Adidas ends Reebok era with $2.5B sale to Authentic Brands | Hacker News Reader

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

reuters.com

70 pointskeiferski67 comments

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

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.

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.

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.

They were probably legit and intentionally more affordable: https://www.blackbusiness.com/2016/07/shaq-affordable-shoes-...

I too had the original Shaq Rebook pumps. Did you pick up one of these?

https://i.imgur.com/MLtw137.jpg

Another gimmick to mess around with. The instant inflation tool (has a CO2 cartridge in it). Circa 1992 it seemed cool as a young kid, fun to mess with for a couple of weeks during school - up to the point where you had to buy the replacement cartridges for something entirely unnecessary.

I had them. They were sold at Aldi for some reason, while they were still popular shoes. Didn't dislike them but the pump gimmick wore off quickly...

I remember those shoes. I bought one pair of Yao Ming signature shoes with that pump on. Those were nice, the only issue was that they had holes on the sole. I think the holes were designed for better ventilation and keeping your feet cool and dry, but the reality is if I walked on some water/rain my feet would immediately get wet.

I didn't have the original pumps, but I wanted a pair growing up. In '05 or '06 when they did a re-release I got a pair of the Pump 2.0s.

Never meet your heroes. Maybe the 2.0s were a different design, but they were incredibly disappointing. The pump pretty much didn't do anything. You could pump them while wearing them and not feel anything.

Just to preface this was I too was young when these came out but for some reason I never thought this was about making the shoes fit better...I thought the pump was there to make you JUMP higher.

I had a pair. They didn't fit any better than shoes tightened with laces.

That was back when Nike and Reebok were actually in competition.

Here's an interesting read about it: https://www.retaildive.com/news/reebok-was-meant-to-be-a-nik...

Dee Brown!

I had one of those pairs. Never used it. But apparently it was targeted at basketball players. I don’t play.

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?

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.

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

They own some brands which are still quite prominent as well, like Forever 21, Eddie Bauer, and Volcom

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).

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-purch...

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.

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.

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.

Can you clarify something that I never understood about this process, are they literally using the loan money to pay themselves?

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.

They bet they can cut costs (and hence quality) faster than customers lose trust in the brand.

Lucky for you, they just filed for IPO, so you can read their prospectus! 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.

Thank you!

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.

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.

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.

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.

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

Growing up in the 80s/90s. In my kid social groups. This is how I categorized the brands;

* Nikes were fashion mixed with athletics and performance and also high quality manufacturing. Add to it what they did with the branding and it's no wonder they are king of the hill. It was my preference then and now.

* Reebok was a Nike knock off with gimmicks like pumps. Pumps were awesome and super hyped at the time. It's the only Reebok I've ever owned and it popped while playing basketball at school :(

* Adidas were pure fashion. I have had a lot of Adidas in my life. But I've had way more Adidas clothing than shoes. Even within the shoe category, it's like the same pair I've had 20 times in different colors (you know the ones). I've had about 2 pairs of shoes that were not those.

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.

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

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!

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

some more info on the origins of the brand over there.

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.

The Jordan brand itself is worth over 10B.

Source: https://www.forbes.com/sites/kurtbadenhausen/2020/05/03/mich...

One word – branding.

Did reebok make a mistake?

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.

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.

"Where did Reebok go wrong" goes back long before Adidas bought them in the first place. Nike had won that battle before many influencers were even born.

Wasn't Reebok, "the physics behind the physiques" way back when?

Adidas bought them for more in 2005 than they sold them for today. Accounting for inflation, that's one hell of a discount.

Which means that wherever they went wrong before 2005, Adidas didn't really do anything to stop them from a downward trajectory.

> Nike had won that battle before many influencers were even born.

I wish I had your superpower of determining causality going back 30 years. Must be a hoot.

Product.... Nike is just innovating all the other legacy product makers, Rebook, Puma, and even Adidas. Especially in the soccer gear department, Nike is just outcompeting them.

Adidas, should have been first, since it is a European company, but they just slacked and their product line stagnated. They thought it was just a marketing problem, which it was not. Just changing their logo to something cooler, didn't make their products any better.

I was an Adidas fan, since they were the 'product of the west', of all the kids that were born under communism. They, and together with Puma made the best soccer shoes and gear. But over time, Nike started innovating hard, and releasing better engineered soccer shoes, and wear. (their Drifit Nikefit shirts are great).

they're just shoes

... thought Reebok and Adidas.

Shoes that have lead to software being developed to purchase all available inventory as fast as possible.

See exhibits A: https://www.nikeshoebot.com/ B: https://ganeshbot.com/ C:https://cybersole.io/

And there's a lot more out there

Top soccer cleats cost $250+. At that price point user expect some innovation (material wise), and not just simple sneakers.

Nike has been outcompeting Adidas/Reebok/Puma and others.

Ps. You can buy cheap soccer cleats at $40-50 price point. They are good just for casual users, but for semi-serious players, they just don't cut it as they tend to have inferior materials, and tend to be heavy and not good for people that want some edge.

Especially if you are an older player (35+ yo), the lighter shoes make a huge difference.

> What did Nike do right?

Luck and paying the right celebrities for endorsements? Also using sweatshops in the global south to extract superprofits [1]?

More and more I'm starting see branding as a way for big companies to slowly condition people to relate emotionally to some spectacle [2] (e.g. an exciting celebrity spokesperson in an advert), distracting them from an often exploitative and unsustainable production process.

How many people know about Rana Plaza? [3]

It's exciting to see new initiatives like 'Fixing Fashion' though (Alicia Minnaard and Dave Hakkens)[4].

[1] https://anticonquista.com/2019/06/29/revolutionary-reads-rev...

[2] https://en.wikipedia.org/wiki/The_Society_of_the_Spectacle

[3] https://youtu.be/OaGp5_Sfbss?t=31

[4] https://www.dazeddigital.com/fashion/article/52553/1/fixing-... - short intro: https://www.youtube.com/watch?v=buWRaffBdNM

Nike is the innovation leader. They have actual scientists and engineers on staff. The other companies mainly wait to see what Nike comes up with and then copy it. Or they just forego performance all together and just make lifestyle products.

1) I think that Nike is a brand that got endorsements right. Adidas was slow to jump on the big shoe deal and they have way fewer deals than Nike.

2) Adidas is a brand that I look to for more classic styles while Nike seems to always be pushing boundaries. Adidas did have a pretty good run with some modern takes(NMDs I liked a lot) but in general I dont like the new styles. Sometimes I like the new styles, but most of the time its just too much for me.

3) Nike was the first that Im aware of to do the user customized versions of their shoes. I think Adidas is doing it now, but IIRC it was less dynamic than Nike allowed.

4) Limited supplies- while this seems counterintuitive limiting the supply of the premium shoes encouraged the collectors to step in. Now instead of hoping the public accepts a $300 dollar sneaker, they jump out and buy as many as they can so they can list them on StockX.

Adidas passing on Jordan was clearly a dumb move.[0]

[0]https://www.nbcsports.com/chicago/bulls/michael-jordan-wante...

Their design, tech, and product was better. Even the name is cooler.

Never once was influenced by… endorsements, haha.

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

They have ~$1B cash on hand, so it’s only ~75% fraudulent at current valuation.

The 25% keep enough people fooled to get enough time to spend the ~$1B.

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.

The SPAC has >500mln in Private Investment in Public Equity (PIPE) commitments.

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".

I think that refers to ABG.

That’s the acquiring company

What is the relevance of this comparison?

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