Annual Report 1997 (1.5 MB PDF) - adidas Group

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2 President’s Letter DEAR SHAREHOLDER, In 1997, we made good progress in pursuing our goal to become the best sporting goods company in the world. Although we will never equate quantity with quality, we are pleased that we are now the second-largest global company in our industry – which itself shows all signs of continued worldwide development. This significant milestone was reached in another successful year in which adidas achieved extraordinary growth in both sales and profit. In 1997, the adidas management decided to make a major external acquisition to complement our strong organic growth. In December, with your approval and support, we acquired Salomon, one of the world’s leaders in sporting goods sectors in which we previously had no significant presence. Through this acquisition, we thus broadened the spectrum of our product range through the addition of three leading sports brands – Salomon for winter sports equipment, Taylor Made for golf equipment and Mavic for cycle components. The ‘fit’ of Salomon and adidas is truly excellent. Both draw on a unique heritage of providing athletes with high- quality products for top performance based on innovation and new technology. Our product lines have practically no overlaps, and our two companies will profit from each other’s respective expertise. As a combined group, adidas and Salomon are well balanced in terms of major product groups (footwear, apparel and equipment), as well as with respect to the seasonal aspects of our business and regional focus on the major sporting goods markets. Our industry will continue to experience a process of consolidation. In the long term, only the largest, integrated companies with a solid financial base will have sufficient strength, market penetration, and opportunities for diversifying risk to assure continued success. We are committed to being among this group, without ever losing sight of our dedication to quality and to our own specific identity. With the acquisition of Salomon, we have taken another major step toward this goal. In 1997, we not only achieved record sales volumes and broadened our product lines; we also reached new levels of success in the key US marketplace. In the United States, the world’s largest sporting goods market, we achieved more than one billion dollars in gross sales for the first time. This means that we are also well on the way to becoming the second-largest in America’s sporting goods sales. Our US order book is continuing to grow rapidly, while the American sporting goods market as a whole shows only moderate growth. We believe that it is not unrealistic to expect that our US market share, which currently stands at around six per cent, will grow to more than ten per cent in the next two years. The basic foundation for this growth is already in place – brand acceptance, product quality, trade-marketing, advertising, and sponsorship agreements with American athletes and teams. We have opened the door to the world’s largest sporting goods market; now we must make the most of our strong competitive positioning there.
While our business in America continues to boom, the sales outlook for the Asian markets is bleak. Although our results there in 1997 were certainly satisfactory, we anticipate a decline in Asia’s contribution to our profit performance in 1998. However, we are confident that this decline will be more than offset by the improved profit situation in the USA. In Japan, we are facing a sea-change in our situation. Our major licensee agreement expires at the end of 1998, and so we are now building our own sales organization which should ensure improved sales and profit figures starting in 1999. We will not rest with our current successes; like the champions we outfit, we are setting our sights continually higher and we are working to improve our future performance. We are investing in products, people and systems, as well as in new endorsements which should guarantee that excellence in championship performance will only naturally be linked with adidas. One example is the new sponsorship agreement with the US National Football League. Expanding our Global Technology Center is another way we aim to guarantee our future success. This is where we carry out basic research, with the objective of achieving a better understanding of the movements of the human body and, based on this knowledge, developing products which not only meet the requirements of sporting excellence but also help to promote and improve athletic performance. It is only with such products, incorporating state-of-the-art research work, that adidas can remain successful. This remains one of our basic beliefs. At the same time, we will also ensure that the brands we have gained with the acquisition of Salomon will not only maintain their positions in the marketplace, but will also be further strengthened by synergies inherent in the perfect fit between our two companies. Of course it will take time to integrate Salomon to a degree that we will maximize the effects of these potential synergies. This, by the way, is one of the reasons why I have extended my contract with adidas by another five years. Overall, then, we are using some very solid building blocks to continue to create value for our shareholders. These include continuing growth from today’s strong adidas product lines, integration of Salomon, enhancing the brand through contemporary design and product development linked to the quick-changing dynamics of shifting marketplace requirements, cost-effective sourcing, target-oriented marketing, and leveraging technological research. You, the shareholder, have demonstrated your trust in our management of your company. In return, we are committed to demonstrating the reasons for that trust each day. At the same time, I would like to express my personal admiration and appreciation to all adidas employees worldwide. We would not be the successful company we are without their belief in our mission, their passion for sports and their daily and enthusiastic commitment to their work. Robert Louis-Dreyfus 3
Page 1 and 2: Annual Report 1997
Page 3: Table of Contents Page President’
Page 7 and 8: FOOTWEAR SALES INCREASED BY AROUND
Page 9 and 10: EXCHANGE RISKS HEDGED During the la
Page 11 and 12: Whilst the 1997 group tax rate agai
Page 13 and 14: The formation of a wholly-owned sub
Page 15 and 16: At December 31, 1997 order backlog
Page 17 and 18: The Many Faces of adidas Page adida
Page 20: 18 Haile Gebrselassie has only one
Page 24: 22 Kobe Bryant, in two short years,
Page 28: 26 Anna Kournikova brings fire, fla
Page 31 and 32: Eddie George 29
Page 33 and 34: adidas-Salomon AG and Subsidiaries
Page 39 and 40: Property and equipment and deprecia
Page 43 and 44: Credit lines: Prior to the announce
Page 45 and 46: The following is a summary of the c
Page 47 and 48: The actuarial valuations of the pla
Page 49 and 50: 15. Financial result Financial resu
Page 51 and 52: 18. Cash flow statement Cash and ca
Page 53 and 54: Auditors’ Report To the Board of
Page 55 and 56:
As at December 31, 1997 Equity 000
Page 57 and 58:
As at December 31, 1997 Equity 000
Page 60 and 61:
58 Attachment II to the Notes adida
Page 62 and 63:
60 Report of the Supervisory Board
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Annual Report 1997 (1.5 MB PDF) - adidas Group

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