(Bloomberg) -- Adidas AG will scale back its struggling Reebok unit, highlighting the urgency being applied by new Chief Executive Officer Kasper Rorsted to turn around a business that's weighed on the sporting-goods maker for years.
The former Henkel leader, a month into the job since replacing longtime CEO Herbert Hainer, on Thursday unveiled plans to overhaul the brand, including relocating its head office, closing stores and trimming 150 jobs. He also predicted that the German company will announce the long-awaited sale of its ailing golf unit by the end of the year.
“We're not going to have eternal patience for seeing results,” Rorsted said on a conference call when asked about the turnaround of Reebok, the athletic shoemaker that has weighed on Adidas since being acquired a decade ago.
Reebok and the TaylorMade golf division have long held back Adidas's performance while its mainstay three-striped sneakers are firmly back in fashion. Adidas-brand sales jumped 20 percent excluding currency swings in the third quarter, far outpacing Reebok's 7 percent growth. Concern over a decline in the gross margin caused by currency swings and in-store spending sent the shares down as much as 8.2 percent.
Rorsted's plan for Reebok includes moving the business to central Boston from outlying Canton, Massachusetts next year. The 650 Reebok staff in Canton will relocate, while about half of the 300 employees there who do some work for Reebok will transfer to Portland, Oregon or Europe. The remaining 150 positions will be eliminated.
One-time Charge
The Danish-born CEO also will speed up plans to scale back Reebok's store network and focus on growing sales with wholesale partners. The number of U.S. outlet stores will be halved, he said. The revamp will involve one-time charges of about 30 million euros, the company said, reducing operating profit by about 20 million euros in the fourth quarter.
Another problem that Rorsted is close to solving is the future of the golf unit, where sales are now rising after years of decline. The search for a buyer, which started in August 2015, will probably be concluded by the end of the year, he said.
Adidas's core business is gaining share at the expense of Under Armour Inc., which last month forecast its worst growth since 2009, and Nike Inc., whose shares fell to their lowest price in more than a year this week on a slowdown in the U.S.
- Group revenue rose 14 percent to 5.4 billion euros in the quarter, operating profit increased 12 percent to 563 million euros
- Gross margin slipped 0.9 percentage points to 47.6 percent
- Operating expenses rose 12 percent to 2.1 billion euros
To contact the reporters on this story: Aaron Ricadela in Frankfurt at aricadela@bloomberg.net, Paul Jarvis in London at pjarvis@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Thomas Mulier
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