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96 Group Management Report
Currency-Neutral adidas Sales in Latin America Up 32%
Brand adidas sales in Latin America increased 32% on a
currency-neutral basis. In euro terms, sales improved 43%
to € 310 million in 2005 from € 217 million in 2004. Con-
tinued strong double-digit growth in the region’s three largest
sporting goods markets Brazil, Mexico and Argentina, due to
increased demand related to a strong product offering, was
the primary driver of this positive development. Virtually all
other countries also grew by double-digit rates.
adidas Own Retail as Important Top-Line Growth Driver
Own retail is an increasingly important part of our business
in all regions and consists of four major components: concept
stores, factory outlets, Internet sales and concession cor-
ners in Asian markets. Concept stores market Sport Perfor-
mance and/or Sport Heritage products directly to consumers
in a stand-alone retail environment and provide us with high
visibility in major metropolitan locations as well as growth
opportunities in Eastern Europe and Asia where less retail
infrastructure is available. Factory outlet stores are also
stand-alone concepts used to optimize clearance activities
for the adidas brand. Internet sales in North America are
available at the Group’s www.adidas.com website. Conces-
sion corners provide adidas sales infrastructure to emerg-
ing markets in Asia. Own-retail concepts result in additional
operating expenses such as personnel costs but allow us to
achieve a significantly higher gross margin on our products
than regular distribution via retail partners. Further, own-
retail activities give us valuable insight into consumer needs
and product positioning. We share this insight with our retail
customers, who also often benefit from being in proximity to
our concept stores.
2005 2004
Total 708 642
adidas Own-Retail Stores
Concept stores
Factory outlets
Concession corners
E-commerce
312
221
174
1
228
206
207
1
Internet 2%
adidas Own-Retail Sales by Channel
Factory outlets 57%
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Concept stores 37%
Concession
corners 4%
Currency-Neutral Own-Retail Sales Increase 36%
In 2005, adidas opened 84 additional concept stores and 15
new factory outlets. Major openings included Sport Perfor-
mance stores in New York, Berlin and Seoul as well as Sport
Heritage stores in Madrid, Los Angeles and Hong Kong. As
a result, the store base at the end of 2005 comprised 312
concept stores, 221 factory outlet stores and 174 concession
corners worldwide. adidas own-retail activities made up 13%
of brand sales in 2005, up from 11% in the prior year. This
represents an increase of 36% in currency-neutral terms and
37% in euros to € 757 million in 2005 from € 555 million in
2004, driven by increases in comparable store sales and new
store openings.
Gross Margin Improves Significantly
The adidas gross margin increased by 1.1 percentage points
to 45.3% in 2005 from 44.1% in 2004. This improvement was
largely driven by increased own-retail activities, our improv-
ing product mix and favorable currency movements. As a
result of these developments, adidas gross profit grew 16% to
€ 2.654 billion in 2005 from € 2.284 billion in 2004.