Adidas 1997 Annual Report Download - page 11

Change
year-over-
DM m year
Total net sales 1,699 +65.6%
of which
Footwear 855 +46.9%
Apparel 834 +90.8%
Gross margin 38.3% +7.6 PP
Order backlog* 1,363 +100.5%
Change
year-over-
DM m year
Total net sales 4,127 +30.7%
of which
Footwear 1,561 +19.2%
Apparel 2,406 +42.0%
Gross margin 42.4% –1 PP
Order backlog* 1,735 +34.6%
9
Whilst the 1997 group tax rate again was
sheltered
by tax losses carried forward in the
German operations and, to a lesser extent, in
some other countries, it is anticipated that
remaining losses carried forward in Germany
will be used up during 1998.
MARKET SHARE IN EUROPE
FURTHER EXPANDED
Europe’s sporting goods markets again saw
only moderate growth in 1997. As in 1996,
above-average increases were recorded in
only a few markets such as the U.K. and
Spain.
In this overall climate, adidas managed to
increase net sales by 31% to DM 4,127 mil-
lion in total, thereby gaining further market
share in the key European markets. In Europe,
apparel sold better than footwear, as clearly
shown by growth of 42% in apparel com-
pared to 19% in footwear. Nevertheless, the
increase in footwear is still well above overall
market performance.
The highest growth rates for adidas were
achieved in the U.K. (+91%), Poland (+68%),
Spain (+63%) and Norway (+52%). In Ger-
many, where consumption in the private
sector is soft and the market for sporting goods
is more or less flat, net sales increased by
a further 11%, clearly demonstrating the
strength of the brand.
adidas subsidiaries in the Middle East, which
are included in Region Europe, generated
combined sales growth of 60%. With the
foundation of a new subsidiary in the United
Arab Emirates in mid 1997, adidas will be
able to leverage its brand recognition in this
market more effectively.
A well-developed sales network in Eastern
Europe has again proved to be a competitive
advantage, which is reflected by a combined
34% growth rate in 1997.
In October, the former joint venture company
in the Benelux countries was transformed
into a wholly-owned subsidiary, creating the
basis for further penetration of this market.
In order to further build and promote the
European activities, adidas signed new spon-
sorship and license agreements or extended
and upgraded the level of existing contracts
in 1997. For example, adidas will be a main
sponsor of the 1998 Soccer World Cup in
France.
DYNAMIC GROWTH
IN NORTH AMERICA
The North American market for branded ath-
letic footwear grew at about 10% in 1997. It
can be assumed that development of the
overall market for sporting goods was on a
comparable level. adidas, in contrast, in-
creased its sales by 66% in 1997, to DM 1.7
billion, clearly outperforming the general
market and raising its market share.
In addition to excellent volume growth, adidas
was also able to increase gross margin to
38.3%. This improvement is directly linked
to a favorable product mix, lower clearance
sales with higher margins achieved from
these clearance sales, and progress made in
increasing average price points.
In footwear, net sales in North America
increased 47% to DM 855 million in 1997.
The increase in footwear was primarily driven
by the running category, which clearly out-
performed the success of the preceding year.
Management Discussion and Analysis
* first half of 1998
* first half of 1998
Europe
North America