Good day, ladies and gentlemen, welcome to the adidas Group conference call for the full year 2013 financial results. For your information, today's conference is being recorded, at this time, I would like to turn the conference over to John-Paul O'Meara. Please go ahead.
Thanks, operator, good afternoon, ladies and gentlemen, good morning to those of you following us from the States. To allow for ease of comparison today, all sales and revenue-related growth rates will be discussed on a currency-neutral basis unless otherwise specified. In addition, all comparisons will also exclude goodwill impairment losses, which Robin will discuss in detail in his presentation today. Let's get started, I'd like to hand over now to our CEO, Herbert.
Yeah, thanks, J.P., good morning or good afternoon, ladies and gentlemen, welcome to the call also from my side. Before we turn to the results of the past financial year, I would like to briefly comment on yesterday's decision of the supervisory board with regard to the early extension of my executive board contract until March 2017. I'm pleased that the supervisory board has expressed its confidence in me by extending my contract by another two years. The generation change, which has already begun with our management team, is a process we intend to complete carefully and diligently. Yesterday's decision gives the company sufficient time to ensure a smooth transition at the helm of the adidas Group and to optimally facilitate the process of succession for the company. In addition, we will do everything in our power to successfully execute against our strategic business plan, Route 2015.
At the same time, we will define our new long-term strategy together with the next generation of company leaders in order to prepare the adidas Group for another era of growth and success. I'm very much looking forward to the next three years. It will be an exciting period for our group. First things first. Let's now turn our attention to the 2013 financial year. In a marathon, every inch of every mile counts. In this spirit, I'm pleased to report that we dug deep in the final stretch of the year and regained a level of growth momentum more typical of our high-performance standard. After a flat performance in the first nine months, we had an exceptional fourth quarter with sales growing by 12%. This drove operating profit up almost four-fold compared to the prior year to a new fourth-quarter record of EUR 98 million.
The strong revenue finish to the year, which was above our expectations, ensured that we comfortably met our revised full-year targets from September, despite a further worsening of currency exchange rates, which cost us a massive nine percentage points on the top line in the fourth quarter. For the full year, this translates into sales growing 3% on a currency-neutral basis or declining 3% in reported EUR to EUR 14.5 billion. Gross margin increasing 1.5 percentage points to a new record level of 49.3%. Operating margin expanding 70 basis points to 8.7%. Finally, net income attributable to shareholders growing 6% to EUR 839 million, well within our September range of EUR 820 million-EUR 850 million. This result, ladies and gentlemen, is a clear testament to the persistence and energies we exercise in making the most out of a challenging year in several areas.
As a recap, three key items in particular impacted our results versus our initial expectation. Negative currency development, distribution constraints in Russia CIS, as well as a stalling global growth market. I discussed the latter two of these three issues in detail of the nine-month results call, and while the impacts are significant in terms of our profitability and top-line achievements, in the end, the devaluation of major currencies versus the EUR was simply the factor that was too significant in magnitude to cover operationally. However, as frustrating as that is, we cannot and should not overlook the powerful underlying operational progress we are making with our brands. This is where I want to focus my attention today with you because ultimately, that's how we will win. The best place to start, this is our fastest growth engine of the year, running.
We called out 2013, as you might remember, as the year of running, and it was exactly that. Sales grew an impressive 17%, and we are by far the hottest and most talked about brand in the category right now. Be it Boost, Springblade, the miCoach SMART RUN watch, or established families such as Supernova or Essentials, adidas is winning and is winning big. In the fourth quarter alone, sales increased 31% in the category. The most important and greatest thing is we are only at the beginning. This is important as running is the authenticator of footwear and apparel technologies in our industry. If running is the authenticator of the industry, then football is the authenticator of what it is to be adidas. If anyone was in doubt about our leadership in the category, then our 35% growth in the fourth quarter should easily settle any debate.
Our growth was fueled by a fantastic start of our World Cup product campaign and a very good Christmas sale. Throughout the quarter, adidas excited football fans around the globe with its colorful summer collection, including a new boot from each of our key ranges. Be it Adizero F50, Predator, Nitrocharge, and 11Pro. We also launched the 2014 FIFA World Cup kits of leading national football federations, including reigning champions Spain, Argentina, and Germany. The kits are inspired by pride, passion, and the vision of next-generation football fans. The shirts that our teams will wear in Brazil this summer are 50% lighter than any previous adidas jersey. Brazuca, the official match ball for the World Cup, was also a favorite amongst Christmas shoppers around the world. In addition to this, Brazuca is the first ball with its own Twitter account, followed by already more than 100,000 fans worldwide.
In no way is this showing up more relevant commercially than in our own retail stores, where we are already enjoying phenomenal sell-throughs of the federation jerseys and the official match balls. In the early weeks of the year, sales of these items were up over 200% compared to the last World Cup in 2010. In a so-called non-event year, we were playing against the tough comparisons with our Euro 2012 success, we increased our football revenues by 4% in 2013. Forget all you may have heard or read about the weak adidas performance in football in 2013. We are leading in this category that is so close to the adidas DNA. Yes, we are leading it in Germany, too.
We are the clear number one in the football overall business, we are also leading in terms of market share in footwear based on what consumers tell us about their preference in football boots. According to the latest NPD data, we are a solid six percentage points ahead of the number two. Is there fierce competition out there for market share in football footwear? Absolutely, as it is the case in all other major sporting categories. In almost all football markets, the two largest brands hold an 80%-95% share, depending on which market you look at. While this tells you something about the performance of all other competitors out there, let me assure you of one thing. Wherever we might be in second place, we will attack and we will win back market share. Another category where there is fierce competition is in sports lifestyle.
Again, after mid-single-digit growth in the first nine months, adidas Originals and sport style sales accelerated in Q4 to 12%. This means we finished the year with 5% sales growth and revenues well in excess of EUR 3.2 billion. Our strategically important adidas NEO label played a central role, continuing to win the hearts, minds, and wallets of teenagers around the world. 14% growth year-over-year is a testament to the fact that more and more young consumers are in love with this young and fresh label. We are now generating almost EUR 700 million in sales with the label, which is impressive by any standards. Taking it all together, it was a very good end to the year for adidas, with 10% sales growth in the fourth quarter and 2% for the full year.
Our diligent focus on driving quality growth, fueled by innovation and strong channel management, also once again paid off for the brand, which can be seen in the strong two percentage point increase in the gross margin. Moving over to Reebok, I am pleased to report a similar story. As promised, we returned Reebok to growth in 2013, with sales increasing 2% for the year and 9% in the fourth quarter. For the year, excluding the NFL license impact that still burdens the first quarter, sales increased 4%. Thanks to that tremendous increase in gross margin of four percentage points to 39.7%, the gap between the adidas and the Reebok gross margin is at its narrowest level. We are now in touching distance of our Route 2015 goal to lift Reebok's margin above 40%.
I'm confident the gap in margins between the brands will continue to narrow further over time. Why? We are on a clear, consistent, and sustainable growth path. Growth in 2013 followed that from 2012, coming exactly in those categories that fit perfectly with our positioning for Reebok as the fitness brand, with sales in 2013 increasing 18% in fitness training, 37% in classics, and more than 300% in studio, albeit from a small base. We also continue to bring our unique Fit Hub concept to new markets, which is an important long-term strategic investment to drive a common presentation of Reebok around the world. In December, for example, the first Reebok Fit Hub and CrossFit box opened in France, located in one of the premier shopping destinations, Avenue de l'Opéra in Paris. This original and innovative concept combines a Reebok retail store and a CrossFit gym.
Finally, to wrap up on the brands, let's have a look at TaylorMade-adidas Golf. As you know, in the third quarter, we took swift action to clean up the market following a slower year for the golf industry. While it cost us some margin to do so, it was the right thing to do. As a result, we were able to swiftly swing back to action in Q4, reminding the consumer and the competition just how powerful an industry leader we are. In the time period when many equipment manufacturers are seasonally quiet, TaylorMade excited the industry with the launch of SLDR and JetSpeed, two extremely popular drivers that are both played extensively on the PGA Tour.
This, together with good market share increases in irons and footwear due to SpeedBlade and Adizero, respectively, allowed us to grow 25% in the fourth quarter and finish the year with a sales increase of 3%. Before I hand over to Robin, let me quickly run through the geographical performance, where again, the message from the fourth quarter is very positive. There's good momentum improvement in nearly all of our markets. Let me start in European emerging markets, where sales grew 4% for the year. Russia CIS obviously plays a central role in this region, and as we discussed several times, this year had its fair share of challenges, also self-made from our distribution center hiccup. The good news is, we have put our own operational issues behind us during the fourth quarter. With trends improving during the last weeks of 2013, sales in Russia grew 8% in Q4.
Operationally, the market has also started well in 2014. The recent Winter Olympic Games in Sochi showed the world how passionate Russia is about sport, and we are already looking forward to playing a major role in the build-up to the 2018 FIFA World Cup in Russia. Nevertheless, we cannot ignore the significant weakness of the Russian ruble since the beginning of the year, as well as the current uncertainty in the region, both of which have added considerable risk to our results in EUR. Robin will take up this topic in more detail in his overall discussion on currency. Elsewhere in the emerging markets, 2013 was an outstanding success. Latin America, which will have a lot of attention in 2014, we led from the front with sales growth of 19% for the full year and 32% in the fourth quarter .
This was driven by the rising anticipation and excitement ahead of the World Cup in Brazil, but it also reflects our continuous investment and improvement in this vibrant part of the world. Moving on to Greater China, we continued to keep both our major competitor and the local brands on the back foot in 2013. Our revenues increased at very consistent rates throughout the year, climbing 8% in the fourth quarter and 7% for the year. Our local management team continues to execute with excellence, blending the appeal and the attractiveness of adidas with a deep understanding of the Chinese consumer. All research confirms that we are one of the hottest brands in China right now, with a fantastic brand footprint being in over 7,600 stores in more than 1,000 cities.
In other Asian markets, sales increased a strong 15% in the fourth quarter and 5% in 2013, driven by strong growth in South Korea, India and Australia. Those markets developed lower than our initial expectations is a 2% increase. There, some lifestyle trends moved against us, and we suffered from lower growth than expected in adidas Basketball due to the unfortunate injury of our star athlete, Derrick Rose. Developments at TaylorMade also impacted this development. Trends picked up in the fourth quarter with a strong end to the year for brand adidas, where sales increased by 10%. Running and football were standout categories, growing 40% plus in the period. Sales in Western Europe also finished the year positively, with growth of 3% in the fourth quarter. For the year as a whole, sales were down 6%.
This was largely related to the absence of the UEFA Euro 2012 and the London 2012 Olympic Games, the latter having about a two percentage point impact on the region's results. It is also due to the continuously negative economic climate and lackluster consumer confidence in most European markets, especially in Southern Europe. Lastly, it is also a result of a fierce competitive battle for market leadership in this important region. Ladies and gentlemen, this sums up our operational performance for 2013. We may not have reached all our ambitious targets that we had originally set for the year, but we are proud that we ended on a high note in Q4 and made 2013 another year of records for the adidas Group. We have every intention to strive for the same again in 2014.
Before I come to that, let me hand over to Robin to give you more details on our financial results and how currencies are affecting these results.
Great. Thanks very much, Herbert, and hello, everybody. As you've just heard, operationally, it has been a good year for our group, with further progress on several key Route 2015 strategic initiatives. This is extremely encouraging as we stay diligent and focused on delivering long-term sustainable growth and margin improvements. The foreign exchange and macroeconomic environment has, and will unfortunately continue to leave its mark on our financial statements. I will spend some time on this at the end of my comments today. First, let me complete the review of the key 2013 and Q4 financials. Starting with our gross margin, where once again, I am proud we have set the industry benchmark for margin management, achieving a 1.5 percentage point increase to 49.3% for the year.
This performance was driven again by a more favorable product and pricing mix, as well as an improved regional and channel mix, which more than offset negative effects from a less favorable hedging rate, as well as lower margins at TaylorMade-adidas Golf. The negative hedging effect amounted to 70 basis points, while the impact of markdowns at TaylorMade-adidas Golf reduced the group's gross margin by 30 basis points for the full year. With the exception of TaylorMade-adidas Golf, gross margin increased in all brands and channels. For the fourth quarter, gross margin declined by 10 basis points. Excluding prior year one-off effects relating to Reebok India, on a like-to-like basis, the group gross margin would have been up 40 basis points in Q4. Looking at our operating expenses. Other operating expenses as a percentage of sales were up 1 percentage point to 42.3% for the full year.
This was mainly due to the accelerated pace of our own retail rollout, as well as ongoing investments in the group's infrastructure throughout the year. The decreased leverage due to the lower top-line growth than originally expected also contributed to this development. Sales and marketing working budget as a percentage of sales increased 30 basis points to 12.4%. As a result of the strong gross margin improvement, group operating margin expanded 70 basis points to 8.7%. For the fourth quarter, other operating expenses as a percentage of sales decreased 2.5 percentage points due to solid operational leverage in that quarter. This drove operating margin for the quarter up 2 percentage points to 2.8%. During the fourth quarter, we added 129 stores to our retail portfolio, bringing our net openings for the year to 294. At the end of 2013, our retail segment operated 2,740 stores.
Of the total number of stores, 1,557 were adidas and 404 were Reebok branded. In addition, we operated 779 multi-branded factory outlets. In summary, in 2013, we opened 534 new stores, 240 stores were closed, and 127 stores were remodeled. Retail revenues grew 8% to €3.4 billion, representing 24% of total group sales. While comp store sales were down 1% for the full year, they turned positive in the fourth quarter, rising 3% for the period. By brand, adidas comp store sales were up 3% for the quarter and remained stable for the full year. Reebok comp store sales remained unchanged for the quarter and were down 3% for the full year. Our e-commerce business continues to do extremely well, with sales increasing 59% in the fourth quarter and 64% for the full year to €250 million. Moving back to the P&L.
Looking briefly at the non-operating items, net financial expenses decreased 2% to €68 million for the full year. While net interest expenses were down 23% due to lower gross borrowings, this good progress was offset by higher negative exchange rate variances, which increased to €18 million from €7 million in the prior year. By the way, full-year tax rate decreased 30 basis points to 29.0%. Moving over to the balance sheet. Operating working capital as a percentage of sales increased 90 basis points to 20.9% compared to the prior year. At year-end, inventories were up 13% on a currency-neutral basis. This was as a result of our expectations for growth in the coming quarters, as well as higher inventories in Russia CIS due to distribution center issues during the second half of 2013. The latter accounted for around two-thirds of the total increase.
As I stated at the end of the nine-month period, we expect this to normalize during the course of the year due to adjusted inventory buying levels for that market. In terms of other balance sheet impacts, as a result of our annual impairment test, we have impaired goodwill and recorded a €52 million pre-tax charge as at December 31, 2013. Goodwill on our balance sheet declined 6% to €1.2 billion, with two-thirds of the decline related to the impairment and the rest due to currency movements. Looking at the specifics, which will probably come as no surprise, within the wholesale cash-generating unit, Iberia, goodwill impairment losses of €23 million were recognized. Within the retail cash-generating unit in North America, goodwill impairment losses of €29 million were recognized. The goodwill of these two cash-generating units is completely impaired.
The impairment losses were mainly caused by adjusted growth assumptions and an increase in the country-specific discount rate. As in the prior year, when we impaired goodwill of €265 million, the impairment loss of €52 million is non-cash in nature and does not affect the adidas Group's liquidity. In terms of capital structure, we ended the year with a net cash position of €295 million compared to the €448 million last year. Higher working capital requirements, as well as the higher dividend payment and higher capital expenditure were the primary drivers for this development. Taking everything into account, our equity ratio increased a strong 1.8 percentage points to 47.3% at year-end. As a result of this strong balance sheet, at our annual general meeting, we will propose a dividend of €1.50.
This is in line with our shareholder return policy to continue progress on increasing our payout ratio within the corridor, of course, of the 20%-40%. For 2013, this represents an increase in the payout ratio to 37.4%. Finally, ladies and gentlemen, before I hand back to Herbert, let me give you some insight into how currencies have impacted our results in 2013, and a look into the implications for 2014. Accumulated for the 12 months, currencies wiped out around €750 million from our top-line result, or five percentage points of growth. Throughout the year, the impact got sequentially worse with a peak of nine percentage points seen in Q4.
To give a few examples, the average rate of the Japanese yen was 21% lower versus the euro, the Argentine peso 20% lower, the Brazilian real 12% lower, the Australian dollar and Turkish lira 9% lower, the Russian ruble and Canadian dollar 6% lower all versus the euro. Unfortunately, these uncontrollable and unavoidable negative effects will continue in 2014. From today's perspective, looking into 2014, taking a simple calculation of the year-to-date averages and applying the current spot rate for the rest of the year, which you can all do yourselves by the way, the picture looks just as bleak. For example, the Argentine peso has already devalued another 32% versus the euro, the Turkish lira 17%, the Russian ruble 15%, the Brazilian real, Australian dollar, and Canadian dollar all 11%, and even the Japanese yen a further 7%.
Of course, as you know, there are others as well. Taking all this into account, if things stay as they are, we will see at least the same kind of translation negative as we saw in 2013. That's a mid-single digit percentage point negative impact on growth. On top of that, we will see additional gross margin pressures given the sharp weakening of currencies such as the Argentine peso and the Russian ruble already so early in 2014. This is because these markets have open exposures against the US dollar related to our US dollar sourcing costs, which in these markets are either too expensive or too illiquid to hedge. Taking all of the foreign exchange-related impacts together, the impact on operating profit could therefore be in the region of EUR 150 million-EUR 250 million.
Obviously, while on aggregate, there is very little we can do in the short term to compensate for these massive currency issues. Rest assured, we will diligently pursue measures to combat the negatives over time. For example, where it makes commercial sense and the consumer environment can bear it, we will selectively increase prices. In certain markets where currency trends persist, we may choose to strategically prioritize our investments or change our business model. In other cases, we may simply choose to absorb the negatives for a period of time to protect and nurture our longer-term potential. Based on what we know today, we have best reflected the current situation in our guidance range for 2014, which Herbert will outline in a moment.
Ladies and gentlemen, let me wrap up by saying, while the currency situation is not pleasant, fundamentally, we are very encouraged by the underlying development of our brands. Our strong margin delivery, despite all of our challenges, underlines our focus on driving long-term, sustainable, and profitable growth for the group. We will continue to work hard over the next months to master the economic environment, and we can do so with confidence given the strong pipeline of products and brand stories we have at our disposal. To give you more details on that, let me now hand you back to Herbert.
Thank you very much, Robin. Let me now talk, ladies and gentlemen, about our operational outlook for the year, which Robin rightly says looks extremely promising. 2014 is a big sports year, there is no doubt about that. As you would expect from a leading sports company, we will live up to the occasion, lift our game, and strive to achieve new heights for the adidas Group. Be it product, be it campaigns, be it imagination, we have everything we need to be successful. We will do it with determination, speed, and with leadership. 2014 is a football year, and it will be an adidas football year. As the official sponsor, supplier, and licensee of the 2014 FIFA World Cup, we will utilize the biggest stage the world of sports can offer to drive new record sales in the category.
On the field of play, adidas will be represented by eight federations. These eight teams include the number one to four of the current FIFA world ranking, Spain, Germany, Argentina, and Colombia. Our latest footwear innovations will be worn by the likes of Lionel Messi, Xavi, Özil, Bale, Bastian Schweinsteiger, Daniele De Rossi, Karim Benzema, Oscar, or Fred, just to name a few. In the coming months, we will also bring out an array of additional innovative products, including the adidas miCoach Smart Ball and the adidas Samba Primeknit, the first-ever football shoe with a knitted upper. It will be at retail in mid-March. Every launch will be paired with stunning new communication activities. There is no doubt that we will see an exciting World Cup, and I can't wait until the Brazuca starts to roll on June 12th. Our ambition has not changed.
Our goal is to achieve new record sales in our football category, being the first brand to reach EUR 2 billion in sales with football performance products only. In running, we will continue to be focused on the expansion of the highly successful Boost franchise, targeting more than eight million pairs in the category in 2014, as well as the further global rollout of Springblade to new markets. Basketball will see the introduction of Boost with the launch of D Rose 10.0 in the second half of 2014. Furthermore, we will leverage our on-court visibility through top NBA players such as Derrick Rose, Jeremy Lin, Dwight Howard, Damian Lillard, John Wall, and Ricky Rubio. The Originals, the relaunch of Stan Smith, and the introduction of the ZX Flux are set to be the major hits at retail in 2014 with strong early sales for us.
In addition, we can look forward to new collaborations with Japanese streetwear designer Nigo, singers Kanye West and Rita Ora, as well as new collaborations with Brazil's The Farm Company and British retailer Topshop. After successfully piloting adidas NEO stores in Germany in 2012 and 2013, we will extend our test phase by opening stores in Poland and the Czech Republic in 2014, as we continue to drive towards our long-term target to grow NEO into a one billion EUR business. First NEO store in Poland opened its doors in Warsaw on February 20. We will also, following the successful test in Germany, to open some more stores here. For Reebok, our category approach will drive quality growth for the brand again in 2014, as we leverage our strategic collaborations with CrossFit, with Spartan Race, and with Les Mills.
All of these consumer access points give us exciting opportunities to reach our consumer right where he or she does their sport or fitness, be it in the gym, in the studio, or at new forms of community-based events such as the CrossFit Games or the 2014 Spartan Race series. We have the product firepower to match these great activities. Be it the shoe of CrossFitters, the CrossFit Nano 3.0; our new revolutionary industry first shoe for obstacle racing, the All Terrain series; new running innovations such as the ZQuick and the Jetfuse; or our fantastic new walking shoe, Skyscape, which we just launched with Australian top model Miranda Kerr. Our footwear offering is a big step forward compared to the year 2013.
Add to that a significant increase in depth to our performance apparel offering, led by the Reebok One series collections, as well as new tailored designs for studio. We have fantastic opportunities to build on the success in apparel we started to enjoy in 2013. In addition, we will also continue our successful partnership with pop icons and celebrities such as Alicia Keys, Shaq O'Neal, and Tyga to drive heat in our classics business, as well as bring back legendary iconic Reebok products such as the Instapump Fury, which celebrates its 20th anniversary this year. While the golf market overall is likely to remain difficult in 2014, TaylorMade-adidas Golf will sustain and extend its clear industry leadership. While we once again have great innovation to leverage, our focus in 2014 is on driving strong sell-throughs.
Therefore, for the first months of the year, we will focus on ensuring strong point of sale results for the volume shipped in Q4, and ship sell-in this year more towards the second quarter to be better aligned with the peak selling season. Lots of great products and initiatives. But to ensure we leverage them to their fullest, we will step up our game with the consumer, connecting and executing with excellence at every opportunity. In this respect, 2014 will see several new initiatives commence in the areas of digital and owned retail. Majority of our communication activities today happen in social media because this is a space where our core target consumer is engaging with brand content. To bring greater consistency, increase speed, and drive higher levels of brand activation online, adidas will be investing throughout the year in establishing digital newsrooms around the whole globe.
This will allow us to better coordinate the brand's online presence as well as leverage and magnify key brand initiatives all year round. Reebok is also creating a global digital center at its headquarters in Canton. This center and its team will engage the fifth-generation consumer in the social world, enabling Reebok to be part of the conversation in real time. In addition, Reebok is also opening the so-called Reebok Production Studios to allow the brand to become a constant creator of exciting and relevant content. Similarly, as announced at our Investor Day 2014, we'll see the beginning of renewal of the environment where our brands should shine the best, our own retail stores. Here we have the clear goal not only to drive higher levels of consumer service, but to elevate our store experience to fully represent the image and aspiration of the brand.
The adidas brand is introducing its first new retail concept in six years with the introduction of the so-called HomeCourt format for sport performance and the Neighborhood concept for Originals. The HomeCourt era began on the 1st of January at the remodeled adidas Brand Center in Beijing, our largest adidas store on the planet. HomeCourt features sport and passion in every single element of the store, be it architecture, communication, presentation, tools, and product. It's already hitting the spot with the consumer, with sales in the first weeks of the year since reopening up 40% compared to the prior year. Over the course of 2014, HomeCourt will be introduced in 25 stores globally.
The next curtains will be lifted in April, when adidas will open its first South American HomeCourt store in Rio de Janeiro, Brazil, followed by Europe, debuting in the U.K. at Bluewater in Kent and Harrods in London. Furthermore, Berlin will see the first store with a new retail concept for Originals, Neighborhood, in March 2014. We will also further experiment with single-category stores, such as outdoor, women, and kids, mainly in our key markets, China and Russia. In addition, we will also continue to run our pilot store projects for NEO to further test the acceptance with the consumer, and we will expand the Reebok Fit Hub concept. In total, we plan total net openings across all concepts of around 250 stores in 2014. There is a lot happening already and a lot to look forward to in 2014.
What does the successful performance of our brands in the various retail channels and markets around the world mean for our 2014 en route 2015 objectives? While we are on track operationally, the environment, unfortunately, has served up more challenges than we had anticipated, with adverse currency movements being the most significant one. Excluding currencies, I'm convinced that we will achieve most, if not all, operational targets we set ourselves within our Route 2015 strategic business plan. Nevertheless, the currency situation as it is right now represents a significant risk to achievement of our goals, as Robin has already outlined in detail. We have reflected this situation in our guidance range for net income attributable to shareholders of EUR 830 million to EUR 930 million.
We have to give you a wider range here because current market volatility makes it hard to predict what the final influence of currency will be on our result. Where we can influence our performance, we will pursue our goals with determination and focus. As Robin explained earlier, currency deterioration is a factor where our influence, at least in the short term, is limited. Nevertheless, we have a proven track record, and we know we can deliver big results when it counts. We will drive high single-digit currency-neutral sales growth in line with our strategic plan in 2014, and we definitely want to continue to drive this kind of growth also in the future. In EUR terms, we will grow our bottom line at a much faster rate than the top line.
As long as currencies don't worsen materially from today's standpoint, I'm confident that we will achieve a double-digit compound annual earnings growth rate over the Route 2015 period. Don't forget, since 2010, we have already generated a 14% compound annual earnings growth rate. This is an exceptional return given the difficult and uncertain global economic environment. Before I close, today brings with it an end to an era at the adidas Group. As you all know, Erich Stamminger has decided to dedicate more time to his private life, and his last day with us is exactly today. Erich and I have worked side by side for more than 20 years, and I can only praise his fine sense for building our brands.
On behalf of everyone at the adidas Group, let me thank Erich for his leadership expertise and the many contributions he has made to the success of the group and its brands in the last three decades. At the same time, I'm pleased to welcome Eric Liedtke to the Executive Board, who most of you saw in action at our Investor Day. Eric will be in charge of Global Brands, and under the mentorship of Erich Stamminger, Eric has already contributed to the extremely positive development of the adidas brand in the recent years. Ladies and gentlemen, let me summarize. We are a high-performance company, and we want to achieve more for ourselves and for you. Be assured, we are ready, willing, and able to do this, as is clearly visible in our strong fourth-quarter performance.
If there is one net message that I would like you to take from today's presentation, then it is the following. We are a growth company, and despite all challenges, the next two years will be operationally very successful for the adidas Group. We will make sure we do what is right for the long-term success of our group. We will make bold decisions and pursue our goals with determination and focus. While currencies will interfere with our financial results, they will not deter our willpower to follow the vision of the group, to be the leading sports company in the world. We are here for the love of sport. This is our passion. We will continue to work in a way that make us proud of adidas Group . I'm convinced that we have everything in place to reach new heights, break records, and drive long-term sustainable value.
With that, ladies and gentlemen, Robin and I are now happy to take all your questions.
Thank you. If you would like to ask a question, please press star one on your telephone keypad at this time. We'll take our first question from Cédric Lecasble of Raymond James. Please go ahead.
Yes. Good afternoon, gentlemen. I would have the main question on how do we reconcile your gross margin trend and your EBIT guidance trend. We understand that Forex currencies are real headwinds today, at the same time, your gross margin guidance is not that negative. It's more reflected on the EBIT guidance. Could you explain us maybe a little more why OpEx will play against the company more than expected in 2014? That's the first question. The second question, could you update us on your running sales, on your sales in running, and maybe give us in % of sales or in % of the adidas brand? That would be very useful. Thank you.
Cédric, thank you very much for those two questions. The currencies are obviously playing a role throughout the whole P&L. For this particular guidance that we're giving, however, what we're pointing out is that we lose a lot of leverage. If we lose so much on the top line, it's not just so much that the gross margin suffers. It is really the operating margin suffers because we don't get the full benefit of decreases in costs because so much of our headquarter costs and indeed some of our long-term contracts are obviously denominated in euros or dollars. That's part of the reason. In terms of the FX movements within the gross margin, that has a lot to do with the hedging. We hedge basically for all of our markets 12 months in advance.
For those markets where it has in the past anyway been not economic to hedge, or it hasn't been possible really to hedge, I'm calling out here particularly Argentina and Russia. There we're exposed when there has not been a hedging because they have to buy in the market, and the dollars, whatever it is, that has an impact on the margin. I think our net margin guidance, 49.5%-49.8% gives us a good indication that we're still expecting the trend in our margin really to be positive.
Yeah. Let me answer the second question on running. Please understand that we don't give out absolute numbers for our running category. Let me tell you that in the fourth quarter, our running business was up by 34%, and I'm definitely more than convinced that going forward for the next years, we will see double-digit growth on the running category. Why? First and foremost, I think with Boost, we have a unique technology, which first and foremost, nobody else has. This is so exceptionally better than what is out in the market that we get so many positive comments, either from the specialty running stores, from the running core group, that, as I said in my speech already, we will ramp up to 8 million pairs in running in 2014 and do even more going forward. Boost is just one part. It's Springblade.
It is our miCoach smartwatch, which gives us absolute credibility, I can tell you that we have never been better and never had higher market shares in the running category above EUR 100 than we have today. This will continue. This also follows our strategy that we start from the top, convince the real runners with the best product, then we will trickle it down.
Thank you.
We take the next question from Jürgen Kolb of Kepler Cheuvreux. Please go ahead.
Thanks very much. Three questions from my side. First, in your annual report, you talk about the North American market again, that you see substantial potential to increase your market share there. You're talking about improved distribution and higher share of specifically developed products for that market. Now, the growth in market share in 2013, as we know, didn't work out. What is changing now for 2014 and maybe also for 2015 that makes you confident that you can now finally use that potential and show developing market share there, first of all? Secondly, on TaylorMade, you indicated that you certainly lost some market share because of some cleaning of inventories. Do you think you can recover that lost margin entirely in 2014, or is that a process that will probably also last into 2015? Lastly, on the FX impact and the midterm strategies.
Robin, I hear you say you'll partly change the business model. What does that exactly mean? Selective price increases I hear you. In what countries do you specifically look at that? Maybe some elaboration on these individual strategies. Thanks.
Jürgen, let me start with the first question, North America. As you remember, in the first two years of our Route 2015 plan in 2011 and 2012, we grew double digits in North America, and we were pleased with the result. Unfortunately, this didn't continue in 2013, as you rightly pointed out. The main reasons have been that there is a certain shift in the fashion part of the business towards more performance-related lifestyle silhouettes, going a little bit away from the adidas Originals. The second point is that unfortunately for the whole year, Derrick Rose more or less didn't play at all. He didn't play the back season 2012-2013, he came back in October and then got injured again. Obviously, this is not helping our basketball business. There is no doubt the potential for us in North America is much bigger.
We make good inroads into the market. We increase our margin, we increase our profitability, we grow. It definitely could be more. I don't see a fast change in this fashion shift, as I said, but going forward, we will bring an array of new product pieces, Stan Smith launch, the [inaudible] , Slack, and so on and so forth, that I definitely see, starting in the second half of 2014 and going into 2015, definitely much more potential. Running will help us, no doubt. I'm sure football or soccer will help us in the U.S., hopefully all our guys are being back in October when the new basketball season will start. Second question to TMaG.
There is no doubt that the leading position which we have in TMaG, being the clear market leader in metal woods and in irons in the meantime, this will continue, no doubt, and we will keep our market share. Of course, we all, not just TaylorMade, all has hoped for a better 2013, but when it started that badly in the first half, especially in North America, the product has been already shipped to the market. I think we have been the first one who realized that there is too much product into the market, and we took, especially Q3, to clean up the market, and this obviously has hurt our margin to a certain extent as well. Going forward, as we have said already, we will try to be more closer to the market demand and the sell-through numbers with our shipping patterns.
Therefore, you can expect for the first quarter, a lower net sales in 2014 for TaylorMade, and then from the second through the fourth quarter, ramping it up again, because we want to make sure that the products are selling through in the first quarter, which we shipped in the last quarter of 2014. But all what we hear about our SLDR driver, now our JetSpeed, is definitely very successful.
In terms of the business models, obviously this is an ongoing thing. We look at each of our operating units and consider what we should be doing here. But it will involve questioning investment. What do we invest in? Do we invest in rollout of retail in certain markets? It will involve looking at the mix of product that we want to sell in these markets. Maybe there is opportunities for local sourcing or where do we actually buy the product from, the types of distribution that might include more e-com or whatever. Of course, we continue to look at what can we do to become even more efficient on our cost base. You have seen us cluster markets. You have seen the Europe ONE initiative that we announced last year. You have seen us also look at the JOM in America.
These are the sort of things that we will continue to do to look at improving our business model, to improve the profitability in the individual markets. In terms of price increases, this is a sensitive issue, obviously, because clearly, as I said, the consumer needs to be in a situation to be able to pay or to be able to afford some of this, and therefore, obviously, easier in markets where there is a higher inflation. But we do have opportunities, if you think of some of our own retail areas where we have more flexibility, perhaps, on the pricing. We have heard from Herbert's comments about the very attractive and somewhat higher margin, or at least higher priced product offerings that we now have in the market that we believe we can further perhaps see opportunities with price increases there.
This will be something taken on a case-by-case basis, depending on the individual country situation.
Understood. Just one quick follow-up. Have you already terminated maybe the opening of one or some stores, specifically in Russia, because of these ruble issues?
Yes. I think that's fair to say, Jürgen. We have reviewed our opening strategy in those sort of markets, yes.
Okay. Very good. Thanks very much, guys.
The next question comes from Matthias Eifert of MainFirst. Please go ahead.
Yes. Hi, Matthias Eifert from MainFirst. First question on the guidance again. Robin, you mentioned up to EUR 250 million negative EBIT impact from currency this year. Do we understand it correctly that you have factored that into the lower end of your guidance range for EPS, what you have given, and you come up with the current spot rate, or would that low end allow even a small deterioration from a currency standpoint from today's levels? That would be my first question. Secondly, can you go a bit more into detail into Russia? Were you fully back up in the fourth quarter in terms of your delivery from the new distribution center, or were there still some issues at the beginning of the quarter, i.e., can we assume that maybe in Q1 you are back to 100% and have a stronger growth rate?
On the same page, how was the retail performance there in terms of like-for-like, and can you extend also a bit more about the adidas 3% like-for-like in the fourth quarter, which was quite nice. Was it all driven by World Cup product already, or was there really underlying improvement in the fourth quarter? Thank you.
Okay, Matthias, I'll start with. Yes, you're absolutely right. I can confirm that the range that I gave you of what we estimate could be the impact in EUR 150-EUR 250 on the EBIT line is what we have taken into consideration in giving the net income guidance of the EUR 830-EUR 930. Yes, we do certainly hope that covers also some further deterioration that may be possible. At the moment, it's the best estimate we can give. Obviously, we don't know exactly where we'll land, but that's why we have such a large or wide range that we present.
In terms to Russia, Matthias, I happily can confirm that the warehouse is fully functional and is distributing flawlessly the products to our over 1,000 stores in Russia. How the first quarter will compare to the last quarter and what influence this is, I can't give you exactly, because even in the third quarter, when we had the difficulties, we were delivering close to 1 million pieces per week, but it was not to the extent which we expected and in the exact order manner. This is over. We are happy that it's fully working now, and I can tell you that 2014 started well in Russia. So far, we don't see any negative impact from the political situation.
Obviously, it would be better if it would be solved fast and peacefully, because the longer it goes, the more nervous consumer gets, and a nervous consumer is never good for your business. So far, I must say, knock on wood, we haven't seen any negative impact. The adidas performance in the fourth quarter with +3% is coming from different sources, be it football, be it running, which I said already. It would have been even higher if we wouldn't have had a setback in outdoor because of the warm climate in most of the parts of the world, holding us back a little bit. The main drivers have been running and football.
Thanks for that. Helpful. Thank you.
The next question comes from Julian Easthope of Barclays. Please go ahead.
Thank you very much. Good afternoon, everyone. I've got three questions as well, if I may. May I start just with the letter that you put into your report and accounts, which is always quite interesting. I think there were a couple of comments in there I'd like you to comment on. The first one being that you said at one point, to quote, "To be fair and frank, we have also made a few executional mistakes towards the Route 2015." I'd be interested to see if you could expand on those. Lastly, you do actually say at the end, "Even if it does take us a little longer to achieve every goal outlined in the plan." I just wondered whether this was a sort of one year or two year delay you would expect in achieving through Route 2015.
The second question I have really comes back to Japan. Last year, you would have hedged the rates from the previous year, but obviously Japan's seen such a huge currency hit. I just wondered what you'd done to offset that. The last question, coming back to currency as well. Back in 2009, you had a massive hit on the ruble. I think it cost you EUR 200 million in terms of EBIT, I think it said in one of your reports. Now, you obviously managed that incredibly well afterwards. I just wondered whether you could take the lessons learned from that and what you actually did to offset that, as to whether they could be applied to the currency movements we have today. Thank you.
Let me start with the first question on the executional mistake. There is no doubt that the Russian warehouse introduction was definitely something which was completely internally done. We have not been alert enough that warehouse shift from a very old manual warehouse to a much more automated warehouse in Russia with retail model, which we don't have in any other countries where we have 1,000 stores with shipping back at the end of the season, the product into the warehouse, then they have to be repackaged and sent out to the factory outlets again or to wherever we want to send them. This was definitely underestimated and not managed well, as we have indicated already in our call in November.
I think also on the TaylorMade side, the first six months, when we shipped all the product to the market, we should have been more careful already in this period that we don't overload the market because it's costing us in margin in the third quarter. These are the two main things when we talk about executional accidents or mistakes in that case.
For the Japan hedging, yes, we definitely have been continuing the hedging in Japan, the simple fact is that they have had to increase prices. It's one of the countries where basically, presumably that was economically desirable according to the government to do that sort of thing in any case. We have, over time, been increasing the pricing in Japan, and that's the only thing we can really do to compensate for that currency decline. Similar sort of thing with what happened in 2009 with Russia. We still suffer, obviously, because we do not hedge really, or we do a very limited hedging because of the cost of it for the Russian ruble. We are having to buy the ruble in the market at the time they require the product. That was only, however, one of the reasons why we had the significant hit in 2009.
The other reason was because so much of our cost base was at that stage also denominated in U.S. dollars. The biggest lesson we had coming out of that was to ensure that the vast majority of our costs, and here I'm talking also about rental agreements, that we could have them also denominated in Russian rubles rather than U.S. dollars. That will help us this period as well, but it does not, however, help us in terms of the cost of the product that we're buying in an unhedged form in U.S. dollars.
Concerning your question on the 2015 target, I think it's fair to differentiate between the operational achievement and the absolute financial numbers. In operational terms, I think that we will achieve most of our goals, if not all, at the end of 2015. Unfortunately, as Robin has already outlined, through the currency devaluation, it is much more difficult on the absolute number. Yeah, this might delay the achieving of our goals in EUR terms by one or two years. We do, in my opinion, the right things operationally as we will drive sales in 2014 by high single digits, and I'm definitely looking forward also in the outgoing years, very positive with all the product pipeline which we have.
Okay, thank you very much. Very helpful.
Our next question comes from Andreas Inderst of Exane. Please go ahead.
Good afternoon, everyone. I have two questions. The first one on your risk profile. What kind of measures can you take to further de-risk your business model overall? That's my first question. The second question is, in case the situation in Ukraine and Russia will escalate, what kind of measures can you take in the very short term? Maybe you can give us a few examples. My third question is also related to TaylorMade. I estimate your EBIT margin must have declined by over 300 basis points for TaylorMade. You answered an earlier question only on the top line, but what kind of margin recovery can we expect in 2014 for the TaylorMade brand? Thank you.
Andreas, I actually think although we always trying to improve our risk management, I think we have a pretty good risk model and that being a truly global organization, multinational with also a very broad portfolio of brands. That is probably the best way to mitigate and manage risk. At least we're spreading it around. We have a very good risk modeling and also risk reporting within the group. I think as other multinationals, we definitely try and keep on top of this. We hedge as much as we can. I mentioned there's a couple of areas where it has not been economic to do so. We have a very sound management of our balance sheet, we're not exposed to considerable risks in that area. I think at the moment, we're probably doing all the things that we can at least identify to manage risk.
I think that's what you're seeing also coming through in a pure operational form that operationally extremely good performance over the last few years.
Concerning Ukraine and Russia, we are monitoring the situation quite carefully, we are in daily contact with our management in Russia. We look at our individual store base, if the conflict would be bigger. Let me also show you that first and foremost, we have less than 10% of our Russian business in Ukraine. We are looking in the moment, especially on the island of Crimea. We have around 10 stores there. All the stores are open. They are all operating. We are in daily contact, we could definitely reroute products, inventory, et cetera, relatively fast. We are preparing for that. On the other hand, we obviously want to do business there because, as I said before, we have not seen any negative impact.
For the people, all what we hear is this daily routine, how they live their lives there. The last question was on TaylorMade and the margin improvement. I thought I had already given an indication in my first answer that because of the cleaning up in the third quarter 2013, we had a bigger margin hit, which I do not expect in 2014 because we will ship less volume into the first quarter and then build it up when the season all around the world have started, that we have less inventory, better sell-through, and obviously, there should be an increase in the margin.
Okay, good. Thank you.
Andreas Riemann of Commerzbank has the next question. Please go ahead.
Good afternoon. Andreas Riemann, Commerzbank. Three questions from my side. First one on retail. Like-for-like was at +3% for the group. Probably like-for-like was negative in Russia, I assume. Was like-for-like positive in all other regions? With regards to Reebok and retail, Reebok doing quite well. Reebok retail was only flat with regards to like-for-like in Q4. Why is Reebok only flat at the LFL level? Western Europe, question number 2, business recovered nicely in Q4. Maybe you can go through the regions. Any countries that stick out here or any countries you are not happy with within Western Europe? The third one, to Herbert, I'm trying again on 2015 target. You already said some goals might be achieved, yes?
My question is it fair to assume that the 11% up margin goal is something for 2017, also bearing in mind that your new contract is running until 2017? That would be my three questions.
I'll answer the first one. In terms of Q4, yep, you're right. We're up 3% like-for-like in retail. Reebok, less positive performance was largely due to the factory outlet performance brand. That's actually, at the end of the day, possibly a good sign because the quality of the product is getting better and better, more concept store or in-line sales. That's what I'm going to say for the first question. Herbert?
Did you answer Reebok retail?
Yes.
Very good. Let me come to Western Europe. Obviously, we had two standout countries in Western Europe, which were Germany and Spain. For sure, helped by the football World Cup, because as you know, we have the German national team and the Spanish national team on a contract, but also with our Brazuca balls and with the running category, as I have already mentioned before, which helped. Coming to the last question, the extension of my contract and the length definitely has nothing to do with the 11%. As I said before, don't forget, we didn't have only the one target for 2015, which was 1711. We had a lot of other targets. We wanted to move the Reebok margin over 40%. We wanted to move the dividend payout to the upper end of the 40% range.
A lot of this is happening or is close before achieving already. The dividend payout ratio is at 37.4%. The Reebok margin is at 39.7%, and we still have 18 months to go to achieve it. On the 11%, it definitely depends on the currency movement, and it's hard to predict what this will look like in the 18 months to go. As I said before, what we have to do as a management team is to drive our operational business, drive growth on the one hand, and be very cost-conscious on the other hand by improving processes and systems. As you know, we do a consolidation of warehouse. We bring Europe ONE together, consolidation of countries, et cetera. We look at our cost base.
Understood the answer with regard to question 3. Just on like-for-like, the question was whether all other regions except for Russia were positive with regard to like-for-like. Is that right?
Yes, that is correct.
Okay, cool. Thanks.
You're welcome.
The next question comes from Philip Frey of Warburg Research. Please go ahead.
Good afternoon, gentlemen. On Western Europe again, in the last two quarters, your key competitor reported low double-digit growth rates in the market and has now over a 20% backlog growth. Can you elaborate on what you see as the key reason for your underperformance and the level of confidence that you have to turn it? Well, I understand plus 200% sounds promising, can we also assume in H1 to see a substantial increase in the wholesale business in Western Europe? Secondly, can you elaborate also, you mentioned or we spoke a bit about the 2015 targets on the margin targets. Would you see these margin upsides mainly as a function of operating leverage? Are there some projects that you can share details like timeframe of execution and saving volumes or anything like that with us that will contribute to your margin improvement?
Lastly, on marketing, I see modest increase in the marketing working budget in percent of sales that you are expecting. Is it a function of the currency exposure in your marketing budget? Or is there also a corresponding increase in percentage of sales in the advertising portion of your marketing budget?
Okay, Philip, let me start with the first one on the European market, and as you called it, underperformance. This has mainly to do with the comparables which we have for 2012. Remember, we are the sponsor of the European Football Championship, in 2012. We had a big push for that. We have been the partner and sponsor of the London Organising Committee, therefore, we're outfitting the whole Team GB. With all the merchandising license rights, which brought us a big boost in sales. It was in total EUR 100 million for the Olympic merchandising program, 80%-90% of that was in 2012, which was definitely a key factor. Obviously, in football, we have a fierce competition going on. In all fairness, I think it has been the first two comparables and items which I mentioned.
In terms of the question, Philip, about our margin and our operating leverage. Let's put it firstly in the context that one of the key goals of our Route 2015 is to fundamentally improve the long-term sustainable profitability of the group. I think over the last few years, you've seen us make considerable progress in this. Indeed, even with all the pressures in 2013, we were able to increase the margin by 70 basis points. We're not quite where we wanted to be by the end of 2013, but we've done a considerable amount and we're very close to that. I think it's the same sort of thing about our efforts in 2014. We will continue to work on all the initiatives that we believe make us more efficient and take cost out of the organization to further improve, sustainably, the operating margin.
A lot of these initiatives we had already commenced, I mentioned to you those over the previous years. Some of the investment in the first few years will be coming to fruition in the last couple of years of the Route 2015. There's that to look forward to. There's obviously also other things that we continue to look at to become even better. We've announced recently the Europe ONE, we've announced JOM. We continue to look at programs where we believe we will get that out, it's not just the existing programs, but more, therefore, yes, operating leverage. The last question was on marketing and the slight increase in that for 2014. I think the thing here is just look at the World Cup. That's basically the reason for the slight increase of 2014 over 2013, the marketing budget.
Is it also on advertising? Is the ad really the media volume that you are buying also increasing?
It is also the communication activities for that event, yes.
Okay, thanks a lot.
You're welcome.
The next question comes from Michael Kuhn of Deutsche Bank. Please go ahead.
Good afternoon, gentlemen. Also three questions from my side. First of all, on Russia once more and on store openings. There seems to be an ongoing pressure due to lots of malls openings to open new stores. Once again, the guidance looks for 250 net openings. My question would be, what does that mean for your profitability in Russia and also for operating expenses in the retail channel as a whole? Secondly, on China, not that much comment around that market as of late. It seems to grow quite steadily at a high single-digit rate. Is that also a development that we should expect into 2014 and probably beyond 2014? Lastly, more from a housekeeping perspective, what's your current euro-dollar trade into this year and for the part that you've hedged into next year?
What could be an operating working capital ratio at the year-end in 2014? Thank you.
The first question to the opening of malls. Yeah, this is definitely correct. Therefore, we adjust our store base. This means we are closing stores, which have been in the right locations five years ago, but the location might not be right again. We definitely will go into the new malls if they are premium malls, and this in the right location with the better equipment and more consumer attractiveness. This is a permanent game which our management in Russia is doing on an ongoing course, and this definitely doesn't have any significant impact on our profitability going forward. With 1,000 stores, you can imagine that this is a breathing process where you always have to refurbish, close, or reopen in new areas where consumer trends are.
In China, yeah, we are happy with our development in 2013. We definitely can assume that this development will go on in 2014. We definitely do not intend to stop there.
In terms of dollar hedging, this year, 2014, we're just over the 133. Looking out into 2015, although we're not extensively hedged yet for 2015, the indication at the moment is about 137. In terms of operating working capital, well, it is our goal, obviously, to further improve it. I think around the 20%-20.9%, we're not bad. The increase this year, as I said, was mainly because of the increase in the inventories, part of that was because of Russia. We'd expect to get that back. We'd look to have a slight improvement at the end of this year in the operating working capital as a percentage of sale.
Okay, thanks a lot.
The next question comes from Antoine Belge of HSBC. Please go ahead.
Hello, it's Antoine Belge with HSBC. Three questions. First of all, on 2015, the margin evolution, even though the basis for 2014 will be lower, can we still expect 160 basis points improvement year-over-year? Second question regarding actually FX impact in your 2014 guidance. Are there also some negative FX impact at the financial income results as well? Finally, I think in the press release you also mentioned some input cost pressures. I would like to confirm that there was nothing new compared to three months ago when you gave the initial guidance. Before, have you seen any sort of worsening element in input costs? Thank you.
Okay, Antoine. Thank you very much for those. In terms of margin, as I said in one of the previous answers, it is our goal to continue to work on things that improve our operating margin. You're aiming around the 1%, I can't tell you at the moment exactly what that will be in 2015 yet. That's too early. We will have a lower base, but there's a lot of things that we're doing to fundamentally improve the operating margin. Our goals are still in place, and they're still what we're aiming for. In terms of the financial exchange rate impact and the financial result, yes, we had EUR 18 million in 2013 whereas last year we only had EUR 7 million, so that was a deterioration of EUR 11 million. In terms of the input costs, we haven't seen anything significant, no significant deterioration in the last three months.
Our guidance, I think is still the same as we gave last year, that there is input pressure that's largely coming from labor. That is obviously reflected in the guidance that we're giving you.
David?
Sorry, Antoine?
David. Just in terms of what kind of inflation year-over-year are you expecting for labor?
For labor where? Our costs in our manufacturing countries are going up low percentage points because of labor. The labor increases in some of these markets are significant. In our FOBs, it's a smaller part, obviously, because the majority of our costs are raw materials.
Thank you.
Ladies and gentlemen, that completes our call for today, and I'm sure we'll see you on the road over the next few weeks. We're in Paris and London next week and the States the two weeks after that. Our next communication will officially be on the 6th of May for the Q1 results.
That will conclude today's conference call. Thank you for your participation.