adidas Group expects growth overseas to push sales at Reebok to roughly $5 billion over the next three to five years from their current $3 billion in revenues. The increases are expected to come from strong growth out of mostly developing markets in Asia/Pacific, Latin America, China, Russia and India. The U.S. is still expected to see challenges in 2007, but may see some improvement in the second half. Reebok expects only “modest” revenue growth of mid-single-digit percentages in the near-term with growth accelerating towards the end of the three- to five-year period.
This year alone, Reebok aims to open 90 stores in Russia and 200 in China. Longer term, Reebok is planning about 3,200 stores in China, India and Russia by 2010, as well as other expansion plans in Turkey, Poland, and other parts of eastern Europe.
Currently, 40% of Reebok's sales come from North America and 40% from Europe, with the balance from the Rest of the World. The company feels that this ratio will change so that the Rest of the World would represent a larger portion of overall sales. One way to do this will be to take over third party distribution agreements and go direct to countries like Brazil, Argentina, Switzerland and Spain. Management said the company is working to buy out those contracts, but that some may have to run their course through 2012.
They also expect to cut costs across the company by about $113 million this year. That cut will more than offset integration costs, resulting in an overall cost savings of about $13 million to $26 million.