Subsequent Events and Outlook
2007 is strategically an important year for the adidas Group. Revitalizing Reebok will be at the forefront of our endeavors, and the first product initiatives developed under the leadership of our new brand management team will be launched in the second half of the year. We will continue to realize integration synergies and further increase cost optimization throughout our organization. Based on our extensive product pipeline and strong marketing initiatives for all our brands, we are confident that we will again be able to deliver strong top- and bottom-line performance this year, and improve our key balance sheet metrics. For the adidas Group, we expect to grow currency-neutral sales at a mid-single-digit rate, driven by growth at all our brands and in all our regions. In addition, we project increases in both our gross and operating margins, which will be between 45 and 47% and around 9%, respectively. Further, we forecast net income attributable to shareholders to grow by double-digit rates approaching 15%. We believe the current trading environment supports our expectations given positive growth projections for our industry and the global economy. No material event between the end of 2006 and the publication of this report has altered our view.
Subsequent Macroeconomic Developments
Since the end of 2006, there have been no major macroeconomic
or sociopolitical changes which we expect to influence
our business materially going forward.
Subsequent Group Events
Buying out distributors and joint ventures around the globe
underscores our Group’s strategy to support our brands with
wholly-owned subsidiaries in key markets. Consequently, on
January 12, 2007, we announced the buyback of distribution
rights for the Reebok brand in Turkey from RBK Spor Urunleri.
Effective April 1, 2007, adidas Spor Malzemeleri Satis ve
Pazarlama
A.S. will become the exclusive distributor of
Reebok products in Turkey. In addition, after the contract with
Reebok’s distribution partner in Chile had expired on December
31, 2006, adidas Chile Ltda. became the exclusive distributor
of Reebok products in Chile effective January 1, 2007.
Subsequent Changes in the Group’s Legal Structure
The Hockey Company was renamed Reebok-CCM Hockey, Inc.,
in January 2007. We believe this new name better reflects the
company’s focus on two key separate and distinct brands:
Rbk Hockey and CCM Hockey.
Subsequent Management Changes
In January 2007, the adidas Group made three key appointments
at adidas and Reebok regional management levels.
At adidas, Patrik Nilsson was appointed President of adidas
North America. At Reebok, Nigel Griffiths was named Head
of Reebok Europe and Dave Mischler Head of Reebok Asia
Pacific. In February 2007, it was announced that Bernd Wahler
would become Chief Marketing Officer Sport Performance for
the adidas brand.
Subsequent Financing Developments
With regard to financing, there have been no major developments
since the end of 2006.
Subsequent Share Count Changes
As a result of stock options exercised as part of various
tranches of the Management Share Option Plan (MSOP) of
adidas AG, the number of outstanding shares increased by
30,200 to 203,567,060 no-par value shares in January 2007.
Subsequent Legal Changes
The adidas Group has taken the necessary steps to comply
with all new and changed regulations introduced by the
Transparency Directive Implementation Act (Transparenzrichtlinien-Umsetzungsgesetz – TUG) and the Act on Electronic
Commercial Registers, Cooperative Society Registers and
the Company Register (Gesetz über elektronische Handelsregister
und Genossenschaftsregister sowie das Unternehmensregister
– EHUG) in January 2007. Accordingly, we will
among other things disclose ad hoc notifications, directors’
dealings, changes in the percentage of voting rights and
financial reports throughout Europe and provide them to the
Company Register for central storage of information relevant
for capital markets.
adidas Backlogs Grow Moderately
Backlogs for the adidas brand at the end of 2006 increased
1% versus the prior year on a currency-neutral basis. This
represents a decrease of 4% in euro terms. Footwear backlogs
declined 1% in currency-neutral terms (– 6% in euros).
Softness in several categories in North America and Europe
was largely offset by growth across all major categories in
Asia. Apparel backlogs grew 5% on a currency-neutral basis
(stable in euros), driven by improvements in the Sport Performance
training and basketball categories. Hardware
backlogs, particularly in Europe, negatively affected growth
rates due to declines in the football category. The transfer of
the NBA and Liverpool licensed businesses from Reebok to
adidas had a positive impact of approximately 1 percentage
point on the development of brand adidas backlogs.
