Reebok 2012 Annual Report Download - page 59

adidas Group
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2012 Annual Report
To Our Shareholders
37
2012
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01.2
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Interview with the CEO
Speaking of China, many sporting goods companies had a
difficult 2012, whereas the adidas Group grew by 15%. What is
the reason behind this and what can we expect in 2013?
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For many players in our industry, China was indeed a challenge
in 2012. However, this was mainly the result of certain specific
competitor issues and not due to any lack of interest in sporting goods
on the part of the consumer. In fact, Chinese consumers have seen their
real income continue to grow strongly, and this is supporting spending
power and consumption for our industry. What is our recipe for success?
Well, it comes back to one of the guiding principles of our Route 2015
strategic plan – focus on the consumer. As part of a rising middle
class, our consumer target group in China is maturing at a rapid pace,
becoming increasingly discerning and sophisticated. They are looking for
innovative global brands with functional, stylish and fashionable products
which they can identify with. adidas fits perfectly to this consumer and,
on top of our global appeal, we also infuse our brand messages and
products with local flair and understanding to ensure we are always top
of mind. This approach spans the entire offering, and this strength is
underpinned through the fact that we saw double-digit growth in adidas
Sport Performance, adidas Originals and the adidas NEO label in 2012.
Additionally, we have deepened our already very close relationship with
our retail partners, who now operate more than 7,500 points of sale
across Greater China. By ensuring that our business remains constantly
in tune with theirs, in particular through our industry leadership in
terms of keeping our inventories under control, we have been able to
keep our product offerings fresh and new at the point of sale. This is a
clear edge we are enjoying and will continue to enjoy. Looking forward,
from our market research, we can see that adidas’ brand appeal has the
most momentum in the Chinese market right now. I fully expect this to
continue in 2013, and I am confident we will take more market share and
grow faster than our major competitors in this critical market.
Taking all the negative impacts for Reebok into account, what
was the underlying business trend, and what do you expect for
the brand in 2013?
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Reebok sales declined 18% currency-neutral in 2012. Excluding
the impacts from the discontinuation of the NFL business and the
transfer of NHL-related sales to Reebok-CCM Hockey, sales declined
8%. The brand’s gross margin was essentially flat at 35.9%, which is
not a bad performance, given we had quite some promotional activity
to move old toning products during the year. While we are obviously
disappointed with the result, we have seen the underlying business
further stabilise. In the fourth quarter, Reebok sales excluding licence
revenues were up 3% currency-neutral. To ensure this now continues,
we will commence a major brand and category offensive in fitness in
2013. Our new category approach, which we call “The House of Fitness”,
allows Reebok to engage with consumers, regardless of how they
choose to stay fit. It focuses on five key areas: Fitness Training, Fitness
Running, Studio categories including Yoga, Dance and Aerobics, Walking
as well as Classics. Several new footwear and apparel collections will
be launched throughout the year to create a broad-based foundation
for long-term, sustainable success. For example, in Fitness Training,
Reebok will introduce the Reebok Delta collection, which takes design
inspiration from the CrossFit community. This collection is redefining
the fitness apparel aesthetic, with every piece designed and developed
for the freedom of movement for any fitness activity. In addition to new
products, we will activate new exciting partnerships to authenticate and
give credibility to Reebok in each category. Renowned yoga instructor
Tara Stiles, the Spartan Race series of obstacle races and the Red Bull
X-Alps adventure race are just a taste of what’s to come over the next
couple of years. Bringing it all together, in 2013, the Reebok brand will
speak to the consumer with one voice by launching a global campaign.
The campaign, which is called “Live with Fire”, will be the brand’s first
concerted effort to inspire the fitness consumer to live a life of passion,
intent and purpose. Everything I see so far confirms we are gaining
traction again with retailers and consumers, and I fully expect a return
to growth for Reebok once we anniversary the last of the NFL-related
comparisons in the first quarter.