Reebok 2010 Annual Report Download - page 183

Group Management Report – Financial Review Subsequent Events and Outlook 179
adidas Group defines long-term
strategic goals
Based on the adidas Group’s strong
brands, premium products, extensive
global presence and its commitment
to innovation and the consumer, the
adidas Group aspires to grow its business
significantly until 2015. According
to our 2015 strategic business plan
“Route 2015”, which was announced
in November 2010, total Group sales
are targeted to grow 45% to 50% on a
currency-neutral basis over the five-year
period, thereby outperforming total
market growth (both GDP and sporting
goods industry). In addition, we aim to
grow our bottom line faster than 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 to reach our strategic goals and
create long-term sustainable share-
holder value, we have defined clear
strategic pillars. These include:
− Clear market positioning and brand
prioritisation: We believe that we have
significant growth potential to exploit
from our portfolio of brands. The majority
of our targeted growth will come from
Global Brands which we anticipate will
contribute 90% of the Group’s expected
revenue increase over the period see
Global Brands Strategy, p. 87. Areas within
the adidas and Reebok brands that
were identified as key contributors to
sustainable growth for the adidas Group
include:
– Gaining sales and market share in the
running and basketball categories
within adidas Sport Performance
– Expanding adidas Sport Style in the fast
fashion business with NEO
– Establishing Reebok as the leading
fitness and training brand
– Leading the industry in the fields of
customisation and interactivity.
By brand, we expect adidas Sport
Performance sales to grow at a mid-
to high-single-digit compound annual
growth rate. We plan to increase adidas
Sport Style and Reebok sales at a
double-digit compound annual growth
rate until 2015.
− Expand presence in key growth
markets: We have identified North
America, Greater China, Russia/CIS,
Latin America, Japan, UK and India
as key growth markets for the next
five years. Of those markets, the three
”attack markets” North America, Greater
China and Russia/CIS are expected to
contribute around 50% of the total Group
growth until 2015, with each market
targeting a double-digit compound
annual growth rate. In the USA, the
Group’s brands have enormous potential
to gain market share by focusing on
improved distribution and allowing a
higher share of products to be specifically
designed for that market. In emerging
markets such as China and Russia, rising
standards of living, increasing disposable
income, positive demographic trends
and growing sports participation should
support demand for sporting goods.
− Intensify controlled space focus: We
intend to increase the portion of sales
that comes from controlled space
initiatives to at least 45% of Group sales
in the coming years. This includes
new openings of adidas and Reebok
own-retail stores, the further extension of
our mono-branded store base in markets
such as China, as well as new shop-
in-shop initiatives with retail partners
around the world. In terms of our own
retail, we intend to open at least 500
adidas and Reebok stores over the next
five years, as well as grow significantly
our eCommerce business, which we
project to increase to € 500 million over
the period see Global Sales Strategy, p. 82.
− Leverage growth and operational
scale through to bottom line: A higher
exposure to emerging markets as well
as expanding controlled space activities
are important levers to improving brand
presence, increasing sell-through
and driving higher Group profitability.
In addition, we continuously work on
streamlining internal processes to
accelerate decision-making, reduce
complexity and make our organisation
leaner and more efficient. Therefore, we
believe there is significant potential to
increase the Group’s operating margin to
11% sustainably by 2015.
− Maintain financial flexibility: We strive
over the long term to maintain a ratio
of net borrowings over EBITDA of less
than two times. A strong balance sheet
increases our flexibility to realise value-
generating medium- and long-term
opportunities in the best interests of our
shareholders as they arise.