG is responsible for brand identity and strategy, and marketing. ABG has approval rights over product design. Their partners (licensees) do everything else (including product design). Presumably for this strategy to work at all, people believe that ABG is sufficiently skilled at branding and marketing (as well as having the ability to synergize across brands... before you laugh, ABG owns the rights to likeness of Marilyn Monroe, Mohummad Ali, Shaq and Elvis) that people who like to be just "operators" will partner with them.
  - admn2 5y ago
    Thank you!
racl101 5y ago
End of an era. Best pair of basketball shoes I owned were the 1st Reebok Shawn Kemp Kamikaze shoes. They were such a good deal and such awesome shoes.
- deleted 5y ago
  [deleted]
acomjean 5y ago
I always remember when I was young they released sneakers with a built in pump, to help them fit better.(inflatable bladder inside the shoe) I always wanted to try those out… It was different. https://en.m.wikipedia.org/wiki/Reebok_Pump https://en.m.wikipedia.org/wiki/Reebok_Pump
- patorjk 5y ago
  Those were the must have shoes when I was growing up in the early 90's. For some reason we thought they would help us play basketball better. I still remember showing up to school with a pair on and all of my friends being impressed.
  - sdoering 5y ago
    I fought so hard until my dad bought me a pair. Damn I thought that maybe once the bullying would stop in school. I still wore the wrong jeans and shirts, though. Nothing like a pair of shoes conjuring up memories.
    - patorjk 5y ago
      I picked up a pair of Shaq shoes when I was in middle school for that reason. Weirdly it did help. I remember a kid that would pick on me stopped because he thought my shoes were cool. Everyone thought they had to have been really expensive too (like Jordan shoes), but they weren't. I had found them at some discount retailer. I'm not even sure if they were legit, but they said Shaq and they looked cool. Eventually someone else found the shoes and brought up that they were inexpensive shoes, but by that time I'd already moved on to a different pair of shoes.
      - coryrc 5y ago
        They were probably legit and intentionally more affordable: https://www.blackbusiness.com/2016/07/shaq-affordable-shoes-kids-sold-over-120-million-pairs-walmart.html https://www.blackbusiness.com/2016/07/shaq-affordable-shoes-...
      - 5y ago
launchaway 5y ago
For reference, Nikola Motors, a fraudulent electric truck manufacturer, has a Market Cap of $4B
- toomuchtodo 5y ago
  They have ~$1B cash on hand, so it’s only ~75% fraudulent at current valuation.
  - vasco 5y ago
    The 25% keep enough people fooled to get enough time to spend the ~$1B.
  - jjeaff 5y ago
    Except stock price is supposed to indicate discounted future expectations of value. I expect that they will spend that $1B in the future with little to show for it.
  - antattack 5y ago
    The SPAC has >500mln in Private Investment in Public Equity (PIPE) commitments.
- hn_throwaway_99 5y ago
  For comparison, though, "Reebok" is really just the Reebok brand. I mean, I'm assuming all of the production of the actual shoes is outsourced to some sweatshops like all the other shoe manufacturers. Even the article refers to Reebok as "the U.S. brand management firm".
  - SheinhardtWigCo 5y ago
    I think that refers to ABG.
  - skinnymuch 5y ago
    That’s the acquiring company
gnicholas 5y ago
Interesting that Adidas didn't have more success with Reebok. I wonder if it's because they didn't want to cannibalize their main brand. In my mind (as someone who grew up in the late 80s and 90s), Reebok made great shoes — better than Adidas and wider than Nike. Most of my tennis shoes growing up were Reebok cross trainers, and I would be more likely to try on a pair of Reeboks than a pair of Adidases. I do like Adidas apparel, and I own a pair of their iconic Sambas. Seems like a missed opportunity. Hope the new owner can turn it around, and not just let it slowly fade into obscurity.
- sdoering 5y ago
  I still semi regularly bought Rebook shoes for R'n'R training. My SO and myself find them to be the perfect combination of stability, lightness and flexibility when doing rock and roll with acrobatics.
- ngokevin 5y ago
  There's a video about how Reebok became the sole sponsor of UFC, forced every athlete to wear them for pennies on the dollar (making them drop their more lucrative endorsements). Their store would have clothing with the athletes' names misspelled, combine two athletes' names together, wrong faces, sell clothes on the wrong section of the store (men's/women's), have wardrobe malfunctions during female fights, feature a map of Ireland for Conor McGregor but completely cut off northern Ireland. And they'd misspell giant words on the screen during their big press conferences.
  - sngz 5y ago
    as someone who trains, that is one of the main reasons I stopped buying reebok. Most of my shorts and shoes were reebok prior to that deal, they were good for the price.
- deleted 5y ago
  [deleted]
- is_true 5y ago
  I was a fan of Reebok, they had really good price/quality items. But a couple of years ago they merged their ecommerce* with the one from Adidas and they increased the prices so almost everything was almost at the same price between the two brands. *in argentina
Rapzid 5y ago
Dang, I just bought a pair of Legacy Lifter IIs.. Maybe I should spring for a backup pair if they work out.
- gnicholas 5y ago
  When I found out Wilson was discontinuing my favorite tennis shoes, I bought eight pairs of them. I still have two pairs left, a decade later. No regrets!
dotcommand 5y ago
And Nike is currently valued at $270 billion. Where did reebok go wrong? What did Nike do right? Crazy how much more successful Nike was.
- rabidonrails 5y ago
  The Jordan brand itself is worth over 10B. Source: https://www.forbes.com/sites/kurtbadenhausen/2020/05/03/michael-jordans-1-billion-nike-endorsement-is-the-biggest-bargain-in-sports/?sh=731ab8216136 https://www.forbes.com/sites/kurtbadenhausen/2020/05/03/mich...
- paxys 5y ago
  One word – branding.
  - amelius 5y ago
    Did reebok make a mistake?
  - deleted 5y ago
    [deleted]
  - ardit33 5y ago
    no, it is product. Adidas soccer shoes have been underperforming because they honestly suck. Even their shirts are pretty bad compared to Nike's drifit. Their classical Samba and Copa mundial, are just too heavy for modern use, and their new fabric/material lightweight shoes are just not as good as Nike's. Nike has innovated material wise, while Adidas hasn't, and it just has only been catching up with inferior me to products.
- antisthenes 5y ago
  Well, Reebok was just an underperforming subsidiary of Adidas, a company that's currently worth ~$70bn. So I don't think it's fair to just compare the 2. What Nike did right, though, is fully embrace the influencer culture, I think. That, and actually having some cool and unique designs. Reebok always felt like "just another shoewear brand" and their clothing lines were completely generic and uninspired.
riffic 5y ago
Unless the page hasn't been kept up to date, the founder of Reebok is still alive at the age of 86: https://en.wikipedia.org/wiki/Joseph_William_Foster https://en.wikipedia.org/wiki/Joseph_William_Foster some more info on the origins of the brand over there.

70 points by keiferski 5y ago

Does anyone know much about Authentic Brands? They own all these stagnant or struggling brands like Brooks Brothers, Barney's, Sports Illustrated, Lucky Brand, Prince, etc., but I can't tell what they actually do with the IP or existing business?

mattlondon 5y ago
I think (don't know) that they license the brand name out to various people. So now you'll start to see "Reebok" branded stuff being made and sold by random stores that wouldn't usually sell "real" sports gear. So you'll see it being made and sold by the Walmart/Tescos of the world etc. People will vaguely recognise the brand for years/decades to come.
- admn2 5y ago
  I think this is definitely true for some of their other brands especially, they own the right to use all these celebs: Elvis, Marilyn Monroe, Shaq, etc. However, it does look like many of their other brands continue operating - Forever 21, Brooks Brothers, Aeropostal (maybe?), Lucky Brand
moolcool 5y ago
They own some brands which are still quite prominent as well, like Forever 21, Eddie Bauer, and Volcom
- lowkey_ 5y ago
  I'm unfamiliar with Volcom, but both Forever 21 and Eddie Bauer can be classified as stagnant or struggling along with the rest mentioned in the prior comment. (Additionally, both companies have also gone through bankruptcy proceedings).
gnicholas 5y ago
As part of the acquisition, the buyers (Authentic Brands and Simon Malls) agreed to continue operating Brooks Brothers stores across the country. Not sure what they've done in other cases. https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purchase-deal-with-retailer-sparc.html https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purch...
- CobaltFire 5y ago
  Interesting note here is that as of last year the US manufacturing of Brooks Brothers was closed. They had been the manufacturer of the top quality of Naval Dress Uniforms (optional), but now it’s only what’s left in stock due to uniform items not being authorized for wear unless they meet a bunch of requirements (Berry Amendment), of which made in the US is one.
deleted 5y ago
[deleted]
peytoncasper 5y ago
I think they do what other private equity groups do with medium sized tech businesses. These companies are usually profitable to some degree, but don’t really have a pathway to growth. This generally makes the unattractive to most investors. However, companies pick up these brands, remove redundancies by combining core aspects of different businesses, try to increase profit margin and just ride it out. Rinse and repeat and you build a portfolio. Once one dries up, you pick up another. A bit like combining good and bad loans together. As a package the good ones can support the bad ones to a degree.
- CPLX 5y ago
  That’s a highly charitable take on what private equity actually does with legacy businesses. In reality they feast on them like bloodsucking leaches. The usual playbook is to load the companies down with as much debt as they possibly can, and use the loan proceeds to pay themselves lucrative fees and dividends. Then they cut expenses to the core and demolish the quality of the product or service and see how long it takes people who aren’t paying attention to realize that the 100 year old brand with a reputation for quality doesn’t really exist any more. Once that’s done they leave the loan underwriters and current employees holding the bag and abscond to a vacation destination of their choice with the money and discuss their next target over Aperol spritzers.
  - tehjoker 5y ago
    Can you clarify something that I never understood about this process, are they literally using the loan money to pay themselves?
  - peytoncasper 5y ago
    I don't technically disagree with you, but I do think this is just a bit hyperbolic. If you just spent $2B on a company, you probably did it to make money at the end of the day. After all, business is rarely charitable. The company you just acquired likely has a declining and unhealthy cash flow and little to no cash reserves. You're unlikely to go and then infuse it with more of your capital. As a result, you're going to turn to outside capital to finance whatever plans you have. These plans are used as justification to creditors with which to take out these loans at whatever interest rate they deem appropriate. Additionally, you're likely going to reward yourself for any profits or turn around that does happen at the company. After all, you do have $2B tied up in this company. I agree, these companies are now more than likely walking corpses. As an employee, I probably wouldn't want to be stuck there as there is likely going to be little spent on employee retention and growth. However, it also does provide extended life to these brands that with a declining cash flow and no outside leadership change would likely meet the same fate and likely much quicker at that. As with everything, there is a spectrum. There are likely examples that did exactly what you just said. And there are also probably examples where the business turned around and went public again some day. The vast majority are going to sit in the middle, with no sinister plan and slowly fade away as the last customers stop giving them money. I think it's unfair to paint the companies being acquired as perfect companies. They have likely already lost customer confidence and as I mentioned in my first post can't find a path to growth. After all, that is why they are in this position to begin with. The morality of this process can certainly be debated, but I think it's fair to say that most people don't invest a lot of money into a business just to run it into the ground as quickly as possible. It does exist, no doubt, but running a firesale is far from the most profitable way earn money on your investment.
lotsofpulp 5y ago
They bet they can cut costs (and hence quality) faster than customers lose trust in the brand.
icegreentea2 5y ago
Lucky for you, they just filed for IPO, so you can read their prospectus! https://www.sec.gov/Archives/edgar/data/0001666054/000110465921089494/tm2114913-5_s1.htm#tPRSU https://www.sec.gov/Archives/edgar/data/0001666054/000110465... I think their strategy is right there on page one: ABG is responsible for brand identity and strategy, and marketing. ABG has approval rights over product design. Their partners (licensees) do everything else (including product design). Presumably for this strategy to work at all, people believe that ABG is sufficiently skilled at branding and marketing (as well as having the ability to synergize across brands... before you laugh, ABG owns the rights to likeness of Marilyn Monroe, Mohummad Ali, Shaq and Elvis) that people who like to be just "operators" will partner with them.
- admn2 5y ago
  Thank you!

racl101 5y ago

End of an era. Best pair of basketball shoes I owned were the 1st Reebok Shawn Kemp Kamikaze shoes. They were such a good deal and such awesome shoes.

deleted 5y ago
[deleted]

acomjean 5y ago

I always remember when I was young they released sneakers with a built in pump, to help them fit better.(inflatable bladder inside the shoe) I always wanted to try those out… It was different. https://en.m.wikipedia.org/wiki/Reebok_Pump https://en.m.wikipedia.org/wiki/Reebok_Pump

patorjk 5y ago
Those were the must have shoes when I was growing up in the early 90's. For some reason we thought they would help us play basketball better. I still remember showing up to school with a pair on and all of my friends being impressed.
- sdoering 5y ago
  I fought so hard until my dad bought me a pair. Damn I thought that maybe once the bullying would stop in school. I still wore the wrong jeans and shirts, though. Nothing like a pair of shoes conjuring up memories.
  - patorjk 5y ago
    I picked up a pair of Shaq shoes when I was in middle school for that reason. Weirdly it did help. I remember a kid that would pick on me stopped because he thought my shoes were cool. Everyone thought they had to have been really expensive too (like Jordan shoes), but they weren't. I had found them at some discount retailer. I'm not even sure if they were legit, but they said Shaq and they looked cool. Eventually someone else found the shoes and brought up that they were inexpensive shoes, but by that time I'd already moved on to a different pair of shoes.
    - coryrc 5y ago
      They were probably legit and intentionally more affordable: https://www.blackbusiness.com/2016/07/shaq-affordable-shoes-kids-sold-over-120-million-pairs-walmart.html https://www.blackbusiness.com/2016/07/shaq-affordable-shoes-...
    - 5y ago

launchaway 5y ago

For reference, Nikola Motors, a fraudulent electric truck manufacturer, has a Market Cap of $4B

toomuchtodo 5y ago
They have ~$1B cash on hand, so it’s only ~75% fraudulent at current valuation.
- vasco 5y ago
  The 25% keep enough people fooled to get enough time to spend the ~$1B.
- jjeaff 5y ago
  Except stock price is supposed to indicate discounted future expectations of value. I expect that they will spend that $1B in the future with little to show for it.
- antattack 5y ago
  The SPAC has >500mln in Private Investment in Public Equity (PIPE) commitments.
hn_throwaway_99 5y ago
For comparison, though, "Reebok" is really just the Reebok brand. I mean, I'm assuming all of the production of the actual shoes is outsourced to some sweatshops like all the other shoe manufacturers. Even the article refers to Reebok as "the U.S. brand management firm".
- SheinhardtWigCo 5y ago
  I think that refers to ABG.
- skinnymuch 5y ago
  That’s the acquiring company

gnicholas 5y ago

Interesting that Adidas didn't have more success with Reebok. I wonder if it's because they didn't want to cannibalize their main brand. In my mind (as someone who grew up in the late 80s and 90s), Reebok made great shoes — better than Adidas and wider than Nike. Most of my tennis shoes growing up were Reebok cross trainers, and I would be more likely to try on a pair of Reeboks than a pair of Adidases. I do like Adidas apparel, and I own a pair of their iconic Sambas. Seems like a missed opportunity. Hope the new owner can turn it around, and not just let it slowly fade into obscurity.

sdoering 5y ago
I still semi regularly bought Rebook shoes for R'n'R training. My SO and myself find them to be the perfect combination of stability, lightness and flexibility when doing rock and roll with acrobatics.
ngokevin 5y ago
There's a video about how Reebok became the sole sponsor of UFC, forced every athlete to wear them for pennies on the dollar (making them drop their more lucrative endorsements). Their store would have clothing with the athletes' names misspelled, combine two athletes' names together, wrong faces, sell clothes on the wrong section of the store (men's/women's), have wardrobe malfunctions during female fights, feature a map of Ireland for Conor McGregor but completely cut off northern Ireland. And they'd misspell giant words on the screen during their big press conferences.
- sngz 5y ago
  as someone who trains, that is one of the main reasons I stopped buying reebok. Most of my shorts and shoes were reebok prior to that deal, they were good for the price.
deleted 5y ago
[deleted]
is_true 5y ago
I was a fan of Reebok, they had really good price/quality items. But a couple of years ago they merged their ecommerce* with the one from Adidas and they increased the prices so almost everything was almost at the same price between the two brands. *in argentina

Rapzid 5y ago

Dang, I just bought a pair of Legacy Lifter IIs.. Maybe I should spring for a backup pair if they work out.

gnicholas 5y ago
When I found out Wilson was discontinuing my favorite tennis shoes, I bought eight pairs of them. I still have two pairs left, a decade later. No regrets!

dotcommand 5y ago

And Nike is currently valued at $270 billion. Where did reebok go wrong? What did Nike do right? Crazy how much more successful Nike was.

rabidonrails 5y ago
The Jordan brand itself is worth over 10B. Source: https://www.forbes.com/sites/kurtbadenhausen/2020/05/03/michael-jordans-1-billion-nike-endorsement-is-the-biggest-bargain-in-sports/?sh=731ab8216136 https://www.forbes.com/sites/kurtbadenhausen/2020/05/03/mich...
paxys 5y ago
One word – branding.
- amelius 5y ago
  Did reebok make a mistake?
- deleted 5y ago
  [deleted]
- ardit33 5y ago
  no, it is product. Adidas soccer shoes have been underperforming because they honestly suck. Even their shirts are pretty bad compared to Nike's drifit. Their classical Samba and Copa mundial, are just too heavy for modern use, and their new fabric/material lightweight shoes are just not as good as Nike's. Nike has innovated material wise, while Adidas hasn't, and it just has only been catching up with inferior me to products.
antisthenes 5y ago
Well, Reebok was just an underperforming subsidiary of Adidas, a company that's currently worth ~$70bn. So I don't think it's fair to just compare the 2. What Nike did right, though, is fully embrace the influencer culture, I think. That, and actually having some cool and unique designs. Reebok always felt like "just another shoewear brand" and their clothing lines were completely generic and uninspired.

riffic 5y ago

Unless the page hasn't been kept up to date, the founder of Reebok is still alive at the age of 86: https://en.wikipedia.org/wiki/Joseph_William_Foster https://en.wikipedia.org/wiki/Joseph_William_Foster some more info on the origins of the brand over there.