Adidas 1998 Annual Report Download - page 4

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2President’s Letter
PRESIDENT’S LETTER
DEAR SHAREHOLDER: In 1998, we achieved the second-best result in our
history. To use the language of sport, this is the silver medal. Jan Ullrich, a passionate
racing cyclist who has been endorsing our products since the start of his career, also had
to be content with second place in the 1998 Tour de France, despite his total commitment
and enormous will to win. However, his popularity with cycling fans worldwide has in no
way diminished. In fact he was voted Germany’s most popular athlete. Donovan Bailey,
the Olympic 100m Champion in Atlanta, put it into words: “What I don’t win only makes
me stronger”. As a company we have a similar philosophy.
When it comes to showcasing our brands, 1998 was truly exceptional. Early in
the year the Winter Olympics focused the attention of sports enthusiasts on Nagano. In
summer the
Soccer World Cup in France attracted more spectators than any single sports
event before.
When the French team, promoting the three stripes, won the World Cup, we
could not have wished for more. These were great times for our brands.
For our share price, times were not so great though. It declined 24 per cent in the
course of the year despite our inclusion in the DAX 30, the German blue-chip index.
This, however, has not been representative of the underlying strength of the adidas
brand: A net sales increase of more than 70 per cent in the USA is a noteworthy achieve
-
ment. And the subsequent improvement of the market share of the adidas brand to more
than 12 per cent in the world’s largest sporting goods market is truly outstanding.
By the same token, the adidas business increased by more than 15 per cent in
Europe. Given our traditionally high market share in most European countries, this is an
accomplishment of comparable dimension to our US achievements.
The fact that we were able to keep our margins stable, to improve our income from
operations by a double-digit figure and to propose the same dividend as last year are, in
my eyes, clear signs of a successful company.
Nevertheless, we cannot ignore the fact that the bottom line in 1998 has not kept up
with top-line growth.
Several factors played a role here:
First: It is practically impossible to protect yourself against the impact of economic
crises as experienced in Asia and Russia – at least in the short term. In Asia, the adidas
brand has lost just over 20 per cent in net sales in one year. In Russia, business has gone
sour after the havoc created by the financial crisis.