Performance
Wholesale results in summary The Wholesale segment comprises the adidas and Reebok business activities with retailers. In 2010, currency-neutral sales in the Wholesale segment increased 8%. In euro terms, Wholesale sales improved 14% to € 8.181 billion from € 7.164 billion in the prior year.
Gross margin decreased 0.3 percentage points to 41.3% (2009: 41.6%), mainly as a result of an unfavourable regional mix.
Gross profit grew 13% to € 3.379 billion in 2010 from € 2.978 billion in 2009.
Segmental operating expenses as a percentage of sales increased 1.0 percentage points to 9.9% (2009:
8.9%). As a result of the gross margin decline, segmental operating margin decreased 1.2 percentage points to 31.4% in 2010 (2009: 32.7%). In absolute terms, segmental operating profit grew 10% to € 2.572 billion in 2010 versus
€ 2.342 billion in 2009.
Currency-neutral segmental sales up 8%
In 2010, Wholesale segmental revenues increased 8% on a currency-neutral basis, driven by growth in all three brand divisions: adidas Sport Performance, adidas Sport Style and Reebok. Currency translation effects positively impacted segmental revenues in euro terms.
Sales in the Wholesale segment grew 14% to € 8.181 billion in 2010 from
€ 7.164 billion in 2009 see 01. Currency-neutral Wholesale sales grow in nearly all regions
Currency-neutral sales for the Wholesale segment in 2010 increased in all regions except Greater China and European Emerging Markets. Currency-neutral revenues in Western Europe rose 8%, driven by sales growth in the UK, Germany and Spain. Currency-neutral revenues in European Emerging Markets decreased 2% on a currency-neutral basis. Currency-neutral Wholesale sales in North America grew 17% due to double-digit growth in both the USA and Canada. Revenues in Greater China decreased 7% on a currency-neutral basis.
Sales in Other Asian Markets grew 8% on a currency-neutral basis due to increases in most markets. In Latin America, currency-neutral sales were up 11%, 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. Currency-neutral adidas Sport Performance sales up 2%
In 2010, adidas Sport Performance wholesale revenues improved 2% on a currency-neutral basis. Growth was mainly a result of sales increases in the football category, due to the 2010 FIFA World Cup, as well as growth in the running category. Sales growth in the outdoor category also contributed to this positive development. Currency translation effects had a positive impact on revenues in euro terms. In 2010, adidas Sport Performance sales grew 9%
to € 5.101 billion from € 4.696 billion in the prior year.
Wholesale net sales by quarter
€ in millions
02
Group Management Report – Financial Review Business Performance by Segment Wholesale Business Performance 151 2010 Wholesale net sales by region
2010 Wholesale net sales by division
04
05
35% Western Europe 20% North America 16% Other Asian Markets 13% Latin America 10% Greater China
6% European Emerging Markets
63% adidas Sport Performance 19% adidas Sport Style 18% Reebok Wholesale net sales by region
€ in millions
2010 2009 Change Change
currency-neutral
Western Europe 2,882 2,633 9% 8%
European Emerging Markets 503 475 6% (2%)
North America 1,609 1,295 24% 17%
Greater China 840 855 (2%) (7%)
Other Asian Markets 1,270 1,041 22% 8%
Latin America 1,077 865 24% 11%
Total 1) 8,181 7,164 14% 8%
1) Rounding differences may arise in totals.
adidas Sport Style sales grow 21% on a
03
currency-neutral basis
Currency-neutral adidas Sport Style wholesale revenues grew 21% in 2010.
This increase was driven by strong momentum in all categories, particularly adidas Originals and the adidas NEO label. Currency translation effects positively impacted revenues in euro terms. adidas Sport Style sales grew 27% to € 1.559 billion in 2010 (2009:
€ 1.225 billion).
Reebok sales grow 12% on a currency-neutral basis
In 2010, Reebok wholesale revenues increased 12% on a currency-neutral basis. This was the result of significant sales growth in the walking and running categories due to the toning and ZigTech platforms as well as growth in training, which more than offset declines in other categories. In euro terms, Reebok sales improved 19% to € 1.505 billion in 2010 from € 1.265 billion in 2009.
Gross margin negatively impacted by unfavourable regional mix
Wholesale gross margin decreased 0.3 percentage points to 41.3% in 2010 from 41.6% in 2009 see 01. Lower input costs as well as less clearance sales were more than offset by an unfavourable regional mix related to a higher portion of sales from lower-margin countries. The adidas brand wholesale gross margin decreased 0.7 percentage points to 43.7% in 2010 (2009: 44.4%). The wholesale gross margin of the Reebok brand increased 2.4 percentage points to 30.8% in 2010 versus 28.4% in the prior year. Wholesale gross profit improved 13% to € 3.379 billion in 2010 versus
€ 2.978 billion in 2009 see 01.
152 Group Management Report – Financial Review Business Performance by Segment Wholesale Business Performance
Wholesale gross margin by quarter in %
Wholesale segmental operating profit by quarter
€ in millions
06
07
Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010
Q1 2009 Q1 2010 Q2 2009 Q2 2010 Q3 2009 Q3 2010 Q4 2009 Q4 2010
42.643.1 39.641.0
41.942.2 39.141.6
614626
490 607
703 813 525534
Segmental operating expenses as a percentage of sales up 1.0 percentage points
Segmental operating expenses in Wholesale primarily relate to sales working budget expenses as well as expenditures for sales force, administration and logistics. In euro terms, segmental operating expenses grew 27% to € 807 million in 2010 from € 636 million in 2009. Segmental operating expenses as a percentage of 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 operating profit improved 10% to € 2.572 billion in 2010 versus
€ 2.342 billion in the prior year. In 2010, segmental operating margin decreased 1.2 percentage points to 31.4% (2009:
32.7%) see 01. This was the result of the gross margin decline as well as higher segmental operating expenses as a percentage of sales.
Number of Wholesale employees decreases
At year-end 2010, the Group employed 4,329 people in the Wholesale segment, which represents a decrease of 8%
versus 4,723 employees in the previous year. This development is mainly due to reorganisation measures following the implementation of the joint operating model in 2009. On a full-time equivalent basis, the Wholesale segment employed 4,158 people at year-end 2010. This represents a decrease of 8% versus the prior year-end level of 4,511.
Group Management Report – Financial Review Business Performance by Segment Retail Business Performance 153 Retail at a glance
€ in millions
2010 2009 Change
Net sales 2,389 1,906 25%
Gross profit 1,476 1,116 32%
Gross margin 61.8% 58.6% 3.2pp
Segmental operating profit 452 259 74%
Segmental operating margin 18.9% 13.6% 5.3pp
08
Retail net sales by quarter
€ in millions
10
Retail number of stores
2010 2009
Total 2,270 2,212
09
Retail results in summary The Retail segment comprises the own-retail activities of the adidas and Reebok brands. In 2010, currency-neutral Retail sales increased 18%. In euro terms, Retail sales grew 25% to
€ 2.389 billion (2009: € 1.906 billion).
Currency-neutral comparable store sales were up 11% versus the prior year.
Gross margin increased 3.2 percentage points to 61.8% (2009: 58.6%). This was mainly a result of a higher proportion of concept store sales at higher margins and positive currency effects related to the Russian rouble. Gross profit increased 32% to € 1.476 billion in 2010 from € 1.116 billion in 2009.
As a result of the increase in gross margin and lower segmental operating expenses as a percentage of sales, segmental operating margin improved 5.3 percentage points to 18.9%
(2009: 13.6%). In absolute terms, segmental operating profit grew 74% to € 452 million in 2010 versus
€ 259 million in 2009.
Currency-neutral segmental sales grow 18%
In 2010, Retail revenues increased 18%
on a currency-neutral basis. Concept store, factory outlet and other retail format sales were all up versus the prior year. Currency translation effects positively impacted segmental revenues in euro terms. Sales grew 25% to
€ 2.389 billion from € 1.906 billion in the prior year see 08. Currency-neutral comparable store sales rose 11% versus the prior year, with increases in all store formats.
Own-retail store base increases At December 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 Group opened 234 new stores, 127 stores were closed, 51 stores were remodelled and 49 stores were reclassified. The reclassification is due to a different methodology applied to store locations which are co-shared by different Group brands.
Currency-neutral Retail sales grow in all regions
Currency-neutral Retail sales increased in all regions. Retail revenues in Western Europe grew 4% on a currency-neutral basis, mainly due to increases in Spain, Germany and Italy. Sales in European Emerging Markets rose 30% on a currency-neutral basis, driven by growth in Russia where both the adidas and Reebok brands had strong double-digit sales growth. Currency-neutral Retail sales in North America grew 14% due to double-digit growth in the USA. Retail revenues in Greater China increased 41% on a currency-neutral basis. Sales in Other Asian Markets grew 1% on a currency-neutral basis, with growth in South Korea partially offset by decreases in Japan. However, the Reebok brand grew at a double-digit rate in Japan. In Latin America, currency-neutral Retail sales grew 34%, with particularly strong growth in Argentina and Mexico. Currency translation effects had a positive impact on regional sales in euro terms see 11.