Adidas 1996 Annual Report Download - page 34

34
sidiaries again generated good
results; they drew upon their com-
petitive advantage of adidas having
been first to have full sales organiza-
tions in major markets such as Hun-
gary, the Czech Republic, Poland
and the former CIS countries. We
intend to establish a wholly-owned
subsidiary in the Slovak Republic in
1997 in order to leverage the size and
potential of this market for adidas.
1996 was an important year for
us not only in terms of major sports
events (e.g. European Soccer
Championships) but also in terms of
signing new sports contracts such
as the World Cup FRANCE ‘98 or
upgrading the level of existing pro-
motional contracts.
The introduction of Feet You Wear
in key markets (Germany, France)
in the second half of 1996 was
well received, with approximately
200,000 units sold.
A focused advertising and promo-
tion strategy, combined with a con-
tinuous adaptation of sales and dis-
tribution structures to the require-
ments of the trade, will be critical to
our continued success in the home
market.
North America
The North American market for
branded athletic footwear grew at
around 10% based on wholesale
prices in 1996. Net sales of adidas
in North America increased by 34%
to DM 1,026 million in 1996 up from
DM 767 million in 1995. The growth
was primarily driven by apparel and
selected footwear segments.
Net Income
14
117
245
1995
314
6.7
199619941993
0.6
3.7
7.0
mNet Income
(DM million)
m Net Income
in %
of Net Sales
Net Sales – Europe
2,101 2,335
1995
3,111
19961994
Hardware and
Other (%)
Apparel (%)
Footwear (%)
mNet Sales
– Europe
(DM million)
48 45 41
44 48
53
8
7
6
Income Taxes increased to DM 107
million in 1996 up from DM 43 million.
The phase-out of tax-loss carry-
forwards in the French and U.K. sub -
sidiaries in 1996 and the increased
taxable income in some subsidiaries
in countries with higher tax rates
such as Italy have led to an increase
in the effective tax rate for the group
(24.1% in 1996 compared to 14.5%
in 1995). Taxable income was shel-
tered by tax-loss carryforwards at
German operations and to a lesser
extent in some other countries.
As of January 1, 1997 adidas had
accumulated Loss Carryforwards
of DM 667 million from operating
losses mainly in years prior to 1993.
Because of restrictions on DM 265
million of these loss carryforwards,
the amount which can be used for
tax purposes is DM 402 million as
of this date, of which DM 317 million
do not have time limitations regard-
ing their usage. The largest amount
of such carryforwards is in the
German operations (DM 282 million).
PERFORMANCE OF REGIONS
Europe
General market conditions in 1996
for sporting goods in major Euro-
pean countries were characterized
by moderate volume growth with
the exception of a few markets like
Spain and the U.K., which had above-
average growth. In this overall
climate of moderate market growth,
we managed to increase net sales
by 33% to DM 3,111 million, thereby
gaining market share in major Euro-
pean markets. Major growth drivers
included Apparel (+47%) in general,
which reinforced the leadership
position of adidas in branded sports
apparel, and selected sports cate-
gories such as soccer, running and
training for Footwear, which grew
at 21%.
Top performing countries with
double-digit growth rates included
Germany (+22%), the U.K. (+65%),
Spain (+54%), Sweden (+53%) and
Norway (+44%). The new joint ven-
ture company in Italy also contrib-
uted considerably to the increase in
net sales. Eastern European sub-