Adidas 2003 Annual Report Download - page 86

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82 REPORTING GROUP MANAGEMENT REPORT /// adidas
adidas /// IN 2003, adidas BRAND SALES GREW 5% ON
ACURRENCY-NEUTRAL BASIS AS A RESULT OF STRONG
GROWTH IN THE SPORT PERFORMANCE DIVISION. IN
EUROS, HOWEVER, REVENUES DECLINED 3% TO
€ 4.950 BILLION VERSUS € 5.105 BILLION IN 2002. adidas
GROSS MARGIN IMPROVED 1.3 PERCENTAGE POINTS TO
40.6% OF SALES IN 2003 FROM 39.2% IN 2002. THIS
POSITIVE DEVELOPMENT REFLECTS THE EXPANSION OF
HIGH-MARGIN OWN-RETAIL ACTIVITIES, IMPROVING PROD-
UCT MIX AND FAVORABLE CURRENCY EFFECTS. OPERATING
PROFIT INCREASED 6% TO € 365 MILLION IN 2003 VERSUS
€ 343 MILLION IN THE PRIOR YEAR AS A RESULT OF GROSS
MARGIN EXPANSION. FOR 2004, IMPROVING CURRENCY-
NEUTRAL SALES, GROSS MARGIN AND OPERATING PROFIT
ARE EXPECTED.
adidas SALES UP 5% ON A CURRENCY-NEUTRAL BASIS IN
2003 /// In 2003, currency-neutral sales for adidas grew 5%.
In euro terms, however, at € 4.950 billion, sales were 3%
lower than in 2002, when sales reached € 5.105 billion.
Currency-neutral sales increased in all regions except North
America.
CURRENCY-NEUTRAL SPORT PERFORMANCE GAINS DRIVEN
BY RUNNING AND TRAINING CATEGORIES /// adidas Sport
Performance is the largest division within the Group and
comprises 83% of brand adidas revenues. Currency-neutral
sales grew 7% in 2003. This represents a decline of 1% in
euro terms to € 4.102 billion in 2003 from € 4.154 billion
in 2002. The product categories with the highest growth in
the division were running and training, where currency-
neutral sales grew at double-digit rates. The strongest per-
forming product initiatives in these two categories were the
ClimaCool®2, the Barracks as well as the B and C series on
the footwear side and adidas Colours in apparel.
STRONG INCREASES IN APPAREL DESPITE OVERALL CON-
SOLIDATION AT SPORT HERITAGE /// The Sport Heritage
division contributes 17% to brand adidas sales. In 2003, sales
in this division declined 4% on a currency-neutral basis or
11% in euro terms to € 817 million versus € 922 million in
2002. This reduction reflects our efforts to optimize distribu-
tion of Sport Heritage products. In footwear, we limited
distri-
bution in certain European markets and Japan to prevent a
potential oversupply of these products. And in North America,
the lack of Sport Heritage footwear in lifestyle and fashion
channels had a negative impact on sales. As a result, foot-
wear revenues decreased 7% on a currency-neutral basis
or 14% in euro terms to € 732 million in 2003 versus
€854 million in 2002. In apparel, however, just the opposite
occurred. This small but fast growing category delivered
currency-neutral revenue growth of 54% or 42% in euros to
€69 million in 2003 from € 49 million in 2002. The main
driver of this improvement was increased expansion of distri-
bution as part of our efforts to better balance the proportion
of apparel sales in our Sport Heritage business.
adidas AT A GLANCE € in millions
2003 2002 Change
Net sales 4,950 5,105 (3%)
Gross margin 40.6% 39.2% 1.3pp
Operating profit 365 343 6%
adidas SPORT PERFORMANCE ///
ADISTAR TR TRAIL RUNNING SHOE