Adidas??”Will Restructuring Its Business Lineup Allow It to Essay Example
In 1998, Adidas acquired Salomon with the aim of surpassing Nike and becoming the leading global sporting goods company. Adidas acknowledged the potential in Salomon's various businesses, such as its ski division, TaylorMade Golf, Mavic, Bonfire snowboard apparel, and ClichE9 skateboard equipment. Despite being the top-selling brand in the 1960s and 1970s, Adidas was overtaken by Nike in the late 1980s, with Nike growing three times bigger than Adidas by 1997. However, doubts about Adidas' ability to achieve its goal arose shortly after the acquisition.
The corporation's performance would be improved by the $5 billion acquisition of Salomon. However, concerns arose about the decreasing appeal of the winter sports industry and challenges in integrating adidas footwear and apparel business with Salomon's business units. It took five years, until 2003, for adidas' earnings per share to match what sharehold
...ers had experienced in 1997. Additionally, it was not until 2004 that the company's stock price returned to its trading range from 1998.
Despite the TaylorMade-adidas Golf division struggling to generate good earnings and the Salomon winter sports business not contributing significantly to the company's overall financial performance, there have been signs of improvement. In 2005, TaylorMade experienced a 12% increase in sales and an impressive 185% increase in operating earnings during the first six months. Conversely, Salomon's operating loss during this period grew by 7% compared to the same period in 2004, totaling 8054 million euros. Consequently, the company announced its intention to sell off its winter sports brands and Mavic bicycle components business before year-end.
In May 2005, Amer Sports Corp., the manufacturer of Atomic skis and Wilson sporting goods, decided to purchase the winter sports
and bicycle wheel businesses for a total of 80485 million. In October 2005, Adidas declared its intention to acquire Reebok International Ltd. for 803.1 billion ($3).
The final part of a restructuring plan for the company was to concentrate on athletic footwear and apparel as well as golf equipment by 2006. Reebok also included Rockport footwear, Ralph Lauren footwear, Greg Norman apparel, and CCM, Koho, and Jofa hockey equipment in their product lineup. In 2004, Rockport and Reebok’s hockey brands generated $377.6 million and $146. million in revenue, contributing to the company’s total sales of $3.8 billion.
Reebok did not reveal the sales impact from its Ralph Lauren or Greg Norman product lines. The purchase would raise adidas' annual revenues to approximately $11 billion and enhance its position in North America, which represented 50% of the worldwide sporting goods market. Moreover, this combination of businesses would bring adidas closer to surpassing Nike, whose revenues in 2004 totaled $13.7 billion.
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