Reebok 2013 Annual Report Download - page 159

adidas Group
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2013 Annual Report
Group Management Report – Financial Review
155
2013
Subsequent Events and Outlook
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03.4
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Operating margin to be between 8.5% and 9.0%
In 2014, we expected the operating margin for the adidas Group to be
at a level between 8.5% and 9.0% (2013 excluding goodwill impairment
losses: 8.7%). This development will be strongly influenced by currency
movements.
Net income attributable to shareholders to be at a level
between € 830 million and € 930 million
Net income attributable to shareholders is expected to be at a level
between € 830 million and € 930 million compared to the 2013 net
income attributable to shareholders, excluding goodwill impairment
losses, of € 839 million. This represents basic earnings per share of
between € 3.97 and € 4.45. Interest rate expenses in 2014 are forecasted
to remain at the prior year level, as lower interest expenses from
euro-denominated borrowings will be offset by higher interest expenses
from bank borrowings in emerging markets. Net foreign exchange
losses in the financial result are also expected to be at a similar level
compared to the prior year. The Group tax rate is expected to be at a level
of around 28.5% and thus more favourable compared to the 2013 tax rate
excluding goodwill impairment losses of 29.0%.
Average operating working capital as a percentage
of sales to decrease moderately
In 2014, average operating working capital as a percentage of sales is
expected to decrease moderately compared to the prior year level (2013:
20.9%). This is mainly due to working capital improvements we expect to
achieve as we move through the year.
Group gross margin to improve in 2014
In 2014, the adidas Group gross margin is forecasted to increase to
a level between 49.5% and 49.8% (2013: 49.3%). Improvements are
expected in most segments. Group gross margin will benefit from a
positive pricing, product and regional sales mix, as growth rates in
high-margin emerging markets are projected to be above growth rates
in more mature markets. In addition, the Reebok brand will positively
influence Group gross margin development. However, these positive
effects will be partly offset by less favourable hedging terms compared
to the prior year, adverse currency movements in emerging markets as
well as increasing labour costs, which are expected to negatively impact
our cost of sales.
Group other operating expenses as a percentage of
sales to be around prior year level
In 2014, the Group’s other operating expenses as a percentage of sales
are expected to be around the prior year level (2013: 42.3%). Sales
and marketing working budget expenses as a percentage of sales are
projected to increase modestly compared to the prior year. Marketing
investments will be centred on major sporting events such as the 2014
FIFA World Cup and highly innovative product launches, particularly
in the running category. Further, we will support Reebok’s growth
strategy in key fitness categories, leveraging partnership assets such as
CrossFit, Spartan Race and Les Mills. Operating overhead expenditure
as a percentage of sales is forecasted to decrease modestly in 2014.
Higher administrative and personnel expenses in the Retail segment
due to the planned expansion of the Group’s store base will be offset by
leverage in other areas.
We expect the number of employees within the adidas Group to increase
versus the prior year level. Additional hires will be mainly related to
own-retail expansion. The adidas Group will continue to spend around
1% of Group sales on research and development in 2014. Areas of
particular focus include advanced cushioning solutions, lightweight and
digital sports technologies as well as sustainable product innovation.
Additionally, investments and research emphasis will also include areas
such as new manufacturing processes and advanced materials
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SEE
RESEARCH AND DEVELOPMENT, P. 99.