Reebok 2011 Annual Report Download - page 144

adidas Group
2011 Annual Report
GROUP MANAGEMENT REPORT – FINANCIAL REVIEW
140
2011
Segmental operating profit increased 31% to € 593 million versus
€ 452 million in the prior year. Segmental operating margin improved
2.3 percentage points to 21.2% (2010: 18.9%) TABLE 08 . This was a
result of the gross margin increase and lower segmental operating
expenses as a percentage of sales.
Retail development by region
Currency-neutral Retail sales increased in all regions. Retail revenues
in Western Europe grew 11% on a currency-neutral basis, mainly due
to increases in Germany, the UK, France, Italy and Spain. Sales in
European Emerging Markets rose 32% on a currency-neutral basis,
driven by growth in Russia where both the adidas and Reebok brands
had strong double-digit sales growth. Currency-neutral Retail sales
in North America grew 14% due to double-digit growth in the USA.
Retail revenues in Greater China increased 20% on a currency-neutral
basis. Sales in Other Asian Markets grew 9% on a currency-neutral
basis, mainly driven by double-digit increases in South Korea. In Latin
America, currency-neutral Retail sales grew 20%, with double-digit
sales increases in all markets except Mexico, where sales were up
at a high-single-digit rate. Currency translation effects had a mixed
impact on regional sales in euro terms TABLE 09 .
03.3 Business Performance by Segment Retail Business Performance
03.3
08 Retail at a glance (€ in millions)
2011 2010 Change
Net sales 2,793 2,389 17%
Gross profit 1,749 1,476 18%
Gross margin 62.6% 61.8% 0.8pp
Segmental operating profit 593 452 31%
Segmental operating margin 21.2% 18.9% 2.3pp
09 Retail net sales by region (€ in millions)
2011 2010 Change Change
(currency-neutral)
Western Europe 476 426 12% 11%
European Emerging Markets 1,055 846 25% 32%
North America 504 461 10% 14%
Greater China 157 131 19% 20%
Other Asian Markets 373 330 13% 9%
Latin America 228 195 17% 20%
Total 1) 2,793 2,389 17% 20%
1) Rounding differences may arise in totals.
Retail Business Performance
Retail full year results
In 2011, currency-neutral Retail sales increased 20%. Concept store,
factory outlet and other retail format currency-neutral sales were
all up at double-digit rates versus the prior year. Currency trans-
lation effects negatively impacted segmental revenues in euro terms.
Sales grew 17% to € 2.793 billion from € 2.389 billion in the prior year
TABLE 08 . Currency-neutral comparable store sales rose 14% versus
the prior year, with increases in all store formats.
Gross margin in the Retail segment increased 0.8 percentage points
to 62.6% from 61.8% in 2010. This was mainly a result of a higher
proportion of concept store sales which achieve higher margins
in comparison to factory outlets and other retail formats. Factory
outlet sales margins also grew year-over-year. By brand, the adidas
gross margin grew 0.3 percentage points to 63.6% (2010: 63.2%) and
Reebok’s gross margin improved 3.0 percentage points to 57.8%
(2010: 54.8%). Retail gross profit increased 18% to € 1.749 billion from
€ 1.476 billion in 2010 TABLE 08 .
Segmental operating expenses increased 13% to € 1.156 billion from
€ 1.024 billion in 2010. This was a result of higher sales working
budget expenses and higher expenses related to the expansion of
the Group’s store base, particularly in emerging markets. Segmental
operating expenses as a percentage of sales declined 1.5 percentage
points to 41.4% (2010: 42.9%), as a result of operating leverage in the
segment. Segmental operating expenses in Retail primarily relate to
personnel and rent expenses as well as the sales working budget.