Reebok 2015 Annual Report Download - page 18

TO OUR SHAREHOLDERS
Letter from the CEO
14
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2015 has also seen two important portfolio decisions. On the one hand, we completed the divestiture
of Rockport, which allows us to focus our resources even more on our core competency – sport – and
on the highest-potential opportunities for our Group. On the other hand, we have strengthened
our digital activities with the acquisition of Runtastic. Their cutting-edge digital capabilities are
enabling us to create unexpected sports experiences that will resonate with our consumers and
clearly stand out in a crowded and constantly changing landscape.
Another important strategic decision will be made shortly. Following a decade of strong and
profitable growth, TaylorMade-adidas Golf experienced two very difficult years in 2014 and 2015,
caused by a number of structural, commercial and operational issues. As a result, halfway through
last year we started analysing future options for our golf business. This strategic review is expected
to be concluded by the end of the first quarter of 2016. At the same time, we also initiated a
major restructuring programme, with the main objective to create a more nimble and profitable
organisation. In the meantime, we have seen very good response to our latest product launches. In
its inaugural week, on both the PGA Tour and European Tour, TaylorMade’s M1 driver has become
the number one played model. In addition, a multitude of players made an immediate switch based
on the impressive results they saw in testing – a true testament to the unrivalled performance of
M1 in its maiden week on tour. But the M1 was not only successful with our tour staff. Due to the
strong early demand and quick sell-through at retail, our launch quantities for the M1 were sold
out quickly after its launch and much faster than we had anticipated. But unlike in the past, we
have decided not to push further volumes into the market, in order to keep the product fresh and
demand high for the next drop in the first quarter of 2016.
Summing it all up: We are in great shape and well prepared to fully compensate the cost pressure
that we and the entire industry will be facing in 2016 as a result of a surge in input costs due
to labour cost increases in our supply chain as well as the strong appreciation of the US dollar
against most major currencies. But make no mistake, the measures we have implemented to
counterbalance this year’s macroeconomic headwinds are not oriented towards the short term as
we will definitely not sacrifice the long-term development of the Group and the desirability of our
brands for short-term margin optimisation. In fact, the opposite is true. All of the initiatives aiming
to support our margin development in 2016 will sustainably increase our operating efficiency and
significantly strengthen our foundation for profitable growth in the future. At the same time, in line
with our firm belief that the desirability of our brands and products will be the decisive factor to
significantly increase revenues and profits over time, we will further increase our brand-building
investments this year.