Adidas 2000 Annual Report Download - page 39

adidas-Salomon ANNUAL REPORT 2000
35
Management Discussion & Analysis
Based on market research from Sports Tracking Europe, the
adidas brand again increased its share of the total footwear
market in 2000 by about 1.0 percentage points to around 27%.
Apparel sales for adidas in Europe were virtually flat at
c1.3 billion. Although the market remains challenging as more
and more brands from the leisure and fashion sector enter the
market for sports-oriented customers, order backlogs at the
end of the year, however, suggest the performance will improve
in 2001.
Hardware sales in Europe increased 9% to c117 million. This
increase is typical for years with major sporting events such as
the EURO 2000TM soccer championships.
Gross Margin Stable at adidas in Europe
The gross margin in Europe was 42.0%, down only 0.1 per-
centage points versus 1999 despite strong currency pressure.
This high level was maintained as the result of increased own-
retail activities as well as lower clearance sales on products
with higher margins.
Further Increase in European Sales Anticipated for 2001
Based on the 2000 year-end order situation, which showed
a year-over-year improvement of 8%, adidas anticipates
single-digit sales growth in Europe for 2001. Order backlogs
indicate positive trends in most key countries, led by the United
Kingdom, Austria and Switzerland, each with orders up over
15%. Increased segmentation and customized offerings are
planned for retail, as well as continued streamlining of organiza-
tional structures, processes and systems.
adidas Sales in North America Down Slightly in 2000
2000 sales in North America were c1.4 billion, down 1% com-
pared to the prior year. This decline, however, would have been
greater without positive currency effects. The reasons for the
decline were both market and company related. In 2000,
adidas was confronted with a difficult retail environment and
brand positioning challenges in North America. The floor space
consolidation trend among retailers continued in 2000, which
hampered demand for adidas and other sports products.
While adidas believes this consolidation will continue in 2001,
the market appears much healthier than it was a year ago.
Reaction to our 2000 collection was mixed, which caused the
product to be less competitive in certain categories. On the
positive side, adidas own-retail sales increased 41% in 2000
as a result of new store openings.
Footwear sales improved 8% to c913 million in 2000, despite
strong growth from niche brands. While sales actually decreased
in currency-neutral terms, the basketball, kids, adventure and
cleated categories developed strongly. The negative impact
on sales in the North American markets came primarily from
apparel. Textile sales declined by 14% to c505 million, reflect-
ing the shift in consumer demand away from athletic apparel to
leisure and fashion-oriented brands. Declines were experienced
in all areas except the performance categories for tennis,
running and swimming.
Gross Margin Declines in North America
The gross margin in North America fell 2.5 percentage points
versus 1999 to 36.1%. This was a result of pricing pressures
from the market that could not be fully compensated for by
the positive impact from own-retail sales and better clearance
margins.
adidas in Europe
(euros in millions) Change year-
2000 over-year
Net sales 2,427 3%
Gross margin 42.0% (0.1pp)
Order backlogs* 8%
* At year-end
adidas in North America
(euros in millions) Change year-
2000 over-year
Net sales 1,430 (1%)
Gross margin 36.1% (2.5pp)
Order backlogs* (12%)
* At year-end
adidas Sales by Region
(euros in millions) Variance
2000 1999 in %
Europe 2,427 2,353 3
North America 1,430 1,444 (1)
Asia 645 500 29
Latin America 169 126 34
Total* 4,672 4,427 6
* Difference in total due to HQ/Consolidation