Reebok 2014 Annual Report Download - page 11

7
2014
/
01.1
/
Letter from the CEO
To Our Shareholders
adidas Group
/
2014 Annual Report
/
Reebok sales grew 5% in total in 2014. During the fourth quarter, Reebok recorded its seventh
consecutive quarter of growth. The 21% increase in the training category impressively underlines
Reebok’s positioning as THE fitness brand.
In addition to these positive developments, the overall performance of the adidas brand underlines the
strong improvement in our competitive position over the course of the year. adidas sales for the full
year increased 11%, with double-digit growth rates throughout the year, with the exception of the first
quarter. This shows that our sales dynamics are right, and the momentum of our core brands is fully
intact.
At the same time, however, 2014 also brought major disappointments. Mid-way through the year, in
light of the various challenges we were facing, we recognised that we wouldn’t be able to achieve our
original goals for 2014. It never feels good to miss the mark, neither in sport nor in business. But it’s
all the more painful when this is brought about not only by external circumstances that we cannot
influence but also by executional mistakes on our part. So let me go into more detail on the various
factors that resulted in not meeting your and our high expectations last year.
As far as our golf business is concerned, we misjudged the market situation at the beginning of
the year. A decline in the number of active players as well as high levels and slow liquidation of
old inventories caused immense problems in the entire industry, and as market leader this hit us
particularly hard. However, we reacted decisively to these challenges, taking a leading role in the
clean-up of excess inventories in the golf market. At the same time, we implemented an extensive
restructuring programme which has involved the closure of one of our facilities in the USA and a 15%
reduction in the global TaylorMade-adidas Golf workforce. Building on these significantly healthier
foundations, and thanks to numerous promising product launches, TaylorMade-adidas Golf will be back
on track for growth and profitability this year.
Russia, on the other hand, is a totally different story. Here, we are the victims of our own success.
Being the clear market leader, we have been particularly impacted by the economic downturn,
deteriorating consumer sentiment and the highly promotional environment in Russia. However, that
does not alter the fact that Russia will remain a growth market for the adidas Group in the long term.
And I am convinced that our perseverance will pay off. We have used the crisis as an opportunity,
increasing our operational flexibility, significantly reducing the number of net store openings and
further optimising our cost structure. With these initiatives, we aim to safeguard our profitability in this
key market to the greatest extent possible and create optimal foundations for sustainable, profitable
growth.
On top of this, we have been severely impacted by the significant devaluation of the rouble and other
emerging market currencies. Negative currency effects wiped more than € 550 million off our top
line last year. In addition, unfavourable hedging rates negatively impacted the Group’s gross margin
by 60 basis points. But none of this changes our underlying strength in the developing economies in
general and our excellent market position in Russia in particular.