Adidas Group First Quarter 2014 Results
Adidas Group confirms guidance for the full year 2014
Adidas Group sales are forecasted to increase at a high-single-digit rate on a currency-neutral basis in 2014. In particular, this year's major sporting events will provide positive stimulus to Group sales. As the Official Partner of the 2014 FIFA World Cup in Brazil, the Adidas brand will be the most visible brand during the event and will benefit from record sales in the football category. Group sales development will also be favorably impacted by the Group's high exposure to fast-growing emerging markets as well as the further expansion of retail. Currency translation is expected to have a significant negative impact on the Group's top-line development in euro terms.
In 2014, the Adidas Group gross margin is forecasted to increase to a level between 49.5 percent and 49.8 percent (2013: 49.3 percent). Improvements are expected in most segments. Group gross margin will benefit from a positive pricing, product and regional sales mix, as growth rates in high-margin emerging markets are projected to be above growth rates in more mature markets. In addition, the Reebok brand will positively influence group gross margin development. However, these positive effects will be partly offset by less favorable hedging terms compared to the prior year, negative exchange rate variances in emerging markets such as Russia and Argentina, as well as increasing labor costs in our cost of sales.
In 2014, the Group's other operating expenses as a percentage of sales are expected to be around the prior year level (2013: 42.3 percent). Sales and marketing working budget expenses as a percentage of sales are projected to increase modestly compared to the prior year. Marketing investments will be centered on major sporting events such as the 2014 FIFA World Cup and highly innovative product launches, particularly in the running category. Further, the Group will support Reebok's growth strategy in key fitness categories, leveraging partnership assets such as CrossFit, Spartan Race and Les Mills. Operating overhead expenditure as a percentage of sales is forecasted to decrease modestly in 2014. Higher expenses in the Retail segment due to the planned expansion of the Group's store base will be offset by leverage in other areas.