Adidas 2001 Annual Report Download - page 37

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32 MD&A
adidas-Salomon consolidated net sales increased
by 5% in 2001 to €6.1 billion. The gross margin
was maintained at an industry-leading 42.6%
despite currency pressure in Europe and an
extremely promotional retail sales environment
in the United States. Through strict cost control
and savings in the Group’s marketing working
budget, operating expenses as a percent of net
sales declined 105 basis points versus the prior
year to 34.8%. adidas-Salomon’s income before
taxes was €376 million, up 9% versus 2000.
The lower tax rate and minorities helped drive
the 15% growth in net income to €208 million
or €4.60 per share. This result is in line with the
expectations communicated by the Group since
the beginning of 2001.
Global Economic Climate Develops Adversely
adidas-Salomon’s strong performance improvements
in 2001 were particularly notable in light of the adverse
economic climate in all major international markets.
International stock exchanges suffered their worst
development in a decade. National economies in all
global markets were under pressure. Momentum of
the US economy slowed substantially with negative
GDP growth in the second half of the year and an
already weak retail performance declining significantly
following the tragic events of September 11. Germany
experienced its lowest GDP growth since the 1993
recession with retail remaining weak throughout the
year. Japan’s economy suffered its fourth recession
in 10 years with strong consumer spending declines.
Unemployment rates rose in all major markets.
Emerging markets also continued to suffer, with major
economic crises occurring in Turkey and Argentina.
Sporting Goods Sector Largely Negative
adidas-Salomon’s impressive 2001 performance also
contrasted strongly with the overall development of
the world’s sporting goods markets. In North America,
clearance activities accelerated as excess inventory from
suppliers entered the market and retailers’ price-war
activities became more aggressive. In Japan, the market
faced overall structural difficulties with all domestic
competitors reporting declining profitability. Globally,
fashion houses and vertical suppliers who had assertively
entered the sporting goods market over the past few
years faced stagnating demand, which contributed
adidas-Salomon
Net Sales by Region
Net Sales
(euros in millions)
3,425
5,065
5,354
5,835
6,112
1997
1998
1999
2000
2001
Net Sales Growth by Brand and Region*
Europe North Asia Latin Total
(in %) America America
adidas 7 (8) 12 3 3
Salomon 4 12 (23) 62 2
TaylorMade-
adidas Golf 26 0 102 – 24
Total 7 (5) 15 4 5
* Versus the prior year
Europe
North
America
17%
3%
30%
50%
Asia
Latin America