Reebok 2010 Annual Report Download

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Annual Report 2010

Table of contents

  • Page 1
    Annual Report 2010

  • Page 2
    ...brand sales increase 12% - Other Businesses sales increase 2% - TaylorMade-adidas Golf sales increase 1% Gross margin: 47.8% Operating margin: 7.5% Operating working capital as a percentage of sales improves to 20.8% Capital expenditure: â,¬ 269 million 2010 Outlook 2011 Low- to mid-single-digit...

  • Page 3
    ... current assets Working capital Net borrowings Shareholders' equity Capital expenditure Net cash generated from operating activities Per Share of Common Stock (â,¬) Basic earnings Diluted earnings Operating cash ï¬,ow Dividend Share price at year-end Other (at year-end) Number of employees Number...

  • Page 4
    Group Brands 2010

  • Page 5
    ... to achieve success, from the world's biggest sporting events to the finest details in our latest product innovations. We know how it all fits together. Our employees, athletes and products together with our brands, heritage, talents and aspirations. Our strengths. Our passion. One Team. Thinking...

  • Page 6
    ... Group Management Report - Our Group Corporate Mission Statement ...Our Brands ...Major Locations and Promotion Partnerships ...Group Strategy ...Global Sales Strategy ...Wholesale ...Retail ...eCommerce ...Global Brands Strategy ...adidas ...Reebok ...Other Businesses Strategy ...TaylorMade-adidas...

  • Page 7
    Group Management Report - Financial Review Internal Group Management System ...Group Business Performance ...Economic and Sector Development ...Income Statement ...Statement of Financial Position and Statement of Cash Flows ...Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 8
    adidas Running Campaign Running is the soul of sport. In 2011, consumers will see adidas running in a new way: young, social, bright and fun - targeting all "next generation athletes". All athletes run either to get better for their sport or just to enjoy the experience of running. adidas helps them...

  • Page 9
    To Our Shareholders Operational and Sporting Highlights 2010 ...Interview with the CEO ...Executive Board ...Supervisory Board ...Supervisory Board Report ...Corporate Governance Report including the Declaration on Corporate Governance ...Compensation Report ...Our Share ...6 10 16 18 20 25 30 34 ...

  • Page 10
    ... training shoe ZigTech. 06.02. Reebok launches its "Reefreshed" website www.reebok.com and kicks off the new "Ree" marketing campaign with TV spots highlighting the two key products, EasyTone and ZigTech. 12.02. Olympic and World Champion gold medallist and former Canadian women's ice-hockey...

  • Page 11
    ...of the event. In the 2010 World Cup, adidas equips more than 200 players and 12 teams Picture 12. 22.06. adidas miCoach, the personal coaching and training system, wins a prestigious Stevie Award in the 2010 American Business Awards. 23.06. Reebok announces its partnership with basketball phenomenon...

  • Page 12
    .../summer 2011 collection in New York. 16.09. Reebok and Fitness First announce a long-term partnership in Germany. 22.09. adidas Basketball unveils the NBA Revolution 30 collection, the lightest and most technologically advanced NBA uniforms, at the NBA Store in New York City. 26.09. adidas athlete...

  • Page 13
    ... Group presents its 2015 strategic business plan: Route 2015. 11.11. adidas opens its first Italian ï¬,agship store for Y-3 in Milan Picture 08. 17.11. Reebok launches a new EasyTone commercial, introducing the innovative toning apparel line which is designed to create resistance and helps tone key...

  • Page 14
    ...twice the prior year level. In 2010, the adidas Group also outlined its most comprehensive and aligned strategic plan to date - Route 2015. Through its premium brands, leadership in innovation and strong financial position, the Group is expecting a mid- to high-single-digit top-line increase and 10...

  • Page 15
    ... these initiatives together, Reebok was among the top three selling footwear brands during the Christmas period in the USA. We also made sure that our Other Businesses had the right support to reach their goals. No more so than TaylorMade-adidas Golf. Sales grew to â,¬ 909 million in 2010. And in...

  • Page 16
    ... is predominantly own retail, comparable store sales increased 25%. And we extended our commanding market share lead in Russia, with Reebok now the number two sporting goods brand behind adidas. In Other Asian Markets and Latin America, sales increased 6% and 14% respectively in 2010. Even in Japan...

  • Page 17
    ... strategic business plan this Group has ever created and is based on our long-term mission to be the global leader in the sporting goods industry. This strategy starts and ends with the consumer. Our key aspiration in the plan is to outperform total market growth, both GDP and sporting goods market...

  • Page 18
    ...all 680 Finish Line stores in the USA with ZigTech imagery for four weeks. In 2011, we are also gearing up for our third key technology platform launch - RealFlex. RealFlex promotes natural movement and is equally striking in terms of design and functionality as Reebok's toning and Zig platforms. In...

  • Page 19
    ... we can continue to capture share in an improving consumer environment. We forecast our Group sales to increase at a mid- to high-single-digit rate on a currency-neutral basis and to reach new record highs in 2011. Group sales growth will be driven by all segments and brands, as well as by expansion...

  • Page 20
    1 2 3 4 16 To Our Shareholders Executive Board

  • Page 21
    ... Germany, in 1957. After obtaining a degree in business studies, he started his career at GfK, a German consumer research institute. In 1983, Erich Stamminger joined adidas Germany. He served in numerous marketing positions before becoming Managing Director for Germany and later Europe and Asia/Paci...

  • Page 22
    ..., Headquarters Nuremberg, Nuremberg, Germany Deputy Chairman of the Supervisory Board 3), CeramTec AG, Plochingen, Germany Alexander Popov Chairman, RFSO "Lokomotiv", Moscow, Russia Hans Ruprecht 1) Sales Director Customer Service, Market Central, adidas AG 18 To Our Shareholders Supervisory...

  • Page 23
    ... the Executive Board of adidas AG Member of the Board of Directors, Beleta Worldwide Ltd., Guernsey, Channel Islands 4) 1) Employee representative. 2) Since January 1, 2010; formerly Senior Manager Quality Analysis & Reporting, Global Operations, adidas AG. 3) Since May 18, 2010; formerly Member of...

  • Page 24
    ... recovery and success. For the adidas Group, this was a year of major sports events such as the FIFA World Cup and the Olympic Winter Games. Furthermore, thanks to innovative products and marketing campaigns, all of our brands met with a very positive response among our consumers. The Group grew in...

  • Page 25
    ... Annual General Meeting, we dealt comprehensively with the budget and investment plan for 2010, which we subsequently approved. At our May 5, 2010 meeting, the Executive Board reported in detail on the current business development and the financial situation of the Group after the first quarter...

  • Page 26
    ...rst half year, which were well above market expectations, as well as the anticipated development of business for the remainder of 2010. Moreover, the Executive Board extensively reported on the IT strategy of the Group and we dealt in detail with the new provisions of the German Corporate Governance...

  • Page 27
    ... members focused on the examination of the annual financial statements and the consolidated financial statements including the Management Reports for 2009 as well as the discussion of the audit reports with the auditor and the detailed examination of the first half year report and quarterly...

  • Page 28
    ... sporting goods industry. Expression of thanks The Supervisory Board wishes to express its appreciation of the tremendous personal dedication, the performance and the ongoing commitment of the Executive Board, the management of the Group companies, the Works Council and all adidas Group employees...

  • Page 29
    ... company nor do they have business or personal relations with adidas AG or the Executive Board. Further information on Corporate Governance Additional information on the following topics can be found on our website under www.adidas-Group.com/ corporate_governance: - Articles of Association - Rules...

  • Page 30
    ... and advises the Executive Board in matters relating to management of the company. The Executive Board reports to the Supervisory Board regularly, expeditiously and comprehensively on business development and planning as well as the risk situation and coordinates the strategy of the company and its...

  • Page 31
    ... of the Supervisory Board Herbert Hainer Chief Executive Officer The above Declaration of Compliance dated February 11, 2011 has been published on our website, where it can be downloaded at www.adidas-Group.com/corporate_governance. To Our Shareholders Corporate Governance Report including the...

  • Page 32
    ... of our management Additional information on the following topics can be found on our website under www.adidas-Group.com: - Code of Conduct - Sustainability - Social commitment - Information and documents on the Annual General Meeting - Directors' Dealings - Accounting and Annual Audit 28...

  • Page 33
    ... to management in good time and that appropriate measures for minimising the risks are developed and initiated see Risk and Opportunity Report, p. 158. Share ownership of the Executive Board and Supervisory Board At the end of the 2010 financial year, the total number of shares held by the members...

  • Page 34
    ...nancial year in line with the short-term development of the company. It is determined by the Supervisory Board in a two-stage process: At the beginning of the 2010 financial year, the Supervisory Board determined as performance criteria both the business-related criteria (increase in income before...

  • Page 35
    ...respective Executive Board member. Executive Board Total Compensation in 2010 â,¬ in thousands Performancerelated compensation component Performance Bonus Compensation component with long-term incentive effect 1) LTIP Bonus 2009/2011 01 Non-performance-related compensation components Annual fixed...

  • Page 36
    ... Corporate Governance Code. This deductible amounts to 10% of the damage up to a maximum of one and a half times the fixed annual salary for all cases of damage within one financial year. Payments to former members of the Executive Board and their surviving dependants In the 2010 financial year...

  • Page 37
    ... of one and a half times the fixed annual compensation for all cases of damage within one financial year in accordance with the recommendations of the German Corporate Governance Code. Compensation of the Supervisory Board in â,¬ 2010 03 2009 Members of the Supervisory Board as at December 31...

  • Page 38
    ... corporate earnings announcements for the first half of 2010 and the better than expected outcome of the European bank stress test. Signs of sustained liberal US Federal Reserve policies also contributed to the positive development. In the fourth quarter, global equity markets continued to increase...

  • Page 39
    ...the adidas Group's strategic business plan "Route 2015" on November 8, market participants expressed their confidence in our Group's medium- to long-term strategic goals. This was reï¬,ected in further share price gains during the last weeks of the year. As a result, the adidas AG share closed 2010...

  • Page 40
    ... among American investors. In January 2010, we removed The Bank of New York Mellon as depositary bank and appointed Deutsche Bank Trust Company Americas to run our Level 1 ADR Programme. Our Level 1 ADR closed the year at US $ 32.60, representing an increase of 20% versus the prior year (2009: US...

  • Page 41
    ... The print version of our 2009 Annual Report also achieved high recognition, taking fifth place in the DAX-30 ranking by Manager Magazin. Share ratios at a glance 2010 08 2009 Basic earnings per share Diluted earnings per share Operating cash ï¬,ow per share Year-end price 2.71 2.71 4.28 48...

  • Page 42
    Originals Denim Campaign In spring/summer 2011, the adidas Originals Blue collection presents a fashionable streetwear range with contemporary looks for men and women. Completing the holistic offer with styles from head to toe, the first in-house Originals denim line is presented together with a ...

  • Page 43
    Fit for the Future adidas ...Reebok ...TaylorMade-adidas Golf ...Reebok-CCM Hockey ...Rockport ...40 58 66 70 72 Fit for the Future

  • Page 44
    ... often ask me how I manage to combine sport with a full-time job. I'm committed to both with heart and soul and always give my best. And I'm proud to be part of a brand that writes the stories of top athletes. Because sport is my passion. 40 Fit for the Future adidas Sport Performance Running

  • Page 45
    ... about adidas running and training: www.adidas.com/running www.adidas.com/training adiStar Ride 3 adidas presents the latest version of its high-performance adiStar running shoe - the adiStar Ride 3. This shoe fuses advanced technologies with luxurious workmanship. With its midfoot support element...

  • Page 46
    ...the goal of making athletes better. All those interested can sign up at www.miCoach.com, choose their gear, choose their plans, and get coached. Fluid Trainer Light In 2010, adidas successfully launched the versatile and comfortable Fluid Trainer - a new product concept in an ergonomic design which...

  • Page 47
    ... - simply be better. The equipment is perfect and you are focused, striving for that perfect performance. It doesn't matter if you've already won six events if you fail in the seventh. Clench your teeth for the last time and excel once again: only another 800m between you and the top spot on the...

  • Page 48
    ... had with me was a prototype of the new adiZero F50 shoe and I wanted to get his opinion. Messi became a part of the team and together we developed the most successful football boot of the 2010 FIFA World Cup in South Africa. Today, I still train three or four times a week. This gives me the feeling...

  • Page 49
    ... dreamed of being part of a Women's World Cup. In 2011, the tournament is taking place in Germany, and for me, working for adidas, the official sponsor and supplier of this event, it is a dream come true: to be there live in the stadium and see the products that I've tested myself, in my job and on...

  • Page 50
    ... planet Internal TPU Support Bands Lateral stability and support Reinforce a single-layer material New TPU Bottom Frame Lateral stability and support Transfers forces from outsole to upper Protects against upper abrasion Climalite Jersey und Short The Climalite jersey is designed for athletes who...

  • Page 51
    ... it your all and have only one mission: to leave the pitch victorious. You're living the dream of millions of children. They believe in you. Every time you go out onto the pitch, it's your turn to give something back to them and the fans. Fit for the Future adidas Sport Performance Football 47

  • Page 52
    ... the ground for my future career. Today, I'm still hooked on basketball: I am fortunate to be the Global PR Manager for adidas Basketball and regularly play with my colleagues in our company sports basketball team. Being among employees who share the same passion for the game makes me feel at home...

  • Page 53
    ... to help him do the impossible. It is Rose's second signature shoe and at 368 grams it is one of the lightest adidas basketball shoes to date. Derrick Rose, American, Basketballer: You look at the clock. Just a few seconds left to play. You only have one objective: to score and win the game. You...

  • Page 54
    ...I work at adidas as Senior Product Manager for the Outdoor category. It means I can test our products, and from my own experience I know what mountain sports enthusiasts really need. Outdoor Find out more about adidas outdoor: www.adidas.com/outdoor 50 Fit for the Future adidas Sport Performance

  • Page 55
    ... with plenty of room for the toes - this shoe offers outdoor athletes support and cushioning for all their fast activities in the mountains. In addition, the Formotion technology enhances motion control in rough terrain and downhill comfort. Fit for the Future adidas Sport Performance Outdoor 51

  • Page 56
    adidas Sport Style Originals B.O.B., American, Rapper and Producer: In hip hop - it's all about image. You have to be authentic, with your own style. You have to know where your roots are, where you come from. Being original is my attitude and the key to my success. I try to unite all this in my ...

  • Page 57
    ...spring/summer 2011 collection, adidas Originals introduces for the first time an in-house denim collection and takes the lead in implementing Originals Denim as a constant and long-term part of its holistic streetwear offer. The denim collection will consist of two styles for both men and women, in...

  • Page 58
    adidas Sport Style NEO adidas NEO label's Go Squad: With its NEO label, adidas Sport Style expands in the fast fashion business, targeting young, style-adopting consumers. For spring/summer 2011, the adidas NEO label introduces the Go Squad, a group of up-and-coming teens who embody the NEO label ...

  • Page 59
    ... inspiration from worldrenowned athlete and style icon David Beckham. NEO Cup Streetwise with a splash of tennis shoe style, the adidas NEO label NEO Cup steps out with a mix of leather and suede uppers, plus Vibe Complete comfort in every step. Fit for the Future adidas Sport Style NEO 55

  • Page 60
    ...skin and I make this happen with training and through my own style. On the pitch and in my daily life, I value passion, foresight and a clear vision. In no other label is the symbiosis of fashion and sport as evident as it is in Y-3. adidas represents sport, Yohji Yamamoto represents design. This is...

  • Page 61
    ...tone and pace of today's world. It stresses the importance of living, working and designing in smarter and more efficient ways. On the footwear front, in spring/summer 2011 adidas SLVR introduces a graphic mesh wedge for women in sorbet colours. Porsche Design Sport Driver's Jacket Inspired by the...

  • Page 62
    ... from sport into everyday life. My lunchtime workouts are part of my daily to-do list and I appreciate the fact that Reebok as my employer makes that possible. My gym kit is nearly as big as my wardrobe, but my favourite product is probably the EasyTone. My role as Marketing Manager Women's fits...

  • Page 63
    ... wear. EasyTone Long Bra Top With the launch of EasyTone apparel in the second half of 2010, the brand introduced the first head-to-toe toning offer in the marketplace. One of the highlight features are Reebok's proprietary ResisTone bands which provide resistance, helping to enhance activation...

  • Page 64
    ... detailing and are perfect to wear during everyday activities or while training at the gym. RunTone Ready The RunTone Ready provides women with a running shoe that creates microinstability and softness that is designed to help tone key butt and leg muscles while she runs. The RunTone Ready comes in...

  • Page 65
    ...and model, I travel a lot and don't have time for an extensive fitness regime. The toning products exercise my muscles not only when I'm doing sport but also during leisure time. Whether on the catwalk or in front of the camera, fitness is the basis of my success. Fit for the Future Reebok Women...

  • Page 66
    ...on. Next year, we're going to compete with our entire Reebok Market Central Marketing Team. What better team bonding can you have than training together and working towards a shared goal? I can't imagine any other job that combines performance, fun and enthusiasm for a brand and its products to this...

  • Page 67
    .... In spring 2011, the next category-specific evolution of ZigTech follows with the launch of ZigTech Nano: a lower-profile version of the original ZigTech, which offers a lightweight ride for the more efficient running consumer. John Wall, American, Basketballer: Basketball - a game? It's much...

  • Page 68
    ... Beatz, American, Artist, Designer and Producer: I love to be ten steps ahead of what's happening on the scene. I am weaving through the parallel worlds of fashion, music and art. In each world, I don't want to be typical. Reebok Classics fits perfect to my chameleon-like quality. For me, style and...

  • Page 69
    .... It features the Classics dropped R branding on the left chest, which is exclusively used in Reebok's Classics collection. The collection for spring/summer 2011 is characterised by the retro look in the American college sports style. Classic Lite Footwear Collection The new Classic Lite collection...

  • Page 70
    ... on the Wear in the World Adventure. In June 2010, TaylorMade-adidas Golf sent two candidates on a golf adventure with the winner earning a position in the company's marketing department. I have been playing golf since the age of two and always dreamed of working in the golf industry. This challenge...

  • Page 71
    ... Golf Shoe Available in multiple widths and extended sizes, adiComfort shoes are engineered to provide a fit for every foot and highest comfort from heel to toe. Golfers experience maximal walking comfort and performance together with a sportive, classic look. Fit for the Future TaylorMade-adidas...

  • Page 72
    ...for more distance. adiPure Z Golf Shoe Designed for the competitive purist, adiPure Z features a modern approach to a classic footwear design characterised by elegant lines, exquisite detailing and premium materials. Hand-finished full-grain leather and a newly styled upper provide a rich look and...

  • Page 73
    Martin Kaymer, German, Golfer: The test swing felt good. You approach the tee and position the ball, full of concentration. The driver sits perfectly in your hands. Its lightness makes it unique. You raise your arms for the swing. Driven on by meticulousness and perfection, you want to be the best. ...

  • Page 74
    ... the opportunity to combine my love for hockey with my everyday work life. As Pro Product Director I work closely with the research and development team to bring to market the best possible product for our pro athletes, and the great thing: I get the chance to test as many new products as possible...

  • Page 75
    ... hurts, but it's outweighed by the joy of winning. At the moment of victory, everything is okay. You feel strong. You and your team. You may work as a team, but you can still be the one who paves the way to the top. A good feeling, and long may it last! Fit for the Future Reebok-CCM Hockey 71

  • Page 76
    ...era of workmanship, Rockport has taken the tradition of hand-finished details, treated leathers and woven accents to the next level with this collection. With adiPrene by adidas, a heel height of 85mm, and a 20mm platform, the shoe guarantees a glamorous appearance to the consumer. 72 Fit for the...

  • Page 77
    ... a vintage look. The shoe is part of the Craftsmanship collection. Rockport's design team was inspired by the range of craftsmanship they encountered while travelling through open-air markets and artisan studios all over the world. Find out more about Rockport: www.rockport.com Hydromotion 2 Hydro...

  • Page 78
    ...February, Reebok launched the 2011 women's campaign "Tone while you live" with six inspirational EasyTone fans, known as the "ReeToners". They represent women from around the world who fit fitness into their busy lives even more with EasyTone. Joining the ReeToners as a global celebrity ambassador...

  • Page 79
    Group Management Report - Our Group Corporate Mission Statement ...Our Brands ...Major Locations and Promotion Partnerships ...Group Strategy ...Global Sales Strategy ...Wholesale ...Retail ...eCommerce ...Global Brands Strategy ...adidas ...Reebok ...Other Businesses Strategy ...TaylorMade-adidas ...

  • Page 80
    ... Statement Our Mission We are committed to continuously strengthening our brands and products to improve our competitive position. We are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product we bring to market. We are consumer...

  • Page 81
    ... designers, manufacturers and marketers of hockey equipment and apparel with two of the world's most recognised hockey brand names: Reebok Hockey and CCM Hockey. 1) From a segmental perspective, Y-3 is consolidated as part of Other Businesses. Group Management Report - Our Group Group Brands...

  • Page 82
    ...America adidas Group Latin America, Panama City, Panama ...01 02 03 Major Promotion Partnerships 2011 IHF Men's World Championship, Sweden January 13 - 30, 2011 ...adidas Official Partner of International Handball Federation NHL All-Star Game, Raleigh/North Carolina, USA January 30, 2011 ...Reebok...

  • Page 83
    ...in Athletics Reebok International Headquarters The Rockport Company Headquarters NHL All-Star Game 11 10 09 adidas Group Japan adidas Group China adidas Global Sourcing NFL Super Bowl 12 adidas Group Latin America Group Management Report - Our Group Major Locations and Promotion Partnerships...

  • Page 84
    ...five years. The plan aims at growing the revenues of the adidas Group by 45% to 50% currency-neutral from 2010 to 2015. In addition, the Group targets a compounded annual earnings growth rate of 15% and aims to reach an operating margin of 11% sustainably by 2015 at the latest see Subsequent Events...

  • Page 85
    ... found in sport - performance, passion, integrity and diversity - and that values sustainability. Supply Chain Become closest to every consumer by building and managing a supply chain that quickly responds to changing market needs and supports multiple distinct business models. Sustainable Company...

  • Page 86
    ... most attractive cities around the world without cannibalising our brands and distribution mix. The roadmap is designed to ensure market share growth in underpenetrated afï¬,uent cities. Focusing on three "attack" markets As part of our strategic business plan Route 2015, the Global Sales function...

  • Page 87
    ... Activate our brands at the point of sale in all relevant channels Ensure commercial success Industry benchmark in servicing retailers with world-class efficiency Build strong relationships with leading and most dynamic retailers Group Management Report - Our Group Global Sales Strategy...

  • Page 88
    ... further increase our profitability. Over the past five years, the adidas Group has evolved into a significant retailer, operating 2,270 stores for the adidas and Reebok brands worldwide see Retail Business Performance, p. 153. 84 Group Management Report - Our Group Global Sales Strategy...

  • Page 89
    ... the Group's performance, a new central leadership team was established in 2009. This team is mandated to develop a global strategic framework and guidelines, represent retail store and market needs on a global level, and to act as a catalyst to drive commercial performance for the adidas and Reebok...

  • Page 90
    ... designed to drive high sales per square metre - Market share growth and increased market presence is in line with our integrated distribution roadmap, where Retail will focus on the top 100 cities globally. adidas Originals Core Store in Munich We will also continue to work on adapting the supply...

  • Page 91
    ...ve-year strategic business plan. The adidas and Reebok brands are expected to deliver 90% of the targeted growth for the Group in that period. Areas within adidas and Reebok that were identified as key contributors and game changers for the adidas Group include: - Gaining sales and market share in...

  • Page 92
    ... designs also into specific sports categories. Reebok thus bridges the two ends of the consumer spectrum, from performance athletes to style setters see 02. Through these differences in positioning, we are therefore not cannibalising each other in the market, but rather challenging and supporting...

  • Page 93
    ...is an adidas goal to be the most personal sports brand by 2015. At Reebok, innovation focus is on fitness and training, where a priority is creating products that provide a material benefit to the consumer in terms of strength, conditioning and ï¬,exibility see Research and Development, p. 110. By...

  • Page 94
    ... target consumer. To achieve this, adidas and Reebok are focused on creating inspirational and innovative brand marketing campaigns and communication techniques to build brand equity and support the achievement of the Group's commercial goals. A key tenet of our marketing and communication strategy...

  • Page 95
    ... Performance. - Leading the industry in the fields of customisation and interactivity across categories. - Expanding adidas Sport Style in the fast fashion business with NEO. â,¬ 8.714 billion Key strategic pillars Net sales in 2010 Group Management Report - Our Group Global Brands Strategy...

  • Page 96
    ... one of adidas' key strategic priorities. For over 50 years, adidas has led all major developments in boot, ball and apparel technologies. Building on its success around major sporting events such as the 2010 FIFA World Cup, the brand strives to increase its strong market position by continuously...

  • Page 97
    ... in-store marketing support for the range. Spearheaded by the "adidas by Stella McCartney" concept, which fuses performance and style for the active women's market, Women's Training will remain a strategic priority. Group Management Report - Our Group Global Brands Strategy adidas Strategy 93

  • Page 98
    ... through partnerships and icons is an important tool to drive market share growth. To address the needs of its diverse consumer groups and maximise business opportunities, adidas Originals takes a three-tier strategy to brand and product marketing: - First, the brand invests and innovates in new...

  • Page 99
    ... as New York, Los Angeles, Miami, Las Vegas, Paris, Milan, Dubai, Singapore, Shanghai and Beijing. 2011 will see the opening of additional Y-3 stores in other inï¬,uential cities in the USA, Asia and Europe and it will expand its business by launching the global e-commerce site Y-3store.com. adidas...

  • Page 100
    ... and apparel. Reebok EasyTone Brand attitude World presence Focus areas Key strategic pillars see p. 59 Net sales in 2010 The brand also expanded its toning reach with a new offering of lifestyle, athletic and dress shoe models to capture additional consumer segments and distribution channels. To...

  • Page 101
    ...Reebok Classics leverages the fitness attitude and roots of the brand into the lifestyle segment. Classics targets consumers who want to be "fit for the street" and value trend-right products that fit their mobile lifestyle. In 2010, the foundation and strategic direction of the Classics business...

  • Page 102
    ... levels. - Maintain high visibility of the adidas Golf brand on the world's major professional golf tours. - Develop Ashworth as a true golf lifestyle brand. â,¬ 909 million Brand mission Brand attitude Key markets Focus areas Key strategic pillars Net sales in 2010 98 Group Management Report...

  • Page 103
    ... apparel among the top-selling golf products in these retail channels. Close working relationships with key accounts will continue in 2011, as will efforts to build additional brand presence at smaller retailers and on-course golf shops. In emerging markets throughout the world, the company employs...

  • Page 104
    ...From a product perspective, the brand will complement its successful R9 franchise and Burner family of metalwoods with the introduction of the new R11 series of drivers and the Burner SuperFast 2.0 in 2011. 100 Group Management Report - Our Group Other Businesses Strategy TaylorMade-adidas Golf...

  • Page 105
    ...thus creating a platform for future profitable growth. In 2010, Ashworth introduced new product lines incorporating proprietary fabrics for easy care and superior wear. The key priority for 2011 will be to further strengthen the messaging of Ashworth's positioning as a golf lifestyle brand for true...

  • Page 106
    ... In 2010, Rockport continued to expand its international distribution. The brand today does business in more than 54 markets worldwide. Sales outside of the United States now account for nearly half of Rockport's total business. Its key priorities include: - Strengthening its position in the USA as...

  • Page 107
    ...in the women's business is expected to show double-digit growth in 2011. Full-price own-retail stores are expected to comprise more than a fifth of total sales by 2014 and are planned to be the main growth driver within the brand over that period. In addition to ongoing progress on product design...

  • Page 108
    ... USA, Scandinavia, Russia Skates, sticks, NHL licensed apparel - Product innovation - Pro validation - Dual brand portfolio â,¬ 200 million Brand mission Brand attitude Key markets Focus areas Key strategic pillars Net sales in 2010 Focus on high-end performance Reebok-CCM Hockey has a dual brand...

  • Page 109
    ...high-performance company. Through a commitment to product innovation, Reebok-CCM Hockey's pricing strategy is to dominate the market in the premium price segments and to be a strong competitor within the mid-price segment of the market. Group Management Report - Our Group Other Businesses Strategy...

  • Page 110
    ... positioning Global Operations ahead of industry competition. Global Operations in go-to-market process 01 GLOBAL OPERATIONS Marketing Briefing Design Concept Product Development Product creation Sourcing Manufacturing Supply Chain Management Distribution Sales Subsidiaries Sales Business...

  • Page 111
    ...'s growth projects: Global Operations will support the growth projects outlined in the Group's Route 2015 plan, such as the adidas NEO label, key market programmes, Retail and eCommerce as well as other key brand programmes such as customisation see Global Brands Strategy, p. 87 and Global Sales...

  • Page 112
    ... key projects. In May, we saw the formal opening of the Group's Spartanburg distribution facility in South Carolina, USA. With this state-of-the-art facility, we are now servicing our wholesale customers as well as our own-retail and e-commerce activities in the USA across the brands adidas, Reebok...

  • Page 113
    ...and adidas Golf. Hardware production by region 1) 08 98% Asia 2% Europe 1) Figures include adidas, Reebok and adidas Golf. Hardware production 1) in million units 09 39 42 34 48 2007 2008 2009 2010 1) Figures include adidas, Reebok and adidas Golf. Group Management Report - Our Group Global...

  • Page 114
    ... our consumers. The research and development process is driven by teams of employees with diverse professional backgrounds. In 2011, R&D will focus on customisation and digital sports products. R&D an integral part of the product creation process R&D within the adidas Group follows a decentralised...

  • Page 115
    ...Development Reebok and Testing Center Advanced Development Center Development and Testing Center TaylorMade-adidas Golf Global Development and Testing Center Global Development Rockport and Testing Center Development and Reebok-CCM Hockey Testing Center Group Management Report - Our Group Research...

  • Page 116
    ... leadership within the sporting goods industry see 06. Even more important is the successful commercialisation of those technological innovations. Also in 2010, the majority of adidas Group sales were generated with products newly introduced in the course of the year. New products tend to have...

  • Page 117
    ... CCM Hockey Rockport Rockport extends truWalk architecture Due to the different business model for the Rockport brand as a leather shoe company, the impact from new styles is significantly lower compared to our other brands. Products launched in 2010 accounted for an estimated 52% of sales (2009...

  • Page 118
    ... Product awards 2010 Product Award Category Brand/Segment 06 Consumer Product Mobile App Fast All-round / Approach Shoe Packaging Design Footwear / Best Sole Mate Sporting Goods Product adidas adidas adidas adidas Reebok Reebok Stevie Award for Best Consumer Product / The American Business Awards...

  • Page 119
    ...PEP is used in all business units of the adidas Group and the online PEP has a coverage of 71%. The target for 2011 is to reach an online coverage of 97% Group-wide. Three-pillar human resources strategy We strive to have the right team in place by focusing our activities on the implementation and...

  • Page 120
    ... succession management process is supported by a system solution which hosts position and employee data related to performance, potential, career aspirations, mobility, etc. Our system solution is applied in 71% of the adidas Group business units. The target for 2011 is to reach a Group-wide online...

  • Page 121
    ... development and leadership competence related to work-life balance. Key employee statistics 03 2010 Total number of employees Total employees (in %) Male Female Management positions (in %) Male Female Average age of employees (in years) 1) Average length of service (in years) Annual training...

  • Page 122
    ...which represents an increase of 7% versus 39,596 in the previous year. This development is primarily related to new employees in the Retail segment, mainly on a part-time basis. On a full-time equivalent basis, our Group had 36,444 employees on December 31, 2010 (2009: 34,437). Due to the high share...

  • Page 123
    ...1) At year-end. 2) Includes, for example, Global Marketing, Global Operations, Global Corporate Services (e.g. Legal, Finance, HR). 3) Number of employees on a headcount basis. 4) Number of employees on a full-time equivalent basis. Due to the high share of part-time employees in our Retail segment...

  • Page 124
    ... - Performance data - Our Group's Environmental Strategy in our 2010 Social and Environmental Online Report and on our website at www.adidas-Group.com/sustainability. Careful supplier selection To improve working conditions throughout our supply chain, the Global Operations function works closely...

  • Page 125
    ...-to-day operations and support the process of self-governance. By running a certified management system, our suppliers demonstrate commitment to continuously enhancing their performance. We help them build or improve human resources systems to maintain proper working conditions, including factory...

  • Page 126
    ...Strategy can be found in our 2010 Social and Environmental Online Report and on our website at www.adidas-Group.com/ sustainability. Improving our environmental footprint at own sites As an important part of our Group's Environmental Strategy, we launched the Green Company Initiative, which targets...

  • Page 127
    ... business opportunities for our Group in the area of sustainable product concepts see Risk and Opportunity Report, p. 158. It is therefore our target that by 2012 100% of adidas Sport Performance footwear products will have some sustainable content. adidas AG in sustainability indices - DJSI World...

  • Page 128
    ... black heads of competitive brands. The television commercial has received wide attention and acclaim for its use of the popular children's song "One of These Things is Not Like the Other". The campaign highlights the driver's stunning design, technology and performance, clearly setting it...

  • Page 129
    Group Management Report - Financial Review Internal Group Management System ...Group Business Performance ...Economic and Sector Development ...Income Statement ...Statement of Financial Position and Statement of Cash Flows ...Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 130
    ...fit as well as optimising operating working capital and capital expenditure. To keep senior management focused on long-term performance improvements we have adopted a modified economic value added (EVA) model. The asset base of a market or operating unit within the Group is subject to a percentage...

  • Page 131
    ... activities. As a result, stock turn development is the key performance indicator as it measures the number of times average inventory is sold during a year, highlighting the efficiency of capital locked up in products in relation to our Group's business. To minimise capital tied up in accounts...

  • Page 132
    ... Group targets versus actual key metrics 2009 Actual 2010 Initial outlook 1) 2010 Actual 03 2011 Targets Sales (year-over-year change, currency-neutral) Gross margin Other operating expenses (in % of sales) Operating margin (Diluted) earnings per share (in â,¬) Average operating working capital...

  • Page 133
    ...quarterly basis. To assess current sales and profitability development, Management analyses sell-through information from our own-retail distribution as well as short-term replenishment orders from retailers. Taking into account year-to-date performance as well as opportunities and risks, the Group...

  • Page 134
    ... low house prices remained as a negative pressure on consumer spending, which only increased modestly in the year. Regional GDP development 1) in % Western Europe European Emerging Markets 01 USA Asia 2) Latin America Global 9 6 3 0 (3) (6) - 2008 - 2009 - 2010 1) Real, percentage change versus...

  • Page 135
    ... year GDP increased 6.6% (2009: decline of 3.4%). The strong recovery was mainly attributable to rising commodity prices and strong domestic demand. Furthermore, the rise in employment rates and income levels stimulated consumer spending in the region. Positive growth in the global sporting goods...

  • Page 136
    ... American sporting goods industry driven by volume and average price increases In the USA, we estimate that sporting goods sales increased at a mid-singledigit rate in 2010, driven by increases in average selling prices and volumes. Lean inventory levels in the first half of 2010 helped retailers...

  • Page 137
    ... Retail sales increased 18% versus the prior year as a result of adidas and Reebok sales growth. Revenues in Other Businesses were up 2% on a currencyneutral basis. Sales grew at TaylorMadeadidas Golf, Rockport and Reebok-CCM Hockey. Currency translation effects had a positive impact on segmental...

  • Page 138
    ... 2009 Change 13 Change (currency-neutral) Footwear Apparel Hardware Total 1) 1) Rounding differences may arise in totals. 5,389 5,380 1,221 11,990 4,642 4,663 1,076 10,381 16% 15% 14% 15% 9% 9% 5% 9% 134 Group Management Report - Financial Review Group Business Performance Income Statement

  • Page 139
    ... 2010 (2009: 2.3%), primarily as a result of new store openings to support the Group's retail expansion see 19. In addition, higher expenditure at the point of sale in connection with the 2010 FIFA World Cup as well as new product launches at the Reebok brand contributed to this development. Gross...

  • Page 140
    ... at the 2010 FIFA World Cup. In addition, increased promotion and marketing initiatives for new product concepts at the Reebok brand impacted this development. Operating overhead expenses decrease as a percentage of sales Group operating overheads include overhead costs related to marketing, sales...

  • Page 141
    ... 4.9 7.5 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. 2006 1) 2007 2008 2009 2010 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. Group Management Report - Financial Review Group Business Performance Income Statement 137

  • Page 142
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. Income before taxes by quarter â,¬ in millions 28 243 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 9 28 176 306 380 7 16 138 Group Management Report - Financial Review Group Business Performance Income Statement

  • Page 143
    ... 32 0.80 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 5 9 168 126 213 19 266 7 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 0.04 0.06 0.60 1.03 1.27 0.09 0.03 Group Management Report - Financial Review Group Business Performance Income Statement 139

  • Page 144
    .... Additions were partly offset by depreciation and amortisation amounting to â,¬ 263 million as well as disposals of â,¬ 17 million. Structure of statement of financial position 1) in % of total assets 2010 33 2009 Cash and cash equivalents ...10.9% Accounts receivable ...15.7% Inventories ...20...

  • Page 145
    ...â,¬ in millions 37 1,415 1,459 1,624 1,429 1,667 2006 1) 2007 2008 2009 2010 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. Group Management Report - Financial Review Group Business Performance Statement of Financial Position and Statement of Cash Flows 141

  • Page 146
    ...intangible assets. Group capital expenditure increased 12% to â,¬ 269 million in 2010 (2009: â,¬ 240 million). The Retail segment accounted for 23% of Group capital expenditure (2009: 30%). Investments primarily related to the expansion of our store base for the adidas and Reebok brands. Expenditure...

  • Page 147
    ... solely relating to the wording, the Supervisory Board is, however, authorised to make these modifications in accordance with § 179 section 1 sentence 2 AktG in conjunction with § 10 section 1 of the Articles of Association. Group Management Report - Financial Review Group Business Performance...

  • Page 148
    ... offer, through a public invitation to submit sale offers or through granting tender rights to shareholders. Furthermore, the authorisation sets out the lowest and highest nominal value that may be granted in each case. 144 Group Management Report - Financial Review Group Business Performance...

  • Page 149
    ...-in of any outstanding amounts. No compensation agreements exist between adidas AG and members of the Executive Board or employees relating to the event of a take-over bid. Group Management Report - Financial Review Group Business Performance Disclosures pursuant to § 315 Section 4 of the German...

  • Page 150
    ... 1,166 498 Remaining time to maturity of available facilities â,¬ in millions 2010 44 2009 2,436 < 1 year ...2,442 1 to 3 years ...2,279 2,458 3 to 5 years ...711 > 5 years ...112 Total 5,544 5,902 822 186 146 Group Management Report - Financial Review Group Business Performance Treasury

  • Page 151
    ... mix The majority of our Group's gross borrowings are denominated in euros and US dollars. At the end of 2010, gross borrowings denominated in euros accounted for 55% of total gross borrowings (2009: 61%). The share of gross borrowings held in US dollars increased to 40% (2009: 33%) see 46. Short...

  • Page 152
    ..., or 76%, versus â,¬ 917 million in the prior year see 47. This development was fully in line with our original target of net debt to be below the prior year level communicated at the beginning of 2010. Strong operating cash ï¬,ow and lower capital expenditure than originally planned positively in...

  • Page 153
    ... 2010 53 2009 4.8 < 1 year ...273 198 561 1 to 3 years ...514 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. 822 3 to 5 years ...711 > 5 years ...112 Total 1,610 1,767 186 Group Management Report - Financial Review Group Business Performance Treasury...

  • Page 154
    .... The Retail segment comprises the own-retail activities of the adidas and Reebok brands. The financial results of TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands are aggregated under Other Businesses. In 2010, sales and profitability of the adidas Group grew...

  • Page 155
    ... Asian Markets 13% Latin America 10% Greater China 6% European Emerging Markets 2010 Wholesale net sales by division 05 63% adidas Sport Performance 19% adidas Sport Style 18% Reebok Group Management Report - Financial Review Business Performance by Segment Wholesale Business Performance 151

  • Page 156
    ... well as higher segmental operating expenses as a percentage of sales. Number of Wholesale employees decreases At year-end 2010, the Group employed 4,329 people in the Wholesale segment, which represents a decrease of 8% versus 4,723 employees in the previous year. This development is mainly due to...

  • Page 157
    ... Group Retail segment operated 2,270 stores. This represents a net increase of 58 or 3% versus the prior year-end level of 2,212. Of the total number of stores, 1,712 were adidas and 558 Reebok branded (December 31, 2009: 1,626 adidas stores, 586 Reebok stores). During 2010, the Group opened 234 new...

  • Page 158
    ... America 18% Western Europe 14% Other Asian Markets 8% Latin America 6% Greater China 2010 Retail sales by store format 13 50% Factory outlets 46% Concept stores 4% Other store formats 154 Group Management Report - Financial Review Business Performance by Segment Retail Business Performance

  • Page 159
    ... store sales for Reebok grew 11%, driven by strong growth in training and running. Currency translation effects had a positive impact on revenues in euro terms. adidas Sport Performance own-retail sales increased 23% to â,¬ 1.404 billion in 2010 from â,¬ 1.142 billion in 2009. adidas Sport Style...

  • Page 160
    ... TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey segments. In addition, the segment Other Centrally Managed Brands, which comprises brands such as Y-3, is also included. In 2010, currency-neutral sales of Other Businesses increased 2%. In euro terms, sales grew 10% to â,¬ 1.420 billion (2009...

  • Page 161
    ... Emerging Markets 2% Greater China 1% Latin America 2010 Other Businesses sales by brand 22 64% TaylorMade-adidas Golf 18% Rockport 14% Reebok-CCM Hockey 4% Other Centrally Managed Brands Group Management Report - Financial Review Business Performance by Segment Other Businesses Performance...

  • Page 162
    ...the Group's business objectives. We have summarised the most important of these risks and opportunities in this Risk and Opportunity Report in three main categories: Strategic and Operational, Compliance-related and Financial. Risk and opportunity management system The adidas AG Executive Board has...

  • Page 163
    ... efforts are supported by global market research and competitor analysis. Through this process we seek to identify the markets, categories, consumer target groups and product styles which show most potential for future growth at a local and global level. Equally, our analysis focuses on those areas...

  • Page 164
    ...financial-accountingrelated IT systems is minimised by Group IT through central control and monitoring of virtually all IT systems, centralised management of change processes and with support through regular data backups. 160 Group Management Report - Financial Review Risk and Opportunity Report

  • Page 165
    ... Group is highly represented, therefore pose a significant short-term risk to sales development. To mitigate this risk, the Group strives to balance sales across key global regions and also between developed and emerging markets. In addition, a core element of our positioning in performance sports...

  • Page 166
    ... balanced sales mix and continually adapting the Group's distribution strategy with a particular focus on controlled space initiatives see Global Sales Strategy, p. 82. Although the market capitalisation of many companies within the sporting goods industry increased substantially in 2010, merger...

  • Page 167
    ... key performance indicators. Underperforming stores are reorganised, remodelled or closed as appropriate. Our increased focus on improving our sophistication as a retailer by investing in management expertise as well as in IT systems remains a key priority for 2011 see Global Sales Strategy...

  • Page 168
    ... sales decline. We focus on pursuing our innovation and design strength. To ensure we can quickly adapt to changing consumer preferences, we focus on streamlining research and development processes to speed up the time to market. 164 Group Management Report - Financial Review Risk and Opportunity...

  • Page 169
    ... goal is to make the adidas Group the "Employer of Choice" within our industry. Attractive reward and incentive schemes are designed to supplement long-term career opportunities and planning see Employees, p. 115. With the expansion of our own-retail activities and the increase of our employee base...

  • Page 170
    ... adidas Group faces a risk of selling defective products, which may result in injury to consumers and/or image impairment. We mitigate this risk by employing dedicated teams that monitor the quality of our products on all levels of the supply chain through rigorous testing prior to production, close...

  • Page 171
    ...differences may arise in totals. 2) Classified as long-term (between 1 and 3 years) in the consolidated financial statements, as they are covered by the committed mid-term syndicated loan. 3) Including interest payments. Group Management Report - Financial Review Risk and Opportunity Report 167

  • Page 172
    ... at a year-end value instead of the more relevant sales-weighted average figure, which we utilise internally to better reï¬,ect both the seasonality of our business and intra-year currency ï¬,uctuations. âˆ' The underlying forecasted cash ï¬,ow exposure (which the hedge instrument mainly relates to...

  • Page 173
    ...2010. Volume forecast variances, greater currency volatility and an increasing portion of our business in emerging markets will expose the adidas Group to additional currency risks in 2011... -10% 193 - (25) (24) (4) 1 (1) 4 Group Management Report - Financial Review Risk and Opportunity Report 169

  • Page 174
    ... of sport and lifestyle Emerging markets as long-term growth drivers Women's segment offers long-term potential Increasing consumer demand for functional apparel Growing popularity of "green" products Social media offering new ways of consumer engagement Strong market positions worldwide Multi-brand...

  • Page 175
    ... production know-how compared to low-tech apparel. Therefore, only a few companies are able to supply high-end functional apparel. Our resources and our positioning as a sports performance leader enable us to constantly develop innovative products and capitalise on them. In 2010, for example, adidas...

  • Page 176
    ... of new consumer needs that are not addressed by current market product offerings. For example, muscle toning has evolved into a meaningful category in less than two years. Having launched the Reebok EasyTone in 2009 as a walking shoe, the Reebok brand has successfully introduced additional styles...

  • Page 177
    ...ways to increase efficiency in our supply chain and make it truly demanddriven. Furthermore, by implementing end-to-end planning processes and improving our replenishment capabilities, we see opportunities to not only better serve our customers but also to reduce our operating working capital needs...

  • Page 178
    ... pipeline of new and fresh products as well as marketing initiatives, we expect top- and bottom-line improvements in our Group's financial results in 2011. We forecast adidas Group sales to increase at a mid- to high-single-digit rate on a currency-neutral basis due to growth in the Wholesale...

  • Page 179
    ... income levels promoting consumer spending. This is expected to support discretionary spending in this region and positively impact the sporting goods sector. However, inï¬,ationary pressure, particularly on apparel, is a potential headwind to growth. Group Management Report - Financial Review...

  • Page 180
    ... TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Gross margin Operating margin Earnings per share Average operating working capital as a percentage of sales Capital expenditure 1) Store base Net borrowings 1) Excluding acquisitions and finance leases. 176 Group Management Report - Financial...

  • Page 181
    ... particular with the adidas and Reebok brands. This will be driven by new product introductions and product extensions. In Greater China, following a sales decline in 2010, we expect a return to strong growth in this region in 2011. This will be driven by more current levels of inventory as well as...

  • Page 182
    ... new hires will be employed on a part-time basis and will be located in emerging markets. The adidas Group will continue to spend around 1% of Group sales on research and development in 2011. Areas of particular focus include customisation and digital sports products at adidas, as well as supporting...

  • Page 183
    ... the top line. It is targeted to grow annual earnings at a compound annual growth rate of 15% and to reach an operating margin of 11% sustainably by 2015 at the latest. For 2012, in line with our mid-term guidance, we project adidas Group sales and net income to increase compared to 2011. In order...

  • Page 184
    ... The shown story is called "Last Minute Party Time" and features a woman being invited to a party while still at work. Her goal is to leave work without having to return home to change. She is able to do so because the Rockport shoes she has worn all day at work are stylish enough for a night out on...

  • Page 185
    ...'s Report ...Consolidated Statement of Financial Position ...Consolidated Income Statement ...Consolidated Statement of Comprehensive Income ...Consolidated Statement of Changes in Equity ...Consolidated Statement of Cash Flows ...Notes ...Statement of Movements of Intangible and Tangible Assets...

  • Page 186
    ... the Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Herzogenaurach, February 15, 2011 Herbert...

  • Page 187
    ... are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group management report are examined primarily on a test basis...

  • Page 188
    .... 31, 2010 Dec. 31, 2009 01 Change in % Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Inventories Income tax receivables Other current assets Assets classified as held for sale Total current assets Property, plant and equipment Goodwill...

  • Page 189
    ... Statement (IFRS) â,¬ in millions Note Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 02 Change Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income Other operating expenses (% of net sales) Operating profit (% of net sales) Financial...

  • Page 190
    ... AG Consolidated Statement of Comprehensive Income (IFRS) â,¬ in millions Note Year ending Dec. 31, 2010 03 Year ending Dec. 31, 2009 Net income after taxes Net gain/(loss) on cash ï¬,ow hedges, net of tax Actuarial loss of defined benefit plans (IAS 19), net of tax Asset ceiling effect (IAS...

  • Page 191
    ... AG Consolidated Statement of Cash Flows (IFRS) â,¬ in millions Note Year ending Dec. 31, 2010 05 Year ending Dec. 31, 2009 Operating activities: Income before taxes Adjustments for: Depreciation, amortisation and impairment losses Reversals of impairment losses Unrealised foreign exchange (gains...

  • Page 192
    ...Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands. The Wholesale segment comprises all business activities relating to the distribution of adidas and Reebok products to retail customers. The Retail segment comprises all business activities relating to the sale of adidas and Reebok...

  • Page 193
    ... and operating policies of the respective enterprise. The number of consolidated subsidiaries evolved as follows for the years ending December 31, 2010 and 2009, respectively: Number of consolidated subsidiaries 2010 2009 January 1 First-time consolidated companies: Thereof newly founded Thereof...

  • Page 194
    ... financial statements. Overview of selected measurement principles Item Measurement principle Assets Cash and cash equivalents Short-term financial assets Accounts receivable Inventories Assets classified as held for sale Property, plant and equipment Goodwill Intangible assets (except...

  • Page 195
    ... past due. Inventories Merchandise and finished goods are valued at the lower of cost or net realisable value, which is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Costs are determined...

  • Page 196
    ...-adidas Golf, Rockport and Reebok-CCM Hockey. The cash-generating units (or groups of units) represent the lowest level within the Group at which goodwill is monitored for internal management purposes after the Group's reorganisation. The impairment test for goodwill has been performed based on cash...

  • Page 197
    ...the strategic business plan of the adidas Group "Route 2015" as communicated on November 8, 2010 see Subsequent Events and Outlook, p. 174 and reï¬,ects an expected mid- to high-single-digit sales increase for the majority of the cash-generating units (or groups of units). For a few emerging markets...

  • Page 198
    ... Executive Board of adidas AG as well as to the managing directors/senior vice presidents of its affiliated companies and to further senior executives of the Group in connection with the Management Share Option Plan (MSOP) of adidas AG see also Note 38. For the final time in 2009, the company had...

  • Page 199
    ... 1, 2009, adidas International B.V. acquired 51% of the shares of Life Sport Ltd. for a purchase price in the amount of ILS 25.6 million. Based in Holon (Israel), Life Sport Ltd. is a marketing company for adidas and Reebok products in Israel. The acquisition had the following effect on the Group...

  • Page 200
    ... for accounts receivable that are neither past due nor impaired. For further information see Risk and Opportunity Report, p. 158. Short-term financial assets are classified at "fair value through profit or loss". Changes in the fair value are recognised in the income statement as they...

  • Page 201
    ...: Other current assets â,¬ in millions Dec. 31, 2010 09 Dec. 31, 2010 Dec. 31, 2009 Accounts receivable and other current assets Property, plant and equipment, net Total 0 47 47 18 108 126 In 2010 and 2009, no material liabilities classified as held for sale have been reported. Dec. 31, 2009...

  • Page 202
    ...amounted to â,¬ 10 million and â,¬ 16 million for the years ending December 31, 2010 and 2009, respectively see Note 30. These are related to assets within other equipment, furniture and fittings, mainly in the Group's own-retail activities, for which contrary to expectations there will be an insuf...

  • Page 203
    ... At December 31, 2010, trademarks, mainly related to the acquisition of Reebok International Ltd. (USA) in 2006 and Ashworth, Inc. in 2008, have indefinite useful lives. This is due to the expectation of permanent use of the acquired brand names. The Group tests at least on an annual basis whether...

  • Page 204
    .... 31, 2009 Prepaid expenses Sundry Other non-current assets 98 2 100 117 9 126 Bank borrowings Private placements Eurobond Total - 273 - 273 95 419 - 514 - 213 498 711 - 112 - 112 95 1,017 498 1,610 Prepaid expenses mainly include prepayments for long-term promotional contracts and service...

  • Page 205
    ...claims with regard to the return of faulty products sold by the Group. The amount of the provision follows the historical development of returns, allowances and warranty as well as current agreements. Provisions for taxes other than income taxes mainly relate to value added tax, real estate tax and...

  • Page 206
    ... to former employees and their survivors. The obligations arising from defined benefit plans are partly covered by plan assets. Amounts for defined benefit plans recognised in the consolidated statement of financial position â,¬ in millions Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2009 Interest...

  • Page 207
    ...ts paid directly by the Group companies and â,¬ 3 million to employer contributions paid into the plan assets. In 2010, the actual return on plan assets was â,¬ 5 million (2009: â,¬ 6 million). Consolidated Financial Statements Notes Notes to the Consolidated Statement of Financial Position 203

  • Page 208
    ... As at February 15, 2011, the company does not hold any treasury shares. Other non-current liabilities Other non-current liabilities consist of the following: Other non-current liabilities â,¬ in millions Dec. 31, 2010 24 Authorised Capital The Executive Board of adidas AG did not make use of the...

  • Page 209
    ...the same time, the Annual General Meeting granted the Executive Board a new authorisation to repurchase adidas AG shares up to an amount totalling 10% of the nominal capital until May 5, 2015. The authorisation may be used by the company but also by its subsidiaries or by third parties on account of...

  • Page 210
    ...fic Growth Fund, Los Angeles, USA 2) BlackRock Financial Management, Inc., New York, USA 3) BlackRock Holdco 2, Inc., Wilmington, Delaware, USA 3) BlackRock, Inc., New York, USA 3) The Bank of New York Mellon Corporation, New York, USA 4) Capital Research and Management Company, Los Angeles, USA...

  • Page 211
    ..., research and development as well as production, which are classified as finance leases. The net carrying amount of these assets of â,¬ 7 million and â,¬ 7 million was included in property, plant and equipment as at December 31, 2010 and 2009, respectively. For the year ending December 31, 2010...

  • Page 212
    ...31, 2010 Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2010 Amortised cost Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of...

  • Page 213
    ... cost Other non-current financial liabilities Derivatives being part of a hedge Derivatives not being part of a hedge Other financial liabilities Finance lease obligations Liabilities classified as held for sale Thereof: aggregated by category according to IAS 39 Financial assets at fair value...

  • Page 214
    ...31, 2009 Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2009 Amortised cost Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of...

  • Page 215
    ... cost Other non-current financial liabilities Derivatives being part of a hedge Derivatives not being part of a hedge Other financial liabilities Finance lease obligations Liabilities classified as held for sale Thereof: aggregated by category according to IAS 39 Financial assets at fair value...

  • Page 216
    ... adjusted by an adidas Group specific credit risk premium. Fair values of long-term financial assets classified as available-for-sale are based on quoted market prices in an active market or are calculated as present values of expected future cash ï¬,ows. The fair values of forward contracts and...

  • Page 217
    ...reclassified from hedging reserves to the income statement. The total net amount of US dollar purchases related to product sourcing versus other currencies was US $ 3.7 billion and US $ 3.7 billion in the years ending December 31, 2010 and 2009, respectively. The notional amounts of all outstanding...

  • Page 218
    ... as promotion contracts, advertising, events and other communication activities. However, it does not include marketing overhead expenses, which are presented in marketing overheads. In 2010, marketing working budget accounted for approximately 26% (2009: 23%) of the total other operating expenses...

  • Page 219
    ..., 2010 Year ending Dec. 31, 2009 Financial income/financial expenses Financial result consists of the following: Financial income â,¬ in millions Year ending Dec. 31, 2010 32 Marketing working budget Sales working budget Marketing overhead 1) Sales force 1) Logistics 1) Research and development...

  • Page 220
    ...million for the year ending December 31, 2010. These amounts mainly relate to tax losses carried forward and unused foreign tax credits of the US tax group. The remaining unrecognised deferred tax assets relate to subsidiaries operating in markets where the realisation of the related tax benefit is...

  • Page 221
    ... bond in the fourth quarter of 2009 and as no share options are outstanding anymore from the MSOP, the Group had no dilutive potential shares for the year ending December 31, 2010. Earnings per share Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 Expected income tax expenses Tax rate...

  • Page 222
    ...and marketing of athletic and sports lifestyle products. Due to the Group's reorganisation in 2009, the Group's internal management reporting has changed. The structure of the Group has been organised according to the two channels Wholesale and Retail and a joint business model for adidas and Reebok...

  • Page 223
    ...statements taking into account items which are not directly attributable to a segment or a group of segments. Net sales (non-Group) â,¬ in millions Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 Capital expenditure â,¬ in millions Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 Reportable...

  • Page 224
    ... Product information Net sales (non-Group) â,¬ in millions Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 Assets of reportable segments Assets of other businesses Non-segmental accounts receivable and inventories Current financial assets Other current assets Non-current assets Total assets...

  • Page 225
    ... from financing activities were related to repayment of short-term borrowings totalling â,¬ 198 million and dividends paid in an amount of â,¬ 73 million. In 2009, the line item "Acquisition of subsidiaries and other business units net of cash acquired" in the consolidated statement of cash ï¬,ows...

  • Page 226
    ... increased by an annual average rate of at least 8%. (2) Relative Performance: During the same period, the stock market price for the adidas AG share must have developed by an annual average of 1% more favourably than the stock market prices of a basket of global competitors of the adidas Group and...

  • Page 227
    ... Code (Handelsgesetzbuch - HGB) is provided in the Compensation Report see Compensation Report, p. 30. Year ending Dec. 31, 2009 Own retail Sales Logistics Marketing Central administration Production Research and development Information technology Total 21,883 4,064 4,749 3,527 3,260 1,886 991...

  • Page 228
    ... in progress Total tangible assets Acquisition cost January 1, 2009 Currency effect Additions Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2009 /January 1, 2010 Currency...

  • Page 229
    ... Impairment losses Reversals of impairment losses Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2009 /January 1, 2010 Currency effect Additions Impairment losses Reversals...

  • Page 230
    ...-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 14) Sub-group adidas Canada 15) Sub-group adidas Brazil 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 10) Sub-group Sports Holdings Corp. 11) Sub-group Reebok International Limited 6) Company with no active business...

  • Page 231
    ... Reebok International Ltd. 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 14) Sub-group adidas Canada 15) Sub-group adidas Brazil 6) Company with no active business 12) Profit and loss transfer agreement 7) The number refers to the number of the company. 13) Sub-group Taylor Made Golf...

  • Page 232
    ... adidas International, Inc. 89 adidas Team, Inc. 90 Taylor Made Golf Co., Inc. 13) 91 Ashworth, LLC. 13) 92 The Reebok Worldwide Trading Company, LLC 93 Reebok-CCM Hockey, Inc. 9) 94 Sports Holdings Corp. 10) 95 RFC, Inc. 96 Reebok Securities Holdings LLC 2) 97 The Rockport Company, LLC 1) Sub-group...

  • Page 233
    ...) Limited 127 Reebok (China) Services Limited 128 RIL Indonesia Services Limited 129 adidas (Suzhou) Co. Ltd. 1) Sub-group adidas UK 2) Sub-group Reebok International Ltd. 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 14) Sub-group adidas Canada 15) Sub-group adidas Brazil Hong Kong...

  • Page 234
    ... 31, 2010 Company and domicile Currency Equity (currency units in thousands) Share in capital held by 7) Attachment II in % 130 131 132 133 134 135 136 137 138 adidas Sports (China) Co. Ltd. adidas (China) Ltd. Zhuhai adidas Technical Services Limited adidas Japan K.K. Taylor Made Golf Co...

  • Page 235
    ... Reebok International Ltd. 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 14) Sub-group adidas Canada 15) Sub-group adidas Brazil 6) Company with no active business 12) Profit and loss transfer agreement 7) The number refers to the number of the company. 13) Sub-group Taylor Made Golf...

  • Page 236
    CCM U+ Crazy Light Campaign To support the market introduction of the new U+ Crazy Light skate, a multifaceted marketing campaign was set, headlined by Washington Capitals' forward Alex Ovechkin. Launched in October 2010 and scheduled to run until the end of 2011, this marketing campaign shows a ...

  • Page 237
    Additional Information Ten-Year Overview ...Glossary ...Index ...Declaration of Support ...Publishing Details & Contact ...Financial Calendar 2011 ...234 236 241 242 242 243 Additional Information

  • Page 238
    ... 2) Effective tax rate 2) Net income attributable to shareholders as a percentage of net sales 5) Net sales by brand (â,¬ in millions) adidas Reebok TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Net sales by product category (â,¬ in millions) Footwear 2) Apparel 2) Hardware 2) 11,990 5,730...

  • Page 239
    ... 4) Working capital turnover 4) Return on equity 4) 5) Return on capital employed 4) 5) Data Per Share 6) Share price at year-end (in â,¬) Basic earnings 5) (in â,¬) Diluted earnings 5) (in â,¬) Price/earnings ratio at year-end Market capitalisation at year-end (â,¬ in millions) Operating cash ï¬,ow...

  • Page 240
    ... adidas Group and is part of a larger sales area operated by a retail partner. Consumer price index (CPI) Measure of the average price of consumer goods and services purchased by households. Determined by measuring the price of a standard group of goods meant to represent the typical market basket...

  • Page 241
    ..., that such a corporation's Supervisory Board must be composed of an equal number of employee and shareholder representatives. Goodwill Intangible asset that quantifies the price that a buyer of a company has paid for the reputation, know-how and market position of the acquired company. Goodwill is...

  • Page 242
    ... teams and individual athletes, as well as advertising, retail support, events and other communication activities, but excluding marketing overhead expenses. As MWB expenses are not distribution channel-specific, they are not allocated to the Group's operating segments. Mono-branded stores adidas...

  • Page 243
    ... position. Net borrowings = short-term borrowings + longterm borrowings - cash - short-term financial assets. Operating overheads Expenses which are not directly attributable to the products or services sold, such as costs for sales, marketing overhead costs, logistics, research and development...

  • Page 244
    ...adidas Group is currently divided into six major business segments: Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands. Sell-through An indicator of how fast retailers are selling a particular product to the consumer. Shop-in-shop adidas, Reebok...

  • Page 245
    ... Statement of Cash Flows 140 ff., 187 Statement of Financial Position (Balance Sheet) 140 ff., 184 f., 196 ff. Structure and Strategy: - adidas Group 77 ff. - Brand Segments 87 ff. Subsequent Events and Outlook 174 ff. Supervisory Board: - Committees 19 - Members 18 f. - Report 20 ff. Supply Chain...

  • Page 246
    .... For further adidas Group publications, please see our corporate website. To improve readability, registered trademarks are omitted in this Annual Report. Concept and Design Strichpunkt, Stuttgart Printed by Eberl Print, Immenstadt 242 Additional Information Declaration of Support / Publishing...

  • Page 247
    ... Calendar Full Year 2010 Results ...Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast Publication of Annual Report 2010 2011 March 2, 2011 First Quarter 2011 Results ...Press release, conference call and webcast May 5, 2011 Annual General Meeting...

  • Page 248
    adidas AG Adi-Dassler-Str. 1 91074 Herzogenaurach Germany ©2011 adidas AG. adidas, Reebok, TaylorMade, adidas Golf, Ashworth, Rockport and CCM are registered trademarks of the adidas Group.