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Annual Report 2010

Table of contents

  • Page 1
    Annual Report 2010

  • Page 2
    ...brand sales increase 12% - Other Businesses sales increase 2% - TaylorMade-adidas Golf sales increase 1% Gross margin: 47.8% Operating margin: 7.5% Operating working capital as a percentage of sales improves to 20.8% Capital expenditure: â,¬ 269 million 2010 Outlook 2011 Low- to mid-single-digit...

  • Page 3
    ... Key Ratios (%) Gross margin Operating expenses as a percentage of net sales Operating margin Effective tax rate Net income attributable to shareholders as a percentage of net sales Operating working capital as a percentage of net sales 1) Equity ratio Net borrowings/EBITDA Financial leverage Return...

  • Page 4
    Group Brands 2010

  • Page 5
    ... know the commitment it takes to achieve success, from the world's biggest sporting events to the finest details in our latest product innovations. We know how it all fits together. Our employees, athletes and products together with our brands, heritage, talents and aspirations. Our strengths. Our...

  • Page 6
    ... Group Management Report - Our Group Corporate Mission Statement ...Our Brands ...Major Locations and Promotion Partnerships ...Group Strategy ...Global Sales Strategy ...Wholesale ...Retail ...eCommerce ...Global Brands Strategy ...adidas ...Reebok ...Other Businesses Strategy ...TaylorMade-adidas...

  • Page 7
    Group Management Report - Financial Review Internal Group Management System ...Group Business Performance ...Economic and Sector Development ...Income Statement ...Statement of Financial Position and Statement of Cash Flows ...Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 8
    adidas Running Campaign Running is the soul of sport. In 2011, consumers will see adidas running in a new way: young, social, bright and fun - targeting all "next generation athletes". All athletes run either to get better for their sport or just to enjoy the experience of running. adidas helps them...

  • Page 9
    To Our Shareholders Operational and Sporting Highlights 2010 ...Interview with the CEO ...Executive Board ...Supervisory Board ...Supervisory Board Report ...Corporate Governance Report including the Declaration on Corporate Governance ...Compensation Report ...Our Share ...6 10 16 18 20 25 30 34 ...

  • Page 10
    ...01. adidas Originals launches its Star Wars collection consisting of footwear, apparel and accessories for men, women and kids Picture 02. 12.01. Reebok announces its partnership with the successful TV show "Germany's next Topmodel" to promote Reebok's groundbreaking shoe EasyTone. 14.01. TaylorMade...

  • Page 11
    ... Step", supporting the market introduction of its men's toning shoe range in the US Picture 11. June 11.06. The 2010 FIFA World Cup kicks off in South Africa. adidas is the Official Sponsor, Supplier and Licensee of the event. In the 2010 World Cup, adidas equips more than 200 players and 12 teams...

  • Page 12
    ... 03 04 02 06 Third Quarter July 11.07. adidas team Spain secure their first World Cup title. With the winning team, award-winning players, exciting product innovations and record sales, adidas is the clear winner of the 2010 FIFA World Cup Picture 01. 18.07. Reebok's Nicolas Almagro captures his...

  • Page 13
    ... innovative toning apparel line which is designed to create resistance and helps tone key muscles with every move. 18.11. adidas Group CEO Herbert Hainer is chosen as "Manager of the Year" by the German Manager Magazin. 26.11. Top model Eva Padberg is announced as a Reebok brand ambassador starting...

  • Page 14
    ...plan to date - Route 2015. Through its premium brands, leadership in innovation and strong financial position, the Group is expecting a mid- to high-single-digit top-line increase and 10% to 15% earnings growth in 2011. In the following interview, Herbert Hainer, adidas Group CEO, reï¬,ects on 2010...

  • Page 15
    ... top three selling footwear brands during the Christmas period in the USA. We also made sure that our Other Businesses had the right support to reach their goals. No more so than TaylorMade-adidas Golf. Sales grew to â,¬ 909 million in 2010. And in doing so, TaylorMade-adidas Golf became the global...

  • Page 16
    ... share lead in Russia, with Reebok now the number two sporting goods brand behind adidas. In Other Asian Markets and Latin America, sales increased 6% and 14% respectively in 2010. Even in Japan, we grew against a difficult consumer market and, in doing so, extended our market leadership position...

  • Page 17
    ... sales growth annually over the five-year period, which represents a 45% to 50% revenue increase from 2010 levels. From a brand perspective, adidas and Reebok will account for more than 90% of the increase, with the rest coming from our Other Businesses. Our three key attack markets North America...

  • Page 18
    ... and Response all grew at double-digit rates. I also wouldn't say 2011 is eventless. The sporting calendar is packed, and with great regional diversity, which can only be good for a brand as global as adidas. Events such as the Cricket World Cup in India, the Rugby World Cup in New Zealand, the Copa...

  • Page 19
    ...a level between â,¬ 2.98 and â,¬ 3.12. We have every advantage a company could possibly desire - strong brands, premium products, superior marketing assets, tremendous global reach and distribution and a very healthy balance sheet. I look forward to 2011 as the first year of our Route 2015 plan. In...

  • Page 20
    1 2 3 4 16 To Our Shareholders Executive Board

  • Page 21
    ...major function within the Group. Herbert Hainer 1 was born in Dingolfing, Germany, in 1954. Following his business studies, Herbert Hainer spent eight years with Procter & Gamble in various sales and marketing positions. He joined adidas Germany in 1987 and has held numerous management positions...

  • Page 22
    ... Nuremberg, Nuremberg, Germany Deputy Chairman of the Supervisory Board 3), CeramTec AG, Plochingen, Germany Alexander Popov Chairman, RFSO "Lokomotiv", Moscow, Russia Hans Ruprecht 1) Sales Director Customer Service, Market Central, adidas AG 18 To Our Shareholders Supervisory Board

  • Page 23
    ... the Executive Board of adidas AG Member of the Board of Directors, Beleta Worldwide Ltd., Guernsey, Channel Islands 4) 1) Employee representative. 2) Since January 1, 2010; formerly Senior Manager Quality Analysis & Reporting, Global Operations, adidas AG. 3) Since May 18, 2010; formerly Member of...

  • Page 24
    ... recovery and success. For the adidas Group, this was a year of major sports events such as the FIFA World Cup and the Olympic Winter Games. Furthermore, thanks to innovative products and marketing campaigns, all of our brands met with a very positive response among our consumers. The Group grew in...

  • Page 25
    ... Annual General Meeting, we dealt comprehensively with the budget and investment plan for 2010, which we subsequently approved. At our May 5, 2010 meeting, the Executive Board reported in detail on the current business development and the financial situation of the Group after the first quarter...

  • Page 26
    ... of the strategic business plan "Route 2015" for the years 2011 to 2015, we focused on the medium-term business development of the Group. Furthermore, the Executive Board informed us about the growth potential of the adidas Outdoor category. Another major point of focus was the report of the...

  • Page 27
    ...German Corporate Governance Code as amended on May 26, 2010 and discussed the contents of the Declaration of Compliance to be issued by the Supervisory Board. At its last meeting in the financial year under review, the members of the committee discussed the draft budget and investment plan for 2011...

  • Page 28
    ... in light of the position of the company and the expectations of shareholders and the capital market. In memoriam We will always honour the memory of our long-standing Supervisory Board Chairman, Mr. Henri Filho, who passed away on December 25, 2010 at the age of 79. As a member of the Supervisory...

  • Page 29
    ...of the members. The members of our Supervisory Board neither exercise directorship or similar positions or advisory tasks for key competitors of the company nor do they have business or personal relations with adidas AG or the Executive Board. Further information on Corporate Governance Additional...

  • Page 30
    ... comprehensively on business development and planning as well as the risk situation and coordinates the strategy of the company and its implementation with the Supervisory Board. Moreover, the Executive Board provides the Supervisory Board with the annual financial statements of adidas AG and the...

  • Page 31
    ... of the Code will thus be met when appointing new Supervisory Board members. Number of mandates of an Executive Board member (section 5.4.5 sentence 2 new version) As the Executive Board member Herbert Hainer currently holds two supervisory board mandates in Group-external listed companies and two...

  • Page 32
    ... be found on our website under www.adidas-Group.com: - Code of Conduct - Sustainability - Social commitment - Information and documents on the Annual General Meeting - Directors' Dealings - Accounting and Annual Audit 28 To Our Shareholders Corporate Governance Report including the Declaration on...

  • Page 33
    ... strategy, we combine all approaches regarding climate protection and resource conservation at our locations under one roof in order to realise the long-term goal of becoming a carbonneutral company on a global level. We promote the positive development of the regions in which our Group operates...

  • Page 34
    ...line with the short-term development of the company. It is determined by the Supervisory Board in a two-stage process: At the beginning of the 2010 financial year, the Supervisory Board determined as performance criteria both the business-related criteria (increase in income before taxes and retail...

  • Page 35
    ... thousands Performancerelated compensation component Performance Bonus Compensation component with long-term incentive effect 1) LTIP Bonus 2009/2011 02 Non-performance-related compensation components Annual fixed salary Other benefits Total Herbert Hainer (CEO) Glenn Bennett 3) Robin J. Stalker...

  • Page 36
    ... last annual fixed salary in the event that adidas AG decides not to renew his contract although he would be willing to continue his function as Executive Board member under the existing conditions. In this case, the amount is based on the annual fixed salary of the financial year at the time of...

  • Page 37
    ... the Supervisory Board increased to â,¬ 920,000 in the 2010 financial year (2009: â,¬ 898,871). Other benefits and additional commitments to the Supervisory Board - The Supervisory Board members did not receive any loans or advance payments from adidas AG. - The company maintains a consequential...

  • Page 38
    ..., global equity markets continued to increase. Despite the emergence of inï¬,ationary pressure in China, positive investor sentiment prevailed due to an increasing number of data points indicating that the global economy and corporate earnings will continue to improve in 2011. adidas AG share price...

  • Page 39
    ...the adidas Group's strategic business plan "Route 2015" on November 8, market participants expressed their confidence in our Group's medium- to long-term strategic goals. This was reï¬,ected in further share price gains during the last weeks of the year. As a result, the adidas AG share closed 2010...

  • Page 40
    ... international companies with substantial operating businesses and credible disclosure policies. Further information on our ADR Programme can be found on our website at www.adidasGroup.com/adr. Five-year share price development 1) Dec 31, 2005 05 Dec 31, 2010 190 160 130 100 70 - adidas AG...

  • Page 41
    ... sector Consumer/Luxury Goods, the adidas Group was ranked number two by buy-side analysts in this survey. The print version of our 2009 Annual Report also achieved high recognition, taking fifth place in the DAX-30 ranking by Manager Magazin. Share ratios at a glance 2010 08 2009 Basic earnings...

  • Page 42
    ...looks for men and women. Completing the holistic offer with styles from head to toe, the first in-house Originals denim line is presented together with a collection of premium accessories led by an assortment of soft fine leather bags. The collection's name is homage to the iconic adidas Originals...

  • Page 43
    Fit for the Future adidas ...Reebok ...TaylorMade-adidas Golf ...Reebok-CCM Hockey ...Rockport ...40 58 66 70 72 Fit for the Future

  • Page 44
    ... often ask me how I manage to combine sport with a full-time job. I'm committed to both with heart and soul and always give my best. And I'm proud to be part of a brand that writes the stories of top athletes. Because sport is my passion. 40 Fit for the Future adidas Sport Performance Running

  • Page 45
    ...www.adidas.com/running www.adidas.com/training adiStar Ride 3 adidas presents the latest version of its high-performance adiStar running shoe - the adiStar Ride 3. This shoe fuses advanced technologies with luxurious workmanship. With its midfoot support element for stability and motion control and...

  • Page 46
    ...personal potential into results by telling, showing and teaching athletes how to become better in their sport. miCoach already offers cardio-based conditioning plans for athletes looking to train for a specific sport. In 2011, adidas will continue to evolve and improve the miCoach personal coaching...

  • Page 47
    ... - simply be better. The equipment is perfect and you are focused, striving for that perfect performance. It doesn't matter if you've already won six events if you fail in the seventh. Clench your teeth for the last time and excel once again: only another 800m between you and the top spot on the...

  • Page 48
    ... on the field of play are equipped with the very best products. In my job as Senior Product Manager in the Business Unit Football at adidas, I'm closer to the football stars than I ever dreamed I could be. Together with my team, we develop football boots, right from the very first idea...

  • Page 49
    ... Manager Product Testing, adidas Speedcell The official match ball of the FIFA Women's World Cup 2011, Speedcell stands for speed, power and team spirit. It combines futuristic texture for perfect grip in all conditions, exceptionally stable ï¬,ight behaviour through aerodynamically placed grooves...

  • Page 50
    ... conduct heat and sweat away from the body to keep players cool and dry in warm conditions. The athletic Slim Fit cut and the sporty crewneck guarantee superior comfort. The design of the jersey and shorts is inspired by the UEFA Champions League. 46 Fit for the Future adidas Sport Performance...

  • Page 51
    ..., Footballer: In that moment in the players' tunnel just before you come out onto the pitch, you can ... of children. They believe in you. Every time you go out onto the pitch, it's your turn to give something back to them and the fans. Fit for the Future adidas Sport Performance Football 47

  • Page 52
    ..., American, Global PR Manager Basketball, adidas Robert: In basketball, everything is about team and trust. And it's about playing! That's why I love to organise open runs, friendly games and tournaments for us adidas ballers, on top of my everyday job. When we play together, we are all united by...

  • Page 53
    ... 1.5 adidas kicked off the NBA season with signature shoes for two of the NBA's most dynamic players: Derrick Rose and Dwight Howard. The pictured adiZero Rose 1.5 is a high-performance basketball shoe with the ideal balance of support and light weight that gives Derrick Rose the edge to help him...

  • Page 54
    ... volcano in the world. I was climbing alone, and extreme weather conditions made it impossible for me to climb the last three metres to the top. I decided to turn back - and yet it was one of my biggest successes. It's not by chance that today I work at adidas as Senior Product Manager for the...

  • Page 55
    ... with plenty of room for the toes - this shoe offers outdoor athletes support and cushioning for all their fast activities in the mountains. In addition, the Formotion technology enhances motion control in rough terrain and downhill comfort. Fit for the Future adidas Sport Performance Outdoor 51

  • Page 56
    adidas Sport Style Originals B.O.B., American, Rapper and Producer: In hip hop - it's all about image. You have to be authentic, with your own style. You have to know where your roots are, where you come from. Being original is my attitude and the key to my success. I try to unite all this in my ...

  • Page 57
    ...spring/summer 2011 collection, adidas Originals introduces for the first time an in-house denim collection and takes the lead in implementing Originals Denim as a constant and long-term part of its holistic streetwear offer. The denim collection will consist of two styles for both men and women, in...

  • Page 58
    adidas Sport Style NEO adidas NEO label's Go Squad: With its NEO label, adidas Sport Style expands in the fast fashion business, targeting young, style-adopting consumers. For spring/summer 2011, the adidas NEO label introduces the Go Squad, a group of up-and-coming teens who embody the NEO label ...

  • Page 59
    ... inspiration from worldrenowned athlete and style icon David Beckham. NEO Cup Streetwise with a splash of tennis shoe style, the adidas NEO label NEO Cup steps out with a mix of leather and suede uppers, plus Vibe Complete comfort in every step. Fit for the Future adidas Sport Style NEO 55

  • Page 60
    ...I make this happen with training and through my own style. On the pitch and in my daily life, I value passion, foresight and a clear vision. In no other label is the symbiosis of fashion and sport as evident as it is in Y-3. adidas represents sport, Yohji Yamamoto represents design. This is why I am...

  • Page 61
    ... high-top version. Each model is available only in small, medium or large as it features an expandable sole. This lightweight Kubo shoe for men and women boasts a fully foldable sole for the first time within the Y-3 range and feels a bit like walking on air. Find out more about adidas Sport Style...

  • Page 62
    ... from sport into everyday life. My lunchtime workouts are part of my daily to-do list and I appreciate the fact that Reebok as my employer makes that possible. My gym kit is nearly as big as my wardrobe, but my favourite product is probably the EasyTone. My role as Marketing Manager Women's fits...

  • Page 63
    ... resistance, helping to enhance activation of the muscles with every move. The pictured EasyTone long bra top is designed to help tone key upper body muscles and promote greater postural alignment. Find out more about Reebok Toning: www.reebok.com Fit for the Future Reebok Women's Sport Toning...

  • Page 64
    ... and are perfect to wear during everyday activities or while training at the gym. RunTone Ready The RunTone Ready provides women with a running shoe that creates microinstability and softness that is designed to help tone key butt and leg muscles while she runs. The RunTone Ready comes in a variety...

  • Page 65
    ...and model, I travel a lot and don't have time for an extensive fitness regime. The toning products exercise my muscles not only when I'm doing sport but also during leisure time. Whether on the catwalk or in front of the camera, fitness is the basis of my success. Fit for the Future Reebok Women...

  • Page 66
    ...on. Next year, we're going to compete with our entire Reebok Market Central Marketing Team. What better team bonding can you have than training together and working towards a shared goal? I can't imagine any other job that combines performance, fun and enthusiasm for a brand and its products to this...

  • Page 67
    ... a lot of kids. It's intense: sprinting, jumping, and changing direction quickly. You need a great deal of strength and energy - the more you have, the better you'll play. I'm a point guard in the NBA, so I'm constantly moving around during a game. Whether I'm dribbling, passing, or scoring the ball...

  • Page 68
    ... and art. In each world, I don't want to be typical. Reebok Classics fits perfect to my chameleon-like quality. For me, style and sound double as a conduit of inspiration for my art. With my work and style I want to inspire others to be creative and innovative, too - using creative inï¬,uence to...

  • Page 69
    ... Heritage Sport Apparel Collection The Classic Heritage Sport Woven Coach's jacket is part of the spring/summer 2011 Heritage Sport Woven Label collection which launched in January 2011. It features the Classics dropped R branding on the left chest, which is exclusively used in Reebok's Classics...

  • Page 70
    ...the Wear in the World Adventure. In June 2010, TaylorMade-adidas Golf sent two candidates on a golf adventure with the winner earning a position in the company's marketing department. I have been playing golf since the age of two and always dreamed of working in the golf industry. This challenge was...

  • Page 71
    ... Golf Shoe Available in multiple widths and extended sizes, adiComfort shoes are engineered to provide a fit for every foot and highest comfort from heel to toe. Golfers experience maximal walking comfort and performance together with a sportive, classic look. Fit for the Future TaylorMade-adidas...

  • Page 72
    ... lines, exquisite detailing and premium materials. Hand-finished full-grain leather and a newly styled upper provide a rich look and feel while adiPrene cushioning technology ensures enhanced impact absorption in the heel for long-lasting comfort. 68 Fit for the Future TaylorMade-adidas Golf

  • Page 73
    Martin Kaymer, German, Golfer: The test swing felt good. You approach the tee and position the ball, full of concentration. The driver sits perfectly in your hands. Its lightness makes it ... your ears and the ball doesn't stop until it reaches the green. Fit for the Future TaylorMade-adidas Golf 69

  • Page 74
    ... When I was offered a job at Reebok-CCM Hockey, I was happy to have the opportunity to combine my love for hockey with my everyday work life. As Pro Product Director I work closely with the research and development team to bring to market the best possible product for our pro athletes, and the great...

  • Page 75
    ..., but it's outweighed by the joy of winning. At the moment of victory, everything is okay. You feel strong. You and your team. You may work as a team, but you can still be the one who paves the way to the top. A good feeling, and long may it last! Fit for the Future Reebok-CCM Hockey 71

  • Page 76
    ..., Rockport has taken the tradition of hand-finished details, treated leathers and woven accents to the next level with this collection. With adiPrene by adidas, a heel height of 85mm, and a 20mm platform, the shoe guarantees a glamorous appearance to the consumer. 72 Fit for the Future Rockport

  • Page 77
    ... of the saying: Form meets function. Rockport has revisited classic patterns and styles and applied advanced technologies and materials to create technologically modern footwear with contemporary styling. This sailing shoe was worn by the Mascalzone Latino Audi Team for the 2010 Louis Vuitton Trophy...

  • Page 78
    ...February, Reebok launched the 2011 women's campaign "Tone while you live" with six inspirational EasyTone fans, known as the "ReeToners". They represent women from around the world who fit fitness into their busy lives even more with EasyTone. Joining the ReeToners as a global celebrity ambassador...

  • Page 79
    Group Management Report - Our Group Corporate Mission Statement ...Our Brands ...Major Locations and Promotion Partnerships ...Group Strategy ...Global Sales Strategy ...Wholesale ...Retail ...eCommerce ...Global Brands Strategy ...adidas ...Reebok ...Other Businesses Strategy ...TaylorMade-adidas ...

  • Page 80
    ... Statement Our Mission We are committed to continuously strengthening our brands and products to improve our competitive position. We are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product we bring to market. We are consumer...

  • Page 81
    ...: developing innovative products, creating new markets, and setting the latest athletic style. Inspired by its roots in fitness, Reebok is a global sports brand that is committed to preparing consumers to be fit for life. Rockport (2% of Group sales) Building on four decades of engineering...

  • Page 82
    ... upcoming sporting events are highlighted on the world map. Major Locations Europe adidas Group Headquarters, Herzogenaurach, Germany ...adidas International Trading, Amsterdam, Netherlands ...adidas Group Russia, Moscow, Russia ...North America adidas North America, Portland/Oregon, USA ...Reebok...

  • Page 83
    ...in Athletics Reebok International Headquarters The Rockport Company Headquarters NHL All-Star Game 11 10 09 adidas Group Japan adidas Group China adidas Global Sourcing NFL Super Bowl 12 adidas Group Latin America Group Management Report - Our Group Major Locations and Promotion Partnerships...

  • Page 84
    ..., sales channels and Group functions globally. Based on our strong brands, premium products, extensive global presence and our commitment to innovation and the consumer, we aspire to outperform total market growth (both GDP and sporting goods market) and to grow our bottom line faster than our top...

  • Page 85
    ... the planet see 2010 Social and Environmental Online Report and on our website at www.adidas-Group.com/ sustainability. adidas Group strategic pillars 01 Markets/Channels Focus investment on the highest-potential markets and our distinct channel approach. One Team Develop a team that is grounded...

  • Page 86
    ... to market developments and manage channel synergies by establishing best practices worldwide. Global Sales defines strategic priorities until 2015 The Global Sales function directs all local market organisations responsible for the distribution of the adidas and Reebok brands. The key priority...

  • Page 87
    ... service offered to the consumer are at all times high and comparable to our own-retail stores. Wholesale strategic pillars 01 To be the globally leading sales organisation in the sporting goods industry Activate our brands at the point of sale in all relevant channels Ensure commercial success...

  • Page 88
    .... Over the past five years, the adidas Group has evolved into a significant retailer, operating 2,270 stores for the adidas and Reebok brands worldwide see Retail Business Performance, p. 153. 84 Group Management Report - Our Group Global Sales Strategy Wholesale Strategy / Retail Strategy

  • Page 89
    ... retailers in the world. In line with our strategic business plan Route 2015, we will further invest in our own-retail activities and will open over 500 stores by 2015 across the existing store formats. People The consumer and our employees are the primary reference points in order to be successful...

  • Page 90
    ... and increased market presence is in line with our integrated distribution roadmap, where Retail will focus on the top 100 cities globally. adidas Originals Core Store in Munich We will also continue to work on adapting the supply chain, system landscape and buying and demand planning processes...

  • Page 91
    ... changers for the adidas Group include: - Gaining sales and market share in the key global categories running and basketball with adidas Sport Performance - Expanding adidas Sport Style into fast fashion with adidas NEO - Establishing Reebok as the leading fitness and training brand - Leading the...

  • Page 92
    ... on innovation and technology with adidas Sport Performance. This sub-brand is the multi-sport specialist. Our positioning here clearly starts in producing the best products for use in specific sports such as football, basketball, running and regional sports. We then seek to leverage brand loyalty...

  • Page 93
    ...is an adidas goal to be the most personal sports brand by 2015. At Reebok, innovation focus is on fitness and training, where a priority is creating products that provide a material benefit to the consumer in terms of strength, conditioning and ï¬,exibility see Research and Development, p. 110. By...

  • Page 94
    ... adidas and Reebok are focused on creating inspirational and innovative brand marketing campaigns and communication techniques to build brand equity and support the achievement of the Group's commercial goals. A key tenet of our marketing and communication strategy is to harness the emotion of sport...

  • Page 95
    ... the industry in the fields of customisation and interactivity across categories. - Expanding adidas Sport Style in the fast fashion business with NEO. â,¬ 8.714 billion Key strategic pillars Net sales in 2010 Group Management Report - Our Group Global Brands Strategy adidas Strategy 91

  • Page 96
    ... over 50 years, adidas has led all major developments in boot, ball and apparel technologies. Building on its success around major sporting events such as the 2010 FIFA World Cup, the brand strives to increase its strong market position by continuously creating the industry's top products and fully...

  • Page 97
    ... offerings and strengthening in-store marketing support for the range. Spearheaded by the "adidas by Stella McCartney" concept, which fuses performance and style for the active women's market, Women's Training will remain a strategic priority. Group Management Report - Our Group Global Brands...

  • Page 98
    ... area where adidas Originals is currently a leader in the digital marketplace. With a holistic offering in products and communications, adidas Originals is focusing on 16- to 24-year-old high school and college kids. 94 Group Management Report - Our Group Global Brands Strategy adidas Strategy

  • Page 99
    ...successful fashion brands and retailers. Therefore, we have to focus on creating retail solutions consisting of both own retail and controlled space with wholesale distribution partners. adidas Sport Style NEO apparel see p. 55 see p. 55 Group Management Report - Our Group Global Brands Strategy...

  • Page 100
    ... conditioning activities. ZigTech not only created outstanding buzz among consumers but also saw strong sell-through success for men, women and kids at key accounts in key markets including the USA, Russia and Korea. 96 Group Management Report - Our Group Global Brands Strategy Reebok Strategy

  • Page 101
    ... a collection of natural minerals that help to increase oxygen levels in the skin. The ZigTech concept will be supported by an integrated global marketing campaign "ReeZig - More Energy" in 2011. The campaign features key assets from Reebok's roster of athletes including John Wall, Lewis Hamilton...

  • Page 102
    ... the world's major professional golf tours. - Develop Ashworth as a true golf lifestyle brand. â,¬ 909 million Brand mission Brand attitude Key markets Focus areas Key strategic pillars Net sales in 2010 98 Group Management Report - Our Group Other Businesses Strategy TaylorMade-adidas Golf...

  • Page 103
    ... and apparel among the top-selling golf products in these retail channels. Close working relationships with key accounts will continue in 2011, as will efforts to build additional brand presence at smaller retailers and on-course golf shops. In emerging markets throughout the world, the company...

  • Page 104
    ... priorities include strengthening its position as the number one metalwood brand in the world and building on its growing global market share in irons. In addition, TaylorMade aims to grow its presence and increase its reputation in all other golf equipment categories including wedges, putters...

  • Page 105
    ..., technology and function. In addition, in 2011, adidas Golf will leverage its marketing efforts for both its footwear and apparel lines with one campaign - "Be Greater". This campaign will call the golfers' attention to how adidas Golf equipment is engineered to help them improve their performance...

  • Page 106
    ... world-class and international design resources appeal to a large consumer base. Rockport Audry Qtr Strap Woven International expansion In 2010, Rockport continued to expand its international distribution. The brand today does business in more than 54 markets worldwide. Sales outside of the United...

  • Page 107
    ... sales in the women's business is expected to show double-digit growth in 2011. Full-price own-retail stores are expected to comprise more than a fifth of total sales by 2014 and are planned to be the main growth driver within the brand over that period. In addition to ongoing progress on product...

  • Page 108
    ... increase market share by leveraging its multi-brand approach to speak to different consumer groups, supported by its dedication to innovate for the leading athletes in the sport. Reebok-CCM Hockey's primary goal is to lead in the high-end performance segment of the hockey market. Therefore, Reebok...

  • Page 109
    ... positioning as a high-performance company. Through a commitment to product innovation, Reebok-CCM Hockey's pricing strategy is to dominate the market in the premium price segments and to be a strong competitor within the mid-price segment of the market. Group Management Report - Our Group Other...

  • Page 110
    ... go-to-market process 01 GLOBAL OPERATIONS Marketing Briefing Design Concept Product Development Product creation Sourcing Manufacturing Supply Chain Management Distribution Sales Subsidiaries Sales Business Solutions Processes and infrastructure of the future 106 Group Management Report...

  • Page 111
    ... see Global Brands Strategy, p. 87 and Global Sales Strategy, p. 82. For example, with the adidas NEO label, Global Operations will support this business with fast fashion creation, sourcing and supply chain management capabilities. For Retail, Global Operations will continue to build the processes...

  • Page 112
    ...partners, 75% were located in Asia, 16% were located in the Americas and 9% in Europe see 03. 32% of all suppliers were located in China. Our Global Operations function manages product development, commercialisation and distribution, and also supervises sourcing for our Wholesale and Retail segments...

  • Page 113
    ...the Rockport brand. Volume of apparel production increases In 2010, we sourced 82% of the total apparel volume for adidas, Reebok and adidas Golf from Asia (2009: 83%). Europe remained the second-largest apparel sourcing region, representing 12% of the volume (2009: 11%). The Americas accounted for...

  • Page 114
    ..., design, engineering and testing, while incorporating the Group's advanced proprietary athletic footwear technologies into the shoe collections. adidas Innovation Team drives brand's R&D initiatives R&D activities at adidas focus on the development of innovative technologies for performance sport...

  • Page 115
    ...Development Reebok and Testing Center Advanced Development Center Development and Testing Center TaylorMade-adidas Golf Global Development and Testing Center Global Development Rockport and Testing Center Development and Reebok-CCM Hockey Testing Center Group Management Report - Our Group Research...

  • Page 116
    ...a full pipeline of innovative products see Subsequent Events and Outlook, p. 174. Successful product launches across all major adidas categories In 2010, adidas sales were again driven by the latest product offerings, with products launched within the year accounting for 75% of brand sales (2009: 80...

  • Page 117
    ... zig-shaped sole absorbs the impact of heel strike and sends a wave of energy along the length of the shoe, propelling the athlete forward with each step. Innovation a key success factor for TaylorMade-adidas Golf At TaylorMade-adidas Golf, current products (i.e. products launched in the last 18...

  • Page 118
    ... Award / 2010 Oscar de l'Innovation Awards / LSA magazine Penta TP ball Ingenuity Honors / International Network of Golf Industry Honors adidas miCoach Innovative Sport Product Reebok Product Ingenuity TaylorMade-adidas Golf 114 Group Management Report - Our Group Research and Development

  • Page 119
    ... on all levels of the organisation. PEP is used in all business units of the adidas Group and the online PEP has a coverage of 71%. The target for 2011 is to reach an online coverage of 97% Group-wide. Three-pillar human resources strategy We strive to have the right team in place by focusing...

  • Page 120
    ...level is discussed regularly by senior management. The succession management process is supported by a system solution which hosts position and employee data related to performance, potential, career aspirations, mobility, etc. Our system solution is applied in 71% of the adidas Group business units...

  • Page 121
    ... development and leadership competence related to work-life balance. Key employee statistics 03 2010 Total number of employees Total employees (in %) Male Female Management positions (in %) Male Female Average age of employees (in years) 1) Average length of service (in years) Annual training...

  • Page 122
    ... at TaylorMade-adidas Golf and ReebokCCM Hockey. The number of employees working in our headquarter functions increased by 5% to 14,250 (2009: 13,547). This development reï¬,ects the changes in the organisation structure. At the end of 2010, 23% of our Group's staff were employed in Western Europe...

  • Page 123
    ... challenge with innovative programmes, such as an employee referral programme which was introduced in 2010. As part of our Group-wide strategic business plan (Route 2015), which defines strategies and objectives for the period up to 2015, Human Resources will further build upon existing programmes...

  • Page 124
    ... - Performance data - Our Group's Environmental Strategy in our 2010 Social and Environmental Online Report and on our website at www.adidas-Group.com/sustainability. Careful supplier selection To improve working conditions throughout our supply chain, the Global Operations function works closely...

  • Page 125
    ... their day-to-day operations and support the process of self-governance. By running a certified management system, our suppliers demonstrate commitment to continuously enhancing their performance. We help them build or improve human resources systems to maintain proper working conditions, including...

  • Page 126
    ... for 2011. Driving environmental improvements in our supply chain In the supply chain, activities focus on helping suppliers establish sound environmental management systems at their manufacturing plants to best reduce their negative environmental impacts. We have developed guidelines and training...

  • Page 127
    ... Sport Performance runs a sustainable product programme called "Better Place", which focuses on the efficient use of resources in the design and selection of materials. The first adidas "Better Place" products were introduced globally in spring/summer 2009 in response to consumers' increasing...

  • Page 128
    ... black heads of competitive brands. The television commercial has received wide attention and acclaim for its use of the popular children's song "One of These Things is Not Like the Other". The campaign highlights the driver's stunning design, technology and performance, clearly setting it apart...

  • Page 129
    Group Management Report - Financial Review Internal Group Management System ...Group Business Performance ...Economic and Sector Development ...Income Statement ...Statement of Financial Position and Statement of Cash Flows ...Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 130
    ...enhancing our Group's sales and gross margin include - optimising our product mix, - increasing the quality of distribution, with a particular focus on controlled space, - supply chain efficiency initiatives, - minimisation of clearance activities. - Operating expense control: We put high emphasis...

  • Page 131
    ...quarter-end 4 Operating working capital in % of net sales = Average operating working capital Net sales Ã- 100 Capital expenditure 1) = Additions of property, plant and equipment plus intangible assets 1) Excluding acquisitions and finance leases. Group Management Report - Financial Review...

  • Page 132
    ...returns of planned capital investments. The cost of equity is computed utilising the risk-free rate, market risk premium and beta. Cost of debt is calculated using the risk-free rate, credit spread and average tax rate. adidas Group targets versus actual key metrics 2009 Actual 2010 Initial outlook...

  • Page 133
    ... those of our major competitors on a quarterly basis. To assess current sales and profitability development, Management analyses sell-through information from our own-retail distribution as well as short-term replenishment orders from retailers. Taking into account year-to-date performance as well...

  • Page 134
    ... Retail segments as well as in Other Businesses. In euro terms, adidas Group revenues grew 15% to â,¬ 11.990 billion from â,¬ 10.381 billion in 2009. The Group's gross margin increased 2.4 percentage points to 47.8% (2009: 45.4%), supported by less clearance sales and a larger share of higher-margin...

  • Page 135
    ... Commission. 3) Source: Economic and Social Research Institute, Government of Japan. 4) Source: China National Bureau of Statistics. 5) Source: Russia Federal Service of State Statistics. Group Management Report - Financial Review Group Business Performance Economic and Sector Development 131

  • Page 136
    ... environment adidas Group revenues and profitability as well as those of many competitors and retailers increased in 2010. In most regions, sales of our Group and other major sporting goods companies increased more significantly than GDP and overall consumer spending. Exchange rate development...

  • Page 137
    ...09 68% Wholesale 20% Retail 12% Other Businesses 2010 net sales by region 10 30% Western Europe 23% North America 16% Other Asian Markets 12% European Emerging Markets 11% Latin America 8% Greater China Group Management Report - Financial Review Group Business Performance Income Statement 133

  • Page 138
    ... raw material prices at the time of sourcing had a positive impact on cost of sales. Net sales by region â,¬ in millions 2010 2009 Change 11 Change (currency-neutral) Western Europe European Emerging Markets North America Greater China Other Asian Markets Latin America Total 1) 1) Including HQ...

  • Page 139
    ... Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. Gross margin by quarter in % 16 45.2 48.6 45.0 48.9 45.3 47.3 46.2 46.5 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 Group Management Report - Financial Review Group Business Performance Income Statement...

  • Page 140
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. Sales working budget in % of net sales 19 2.7 2.3 2.6 2008 2009 2010 Marketing working budget in % of net sales 20 10.5 9.9 10.7 2008 2009 2010 136 Group Management Report - Financial Review Group Business Performance Income Statement

  • Page 141
    ... 4.9 7.5 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. 2006 1) 2007 2008 2009 2010 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. Group Management Report - Financial Review Group Business Performance Income Statement 137

  • Page 142
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. Income before taxes by quarter â,¬ in millions 28 243 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 9 28 176 306 380 7 16 138 Group Management Report - Financial Review Group Business Performance Income Statement

  • Page 143
    ... quarter in â,¬ 32 0.80 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 5 9 168 126 213 19 266 7 Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010 0.04 0.06 0.60 1.03 1.27 0.09 0.03 Group Management Report - Financial Review Group Business Performance Income...

  • Page 144
    ...1) For absolute figures see adidas AG consolidated statement of financial position, p. 184. Structure of statement of financial position 1) in % of total liabilities and equity 2010 34 2009 Short-term borrowings ...2.6% Accounts payable ...16.0% Long-term borrowings ...12.6% Other liabilities...

  • Page 145
    ...â,¬ in millions 37 1,415 1,459 1,624 1,429 1,667 2006 1) 2007 2008 2009 2010 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. Group Management Report - Financial Review Group Business Performance Statement of Financial Position and Statement of Cash Flows 141

  • Page 146
    ...tangible and intangible assets. Group capital expenditure increased 12% to â,¬ 269 million in 2010 (2009: â,¬ 240 million). The Retail segment accounted for 23% of Group capital expenditure (2009: 30%). Investments primarily related to the expansion of our store base for the adidas and Reebok brands...

  • Page 147
    ... powers of control. Voting right control if employees have a share in the capital Like all other shareholders, employees who hold adidas AG shares exercise their control rights directly in accordance with statutory provisions and the Articles of Association. Executive Board appointment and...

  • Page 148
    ... offer, through a public invitation to submit sale offers or through granting tender rights to shareholders. Furthermore, the authorisation sets out the lowest and highest nominal value that may be granted in each case. 144 Group Management Report - Financial Review Group Business Performance...

  • Page 149
    ... amounts. No compensation agreements exist between adidas AG and members of the Executive Board or employees relating to the event of a take-over bid. Group Management Report - Financial Review Group Business Performance Disclosures pursuant to § 315 Section 4 of the German Commercial Code 145

  • Page 150
    ... Group level ensure that the transactions of the individual business units are in compliance with the Group's Treasury Policy. Centralised treasury function In accordance with our Group's Treasury Policy, all worldwide credit lines are directly or indirectly managed by the Group Treasury department...

  • Page 151
    ... of our Group's gross borrowings are denominated in euros and US dollars. At the end of 2010, gross borrowings denominated in euros accounted for 55% of total gross borrowings (2009: 61%). The share of gross borrowings held in US dollars increased to 40% (2009: 33%) see 46. Short-term credit lines...

  • Page 152
    ... was fully in line with our original target of net debt to be below the prior year level communicated at the beginning of 2010. Strong operating cash ï¬,ow and lower capital expenditure than originally planned positively inï¬,uenced this development. Currency effects had a positive impact of â,¬ 43...

  • Page 153
    ... 2010 53 2009 4.8 < 1 year ...273 198 561 1 to 3 years ...514 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. 822 3 to 5 years ...711 > 5 years ...112 Total 1,610 1,767 186 Group Management Report - Financial Review Group Business Performance Treasury...

  • Page 154
    ... supported by double-digit sales growth in most major markets. Currency translation effects had a positive impact on regional sales in euro terms see 03. Wholesale at a glance â,¬ in millions 2010 2009 01 Change Net sales Gross profit Gross margin Segmental operating profit Segmental operating...

  • Page 155
    ... Europe 20% North America 16% Other Asian Markets 13% Latin America 10% Greater China 6% European Emerging Markets 2010 Wholesale net sales by division 05 63% adidas Sport Performance 19% adidas Sport Style 18% Reebok Group Management Report - Financial Review Business Performance by Segment...

  • Page 156
    ... sales increased 1.0 percentage points to 9.9% (2009: 8.9%). This was primarily due to higher warehousing and distribution costs. Expenditures in conjunction with the 2010 FIFA World Cup as well as Reebok's growth strategy also had a minor impact. Segmental operating profit increases 10% Segmental...

  • Page 157
    ... 31, 2010, the adidas Group Retail segment operated 2,270 stores. This represents a net increase of 58 or 3% versus the prior year-end level of 2,212. Of the total number of stores, 1,712 were adidas and 558 Reebok branded (December 31, 2009: 1,626 adidas stores, 586 Reebok stores). During 2010, the...

  • Page 158
    ... America 18% Western Europe 14% Other Asian Markets 8% Latin America 6% Greater China 2010 Retail sales by store format 13 50% Factory outlets 46% Concept stores 4% Other store formats 154 Group Management Report - Financial Review Business Performance by Segment Retail Business Performance

  • Page 159
    ... by double-digit growth in the training, football and running categories. Comparable store sales for Reebok grew 11%, driven by strong growth in training and running. Currency translation effects had a positive impact on revenues in euro terms. adidas Sport Performance own-retail sales increased 23...

  • Page 160
    ... primarily include the TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey segments. In addition, the segment Other Centrally Managed Brands, which comprises brands such as Y-3, is also included. In 2010, currency-neutral sales of Other Businesses increased 2%. In euro terms, sales grew 10% to...

  • Page 161
    ...Western Europe 2% European Emerging Markets 2% Greater China 1% Latin America 2010 Other Businesses sales by brand 22 64% TaylorMade-adidas Golf 18% Rockport 14% Reebok-CCM Hockey 4% Other Centrally Managed Brands Group Management Report - Financial Review Business Performance by Segment Other...

  • Page 162
    ... financial market expectations with regard to transparent and comprehensive risk and opportunity communication have intensified. In 2010, we therefore reviewed our risk processes and systems in order to enhance our Group-wide risk and opportunity management approach, to increase internal awareness...

  • Page 163
    ... social landscape. On the other hand, they closely observe brand, distribution channel and price point developments. A key element of the identification process is primary qualitative and quantitative research such as trend scouting, consumer surveys as well as feedback from our business partners...

  • Page 164
    ...financial-accountingrelated IT systems is minimised by Group IT through central control and monitoring of virtually all IT systems, centralised management of change processes and with support through regular data backups. 160 Group Management Report - Financial Review Risk and Opportunity Report

  • Page 165
    ... of brand image Own-retail risks Risks from rising input costs Supplier default risks Inventory risks Customer risks Regulatory risks Risks from loss of key event or promotion partnerships Product design and development risks Personnel risks IT risks Compliance-related risks Legal risks Social and...

  • Page 166
    ... Sales Strategy, p. 82. Although the market capitalisation of many companies within the sporting goods industry increased substantially in 2010, merger and acquisition activity is forecasted to intensify in the light of good credit market conditions as well as improving corporate balance sheets...

  • Page 167
    ... how they conduct business. In addition, over recent years, several large customers have been expanding their own private brand and private label businesses, which can negatively impact our efforts to increase shelf space. Group Management Report - Financial Review Risk and Opportunity Report 163

  • Page 168
    ... impact on the Group. Risks from loss of key event or promotion partnerships Event and promotion partnerships play an important role in building brand image and product authenticity with our consumers, and this ultimately supports the generation of sales of licensed products. The adidas Group...

  • Page 169
    ... the adidas Group's overall Route 2015 strategic business plan. New quality reviews for major projects have been implemented to ensure that the progress, quality and costs of those projects are regularly evaluated by members of senior management. Finally, IT-related processes and systems were key...

  • Page 170
    ... adidas Group faces a risk of selling defective products, which may result in injury to consumers and/or image impairment. We mitigate this risk by employing dedicated teams that monitor the quality of our products on all levels of the supply chain through rigorous testing prior to production, close...

  • Page 171
    ...resources available to meet maturing liabilities with regard to timing, volume and currency structure. In addition, the adidas Group faces the risk of having to accept unfavourable financing terms due to liquidity restraints. Our Group's Treasury department uses an efficient cash management system...

  • Page 172
    ... market values of the US dollar hedges would have decreased shareholders' equity by â,¬ 157 million. A 10% weaker euro at December 31, 2010 would have led to a â,¬ 4 million decrease in net income. Shareholders' equity would have increased by â,¬ 193 million see 06. To better reï¬,ect the current...

  • Page 173
    ... rate developments in the financial markets. As 2011 hedging has almost been completed, it is clear that conversion rates on major currencies will be slightly less favourable compared to those of 2010. Volume forecast variances, greater currency volatility and an increasing portion of our business...

  • Page 174
    ... markets as long-term growth drivers Women's segment offers long-term potential Increasing consumer demand for functional apparel Growing popularity of "green" products Social media offering new ways of consumer engagement Strong market positions worldwide Multi-brand approach Personalisation...

  • Page 175
    ... companies are able to supply high-end functional apparel. Our resources and our positioning as a sports performance leader enable us to constantly develop innovative products and capitalise on them. In 2010, for example, adidas launched the Terrex Softshell Jacket. Engineered for high-performance...

  • Page 176
    ... seen as potentially a major future trend. In order to tap into this opportunity, we are expanding our efforts to bring to market more lightweight and ï¬,exible products that support the athlete's natural course of motion. 172 Group Management Report - Financial Review Risk and Opportunity Report

  • Page 177
    ... costs, and allows us to offer more focused ranges to our retail partners. Financial opportunities Favourable financial market changes Favourable exchange and interest rate developments can potentially have a positive impact on the Group's financial results. Our Group Treasury department closely...

  • Page 178
    ...Based on our innovative strength, extensive pipeline of new and fresh products as well as marketing initiatives, we expect top- and bottom-line improvements in our Group's financial results in 2011. We forecast adidas Group sales to increase at a mid- to high-single-digit rate on a currency-neutral...

  • Page 179
    ... income levels promoting consumer spending. This is expected to support discretionary spending in this region and positively impact the sporting goods sector. However, inï¬,ationary pressure, particularly on apparel, is a potential headwind to growth. Group Management Report - Financial Review...

  • Page 180
    ... in the global golf market. Revenues at Rockport are forecasted to increase at a high-single- to low-double-digit rate as a result of improvements in the brand's product portfolio and own-retail expansion. Sales at Reebok-CCM Hockey are expected to grow at a low-single-digit rate in 2011, mainly due...

  • Page 181
    ... the adidas and Reebok brands. This will be driven by new product introductions and product extensions. In Greater China, following a sales decline in 2010, we expect a return to strong growth in this region in 2011. This will be driven by more current levels of inventory as well as the expansion of...

  • Page 182
    ...central costs. We expect the number of employees within the adidas Group to increase versus the prior year level. Additional hires will be mainly related to own-retail expansion. The majority of new hires will be employed on a part-time basis and will be located in emerging markets. The adidas Group...

  • Page 183
    ... Sport Performance sales to grow at a midto high-single-digit compound annual growth rate. We plan to increase adidas Sport Style and Reebok sales at a double-digit compound annual growth rate until 2015. âˆ' Expand presence in key growth markets: We have identified North America, Greater China...

  • Page 184
    ... The shown story is called "Last Minute Party Time" and features a woman being invited to a party while still at work. Her goal is to leave work without having to return home to change. She is able to do so because the Rockport shoes she has worn all day at work are stylish enough for a night out on...

  • Page 185
    ...Consolidated Statement of Financial Position ...Consolidated Income Statement ...Consolidated Statement of Comprehensive Income ...Consolidated Statement of Changes in Equity ...Consolidated Statement of Cash Flows ...Notes ...Statement of Movements of Intangible and Tangible Assets ...Shareholdings...

  • Page 186
    ... Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Herzogenaurach, February 15, 2011 Herbert Hainer...

  • Page 187
    ... by adidas AG, Herzogenaurach, comprising the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash ï¬,ows and the notes, together with the Group management report for the fiscal year January 1 to December 31, 2010...

  • Page 188
    adidas AG Consolidated Statement of Financial Position (IFRS) â,¬ in millions Note Dec. 31, 2010 Dec. 31, 2009 01 Change in % Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Inventories Income tax receivables Other current assets Assets ...

  • Page 189
    adidas AG Consolidated Income Statement (IFRS) â,¬ in millions Note Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 02 Change Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income Other operating expenses (% of net sales) Operating profit ...

  • Page 190
    ...) 82 82 0 adidas AG Consolidated Statement of Changes in Equity (IFRS) â,¬ in millions Share capital Capital reserve Cumulative translation adjustments Hedging reserve Other reserves 1) Retained earnings Total shareholders' Non-controlling equity interests 04 Note Total equity Balance at December...

  • Page 191
    ...and other business units net of cash acquired (Purchase of)/proceeds from sale of short-term financial assets Proceeds from sale/(purchase) of investments and other long-term assets Interest received Net cash used in investing activities Financing activities: Proceeds from/(repayments of) long-term...

  • Page 192
    ... markets leather footwear for men and women. Reebok-CCM Hockey designs, produces and markets hockey equipment such as sticks and skates as well as apparel mainly under the brand names Reebok Hockey and CCM Hockey. The Other Centrally Managed Brands segment primarily includes the business activities...

  • Page 193
    ...accounting principles. A company is considered a subsidiary if it is controlled by adidas AG, e.g. by directly or indirectly governing the financial and operating policies of the respective enterprise. The number of consolidated subsidiaries evolved as follows for the years ending December 31, 2010...

  • Page 194
    ...value less costs to sell Amortised cost Impairment-only approach Assets and liabilities of the Group's non-euro functional currency subsidiaries are translated into the reporting currency, the "euro", which is also the functional currency of adidas AG, at closing exchange rates at the balance sheet...

  • Page 195
    ...fied as held for sale. Property, plant and equipment Property, plant and equipment are measured at amortised cost. This comprises any costs directly attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by Management less accumulated...

  • Page 196
    ... regional markets which are responsible for the joint distribution of adidas and Reebok as well as TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey. The cash-generating units (or groups of units) represent the lowest level within the Group at which goodwill is monitored for internal management...

  • Page 197
    ... long-term average growth rate of the business in which each cash-generating unit operates. Discount rates are based on a weighted average cost of capital calculation considering a fiveyear average market-weighted debt/equity structure and financing costs referencing the Group's major competitors...

  • Page 198
    ...plan assets is deducted in order to determine the net liability. The discount rate is set on the basis of yields at the balance sheet date for high-quality corporate bonds. Calculations are performed by qualified actuaries using the "projected unit credit method" in accordance with IAS 19 "Employee...

  • Page 199
    ...51% of the shares of Life Sport Ltd. for a purchase price in the amount of ILS 25.6 million. Based in Holon (Israel), Life Sport Ltd. is a marketing company for adidas and Reebok products in Israel. The acquisition had the following effect on the Group's assets and liabilities: Life Sport Ltd.'s net...

  • Page 200
    ...the fair value are recognised in the income statement as they occur. The majority of short-term financial assets are marketable securities relating to money market funds and structured deposits. Other current financial assets Other current financial assets consist of the following: 07 Accounts...

  • Page 201
    ... other than income taxes Sundry Other current assets, gross Less: accumulated allowances Other current assets, net 200 122 70 392 2 390 208 84 72 364 4 360 Prepaid expenses relate mainly to promotion agreements and service contracts as well as rents. Consolidated Financial Statements Notes...

  • Page 202
    ... equipment mainly relate to building projects in Herzogenaurach amounting to â,¬ 33 million. For details see Statement of Movements of Intangible and Tangible Assets see Attachment I to these Notes. The majority of goodwill which primarily relates to the acquisition of the Reebok business in 2006...

  • Page 203
    ... settlements were used in order to calculate the fair value as at December 31, 2010. Dividends are distributed by FC Bayern München AG instead of regular interest payments. Additionally, long-term financial assets include investments which are mainly invested in insurance products and are...

  • Page 204
    ... average interest rate on the Group's gross borrowings remained stable at 5.1% in 2010 (2009: 5.2%). As at December 31, 2010, the Group had cash credit lines and other long-term financing arrangements totalling â,¬ 5.5 billion (2009: â,¬ 5.9 billion); thereof unused credit lines accounted for...

  • Page 205
    ...lling customer claims with regard to the return of faulty products sold by the Group. The amount of the provision follows the historical development of returns, allowances and warranty as well as current agreements. Provisions for taxes other than income taxes mainly relate to value added tax, real...

  • Page 206
    ...ve years amounted to â,¬ 0 million at December 31, 2010 (2009: â,¬ 1 million). Present value of funded obligation Fair value of plan assets Funded status Present value of unfunded obligation Asset ceiling effect Net defined benefit liability thereof defined benefit liability thereof adidas AG...

  • Page 207
    ... accepted capital market principles. In the UK, the assumed long-term rate of return on each asset class is assumed to be in line with long-term government bonds, with an additional investment return of 3.5% for equity securities and 1.0% for corporate bonds. In Germany, the plan assets are invested...

  • Page 208
    ... 31, 2009, the nominal capital of adidas AG ("the company") amounted to â,¬ 209,216,186 divided into 209,216,186 no-par-value bearer shares and was fully paid in. On May 6, 2010, the Annual General Meeting of the company resolved the conversion from no-par-value bearer shares into registered no-par...

  • Page 209
    ... capital increase. The Executive Board of adidas AG did not issue any option or conversion rights, or any shares from the Contingent Capital 2010 in the 2010 financial year or in the period beyond the balance sheet date up to and including February 15, 2011. Consolidated Financial Statements...

  • Page 210
    .... Capital management The Group's policy is to maintain a strong capital base so as to uphold investor, creditor and market confidence and to sustain future development of the business. The Group seeks to maintain a balance between a higher return on equity that might be possible with higher levels...

  • Page 211
    ... information technology functions, for which it has entered into long-term contracts. Financial commitments under these contracts mature as follows: Financial commitments for service arrangements â,¬ in millions Dec. 31, 2010 Dec. 31, 2009 Operating leases The Group leases primarily retail stores...

  • Page 212
    ... Dec. 31, 2010 Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2010 Amortised cost Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being...

  • Page 213
    ...-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC) Financial Liabilities at fair value through profit or loss Held for Trading (FLHfT) n.a. FLHfT FLAC n.a. FLAC 6 6 - 3 - 6 6 - 3 - 6 6 - 3 - 336 - 336 1,824 14 3,723 28 Consolidated Financial Statements...

  • Page 214
    ... cost Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Other equity investments Available-for-sale...

  • Page 215
    ...Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC) Financial Liabilities at fair value through profit or loss Held for Trading (FLHfT) n.a. FLHfT FLAC n.a. FLAC 13 12 - 2 - 13 12 - 2 - 13 12 - 2 - 193 âˆ' 193 1,580 12 3,235 21 Consolidated Financial Statements...

  • Page 216
    ...future cash ï¬,ows using current interest rates for debt of similar terms and remaining maturities, and adjusted by an adidas Group specific credit risk premium. Fair values of long-term financial assets classified as available-for-sale are based on quoted market prices in an active market or are...

  • Page 217
    ...the investment in the foreign entity has been sold or the loan has been paid back. In order to determine the fair values of its derivatives that are not publicly traded, the adidas Group uses generally accepted quantitative financial models based on market conditions prevailing at the balance sheet...

  • Page 218
    ..., which are presented in marketing overheads. In 2010, marketing working budget accounted for approximately 26% (2009: 23%) of the total other operating expenses. Expenses for central administration include the functions IT, Finance, Legal, Human Resources, Facilities & Services as well as General...

  • Page 219
    ...income/financial expenses Financial result consists of the following: Financial income â,¬ in millions Year ending Dec. 31, 2010 32 Marketing working budget Sales working budget Marketing overhead 1) Sales force 1) Logistics 1) Research and development 1) Central administration 1) Other operating...

  • Page 220
    ...million for the year ending December 31, 2010. These amounts mainly relate to tax losses carried forward and unused foreign tax credits of the US tax group. The remaining unrecognised deferred tax assets relate to subsidiaries operating in markets where the realisation of the related tax benefit is...

  • Page 221
    ... or if the Group were to sell its shareholdings in the subsidiaries. Earnings per share 34 Tax expenses Tax expenses are split as follows: Income tax expenses â,¬ in millions Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 Current tax expenses Deferred tax (income) Income tax expenses 314...

  • Page 222
    .... Accounting policies applied for reporting segmental information are the same as those used for the adidas Group as described in Note 2. The results of the operating segments are reported in the line item "Segmental operating profit". This is defined as gross profit minus costs directly...

  • Page 223
    ...2010 Year ending Dec. 31, 2009 Reportable segments Other businesses HQ/Consolidation Total 110 8 128 246 112 6 141 259 Operating profit for reportable segments Operating profit for other businesses HQ/Consolidation Marketing working budget Other operating expenses Royalty and commission income...

  • Page 224
    ... Product information Net sales (non-Group) â,¬ in millions Year ending Dec. 31, 2010 Year ending Dec. 31, 2009 Assets of reportable segments Assets of other businesses Non-segmental accounts receivable and inventories Current financial assets Other current assets Non-current assets Total assets...

  • Page 225
    ...cash outï¬,ow from investing activities was mainly related to spending for property, plant and equipment such as investments in the furnishing and fitting of stores in the Retail segment, in new office buildings and IT systems as well as the purchase of short-term financial assets. Cash outï¬,ows...

  • Page 226
    ... shareholder return approach" - has increased by an annual average rate of at least 8%. (2) Relative Performance: During the same period, the stock market price for the adidas AG share must have developed by an annual average of 1% more favourably than the stock market prices of a basket of global...

  • Page 227
    ... information Employees The average numbers of employees are as follows: Employees Year ending Dec. 31, 2010 40 Executive Board In 2010, the overall compensation of the members of the Executive Board totalled â,¬ 11.5 million (2009: â,¬ 10.5 million): â,¬ 7.1 million thereof relates to short-term...

  • Page 228
    ... in progress Total tangible assets Acquisition cost January 1, 2009 Currency effect Additions Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2009 /January 1, 2010 Currency...

  • Page 229
    ... effect Additions Impairment losses Reversals of impairment losses Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2010 Net carrying amount December 31, 2008 December 31...

  • Page 230
    ...) Sub-group Sports Holdings Corp. 11) Sub-group Reebok International Limited 6) Company with no active business 12) Profit and loss transfer agreement 7) The number refers to the number of the company. 13) Sub-group Taylor Made Golf Co., Inc. 226 Consolidated Financial Statements Shareholdings

  • Page 231
    ... Reebok-CCM Hockey, Inc. 14) Sub-group adidas Canada 15) Sub-group adidas Brazil 6) Company with no active business 12) Profit and loss transfer agreement 7) The number refers to the number of the company. 13) Sub-group Taylor Made Golf Co., Inc. Consolidated Financial Statements Shareholdings...

  • Page 232
    ... North America 86 adidas North America, Inc. 87 adidas America, Inc. (formerly adidas Sales, Inc.) 88 adidas International, Inc. 89 adidas Team, Inc. 90 Taylor Made Golf Co., Inc. 13) 91 Ashworth, LLC. 13) 92 The Reebok Worldwide Trading Company, LLC 93 Reebok-CCM Hockey, Inc. 9) 94 Sports Holdings...

  • Page 233
    ... 137,218 18 17 directly 93 110 126 126 4 100 100 100 100 100 100 100 100 6) Company with no active business 12) Profit and loss transfer agreement 7) The number refers to the number of the company. 13) Sub-group Taylor Made Golf Co., Inc. Consolidated Financial Statements Shareholdings 229

  • Page 234
    Shareholdings of adidas AG, Herzogenaurach at December 31, 2010 Company and domicile Currency Equity (currency units in thousands) Share in capital held by 7) Attachment II in % 130 131 132 133 134 135 136 137 138 adidas Sports (China) Co. Ltd. adidas (China) Ltd. Zhuhai adidas Technical ...

  • Page 235
    ... Reebok-CCM Hockey, Inc. 14) Sub-group adidas Canada 15) Sub-group adidas Brazil 6) Company with no active business 12) Profit and loss transfer agreement 7) The number refers to the number of the company. 13) Sub-group Taylor Made Golf Co., Inc. Consolidated Financial Statements Shareholdings...

  • Page 236
    ... Light skate, a multifaceted marketing campaign was set, headlined by Washington Capitals' forward Alex Ovechkin. Launched in October 2010 and scheduled to run until the end of 2011, this marketing campaign shows a comical approach with Ovechkin's ï¬,oating head and is a fresh take on hockey media.

  • Page 237
    Additional Information Ten-Year Overview ...Glossary ...Index ...Declaration of Support ...Publishing Details & Contact ...Financial Calendar 2011 ...234 236 241 242 242 243 Additional Information

  • Page 238
    ... Income Statement Ratios Gross margin 2) Operating margin 2) 3) Interest coverage 2) Effective tax rate 2) Net income attributable to shareholders as a percentage of net sales 5) Net sales by brand (â,¬ in millions) adidas Reebok TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Net sales by product...

  • Page 239
    ... Current asset intensity of investments Liquidity I 4) Liquidity II 4) Liquidity III 4) Working capital turnover 4) Return on equity 4) 5) Return on capital employed 4) 5) Data Per Share 6) Share price at year-end (in â,¬) Basic earnings 5) (in â,¬) Diluted earnings 5) (in â,¬) Price/earnings ratio...

  • Page 240
    ... with retail partners and co-branded stores. Controlled space offers a high level of brand control and ensures optimal product offering and presentation according to brand requirements. Corporate Governance Distribution of rights and responsibilities among the primary stakeholders in a company, in...

  • Page 241
    ... are traded fairly between business parties. Fair value is often identical to market price. Finance lease Method of acquiring an asset that involves a lease with a special leasing company for a specific, non-terminable initial leasing term. The investment risk is borne by the lessee. Financial...

  • Page 242
    ... teams and individual athletes, as well as advertising, retail support, events and other communication activities, but excluding marketing overhead expenses. As MWB expenses are not distribution channel-specific, they are not allocated to the Group's operating segments. Mono-branded stores adidas...

  • Page 243
    ...to use the name of a brand or business for the production and sale of products. For adidas, licensed products include cosmetics, watches and eyewear, for Reebok, fitness equipment and for TaylorMade-adidas Golf, bags and gloves. Promotion partnerships Partnerships with events, associations, leagues...

  • Page 244
    ...operating segments. Segment Also Business Segment. Units within a company that have profit and loss responsibility. The adidas Group is currently divided into six major business segments: Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands. Sell...

  • Page 245
    ... M Major Locations and Promotion Partnerships 78 f. Management Share Option Plan (MSOP) 222 f. Market Capitalisation 35 Marketing Working Budget 136 Mission Statement 76 N Net Income Attributable to Shareholders Inside Front Cover, 138f. Notes 188 ff. O Off-Balance Sheet Items 142 Operating Expenses...

  • Page 246
    ... a member of DIRK (German Investor Relations Association) and NIRI (National Investor Relations Institute, USA). This report is also available in German. For further adidas Group publications, please see our corporate website. To improve readability, registered trademarks are omitted in this Annual...

  • Page 247
    Financial Calendar Full Year 2010 Results ...Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast Publication of Annual Report 2010 2011 March 2, 2011 First Quarter 2011 Results ...Press release, conference call and webcast May 5, 2011 Annual ...

  • Page 248
    adidas AG Adi-Dassler-Str. 1 91074 Herzogenaurach Germany ©2011 adidas AG. adidas, Reebok, TaylorMade, adidas Golf, Ashworth, Rockport and CCM are registered trademarks of the adidas Group.