Adidas 1999 Annual Report Download - page 6

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President’s Letter
PRESIDENT’S LETTER
Dear Shareholder:
1999 was a highly successful year for adidas-Salomon.
Despite a tough market environment, we achieved a
strong gross margin, delivered our best ever operating
profit and drove income before taxes to a record level.
Integration of the former Salomon group brands posi-
tively impacted our results, the start-up of adidas Japan
has exceeded our expectations, Asia is performing well,
and Europe is showing an upward trend. Only in North
America, which represents around one third of our sales,
do we see our sales softening. Here, our business is being
negatively impacted by an adverse market situation.
Although we can be content with our 1999 results, we
need to improve them further. We have to set our sights
even higher if we want to establish ourselves as the
world’s best sporting goods company. We are in a position
to achieve above-average sales growth with innovative
products and efficient structures. This can only be
leveraged through to an even stronger bottom-line
improvement if we further strengthen cost control within
the Group. In order to further enhance shareholder value
we need to focus on what we do best: developing and
marketing top-quality sporting goods.
Our aim is to shape our company into a high-performance
organization with a focus on innovative sports products.
To this end, at the beginning of 2000, we decided to
implement a growth and efficiency program which
supports our objective to achieve a 15% annual growth
in earnings between 2001 and 2003.
For the adidas brand, for example, focusing on our own
strengths means streamlining the product range, cutting
the number of products by 20%, pushing products
with strong margins, eliminating the weaker ones. This
reduces complexity in all areas of the organization, from
design to product development, from sourcing to ware-
housing. And it sets free energies that will allow us to
concentrate more strongly on winning products.
These will be products featuring new technologies and
exciting new designs. For instance, prior to the European
Soccer Championship we will be introducing a new
Predator®soccer boot with exchangeable studs. For the
Olympic Games in Sydney we will be presenting a sprint
shoe incorporating state-of-the-art carbon technology
that has been developed by Salomon for adidas. In the
design sector, we are moving to new designs, working
together with external design studios and developing
footwear concepts that will generate new impetus in
categories with strong sales potential.
Focusing on our core business also means further
enhancing the innovative strength of the Salomon
and Taylor Made brands. In the hardware sector, it is
vital that we remain at the leading edge, convincing
customers that with our new ideas they can improve
their performance and thus further increase their enjoy-
ment of sport.
Our clear focus on the essentials is also reflected in our
brand policy. After intensive discussions, and extensive
tests and market research, we decided not to pursue
any further the idea of a new brand for the leisurewear
market. Our market research showed quite clearly that
this market potential can be leveraged with significantly
less effort and risk by further differentiating our existing
brands. That is where our strength lies!