Adidas 1998 Annual Report Download - page 13

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Management Discussion and Analysis 11
NEW RECORD IN SALES AND PROFIT
In 1998, adidas increased net sales
by 26% to over DM 8.4 billion, strengthening its position as the world’s second-largest sport
-
ing goods brand. The high sales growth was primarily driven by Footwear, which increased
by 35% to just under DM 3.9 billion. Net sales of Apparel grew 19% to just under DM 4.3
billion. Hardware sales increased 16%, contributing DM 276 million to the new sales record.
Gross margin improved by 20 basis points to 42.1%. This success primarily reflects
the continued strict control of all sourcing costs. As adidas was also able to maintain sell-
ing, general and administrative expenses at an almost stable level in relation to net sales,
income from operations improved to a new record of DM 752 million.
POSITION IN THE EUROPEAN MARKET STRENGTHENED In 1998,
the total market for branded athletic footwear in Europe decreased slightly. Although exact
figures for the overall European sporting goods market are not yet available, indications
are that the development was comparable to that of the athletic footwear market.
In this flat market, net sales of products under the adidas brand name increased by
17% to DM 4.8 billion. For the first time since 1994, adidas Footwear growth rates (+19%)
were higher than those of Apparel (+14%). The increase in Footwear was primarily driven
by Running, Tennis, Kids, Women and Originals. Running remains the largest sports cate-
gory, ahead of Soccer and Training.
Apparel growth in 1998 was primarily driven by non-fashion categories such as
Sports Specific, i.e. Running, Tennis, Basketball, Workout, and also Swimwear. Measured
by volume, Training remains the largest category, followed by Soccer, Lifestyle and Swim-
wear. This development reflects a product strategy which addresses the performance-
oriented sports enthusiast.
As a result of the difficult market situation in Europe, and the slower growth rate for
Apparel, gross margin declined by 1.1 percentage points to 41.3%.
adidas
SALES AND EARNINGS OF THE adidas BRAND AGAIN SHOWED DYNAMIC DEVELOPMENT IN 1998.
VIGOROUS GROWTH IN THE USA, THE WORLD’S KEY SPORTING GOODS MARKET, LED TO SIGNIFICANT
INCREASES IN MARKET SHARE, OFFSETTING CRISIS-RELATED DECLINES IN ASIA. THE adidas BRAND AGAIN
INCREASED INCOME FROM OPERATIONS. IN 1999, HOWEVER, SALES AND EARNINGS GROWTH OF THE
adidas BRAND IS EXPECTED TO SLOW, REFLECTING LESS DYNAMIC MARKETS.
adidas FOOTWEAR
Net sales 1998, split by categories, in %
Training 11.6
Soccer 10.8
Running 46.4
Basketball 11.0
Tennis 7.8
Others 12.4
n
n
n
n
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Net sales 1998, split by region
Americas Europe Asia
46.2% 47.6% 6.2%
adidas FOOTWEAR