Reebok 2009 Annual Report Download - page 23

TO OUR SHAREHOLDERS Interview with the CEO 19
HERBERT HAINER
A decline in gross margin of over three percentage points to
45.4% was the primary reason for the bottom-line decrease
we suffered in 2009. There were three main reasons for
this. Firstly, input costs increased sharply versus the
prior year as a consequence of record-high raw material
prices and significant wage cost pressures in 2008 which
affected our product costs for 2009. Equally important was
the devaluation of the Russian rouble, which depreciated
considerably versus the US dollar, our functional currency
for the Russian market. As we were not able to compensate
the top-line effect with price increases, this development
squeezed gross profit by over € 200 million. Thirdly, excess
inventories at the beginning of the year meant we had to
take extra measures to clear stock at lower margins. This
was due to our commitment to product orders prior to a full
understanding of the magnitude of the economic downturn
in late 2008.
The decisive steps we started to take in late 2008 and
during 2009 to increase operational efficiency have certainly
helped us mitigate some of these effects. But at the same
time, we had to get the balance right between cutting costs
and maintaining investments in areas such as controlled
space, promotion partnerships and product innovation to
support future growth. I believe we definitely found the right
balance in 2009, and we will see material benefits from our
actions in 2010 and beyond.
HERBERT HAINER
Although our Group revenues declined 6% currency-neutral
in 2009, I believe all of our brands have made the most out of
the difficult environment, with each in some way enhancing
its market position. For adidas, in the year we celebrated the
60th anniversary of the brand, the key highlight was achieving
9% currency-neutral revenue growth in our adidas Sport Style
division to a new record sales level of € 1.65 billion. In addition,
we again showed our prowess in football as we successfully
launched many of our FIFA World Cup™ initiatives in the fourth
quarter, which had an immediate impact driving football sales
up 27% currency-neutral for the quarter. At Reebok, after
four years of hard work, we are finally seeing the first real
commercial successes from our product and creative efforts
to reposition the brand. We are leading the industry in the
emerging toning category which experts are tipping as the
next billion dollar category. Reebok has made a big statement
here with the introduction of the EasyTone™. In 2009 we over-
achieved our sales target three-fold, and we expect to sell
several million pairs of toning footwear in 2010. At TaylorMade,
our unrivalled innovation pipeline has again paid off to
tremendous success. We have extended our market share lead
in metalwoods and taken significant market share from our
major competitors in a host of categories, most notably in irons
where we are now the market leader in the United States.
QUESTION
Profitability declined significantly
in 2009. Can you outline the main
reasons for this?
QUESTION
What were the key highlights at your
major brands in 2009?