Capping off a challenging year, Adidas AG significantly widened its fourth-quarter loss. The net loss came in at €140 million ($155 million), compared with a loss of €10 million for same period the year before.

Fourth-quarter sales rose 6.5 percent to €3.6 billion with growth continuing or recovering strongly in most regions of the world. The continued laggard was North America and Adidas’ officials stated that turning around the region will be a major focus in 2015.

“As we are enjoying strong growth in most regions around the world, our focus in 2015 will be on the region in which that growth has been elusive up to now, namely North America,” said Herbert Hainer, CEO, on a conference call with analysts.  

He added, “As a group, we underperformed in North America and we are all disappointed when we look back over the last 12 months. For us, however, one thing is clear; we want and we need to win in that market.”

Hainer pointed to several steps already taken, including bringing on a “significant change in leadership” in its NA organization last year, as well as adding key external talent, particularly in design.

“This will help us to develop the right product for the market and become more relevant to US consumers, which his crucial for our future success in this all-important market, as is our execution at the point of sale,” said Hainer. “We definitely need to increase brand presence and improve the presentation of our products.”

He also pointed to Adidas’ more aggressive efforts to sign NBA, NFL and MLB players to particularly support the Adidas flagship brand in the NA region. Beyond the star signings, Adidas plans to “increase visibility at the grassroots level, grow our college portfolio and better utilize epic moments in college sports with the ultimate goal to be credible for our young target group.”

Concerns that the company is losing significant shelf space to competitors such as Nike and Under Armour in the region came up earlier in the week after Ed Stack, Dick’s SG’s CEO, indicated during the retailer’s fourth-quarter conference call that the chain’s new activewear line by “American Idol” singer Carrie Underwood was “primarily” taking space occupied by Adidas and Reebok.

Speaking at an investor conference the following day, Stack clarified his comments by stating that he expects Adidas to still be a growing business at Dick’s SG.

“The idea that we are kicking Adidas off the shelves, nothing could be further from the truth,” Stack said Wednesday. “For all the Adidas fans, there will be plenty of Adidas product.”

Asked directly about losing space to rivals in the U.S., Hainer said Adidas remain a “large and very important partner” to Dick’s SG and pointed to Stack’s follow-up comments. He also said Adidas continues to have strong partnerships with its U.S. partners, citing its extensive collaborations with Foot Locker during NBA All Star Week in New York City and its deal to bring back Reebok’s Pump shoe in mid-March at Finish Line. Relationships are equally strong across sporting goods accounts.

“I don't worry that,” said Hainer of the rival’s recent selling-floor gains. “With the more marketing, the more advertising, the better product introductions into the American marketplace, we will get the shelf space back, which we need it to drive our business.”

Other challenges addressed were the significant decline seen last year at TaylorMade-Adidas Golf, with Hainer admitting the company “misjudged the market situation at the beginning of the year.”

With aggressive efforts to clean up inventories, a restructuring that involved a 15 percent reduction in the global TaylorMade workforce, and promising launches, “TaylorMade-Adidas Golf will be back on track for growth and profitability this year,” Hainer stated.

In the Russia/CIS region, Adidas is the “clear market leader and Reebok a strong number three,” but the significant deterioration of the Russian ruble and “significant deterioration of the Russian ruble” particularly weighed on profits. With efforts to reduce its planned store count and control both inventories, “we were able to secure profitability levels above the Group’s average, even in such a lackluster environment and we will continue to work on that going forward,” said Hainer.

Overall, negative translation effects reduced its sales by more than €550 million ($605 mm) last year and cut its operating profit by €170 million ($198 mm).

On the upside, Hainer noted that despite “tough macroeconomic headwinds at the end of the year,” revenues for the full year grew by 6 percent and the company ended with “a very strong fourth quarter.” Double-digit growth was seen in Western Europe, Greater China, European Emerging Markets and Latin America.

The bigger loss in the quarter was attributed to higher input costs, negative currency effects and goodwill impairment losses of €78 million ($85.8 mm), largely related to the deterioration of the Russian ruble. The period also included a €82 million ($90.2 mm) loss related to the sale of Rockport. Excluding goodwill impairment, the loss was €61 million ($67.1 mm) against earrings of €43 million a year ago.

Gross margins in the quarter decreased 2.6 percentage points to 44.9 percent mainly due to negative currency effects as well as higher input costs. In addition, lower product margins at TaylorMade-Adidas Golf also contributed to the gross margin decline. Operating expenses in the quarter grew 3 percent overall declined as a percentage of sales, by 1.3 percentage points to 45.5 percent.

For the year, earnings declined 37.6 percent to €490 million ($539 mm), or €2.35 a share. Excluding goodwill impairment, earnings dropped 32.2 percent to €568 million ($624.8 mm), or €2.72 a share. Sales improved 2.3 percent to €14.5 billion ($15.95 bn).

In late July, Adidas admitted it wouldn’t be able to meet its financial goals for 2015 and cut its net profit target for 2014 from a range of €830 million to €930 million to around €650 million. The company said in January it had met the target, excluding charges related to Rockport and Russia.

By brand, sales for Adidas grew 11.1 percent in the quarter to €2.87 billion ($3.16 bn) and jumped 11.3 percent on a c-n basis. The gains were driven by double-digit sales growth in the Sport Performance training and running categories as well as at Adidas Originals and Adidas NEO, said Robin Stalker, CFO, on the call. In the year, Adidas brand sales grew 10.8 percent on a c-n basis.

Hainer noted that the Adidas brand has seen double-digit growth in each of the last 3 quarters. In key categories, Adidas’ global football sales increased more than 20 percent, achieving new record sales of €2.1 billion ($2.3 bn). Said Hainer, “We clearly won the 2014 FIFA World Cup.”

Running, led by its Boost platform, continued to grow double digit for the Adidas brand with revenues up 17 percent in Q4, marking the fourth consecutive quarter of double-digit growth.

Adidas Originals and Sports Style were up 19 percent in Q4 and 12 percent for the full year. The Adidas NEO line climbed 27 percent in the year. Adidas Originals was ahead 17 percent in Q4, helped by product introductions such as ZX Flux and Stan Smith.

Reebok’s revenues dipped 1.6 percent in the quarter to €420 million ($462 mm) and increased 0.6 percent on a c-n basis. Double-digit sales increases in the fitness training, walking and studio categories were partly offset by decreases in the fitness running category and Classics. For the year, sales on a c-n basis grew 4.7 percent.

Hainer noted that the quarter marked Reebok’s 7th consecutive quarter of growth.

“Brand positioning in fitness is resonating extremely well with consumers around the world, particularly in markets where we are driving our own controlled-space agenda,” said Hainer. Russia, South Korea, the U.K. and Spain grew at double-digit rates for Reebok in 2014.

By segment for Adidas Brand and Reebok, Wholesale revenues grew 8.1 percent in the quarter to €2.2 billion ($2.42 bn) and gained 5.3 percent on a c-n basis. For the year, Wholesale segment revenues grew 6 percent on a c-n basis with sales increases in all regions except North America. Strong momentum is particularly being seen in Western Europe, where revenues increased 13 percent in the fourth quarter with both Adidas and Reebok growing at double-digit rates.

For the full year the wholesale gross margin decreased 1 percentage point to 41.7 percent as the positive effect from a more favorable product mix was more than offset by negative currency effects following the devaluation of currencies such as the Argentine peso and Brazilian real.

Retail segment revenues for Adidas Brand and Reebok rose 11.6 percent in the quarter to €1.04 billion ($1.14 bn) and gained 20.1 percent on a c-n basis. The Retail segment grew 20.9 percent on a c-n basis for the year and now represents 26 percent of the company’s total sales. Comps in the year grew 9 percent with every region posting at least a mid-single-digit growth. By brand, Adidas comps increased 10 percent for the quarter and also for the full year, while Reebok’s comps inched up 1 percent both in Q4 and in the year.

E-commerce revenues jumped 62 percent in the quarter and 72 percent for the year, to more than €420 million ($462 mm).

Gross margin in the Retail segment decreased 2.8 percentage points to 59.4 percent as a more favorable product mix overall was offset by increased clearance activities in Russia/CIS as well as the impact of the devaluation of the Russian ruble. It ended the year with 2,913 stores, including 1,616 under Adidas, 446 under Reebok, and 851 multi-branded factory outlets.

In its Other Businesses segment, which includes TaylorMade and Reebok-CCM Hockey, sales declined 13.6 percent in the quarter to €350 million ($385 mm) and gave back 16.5 percent on a c-n basis. Revenues declined 19.1 percent on a c-n basis. The full-year gross margin for Other Businesses decreased 5.1 percentage points to 34.7 percent, mainly due to significantly lower product margins at TaylorMade.

TaylorMade-Adidas Golf’s sales in the quarter were down 21.0 percent to €240 million ($264 mm) and tumbled 24.2 percent on a c-n basis. The drop reflected ongoing efforts to clean retail inventories and the timing of new product introductions compared to the prior year period. Sales declined 27.7 for the year on a c-n basis.

Reebok-CCM Hockey’s revenues were up 2.9 percent in the quarter to €81 million ($89.1 mm) and gained 2.2 percent on a c-n basis as a result of strong sales growth in sticks. Sales on a c-n basis added 7.3 percent in the year.

By region, sales in North America rose 3.0 percent in the quarter to €805 million ($886 mm) but declined 4.2 percent on a c-n basis. Mid-single-digit growth at Adidas was more than offset by double-digit declines at TaylorMade and Reebok. While its wholesale segment in the region ended the year with revenues down 9 percent in Q4, its own retail activities were up a strong 16 percent, supported by comp growth of 8 percent. Currency-neutral sales in the NA region were down 6.3 percent in the year due to sales declines in the U.S.

In Western Europe, sales in the quarter grew 14.7 percent to €850 million ($935 mm) and gained 13.4 percent on a c-n basis. The gains came despite tough comparisons against sell-in of World Cup related products in the prior year. Football and running, as well as Adidas NEO, grew at double-digit rates, and Reebok also saw double-digit growth. Key geographical areas such as the U.K., Germany, France and Poland all grew in double-digits. For the year, Western Europe grew 8 percent on a c-n basis.

In European Emerging Markets, revenues dipped 2.7 percent in the quarter to €441 million ($485 mm) but advanced 16.0 percent on a c-n basis. The performance reflected double-digit growth at both Adidas and Reebok. For the year, sales increased 19 percent on a c-n basis with double-digit gains in all of the region’s major markets.

In Other Asian Markets, sales dipped 1.0 percent in the quarter to €611 million ($672 mm) and were down 0.3 percent on a c-n basis. High-single-digit growth at Adidas was offset by double-digit declines at TaylorMade. Revenues at Reebok were flat. For the year, sales inched up 2 percent on a c-n basis.

In Latin America, sales in the quarter advanced 6.9 percent to €415 million ($456.5 mm). The 12.3 percent growth on a c-n basis came on top of a 32 percent increase in the year-ago quarter. The gains were driven by a 13 percent sales increase for Adidas and an 11 percent at Reebok. Full-year revenues in Latin America grew 19.4 percent on a c-n basis, with double-digit sales increases in all major markets, in particular in Argentina, Mexico and Brazil.

Greater China's sales jumped 18.9 percent in the quarter to €488 million ($537 mm) and grew 11 percent on a c-n basis, due to double-digit increases from Adidas. Sales in Greater China increased 10 percent for the year on a c-n basis. Adidas Brand “continues to enjoy very strong momentum in the Chinese market” with revenues up 12 percent in the fourth quarter and 11 percent for the full year, supported by double-digit increases at Adidas Originals and Adidas NEO, said Stalker.

For 2015, Adidas projected sales will grow at a mid-single-digit rate on a c-n basis. The gains are expected to be driven by “significantly improved top-line development at TaylorMade-Adidas Golf as well as ongoing robust momentum at both Adidas and Reebok.” Further expansion at retail is also expected to offset tough comparisons against World Cup revenues.
 
Gross margins are expected to range from 47.5 percent to 48.5 percent, which compares with 47.6 percent. Higher product margins at TaylorMade as a result of less clearance activity as well as a more favorable pricing and product mix at both Adidas and Reebok are expected to help offset adverse currency movements in emerging markets, in particular in Russia/CIS.

Operating expenses as a percent of sales are expected to be around 2014’s level of 42.7 percent. Stepped up marketing and point-of-sale investments are planned to support momentum at Adidas and Reebok particularly in developed markets such as North America and Western Europe. Both brands launched major campaigns at the start of 2015.

Net income from continuing operations is projected to increase at a rate of 7 percent to 10 percent.