ECONOMIC AND SECTOR DEVELOPMENT 

GLOBAL ECONOMIC EXPANSION SLOWS
The global economy expanded by 3.6 % in 2007. This represents a modest slowdown versus the prior year (2006: 3.8 %). Following strong increases in the first six months of the year, turbulence on international capital and credit markets resulting from the subprime crisis in the USA dampened economic expansion as the year progressed.

In Europe, full year GDP grew 2.9 % (2006: 3.1 %). Growth was primarily a result of the region’s emerging markets which, with around 6 % GDP expansion, again outperformed Western European economies. The latter mainly showed lower GDP growth compared to the prior year. Following a peak in May 2007, consumer confidence in the EU declined steadily over the remainder of the year.

In the USA, economic growth slowed to a level of 2.2 % in 2007 (2006: 2.9 %). This was largely a result of spillover effects from the subprime crisis. US consumer confidence declined consistently from mid-summer to November 2007, reaching its lowest level since late 2005. The main drivers of this decline were rising oil prices, less available credit as a result of the subprime issue, and a weak dollar.

In Asia, most of the region’s economies continued on a strong upswing. Asia’s GDP grew 8.6 % in 2007 (2006: 8.5 %). GDP growth in China was 11.5 %, while Japan’s economy expanded by only 1.9 %. The region’s other emerging markets grew at double-digit rates as a result of flourishing export activity. Consumer confidence in Asia increased, with the exception of Japan.

Latin American economies continued to be positively influenced by the global surge in commodity prices and increased export activity. As a result, GDP growth in the region was 5.0 % in 2007 (2006: 5.2 %). Consumer confidence in the region decreased slightly as a result of an increasing number of consumers struggling with high credit costs.

REGIONAL GDP DEVELOPMENT 1) in %
Source: Allianz
1)	Real, percentage change versus prior year; 2007 figures are estimated.

QUARTERLY CONSUMER CONFIDENCE DEVELOPMENT
by region

1) Source: Conference Board.
2) Source: European Commission.
3) Source: Economic and Social Research Institute, Government of Japan.

EXCHANGE RATE DEVELOPMENT¹⁾
€ 1 equals

1) Spot rates at quarter-end. 

MIXED DEVELOPMENT OF GLOBAL SPORTING GOODS INDUSTRY
In 2007, the global sporting goods industry had a mixed regional development. The European sporting goods industry was stable, while the US market remained highly competitive. Asia and Latin America contributed significantly to our industry’s growth.

EUROPEAN SPORTING GOODS INDUSTRY STABLE
In Europe, revenues in the largest sporting goods markets were basically unchanged compared to the prior year. Slightly weaker sales in Western Europe were offset by stronger sales in the region’s emerging markets. Lower sales in Western Europe primarily resulted from the non-recurrence of positive effects related to the 2006 FIFA World Cup™ and a continuously difficult retail landscape in the UK. Footwear sales remained stable in 2007 compared to the previous year. Apparel sales, however, decreased at a low-single-digit rate, largely driven by the non-recurrence of the 2006 FIFA World Cup™ jersey and replica volumes.

From a country perspective, growth in Spain and France was offset by promotional market conditions in other countries. The UK market in particular saw continued contraction, with volumes declining. Nevertheless, average prices started to recover over the course of the year. Average selling prices for footwear and apparel in the other countries also stabilized.

On a category basis, the European market continues to be positively influenced by growth in the outdoor and lifestyle categories. Running was negatively impacted by the ongoing trend towards sport fusion styles, and the football category declined due to the non-recurrence of positive effects related to the 2006 FIFA World Cup™. Channel development was mixed. General sporting goods stores were the major growth channel on the footwear side, while the volume channel was the only growth channel on the apparel side.

US SPORTING GOODS INDUSTRY HIGHLY COMPETITIVE
The sporting goods industry in North America continued to be dominated by the shift towards new sport fusion styles. These styles gained strongly on the back of significant losses in the classics and basketball categories.

The footwear market grew at a mid-single-digit rate in 2007. Sales in the apparel market were largely unchanged versus the prior year. Average selling prices increased marginally across the industry. Sport fusion and vulcanized footwear styles increased markedly. The region’s retail environment continued to be very challenging, driven by price competition in the athletic specialty channel. Retail growth was strongest in the sporting goods and family footwear channels.

ASIAN SPORTING GOODS MARKET FLOURISHES
In Asia, the sporting goods sector grew at a high-single-digit rate in 2007. Stagnation in Japan was more than compensated by strong growth in the region’s emerging markets, in particular China. In these markets, footwear sales grew at a double-digit rate with running, basketball and training being the main contributors. Apparel sales also increased at a double-digit rate, mainly due to growth in the training category. Average selling prices were stable throughout the region.

LATIN AMERICAN SPORTING GOODS MARKET INCREASES
In Latin America, the sporting goods industry developed in line with the overall economy and grew at a mid-single-digit rate compared to the prior year. Both apparel and footwear sales increased modestly in 2007 compared to the previous year, reflecting higher consumer spending in the region. Average selling prices increased in Argentina and Venezuela due to high inflation rates and were stable in the region’s other countries.

ADIDAS GROUP OUTPACES INDUSTRY AND OVERALL ECONOMIC GROWTH
In 2007, adidas Group revenues grew faster than both the economy and the sporting goods industry in all regions, with the exception of North America. From a macroeconomic perspective, the two most important indicators of how conducive a region’s economic development is to our business are GDP growth and consumer confidence. Performance in the sporting goods industry, however, is often more influenced by product category trends, development of key retail partners as well as pricing and volume trends in the sector.