• U.S.

Rebound For Reebok

7 minute read
Ron Stodghill II

It’s hard to imagine that Paul Fireman has much in common with Allen Iverson. Fireman is the fleshy 57-year-old entrepreneur who plays golf and goes deep-sea fishing in what spare time he has. Iverson is the prince of the National Basketball Association, a coiled, 6-ft.-tall 26-year-old who spends his spare time playing video games and barking out gangsta rap music.

The common cause is Reebok International Ltd., Fireman’s shoe company, for which Iverson happens to be top pitchman. And the combination is just one reason why Reebok, written off two years ago as a dead maker of fad sneakers, is back. Since signing Iverson, Fireman has pulled down endorsement agreements from women’s tennis giant Venus Williams, sponsored two seasons of Survivor and inked a deal with the National Football League to be its exclusive supplier of uniforms and sideline apparel. But the real victory came this month when Fireman and NBA commissioner David Stern announced a 10-year arrangement that makes Reebok the official outfitter and marketer of game uniforms and warm-up gear for the entire NBA. “It was amazingly foolish for Nike to lose the NFL,” says Fireman. “But to lose the NBA–that’s heresy.”

For once in a long time, Fireman can afford to gloat–and even hint that Reebok might again have a shot at unseating Nike, the champion of footwear. The roster of top athletic talent and deals with the NFL and the NBA have turned Reebok from an also-ran into a contender for domination of the athletic-apparel market. Sure, Nike owns 36% of the U.S. sneaker business right now, compared with Reebok’s 11%. But the league deals represent a long-term threat to the Swoosh. For one thing, it means that if Michael Jordan returns to the game, no matter what he wears on his feet, he’ll be wearing a Reebok logo on his back. Such prospects have put Reebok in good favor with Wall Street; its stock is up more than 20% this year–and nearly 400% since January 2000.

Reebok’s fall and rise are a classic tale of the wonders of the entrepreneurial world. Fireman was selling sports equipment for his father’s business when in 1979, during a Chicago trade show, he became impressed by a hand-sewn leather sneaker called Reebok, named after a type of African gazelle and marketed by the heralded British athletic-shoe company J.W. Foster & Sons (a family-owned company that made the running shoes worn in the 1924 Olympics by the athletes celebrated in Chariots of Fire). Fireman bought the U.S. distribution rights to Reebok, and by 1984 had dropped out of college and was putting all his time into marketing his company’s soft, brightly colored leather sneakers. His timing was perfect. Reeboks became standard equipment for the suddenly booming women’s aerobics movement. And they became such a hip fashion icon that in 1986 Mick Jagger had to write Fireman directly to request a pair because they were sold out in London. And everywhere else.

But the late 1980s saw a backlash among management gurus against the idea of entrepreneurs running their own companies. Instead, professional managers came into vogue, so that at places like Apple, Lotus and even Ben & Jerry’s, the founding fathers stepped, or were eased, aside. At Reebok, which had begun an aggressive push into foreign markets, the board feared that Fireman might finally be in over his head.

Reebok’s woes began under the new cast of professional managers; there were five presidents in a decade. In an effort to broaden its customer base, Reebok in 1992 ventured out from its core recreational-fitness customers to make sneakers in more competitive sports categories like baseball, basketball and soccer, where such rivals as Nike, Adidas and New Balance were already slugging it out. “Women started feeling like we had lost track of them,” says David Perdue, who was brought in by Fireman this year to run Reebok’s main lines of business, sneakers and apparel. “And kids too found us not to be relevant.” As declining sales forced the company to cut back on R. and D., the styling of Reeboks across the board fell out of favor. John Shanley, an analyst with Wells Fargo Van Kasper, puts it this way: “Reebok shoes started looking like they belonged on the shelf of an orthopedic patient.”

Not anymore. Back in December 1999, Fireman–who with his wife Phyllis owns about a 20% stake in Reebok–won the board’s approval for a turnaround plan. At the heart of his strategy was a return to the company’s roots–sharp, provocative design. In addition, he began pushing innovation from his engineers. They came up with Reebok’s DMX technology, a sole containing numerous air channels for cushioned comfort, and Traxtar, a line of shoes for kids that contain built-in computer chips and motion sensors that measure the wearer’s running speed and jumping height. “Most people’s view of entrepreneurs is that their business eventually outgrows them,” says Reebok CFO Ken Watchmaker. “We’ve learned the hard way that Paul is the lifeblood of this business.”

Of course, Fireman knows that gizmos won’t bring down Nike– unless Reebok has a lot of well-marketed attitude to go with them. He calls this “the Cool Factor”–the mysterious marketing mojo that powers the $11 billion athletic-footwear market. That’s where Iverson comes in, with his tattoos, corn-rowed hair and ‘hood bravado. Allen is indispensably cool, which is why, a few months ago, when Reebok was the object of shrill protests over the obviously homophobic, misogynist lyrics in the basketball star’s debut rap song, Fireman stood by his man. “I didn’t agree with the song,” says Fireman, who conceived the Reebok Human Rights Awards. “But he had a right to sing it.”

The way Fireman sees it, the conventional approach to business is boring, so bring on the controversy, play the game by your own rules, be a real entrepreneur. Back in the early 1990s, when he was already earning a seven-figure salary and bonuses, he was denied membership at a country club near his New England home. Fireman assumed the club turned him down because he is Jewish. He didn’t fight for entry; he bought his own country club, decked out with an 18-hole golf course, an Olympic-size pool and tennis courts. That helps explain why he identifies with stars like Iverson and Williams, who fit the mold because they break it. They aren’t heroes like Tiger Woods, but they attract attention. And they have the stuff of greatness, which means big rewards if they’re on your team.

But attitude won’t be enough to down Nike. Fireman’s longtime rival Phil Knight still sits atop a company that commands a market share more than triple Reebok’s. And his troops declare that they turned down deals with the NFL and NBA because the licensing business has never been–and never will be–profitable. Instead, Nike’s path to the future has shifted from building brand awareness (it hardly needs that now) to gaining a stronger foothold in growth markets like soccer and golf. Adam Helfant, Nike’s global sports marketing director, estimates that $50 million in annual revenues will probably come from Reebok’s NBA deal–not worth Nike’s energy: “That’s two months’ worth of Jordan business for us.”

Reebok’s big-league deals will really start paying off in three years through a heightened profile among youth, about the time that Michael Jordan will have to hang up his high-tops for good. “You don’t get cool by writing checks,” says Fireman. The Reebok chief is counting on his big-league deals and projects like Diamond, a kind of high-end designer boutique within Reebok that aims to develop the trendsetting sneakers and street fashion of tomorrow. This time around, Paul Fireman’s state of rebellion may be here to stay for a while.

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