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Adidas (ADDYY)–owned sportswear brand Reebok has returned to profitability in the past few years — however, it's a far cry its glory days of the 1980s. Could a takeover by NBA Hall of Famer Shaquille O'Neal breathe new life into the company?
O'Neal recently joined Yahoo Finance's YFi PM and discussed the rumor of him possibly purchasing the company, which back in 1992 signed the size-22, number one draft pick to endorse Reebok’s “Shaq Attaq” in a $15 million deal.
"Of course there's always a chance. I know they're owned by Adidas and I think my people have had conversations with them, and hopefully, that could come to fruition one day, I would love to be a part owner of Reebok."
Big men don’t sell shoes
NPD Group vice president Matt Powell tells Yahoo Finance that for a short time in the mid-80s Reebok was Number 1 in terms of U.S. athletic footwear market share. Its success was off the back of the aerobics craze gripping the nation during that time — with the Reebok Princess sneakers among the brand’s top sellers.
Reebok was humming along until 1985, when a guy by the name of Michael Jordan burst onto the basketball scene. Sponsored by Nike (NKE), Jordan propelled the brand to unprecedented highs — and Reebok has lost out on market share ever since.
Since Nike already had Jordan, Reebok looked to the next up-and-coming NBA superstar to be the focal point of the brand: the 7’1 center from Louisiana State University best known as Shaq.
Reebok finally had an NBA superstar all to themselves, but ironically that did not translate into monster sales. Powell tells Yahoo Finance that big men typically don't sell shoes.
"When Reebok was making Shaq's shoes back in the day, they really didn't do that well. Big men typically don't sell shoes because ... they're big. They require a shoe that really has a very strong platform that will protect them from injury — and that platform makes the shoes look big and clunky."
Powell notes that part of the success of a basketball sneaker, especially among younger kids, is how it helps the wearer model his or her game after a player.
"Your average 12-year-old shooting around in the driveway can dream of being Steph Curry. But there's no way he's ever going to be Kevin Garnett or Dwight Howard or Shaq in terms of size. And, you can't emulate that game in a driveway."
In 2006, sportswear giant Adidas acquired Reebok for $3.8 billion, in what Powell calls “one of the worst acquisitions ever made.” The company had about 8% of the U.S. athletic footwear market share at the time, and by 2019 it has shrunk to less than 1%.
It’s been a struggle at times for Adidas to get Reebok back to profitability. However, Reebok revenues grew 4% in 2017 — and due to store consolidation and other cost-cutting measures like relocating the brand to a new Boston headquarters — the company turned a profit in 2018. Yet in Q1 of 2019, Adidas reported that sales of the Reebok brand declined 6% despite growth in its classic sneaker line.
Could Shaq help the brand bounce back? In addition to his legendary basketball career, he’s released four rap albums (one of which went platinum), appeared in several hit movies, and starred in his own TV reality shows. He’s also a basketball commentator, general manager of an e-gaming platform, an investor, and a real estate entrepreneur. Most recently, Shaq joined the board of Papa John’s and became its new spokesperson.
But despite trading his basketball sneakers for business shoes, Shaq still has a soft spot for Reebok.
"That's my favorite brand; I remember when Reebok was number 1 in the footwear market. I would love to be the one to get them back on track," he said to Yahoo Finance.
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.