- Deal: ABFRL has signed a long-term licensing agreement with ABG (NY based) to acquire exclusive rights to sell the Rebook brand in India and other ASEAN countries.
- Rebook globally : So just to give you a sense of the global scale of these large sports footwear brands: Nike US$35bn in sales, Adidas US$20bn, Rebook US$2bn (see chart below for how the global sales have evolved).
- Rebook was a thriving brand until the late 90s, and later, ran into trouble. Adidas acquired Rebook in 2005 to turn it around but after failing to do so for 15 years, divested it very recently to ABG (Authentic Brands Group). A quick search suggests they sold at a loss.
- ABG is a US-based brands conglomerate. It seems they are looking to sell out non-core non-US parts of Rebook on a piecemeal basis.
- By buying Rebook, ABFRL hopes to turn around and scale a brand which even Adidas failed to do. The deal itself looks cheap, Rs400cr sales bought for Rs100cr. Rebook topline has been growing mid-single-digit which is nothing to write home about. Though I do not have the numbers, my sense is Adidas, Nike and Puma do about Rs800-100cr in sales each and may be faster growing. Never ignore the fact that they get access to the latest global lunches, fast fashion trends and leverage on global brand equity (need very deep pockets). I am not sure of the profitability for Rebook India, but this may be either very low margin or even loss-making for now. Why else would ABG sell it so cheap to ABFRL.
- Why has ABFRL bought it then ? 1) Allows them to enter the branded footwear category. They have certainly decided to enter as many categories as possible, the most recent being ethnic wear. 2) Rebook is an indirect play on athleisure wear (currently play this through VH innerwear), which now makes a fair share for their traditionally footwear brands. My sense is ABFRL would now expand EBOs aggressively and work on reducing the cost structure by using their scale and reach. This will add about 5% to the CONSOL. topline and about Rs100cr to net debt taking it back to Rs1000cr, not a major worry but investors would have rather liked to become net debt-free first. The concern remains that are trying to do too much too fast and across multiple categories, segments, and price points. Sales can come but ROCE, dilution, leverage would remain concerns over the next year or two. Also, a case in point here is ABFRL’s acquisition of Forever 21 in India, where the intent was to catch up with Zara and H&M. That has not gone well and the brand struggled for years until very recently when some green shoots have emerged. Zara and H&M do sales of ~Rs2000cr each with Forever 21 still below Rs200cr with anemic growth and has barely reached breakeven after 5 years with ABFRL.
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