Reebok 2013 Annual Report Download - page 38

adidas Group
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2013 Annual Report
To Our Shareholders
34
2013
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01.4
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Letter from the CEO
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In Originals, the relaunch of Stan Smith and the introduction of ZX Flux are set to be major hits at retail
in 2014 with strong early sell-throughs to date. We are also going to introduce a new store concept called
“Neighbourhood”, which we will roll out to over 30 cities in the next few years, as well as focus on new
collaborations with premium retailers, such as Topshop, Urban Outfitters and Farm.
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After successfully piloting adidas NEO stores in Germany in 2012/2013, we will extend our test phase by
opening stores in Poland and the Czech Republic in 2014, as we continue to drive towards our long-term
target to grow NEO into a one billion euro business. The first NEO store in Poland opened its doors in
Warsaw on February 20.
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For Reebok, our category approach will drive quality growth for the brand again in 2014, as we leverage
our strategic collaborations with CrossFit, Spartan Race and Les Mills, as well as with pop icons and
celebrities such as Alicia Keys, Shaq O’Neal and Tyga in our Classics business.
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While the golf market is likely to remain difficult in 2014, TaylorMade-adidas Golf will sustain its
leadership via game-changing innovations such as the JetSpeed driver, which incorporates TaylorMade’s
renowned Speed Pocket technology, or via the adizero One golf shoe, which is the lightest performance
golf shoe in the company’s history.
As you know, in 2010 we created our strategic business plan Route 2015. The centrepiece of the plan is to
prepare and, in many respects, to transform the Group for long-term sustainable growth and success. Now,
just after the half-way point of our journey, it’s time to reflect and refine our focus. After three years, while
I am satisfied that we are well on track operationally, unfortunately the environment has served up more
challenges than we had anticipated. Be it input cost pressures, a persistently weaker European market
environment or, most significantly, adverse currency movements. And to be fair and frank, we have also
made a few executional mistakes.
However, the most important thing about a high-quality management team is that they know how to tackle
challenges – and believe me, we have all the insight, character and determination to do so. Excluding
currencies, I am convinced that we will achieve most, if not all of the operational targets we set ourselves
for Route 2015. Nevertheless, the currency situation, as it is right now, represents a significant risk to the
achievement of our goals. This is already reflected in our financial guidance for 2014, where we expect
another year of significant currency translation negatives. Right now, the order of magnitude could be as
much as we saw in 2013, i.e. a mid-single-digit percentage point negative just from translation. On top of
that, we will see additional gross margin pressures given the sharp weakening of currencies such as the
Argentine peso and the Russian rouble already so early in 2014. This is because these markets have open
exposures against the US dollar, related to our US dollar sourcing costs, which in these markets are too
expensive to hedge. We have reflected this situation in our 2014 guidance range for net income attributable
to shareholders of € 830 million to € 930 million.
So, what does that mean for our 2015 targets? As we start our approach and final ascent to the top of the
mountain, currency headwinds will make our climb to the summit more challenging than we thought when
setting out from base camp. But let me assure you we have the right equipment, the best know-how and the
most talented people to complete this climb, and the endurance to get there, even if it does take us a little
longer to achieve every goal outlined in the plan.