Reebok 2011 Annual Report Download - page 36

adidas Group
2011 Annual Report
TO OUR SHAREHOLDERS
32
2011
01.2 Interview with the CEO
01.2
? Beyond your Olympic sustainability goals, have you other
specific sustainability targets for the Group?
!
As part of our Environmental Strategy, which is an integral
part of our overall Route 2015 strategic business plan, we have
numerous programmes in place to use resources more efficiently.
Like our consumers, we are also concerned about the rate of natural
resource depletion and we have to push the boundaries to become
more efficient and environmentally benign. Building on the Olympic
initiatives I just mentioned, another great example on the product side
is our commitment to the Better Cotton Initiative, which the adidas
Group co-founded. Here, adidas has committed to use 100% Better
Cotton by 2018, which aims to improve the environmental impact in
the mainstream cotton industry. In addition, within our own operations
it is also our goal to reduce the emission of carbon dioxide by 30% by
2015, the usage of paper by 50% and the usage of water by 20%. There
is still a lot to be done and we are nowhere close to being ‘there’ yet.
However, our initiatives definitely show that we are actively working
on being more environmentally sustainable, using resources more
efficiently and taking the next generation’s needs into consideration
when doing business today.
? There is a lot of media excitement about the adidas
NEO label. Can you tell us about your aspirations with
this sub-brand?
!
After looking closely at the market, it was clear that there is
a younger consumer out there looking for fresh fashion options. For
us, this consumer is the 14- to 19-year-old global teen. To step into
this market, we created the adidas NEO label. NEO means new. New
by definition. New in concept. New in spirit. It brings the heritage of
sport and translates that into fashion at an accessible price point for
teen consumers. No other brand has the history, credibility and style
to do this. Like everything we do at adidas, we offer these consumers
something special just for them, with fashionable products grounded
in their likes, dislikes, trends and behaviours. Looking at the size of
the fast-fashion market, the sales potential is significant and our
aspiration is to create € 1 billion in sales from the adidas NEO label
over time. This is why NEO is one of the selected growth projects of
Route 2015.
? And how does your growing expertise in own retail play into
making adidas NEO a success?
!
It is critically important, because this business will only be
successful in a controlled space environment. Operationally, the
adidas NEO label is something new for our Group. This business model
requires additional capabilities in our supply chain to facilitate greater
in-season flexibility and responsiveness to changing trends. We have
been working hard to build these skills and will comprehensively test
them this year. In February, we kicked off a pilot phase by opening
our first own-retail NEO store in Hamburg, Germany. We will open
ten altogether in Germany this year, complementing our existing
NEO own-retail store base of 29 in Russia. These new stores are
roughly 200 to 250m² in size. In them, new technology, processes
and merchandising techniques, including RFID (Radio Frequency
Identification), will be leveraged to support and optimise daily product
delivery. We will also engage the consumer with unique in-store
experiences like the Social Mirror, where consumers can try on their
favourite NEO outfits, take a picture or video and upload it to Facebook
or Twitter.
? Now that the adidas Group has achieved a net cash position,
does this change your policies towards capital management
and dividends or other shareholder return opportunities?
!
Over the past three years, through our ongoing focus on
improving cash flow, we have reduced our net borrowings by
€ 2.3 billion. This highlights the strength of our business model
and puts us in a great position to further support and invest in our
opportunities and growth initiatives. With Route 2015, we have a great
plan, ambitious and realisable. And executing on this will ultimately
yield superior returns for our shareholders in the long term. In terms
of our approach towards capital management, I see no reason to
change anything. In fact, the current economic climate only reinforces
our pursuit of conservative and cost-effective capital management
policies. Nevertheless, this still leaves plenty of room to continue
advancing direct shareholder returns. And we are fully committed to
this. For now, our focus is on the annual dividend. Here, we have a
clear target to increase the payout ratio within our 20% to 40% target
range. For 2011, we intend to pay a dividend per share of € 1.00, 25%
more than last year, representing an increase in the payout ratio of
1.7 percentage points to 31.2%.