* Reebok unit has struggled since 2005 Adidas buyout
* Brand seeks boost by tie-ups with fitness programmes
* Quirky shoe launches grab attention
By Victoria Bryan
FRANKFURT, Oct 1 (Reuters) - Reebok is turning tosponsorship deals with prominent fitness groups to try to revivea venerable name that has faded since it became part ofGermany's Adidas sportswear group eight years ago.
The sports shoe and clothing brand is winning converts amonghardcore sports enthusiasts and aims to build on this support tomake up ground it has lost to rivals such as global marketleader Nike.
"They had a sticky patch, but now the shoes and gear aregood," said former triathlete Steve Antcliff who runs a gym inthe German city of Frankfurt offering CrossFit classes, forwhich Reebok produces training shorts, shoes and shirts.
The CrossFit regime of squats, lifts and rope-climbing hasbeen imported from the United States and is attracting devoteesin Europe.
Adidas hopes to revive Reebok after paying $3.8 billion forthe company in 2005 in order to take a larger slice of businessin the United States, the world's largest sportswear market withsales of $80 billion.
The deal instantly doubled Adidas' U.S. sales, and takingover Reebok's basketball and baseball contracts gave the Germancompany's famous three-stripes brand more exposure there.
But U.S.-headquartered Reebok has struggled. It lost acontract to supply the U.S. National Football League and was hitby a lockout at the National Hockey League. Its toning shoes(intended to tone the body as you walk) fell out of favour, andit was the victim of fraud in India.
After cutting the brand's 2015 sales target by a third lastyear, Adidas also took a 265 million euro ($358 million)writedown on its fourth quarter 2012 results.
Now it is promoting Reebok as a fitness brand via a range ofsponsorship deals and shoe launches. The strategy is not unlikea renewed emphasis on soccer deals, team sports and runningproducts now underway at rival Puma.
For Reebok, the effort appears to be paying off. When Adidaswarned on its profit last month, analysts were quick to notethat Reebok was, for once, not cited as a problem.
"It's confirmation that Reebok is doing better," CedricLecasble, an analyst at investment group Raymond James, toldReuters. "While it's not really impressive yet, the strategy ismore focused and I expect Reebok will be the strongest brand interms of sales growth in the third quarter."
Adidas CEO Herbert Hainer has predicted growth in comingyears.
"We're getting more and more confident about what we'redoing. Slowly but surely it's starting to pay off, as we can seein sales at our stores and in the acceptance of our collectionsfrom wholesalers around the world," he said when Adidasannounced its results in August.
FITNESS AND FASHION
Adidas says it needs several brands to cover the whole ofthe global sportswear market. The Adidas brand is big in soccerand basketball, while Reebok is focussed on fitness and fashion.
Following the CrossFit sponsorship deal, Reebok has linkedwith fitness group Les Mills - known for its Bodypump andBodycombat classes - and the Spartan Race series of obstaclecourse races.
Such tie-ups have a longer life cycle than other marketingstrategies, such as television or print advertisements, Nomuraanalyst Christopher Walker told Reuters.
"You do notice these things as a gym goer. You probably geta better return on those investments than you do for an advertthat appears on television for a month and is then forgotten."
Sector experts also applaud Adidas for stepping back fromgrowing sales at all costs in order to improve Reebok's grossprofit margin - a key measure of profitability in the sector.
After second quarter sales rose 11 percent and Reebok'sgross margin improved by 4.1 percentage points to 39.4 percentin the first half, more is expected for the third quarter.
While that's the highest gross margin for the period thatReebok has achieved since it was bought by Adidas, it's a longway off the 50.1 percent for the group as a whole in the firsthalf. Nike's rose 1.2 percent to 44.9 percent in its firstquarter.
Reebok accounts for around 10 percent of Adidas sales, while Reebok's share of the global $245 bln sportswear market hasslipped to 1.8 percent in 2012 from 2.1 percent in 2007,according to Euromonitor. Adidas is the world number two with a9.5 percent market share, behind Nike on 13.6 percent.
SHOES STAND OUT
Like its rivals, Reebok is shifting to higher pricedproducts that offer more performance elements to boostprofitability.
The average men's running shoe in the United States cost $69in 2012, a 6 percent increase on 2011, and year to date it'salso up 6 percent, said Matt Powell, an analyst from researchgroup SportsOneSource.
Since the 1980s, when its all-white 'Princess' sneakers weretop sellers in the United States, Reebok has been losing ground.In 2005, it was still second in the running market with a 12percent share behind Nike. Now it is the No. 5 behind Nike,Brooks, Asics and New Balance.
Trying to stand out in a crowded market, Reebok launched theATV 19+ all-terrain running shoe, at around $140 a pair.
Its knobbly sole led reviewers to call the shoe bizarre andridiculous but the attention could help to secure shelf space in the big U.S. chains.
The aim is get Reebok on consumers' minds again with asteady stream of product launches.
"Ideally they will then buy other Reebok products - sneakersfor the weekend or yoga pants," Reebok boss Matt O'Toole said inan interview with Handelsblatt newspaper last week.
- Consumer Discretionary