Adidas 2002 Annual Report Download - page 92

90 REPORTING MANAGEMENT DISCUSSION & ANALYSIS /// OUTLOOK
Outlook /// 2003 IS GOING TO BE ANOTHER IMPORTANT
YEAR FOR adidas-Salomon. DESPITE TOUGH MARKET
CONDITIONS GLOBALLY, WE ARE CONFIDENT THAT
CONCENTRATION ON THE GROUP’S STRATEGIC PRIORITIES
WILL HELP US DELIVER STRONG TOP- AND BOTTOM-LINE
PERFORMANCE IN 2003. THIS INCLUDES INCREASING OUR
FOCUS ON THE CONSUMER, LEADING IN DESIGN AND
PRODUCT INNOVATION, GROWING LEADING POSITIONS IN
ALL MAJOR MARKETS AND CATEGORIES AS WELL AS
INCREASING FOCUS ON THE EXECUTIONAL EXCELLENCE
AND FINANCIAL HEALTH OF THE GROUP. WITH STRONG
BRAND MOMENTUM, NEW TECHNOLOGIES AND MARKETING
INITIATIVES, WE EXPECT TO GROW adidas-Salomon
REVENUES BY AROUND 5% AND DELIVER EARNINGS
GROWTH OF BETWEEN 10 AND 15%.
INTERNATIONAL MARKETS REMAIN UNDER PRESSURE ///
Given the difficult environment at the beginning of the year,
major improvements in the overall global economic perfor-
mance are unlikely for 2003. The ongoing tension in the Middle
East and its uncertain outcome puts the recovery of global
markets at risk. As a result, the current consensus among
leading economists is that economic growth will proceed at a
low level in 2003. For the USA, a slight improvement seems to
be possible from the second half going forward, driven by
further tax reductions and continued low interest rates.
Nevertheless, GDP is expected to grow at a level lower than in
2002. In Europe, with GDP growth of around 1.5% in 2003
most economists project a small improvement compared to
the prior year. At the same time, the prospects for Germany
are not as promising, partly due to its high dependence on
world trade and the exchange rate. The growth prospects for
Asia and in particular for South East Asia and India will be
tightly linked to global security issues and the possible war
in Iraq. However, GDP growth in Japan continues to be uncer-
tain. In Latin America, the macroeconomic instability is
expected to continue throughout 2003.
SPORTING GOODS SECTOR OUTLOOK MIXED /// The outlook
for the sporting goods sector in 2003 remains mixed. Despite
the negative macroeconomic developments in the USA, it is
anticipated that low interest rates and low unemployment will
act as anti-cyclical cushions for consumer spending. As a
result, the general retail environment is expected to improve
in the second half of the year. However, uncertainty remains
because of the ongoing situation in the Middle East. The
market for winter products will be as difficult as it was in
the prior year due to the persistent poor snow conditions in
Europe and Asia early in the season. While the golf market
should offer sustainable growth opportunities in Asia and
Europe, the US golf business will be challenging going for-
ward given the recent declines in the number of golf rounds
played and the extremely promotional environment at retail.
DOUBLE-DIGIT INCREASES IN THE USA AND ASIA DRIVE
adidas-Salomon SALES GROWTH /// In 2003, we strive to
sustain healthy top-line expansion. This means that Group
sales are projected to grow around 5% in 2003 with currency-
neutral growth coming from all regions. In particular, double-
digit sales increases in North America and Asia will be major
contributors. The strong momentum of our brands in America
will continue and we expect to again deliver double-digit
growth in footwear and to significantly accelerate growth in
apparel as well. In Asia, growth is likely to be characterized
by continued strong adidas brand momentum in Japan,
following the very successful 2002 FIFA World Cup™ activities.
Greater China will be another important source of growth in
the region. In Europe, adidas-Salomon is targeting moderate
overall gains, supported by substantial improvements in key
markets such as Italy and the UK as well as further growth
with key accounts. In Latin America, moderate sales
increases are expected, although growth in the region is
uncertain because of regional effects tied to financial crises
in several key markets.