With its current drive and the upcoming international sports events, the Adidas Group is confident of reaching a sales increase at a mid to high single-digit level in constant currencies this year. This rise should be driven by strong performance in emerging markets and the expansion of its own retail business.
| Net Sales € in millions | ||||
| 2011 | 2010 | Change | Change | |
| Wholesale | 8,971 | 8,181 | 9.7 | 11.0 |
| Retail | 2,793 | 2,389 | 16.9 | 19.7 |
| Other Businesses | 1,580 | 1,420 | 11.3 | 12.7 |
| Western Europe | 3,922 | 3,543 | 10.7 | 10.3 |
| European Emerging Markets | 1,597 | 1,385 | 15.3 | 22.3 |
| North America | 3,102 | 2,805 | 10.6 | 15.3 |
| Greater China | 1,229 | 1,000 | 22.9 | 23.4 |
| Other Asian Markets | 2,125 | 1,972 | 7.8 | 5.1 |
| Latin America | 1,369 | 1,285 | 6.5 | 9.7 |
| Adidas | 9,867 | 8,714 | 13.2 | 14.5 |
| Reebok | 1,962 | 1,913 | 2.5 | 5.8 |
| TaylorMade-adidas Golf | 1044 | 909 | 14.8 | 15.9 |
| Rockport | 261 | 252 | 3.4 | 6.3 |
| Reebok-CCM Hockey | 210 | 200 | 4.9 | 5.9 |
| Total | 13,344 | 11,990 | 11 | 13 |
Adidas is bullish about the brand's exposure in the Uefa championships this coming summer as the brand will be its sponsor. It will also be outfitting six prominent teams, including Spain and Germany, as well as one of the hosts, the Ukrainian team. The group reiterated its target to reach sales of more than €1.5 billion with football products this year. It will rely on sales of the Tango 12 match ball, as well as the new version of the Predator boot, to be launched in June, and another Adizero F50 Mi Coach.
Sales of the Adidas brand are also expected to continue increasing in the running category, fueled by a new technology that is meant to reproduce the natural movement of the foot. For this purpose, Adidas will be introducing new TechFit uppers and outsoles.
On the other hand, the group warned that the Reebok brand's sales should decline this year, due to the end of its licensing deal with the NFL, as well as the transfer of its US-related NHL business to Reebok CCM Hockey.
Still, the company will continue to invest in the Reebok brand and its focus on fitness, with a campaign titled “the sport of fitness has arrived.” It will also build on a marketing partnership with CrossFit, a fitness community that promotes a healthy lifestyle. It has an estimated 300,000 members in 57 countries using 3,000 CrossFit fitness studios, and many of them are Reebok-branded. Reebok also sells a CrossFit range and it sponsors the Reebok CrossFit Games, which drew 26,000 participants last year.
Herbert Hainer, chief executive of the Adidas Group, is confident that it will continue to expand in North America, partly due to the fact that its distribution mix has markedly improved. He said that the group gained market share in high-quality malls and sporting goods stores, and that it started to diversify with directional regional accounts.
The outlook is equally upbeat for China, where consumers appear to be turning away from some of the local brands in favor of both Adidas and Nike. Unlike the Chinese brands, some of which have suffered from excess inventories and had to embark on distribution clean-ups, Adidas said its retail inventories were healthy. It has been working intensely with retail partners to make sure it would obtain regular feedback on sell-through, and replenish accordingly (an extensive update on the sports market in China, including details on the progress of the leading brands, will appear in our upcoming issues).
As for Russia, the third attack market picked by the Adidas group, it should develop even faster than expected. Hainer said it should already achieve sales of more than €1 billion in Russia this year – one year earlier than planned.
On the retail side, the group expects to open 100 to 150 stores for the Adidas and Reebok brands this year. The openings are expected to deliver about half of the growth in the group's retail sales, which are budgeted to expand at a low-teens rate.
The retail expansion will also involve the Neo format, which was launched in emerging markets as a cheaper version of Originals but has moved toward a fast-fashion format. The company itself runs 29 of these stores in Russia and it has opened another five Neo stores in Germany. It intends to open another five, to properly try out the format in Germany, and it might then decide to launch it in other European markets.
These Neo stores are relatively small, with a surface of 200 to 250 square meters. They are fitted with some of the latest in retail technology, such as Radio Frequency Identification (RFID) – a technique that enables Adidas to follow products from production to the shelf through radio frequency. In other words, it allows the company to check out at any time where the product actually is, as a means to further improve its daily product flow.
The group's gross margin is expected to remain stable, as it will continue to be affected by high input costs, particularly in the first half of the year. On the other hand, it will also continue to benefit from more sales in its own stores and in emerging markets. Sales and marketing expenses as a percentage of sales should remain stable in spite of the international events. The group's operating margin is budgeted to increase slightly to approach 8.0 percent for the year. The net income should break the magin $1 billion threshold, as earnings per share are expected to go up by 10 to 15 percent.
