Adidas—Will Restructuring Its Business Lineup Allow It to
Adidas—Will Restructuring Its Business Lineup Allow It to
Catch Nike?
Overview
Adidas’ 1998 acquisition of diversified sporting goods producer Salomon was expected to allow the athletic footwear company to vault over Nike to become the leader of the global sporting goods industry. Salomon had several businesses that adidas management viewed as attractive—its Salomon ski division was the leading producer of ski equipment; TaylorMade Golf was the second largest seller of golf equipment; and Mavic was the leading producer of high-performance bicycle wheels and rims. Other Salomon businesses included Bonfire snowboard apparel and ClichE9 skateboard equipment. Adidas had been the best-selling brand of sporting goods throughout the 1960s and 1970s, but Nike had overtaken adidas as leader of the athletic footwear industry in the late-1980s and had grown to three times the size of adidas by 1997.
Almost as soon as the deal was consummated, it looked doubtful that the 801.5 billion acquisition of Salomon would boost the corporation’s performance. Chief concerns with the acquisition were the declining attractiveness of the winter sports industry and integration problems between the adidas footwear and apparel business and Salomon’s business units. Not until 2003, five years after the acquisition, had adidas’ earnings per share returned to the level that shareholders enjoyed in 1997. In addition, the company’s stock price failed to return to its 1998 trading range until 2004. The Salomon winter sports business had contributed very little operating profit to the company’s overall financial performance since its acquisition and the TaylorMade-adidas Golf division had struggled at various times to deliver good earnings. However, TaylorMade seemed to have turned the corner in 2005 with sales and operating earnings improving by 12% and 185%, respectively, during the first six months of 2005. Salomon’s operating loss of 8054 million euros during the first six months of 2005
Catch Nike?
Overview
Adidas’ 1998 acquisition of diversified sporting goods producer Salomon was expected to allow the athletic footwear company to vault over Nike to become the leader of the global sporting goods industry. Salomon had several businesses that adidas management viewed as attractive—its Salomon ski division was the leading producer of ski equipment; TaylorMade Golf was the second largest seller of golf equipment; and Mavic was the leading producer of high-performance bicycle wheels and rims. Other Salomon businesses included Bonfire snowboard apparel and ClichE9 skateboard equipment. Adidas had been the best-selling brand of sporting goods throughout the 1960s and 1970s, but Nike had overtaken adidas as leader of the athletic footwear industry in the late-1980s and had grown to three times the size of adidas by 1997.
Almost as soon as the deal was consummated, it looked doubtful that the 801.5 billion acquisition of Salomon would boost the corporation’s performance. Chief concerns with the acquisition were the declining attractiveness of the winter sports industry and integration problems between the adidas footwear and apparel business and Salomon’s business units. Not until 2003, five years after the acquisition, had adidas’ earnings per share returned to the level that shareholders enjoyed in 1997. In addition, the company’s stock price failed to return to its 1998 trading range until 2004. The Salomon winter sports business had contributed very little operating profit to the company’s overall financial performance since its acquisition and the TaylorMade-adidas Golf division had struggled at various times to deliver good earnings. However, TaylorMade seemed to have turned the corner in 2005 with sales and operating earnings improving by 12% and 185%, respectively, during the first six months of 2005. Salomon’s operating loss of 8054 million euros during the first six months of 2005