Europe

adidas has divided its operating activities into the following operating segments: Europe, North America adidas, North America Reebok, Asia-Pacific, Russia/CIS, Latin America, Emerging Markets, adidas Golf, Runtastic and Other centrally managed businesses. While the operating segments Europe, Asia-Pacific, Russia/CIS, Latin America, and Emerging Markets are reported separately, North America adidas and North America Reebok are combined to the reportable segment North America. Each reportable segment comprises all wholesale, retail and e-commerce business activities relating to the distribution and sale of products of the adidas and Reebok brands to retail customers and end consumers. The remaining operating segments are aggregated under Other Businesses due to their relatively lesser significance.

All markets significantly impacted by global coronavirus pandemic

The global spread of the coronavirus during 2020 led to a significant number of temporary store closures, with a corresponding negative impact on adidas’ top-line development in all market segments. Exceptional e-commerce growth could only partially offset the material revenue decline in the physical channels. In most segments, a more favorable channel mix due to the exceptional e-commerce growth had a positive effect on the gross margin development. However, this was more than offset by a less favorable pricing mix due to increased promotional activity and negative currency fluctuations in most segments. At the same time, operating expenses declined in all segments as a result of the company’s decision to proactively reduce costs in light of the coronavirus pandemic.

Europe

In 2020, sales in Europe declined 12% on a currency-neutral basis as well as in euro terms to € 5.320 billion from € 6.071 billion in 2019. adidas brand revenues were down 12% on a currency-neutral basis, due to declines in both Sport Inspired and Sport Performance. Reebok brand revenues in Europe decreased 16% on a currency-neutral basis, due to declines in both Sport and Classics.

Gross margin in Europe decreased 2.2 percentage points to 49.3% from 51.5% in 2019, as a more favorable channel mix was more than offset by a less favorable pricing mix due to increased promotional activity, negative currency developments and purchase order cancellation costs. Operating expenses were down 2% to € 1.681 billion versus € 1.722 billion in 2019, reflecting a decline in marketing expenditure. Operating expenses as a percentage of sales were up 3.2 percentage points to 31.6% (2019: 28.4%). As a result of the lower gross margin and higher operating expenses as a percentage of sales, operating margin was down 5.4 percentage points to 17.8% (2019: 23.2%). Operating profit in Europe declined 33% to € 947 million versus € 1.408 billion in the prior year.