Reebok 2011 Annual Report Download - page 168

adidas Group
2011 Annual Report
GROUP MANAGEMENT REPORT – FINANCIAL REVIEW
164
2011
03.5 Subsequent Events and Outlook
03.5
In Latin America, GDP growth rates are likely to moderate to a level
of around 3.5% in 2012. A healthy labour market, strong domestic
investment levels, robust private consumption rates and industrial
production are all forecasted to support economic activity in the
region. Relatively high commodity prices are also expected to continue
to contribute to growth. However, inflation as well as an expected fall
in exports to Europe are concerns for economic growth in the region.
Sporting goods industry growth to continue in 2012
In the absence of any major economic shocks, we expect the global
sporting goods industry to expand in 2012, however with significant
regional variation. Following macroeconomic trends, consumer
spending on sporting goods in the emerging economies will
outperform the more developed markets. Inflationary pressures,
particularly in relation to commodity prices, are expected to moderate
in the second half of the year. However, wage growth in the faster-
growing economies will continue to add significant costs to the
industry, especially where the industry sources and manufactures.
A contraction in private consumption in mature markets such as the
USA and Western Europe is forecasted for 2012 and will detract from
expansion of the industry in those regions. While growth rates will
moderate compared to 2011, the sporting goods sector is expected
to continue to grow rapidly in the emerging economies, especially in
China and India. Furthermore, the global sporting goods industry will
be positively impacted by two of sport’s largest events in 2012 – the
London 2012 Olympic Games and the UEFA EURO 2012.
In Europe, the sporting goods industry is expected to grow modestly
in 2012, with significant regional variation. In many markets, sporting
goods retail activity is forecasted to be negatively affected by austerity
measures, low wage growth and reduced consumer spending
compared to 2011. However, the region hosts both the London 2012
Olympic Games (UK) and the UEFA EURO 2012 (Poland and Ukraine),
which are expected to support the industry.
In North America, industry growth rates are expected to moderate
compared to the prior year, in line with overall consumer spending
expectations. From a category perspective, running (particularly light-
weight running), training and high-performance basketball are seen
as significant sporting goods drivers for the year. The US golf market
is expected to see continued consolidation in 2012.
In Greater China, wage growth and domestic consumption are set
to continue to propel sporting goods sales in 2012. The trend and
market share shift towards international brands is also expected to
continue, as local players struggle with declining brand image as well
as inventory and product ageing issues.
In other Asian markets, the sporting goods industry is forecasted
to grow in 2012, however with regional variances. Japan’s sporting
goods industry is expected to expand compared to 2011, albeit at a
moderate rate given that overall consumer confidence and spending
are expected to remain low. Most of the other major Asian emerging
markets are expected to see rapid sporting goods sales growth in 2012,
as domestic demand increases and rising wages drive purchases of
discretionary items.
The sporting goods industry in Latin America is projected to grow
in 2012, with a healthy labour market and wage growth expected to
continue. These developments are forecasted to promote consumer
spending and support discretionary purchases in the region, positively
impacting the sporting goods sector.
adidas Group currency-neutral sales to increase at a
mid- to high-single-digit rate in 2012
We expect adidas Group sales to increase at a mid- to high-single-
digit rate on a currency-neutral basis in 2012. Despite the high degree
of uncertainty regarding the global economic outlook and consumer
spending, Group sales development will be favourably impacted by our
high exposure to fast-growing emerging markets as well as the further
expansion of Retail. In addition, this year’s major sporting events will
provide positive stimulus to Group sales. As Official Sponsor of the
UEFA EURO 2012 in Poland and Ukraine, the adidas brand will benefit
from additional sales in the football category. And as the Official
Sportswear Partner of the London 2012 Olympic Games and Team
GB, the adidas brand will be the most visible brand during the event.
This event not only provides an excellent platform to increase the
brand’s presence in the important UK market, but also to present its
perform ance credentials globally.