Adidas 1999 Annual Report Download - page 23

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19
Management Discussion and Analysis
Change
year-over-
1999 year
Net sales DM 246 m +13%
Gross margin 40.0% +1.0 PP
LATIN AMERICA
Outlook for North America
expected to improve
Based on the order situation, sales in the first half of
2000 are expected to remain on the decline. Demand
for Apparel, in particular, continues to slow.
In the second half of the year 2000, business is ex-
pected to improve again. It is anticipated that sales in
the second half will reach the previous year’s level. This
is supported by indications that the Fall/Winter ranges,
containing many new designs, have met with positive
customer response.
Latin America recovered well
At the beginning of 1999, the shock waves that had
rocked the financial markets in Asia and Russia in
1998 also reached Latin America. The devaluation of
the Brazilian Real in January had a significant impact
on the entire continent, affecting economies throughout
the region. Most severely affected were the subsidiaries
in Brazil, Uruguay and Argentina, although the latter
still managed to increase its net sales by 53%.
Apparel sales grew more
strongly than Footwear
Overall, the net sales of adidas subsidiaries in the region
increased by 13% to DM 246 million, with Apparel grow
-
ing by 44% and Footwear by 8%. These very different
growth rates reflect the fact that growing the Apparel
business has been a major focal point in further devel-
opment of the adidas brand. The product management
and sales force in this division were strengthened in
1999. Accordingly, the Apparel share of total net sales
increased from 18% to 23%. Comparison with the
Group average indicates that there is still considerable
potential for further growth in the Apparel category.
Control over the brand strengthened
These efforts to achieve sustainable growth are accom-
panied by an ongoing commitment to strengthen control
over the brand in Latin America. The establishment of a
wholly-owned adidas subsidiary in Colombia marks the
commitment to this policy, as does the take-over of
sales activities in Central America and the Caribbean,
which had formerly been serviced by a distributor.
A growing number of adidas-owned retail stores will help
gauge market sentiment and convey a consistent brand
message throughout the region. In addition, substantial
efforts will continue to be focused on the presentation
of the brand at independent retailers.