Good day. Welcome to the Adidas Group conference call for the first half year 2013 financial results. 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, sir.
Thanks, operator. Good afternoon, ladies and gentlemen. Our presenters today are Herbert Hainer, Adidas Group CEO, and Robin Stalker, Group CFO. To allow for ease of comparison, all sales and revenue-related growth rates will be discussed on a currency-neutral basis unless otherwise specified. With that, I'll hand the call over to Herbert.
Thanks, J.P. Good afternoon or good morning, ladies and gentlemen, wherever you are. I'm very pleased to report that we were able to deliver record earnings per share for the group of EUR 2.29 for the first six months, which is an increase of 6% compared to a year ago. The financial highlight of the first half has to be our strong gross margin development, which increased 2.1 percentage points to 50.1%. This result is a clear measure of success of our Route 2015 strategies to drive quality growth across all of our business activities. It shows that we are focusing on the right categories and that our innovations are resonating with the consumer, all of which is supporting considerable improvements in our product and price mix. It also shows that we are improving execution across all of our channels of distribution.
The strengthening of our operational KPIs in own retail and the strong growth of e-commerce are particular standouts in this respect. Finally, this strong gross margin performance shows that our industry-leading inventory management is again proving to be a winner. For the first half in the second quarter, sales were flat compared to the prior year. In reported terms, sales declined 4% in the second quarter and 3% year-to-date. Considering the material challenges we faced from currency headwinds, the difficult comparisons related to last year's major sporting events, and the continued soft trading environment in Europe, this is a solid result, including many highlights which underpin the strength and potential of our business globally. None more so than the emerging markets, which continue to be a fantastic source of opportunity for our group.
In general, while economic growth rates have also slowed in many of these economies, conditions for our group have remained very strong as these nations become more and more consumer-driven. In fact, we even saw some modest acceleration in several of these markets in the second quarter, with Latin America at the top of the list. Supported by the 2013 FIFA Confederations Cup, sales growth in the region accelerated to 21% in the second quarter. We have been investing constantly in our brands in the region over the past few years, raising our game at the point of sale in anticipation of a strong reception to two of the world's biggest sport events: 2014 FIFA World Cup and the 2016 Olympic Games. The results are paying off as our brands connect and resonate perfectly with this consumer base, known for its high energy and passion for sports.
Another bright spot for our group continues to be Greater China, where sales were up 6% in the quarter. Comparable store sales also remain very strong, up 11% in the second quarter and 9% in the first half. The Chinese consumer has clearly voted that adidas is their preferred sports and sports lifestyle brand, and this is leading to significant market share gains as we once again close in on market leadership in the region. In a recent survey by Millward Brown of more than 60,000 consumers in China, adidas ranked the highest of all clothing and footwear brands in the top 20 most powerful international brands. Everything in the emerging markets hasn't been perfect in the first half. In European emerging markets, we have had some issues to overcome, due mainly to softer conditions in Russia and the CIS.
Given the rapid pace of overall retail space expansion, with many new malls coming on stream every year, we have seen traffic dynamics deteriorate in some locations. On top of a cooler consumer environment, this has negatively impacted our comp store sales growth performance in the first six months. On a positive note, however, due to improvements in our operational performance, we have seen a strong margin development in this already highly profitable market. With trends beginning to stabilize in recent weeks and given the strong product pipeline for the second half, I expect comp store sales growth to move back towards positive territory by the end of this year. In addition, our entire store network will also begin to benefit from considerable IT and infrastructure investments we have been carrying out in Russia in order to speed up and improve our operations.
We will see this coming through more powerful in 2014. The recently opened 49,000 square meter distribution center in Chekhov, close to Moscow, which will ultimately consolidate six warehouses into one location, is a great example of the potential upside we still have operationally in this market. Staying on the subject of trickier markets, Western Europe has also proven more challenging this year, with sales for the first half down 9%. While there were some bright spots such as France, Poland, and the Nordics, sales were down in most other major markets. The U.K., Spain, and Italy were particularly weak, down strong double digits. Ladies and gentlemen, let's not forget that this region benefited the most from last year's major sporting events.
While it is hard to isolate all of the football-related event sales, products related to the London 2012 Olympic Games definitely had a considerable impact, accounting for approximately three percentage points of the decline. In terms of the underlying trends, I'm confident we will turn the corner in Western Europe in the second half. Already in the second quarter, we have seen some good signs of an inflection point. For example, our own retail comparable store sales increased 2% after being down 4% in the first quarter. Discussion with our wholesale partners have also moved into more constructive territory as excitement builds ahead of the 2014 FIFA World Cup and the strong reception to our latest product in running and Originals as well as at Reebok. Moving over to North America. Also, I would have liked to have seen better growth rates.
I'm satisfied that our brands continue to move in the right direction. Group sales in North America were up 1% in the first half and down 2% in the second quarter. The latter was mainly due to sales declines at TaylorMade-adidas Golf owing to a more challenging golf market, and I will come to that in more detail in a few minutes. For adidas, sales were flat in Q2 and up 3% in the first half, as strong growth in running and training was offset by declines in basketball. The latter was mainly due to lapping strong growth in footwear from the prior year. At Reebok, sales in North America in the quarter, excluding the NFL impact, were up 1%.
We move into the second half of the year, I fully expect trends to improve for both brands, with a strong lineup of new innovations hitting the market in time for the back-to-school and the holiday seasons. Finally, to complete a look at the global picture in other Asian markets, group revenues improved considerably from the first quarter decline and were up a healthy 7% in the second quarter. This was a result of strong growth in South Korea, India, and Australia. Earlier this year, I called out the significance of 2013 as a year where we will define what groundbreaking innovation really means. Looking at our results by brands, there is clear evidence that we are fully on track, which in turn has allowed us to deliver such strong improvements in product and pricing mix.
At adidas, running personifies exactly this with the category taking on a whole new dynamic spearheaded by our mission to create products that gives the highest level of energy return to the runner. With Boost, which we spoke about extensively last quarter, we know we have something special. Following its highly successful launch and the continued strong performances in our other key running franchises such as Supernova, Response, and ClimaCool, sales in the category are up 14% year to date and 16% in the second quarter. Outdoor is another great example where several years of award-winning innovation continues to drive our position up the league table of the leading outdoor brands in the world. In the second quarter, sales in the category were up 25%.
Even in football, despite tough prior year comparisons, we were able to build on last year's success with strong growth of 6% in football footwear as Nitrocharge has already become the newest 1 million unit adidas Franchise. Finally, for adidas, innovation transcends more than just technical product. It is also the basis for continuously challenging ourselves to create the unexpected for today's highly demanding lifestyle consumer. Here with adidas Originals, we have the longest and most consistent track record of any brand in our industry. Once again, in Q2, sales did not disappoint, increasing 8% driven by strong growth in the emerging markets and high demand for our action sport styles where sales almost doubled. In addition, adidas Sport Performance sales increased 9% driven by strong growth of 12% at the adidas NEO label.
With NEO, we are really encouraged with the strong fan base we're gathering rapidly for the label across the globe. Now moving over to Reebok. We enjoyed a solid return to growth in the second quarter with sales increasing 11%. This means brand sales are now down only 4% in the first half. Excluding the NFL impact, sales are up 1% in the first six months. Even more important, the brand's gross margin again improved considerably, expanding 4.1 percentage points to 39.4% in the first half, which is also the highest first half gross margin that we have achieved since we acquired Reebok in 2006. Although we still have some considerable work to do to turn all markets around, I'm confident Reebok will show currency neutral sales growth for the full year.
Key to this success is the strong product foundation and the close connection we are creating with the fitness consumer as we gain credibility by building on our existing partnerships, such as with CrossFit and through new associations with exciting grassroots events like the Spartan Race or The Color Run. Also, through the significant improvements in the brand and product architecture we have implemented over the past 18 months, we are delivering a more consistent brand look and feel to our key target consumers. This is also visible as growth becomes much more diversified with fitness, training, and classics growing 13% and 21% respectively in the quarter, and solid growth in both footwear and apparel. Finally, let's take a look at TaylorMade-adidas Golf, which endured a slightly more challenging second quarter.
Here, there are a few things to note. Firstly, the golf market has been considerably weaker this year due to a late start to the season in many countries. As a result, rounds played around the world have declined on average at a double-digit rate. With golfers starting to play later, this has had a knock-on impact on trends at retail. Right now, this is particularly visible in metalwoods, where retail sales are down at a high single-digit rate in the first half. As a dominant market leader in this category, with a market share of close to 40%, we are unfortunately not immune from this. Secondly, considering our growth of 20% last year and 16% the year before, we were expecting that this year would be more about consolidating our position before the next push forward.
That push forward is not too far away, and I look forward to coming back to this and some of the other exciting plans we have for the rest of 2013 in a few minutes. Before that, let me hand over to Robin to complete our discussion on the first half.
Great. Thanks very much, Herbert, and good afternoon, ladies and gentlemen. As you've just heard, our group delivered a solid performance in the first half of 2013. For my comments today, I want to focus on three topics. Firstly, an update of our key financial KPIs for the group. Secondly, a review of the performance in our various channels. Finally, I'll wrap up with some further details to help you better understand the various currency impacts affecting our results this year. Let's start with what is clearly the key financial highlight of the first half, our gross margin development. As you've already heard, our group gross margin increased 2.1 percentage points to 50.1% in the first six months, or by 1.8 percentage points in the second quarter, also to 50.1%.
Similar to the first quarter, this development was primarily driven by product and pricing mix as well as regional and channel mix, which more than offset the negative effects from a less favorable hedging rate. The negative effect from hedging amounted to 1.3 percentage points in the second quarter and 70 basis points in the first half. For the second half of the year, I expect the negative impact to be even more pronounced than in the first six months. Moving over to the operating expenses, again, we showed good discipline in managing our costs, considering further investments into the group's own retail activities and infrastructure, where, in particular, we considerably expanded our store network globally. This resulted in other operating expenses increasing 1% for the quarter and year to date.
Thereof, sales and marketing working budget expenditure decreased 5% and 1% for the second quarter and the first half, respectively. As a percentage of sales, other operating expenses were up 1.9 percentage points and 1.5 percentage points, respectively. Also as a percentage of sales and marketing working budget decreased 20 basis points to 13.2% for the second quarter and were up 20 basis points to 12.4% for the first half. As a result of the modest growth of expenses and the strong gross margin improvement, group operating profit increased 4% in the first six months to a new record level of EUR 693 million. This translates into an operating margin of 9.7%, up 70 basis points compared to a year ago. In the second quarter, operating margin expanded 10 basis points to 7.4%.
Turning now to the non-operating items of the P&L, net financial expenses decreased 26% in the first half compared to a year ago. This mainly reflects a 33% decrease in interest expense due obviously to lower gross borrowings. The first half tax rate increased a slight 10 basis points to 27.5%, but well in line with our guidance for the year over tax rate increased to a level between 28.0% and 28.5%. As a result, net income attributable to shareholders for the first six months increased 6% to EUR 480 million, which translates into a basic and diluted EPS of EUR 2.29. Second quarter net income attributable to shareholders as well as basic and diluted earnings per share increased 4% to EUR 172 million and EUR 0.82 respectively. Looking at the balance sheet and cash flow development, we continue to manage our capital diligently.
At quarter end, inventories remained on par with the prior year levels on a currency neutral basis. As a result, the group's operating working capital as a percentage of sales also remained at a very low level of 20.3%. The combination of our tight control of working capital with our strong operational performance led to another period with significant cash flow generation. This is reflected in the 70% year-over-year decline in net debt from EUR 380 million to a level of only EUR 94 million. Taking all of our results together, we have seen a strong increase in our equity ratio of 2 percentage points to 47.5%. Let's look at the segments. The currency neutral wholesale revenues decreased 1% in the second quarter and 2% for the first half as sales growth at adidas Sport Style was more than offset by revenue declines at Reebok and adidas Sport Performance.
Gross margin for the segment was up 2.8 percentage points for the quarter and 2.7 percentage points for the first half, driven by pricing as well as a more favorable product and regional mix. In the retail segment, revenues in the second quarter grew 5%. For the first half, sales increased 6% as a result of growth at both adidas and Reebok. Comparable store sales were down 2% for the quarter and 1% for the first half. As in Q1, the decline in Comparable store sales is due to the difficult trading environment in Russia CIS at the beginning of the year, given the overall weakness in traffic and consumer sentiment. Beyond Russia CIS, retail trading was robust during the second quarter, with all other regions showing Comparable store sales increases in Q2.
By brand, adidas Comparable store sales were down 1% for both the quarter and the first six months, while Reebok Comparable store sales decreased 3% and 1% for the quarter and the first half, respectively. Our e-commerce business continues to do extremely well, with sales increases accelerating to 79% in the second quarter. For the first half, our e-commerce business was up 74%, breaking the EUR 100 million level for the first time in a six-month period. Retail gross margin increased 2.5 percentage points to 65.4% for the second quarter and by 1 percentage point to 63.2% in the first six months. Positive effect from a more favorable pricing and product mix, as well as less clearance activities, were the main contributors to the margin increase.
Our commitment towards the Group's retail expansion is underpinned looking at the number of store openings during Q2, as we have added 84 stores to our retail portfolio during the quarter. This also explains the increase in segmental operating expenses as a percentage of sales of 3 percentage points for the quarter and 2.5 percentage points for the first half. At the end of the second quarter, we operated 2,542 stores. Of the total number of stores, 1,437 were adidas, 356 were Reebok branded, and in addition, the adidas Group retail segment operated 749 factory outlets. During the first six months, we opened 248 new stores and closed 152 stores, while 55 stores were remodeled. Let me now spend a minute on other businesses.
Sales decreased here 4% in the second quarter as a result of the difficult trading conditions in the global golf market, which resulted in TaylorMade-adidas Golf sales decreasing in many regions such as Western Europe, other Asian markets, and North America. All other segments grew during the second quarter. For the first six months, revenues of other businesses were up 2%, driven by sales increases at TaylorMade-adidas Golf from the first quarter and from Rockport. The segment of quarterly gross margin decreased 1.9 percentage points to 43.4%. For the first six months, gross margin was down 0.5 percentage points to 44.0%, mainly due to lower product margins at TaylorMade-adidas Golf, which more than offset the positive effect from higher product margins at Reebok and at Reebok-CCM Hockey.
Wrapping it up for today, let me comment now on the significant challenge we are facing this year from currency movements and in particular, currency translation. As I'm sure you're well aware, currencies such as the Japanese yen, the Australian dollar, Brazilian real, Argentinian peso, British pound, and indeed the Russian ruble, have all weakened considerably versus the euro in a relatively short period of time. As you can see, in the second quarter alone, this cost us four percentage points from our top-line growth. It also implies a considerable double-digit million EUR negative impact on our operating profit in the first half.
Based on current spot rates, the impact from translation in the second half of the year is likely to show an even further deterioration, and I currently expect that we may see between a 5%-6% percentage point impact on our reported top-line results relative to our achieved currency neutral sales growth. While this is a considerable headwind to our reported figures in euros, we should not let this distract from the strong underlying operational improvements that we have seen in our business this year. With that in mind, now let me hand you back to Herbert, who will go into more detail on how we are shaping up to accelerate growth as we move through the balance of the year.
Thanks, Robin. Given our solid start to the year, we can therefore reconfirm the maturity of our full-year targets with only some minor tweaks to reflect recent developments. Given the lackluster trading environment in Europe as well as the unfavorable development of several currencies versus the EUR, as Robin just has mentioned, it is fair to say that our absolute goals for the year are more challenging to reach than when initially announced. As a result, we have widened the range for our currency neutral full-year sales forecast, which we now expect to grow at a low- to mid-single-digit rate. In terms of phasing, we expect a stronger Q4 than Q3.
Given the health of our inventories in the market, the continued desirability of our brands, and the strong first-half improvement, we now expect to achieve a gross margin of 48.5%-49%, compared to our initial target range of 48%-48.5%. Due to the faster pace of new store openings, we also expect operating expenses as a percentage of sales to increase compared to our previous guidance of a modest decline. Nevertheless, due to the strong gross margin development, our operating margin target of approaching 9% for the full year remains unchanged.
Taking it all together, we continue to forecast net income attributable to shareholders to increase at a rate between 12% and 16% to a new record level of between EUR 890 million and EUR 920 million. This means that while you should be wary of currency development, as Robin clearly explained, from a strategic and operational perspective, we can look forward to the beginning of a period of increasing momentum for the group. Our powerful brand engine, the clear market share wins in the emerging markets, and the excitement building throughout the world ahead of the 2014 FIFA World Cup, are all fueling a slow but steady improvement in market sentiment. We will be doing everything possible to spur consumer appetite, leading from the front with an accelerated pace of product launches and marketing campaigns. Adidas running will again be front and center.
By now, I'm sure most of you have already heard about our latest major innovation, Springblade. Featuring 16 forward-angled blades made out of a high-tech polymer, it is the first running shoe with individually tuned blades engineered to help propel runners forward. Springblade is truly another game-changer in so many respects. Not only does it live up to the promise of explosive energy return, but its futuristic and iconic look is ideally suited for our long-term target to win with the high school kid. Introduced at Retail in Americas last Thursday, the social buzz ahead of the launch was electric, and so are the early sell-throughs. Springblade has broken all of our e-commerce records and is already among the top-selling shoes with our retail partners. In fact, in the last week, traffic to our adidas.com site in North America has almost doubled.
Therefore, when I look at our capacity plans for Boost and Springblade combined for the next 18 months, I am convinced that this year of running is just the beginning of a long-term upward trend for us in the world's most important footwear category. In other categories, there is also plenty to excite. In basketball, while we had a rather quiet second quarter, momentum is set to return to the category. Throughout the summer, we have been busy activating the brand around the world with our growing roster of top NBA stars. On the Quick vs. Fast tour, featuring John Wall, Ricky Rubio, Damian Lillard, Jrue Holiday, and Mike Conley, we were busy promoting the Crazylight and the adizero Crazy Light 3 basketball shoes. Derrick Rose traveled the world, exciting fans with some news that he is all in for day one.
In football, the new club season is kicking off, where we welcome many new teams and heroes to the brands, such as Flamengo in Brazil and German star Mesut Özil. If you have not seen it yet, check out the new Speed of Light campaign capturing the football genius of Lionel Messi like you have never seen before. The film captures and analyzes Leo's movement to reveal the secret of his movement on the pitch, as well as the light in motion design of the new adizero F50 Messi boot, which he will wear for the first part of the season. Over the coming months, you will be hearing and seeing a lot more on football as we accelerate our activations ahead of the 2014 FIFA World Cup.
While we will be telling you more about it in the third quarter, be assured that we have a lot of fantastic innovations in store for 2014. As one teaser, we recently announced that we will be introducing the adidas miCoach Smart Ball. The Smart Ball has been designed to improve technique, power, spin, and accuracy through an automated digital coaching system. After three years of development, we created a ball with inbuilt sensors that track its movement and feeds the information back to the player through an app on the phone. At Reebok, the pace of new product introductions has also picked up heading into back to school, including the Reebok One Series performance footwear and apparel collections, the ATV19+ versatile running shoe and strong updates in classics, particularly the Franchise 5 and the Retro basketball.
In particular, our Shaq product has been flying off the shelves, and the campaign we created with Shaq and Tyga is the most viewed ever on Foot Locker's YouTube channel, with 6.5 million hits to date. We will continue to drive momentum in core classics as we celebrate 30 years of the Reebok Classic Leather, which underpins the great heritage and authenticity of Reebok footwear. In addition, we will also continue ramping up our connections with the leaders and trendsetters in the fitness industry. Part of this strategy is to build long-lasting relationships with the best fitness instructors in the world. The key enabler of this is the Reebok One platform, which is already proving to be a huge draw, already accumulating over 5,200 members. Following up in the same context, today, I am happy to announce another exciting collaboration for Reebok in this respect.
Reebok has entered into a new partnership with the largest provider of group exercise programming in the world, Les Mills. This partnership will be an important component of Reebok's studio category moving forward, which we kicked off in full this year with the launch of our yoga intense franchises. Les Mills has a history that dates back to 1968 and today has more than 100,000 instructors worldwide. Their products include programs such as BODYPUMP, BODYCOMBAT, and GRIT, some of the most popular group workouts in the world. This is clearly another great example of how partnering with the very best in the fitness industry can ensure we are front and center where our target consumers are most active.
In terms of showcasing the new Reebok positioning and product range to the consumer, for those of you in Europe, we will open our first FitHub store in London on September 12th, which is a continuation of the global rollout of the FitHub concept, the anchor for all of our future controlled space initiatives for the brand. Finally, to come to full circle on the brands, I told you in the first part of my speech that the next push in golf is coming, well, it is already here. At the end of July, we introduced our newest and longest driver ever, SLDR. Featuring more effective and easier-to-use movable weight technology, it is already the number one driver on tour. In addition, we also will continue to drive market share gains in footwear, thanks to the extension of the adizero and Response platforms.
I expect an acceleration in sales growth from Adams Golf as the first fruits of our combined efforts come to life. Ladies and gentlemen, to wrap up for today, the message is quite clear. From an operational and strategic perspective, our group is in perfect shape. At Adidas, we are growing strongly in our key strategic categories, and our pipeline is packed. We have successfully brought Reebok back to growth, and the path is set and clearly defined to drive sustainable long-term success. We are the undisputed leader in golf with an unparalleled track record, and we have everything it takes to drive it further. We have a strong balance sheet, giving us the firepower to invest organically in our operations and the long-term global mega trends of health, fitness, and sports.
Although there are still a few speed bumps out there, our game plan is providing winning results. We are focused on the consumer, and we are focused on the quality of our business. In December, I look forward to welcoming you here to Herzogenaurach, where we will have our final update session on Route 2015. With that, thank you very much, Robin and I will be happy to answer all your questions.
If you wish to ask a question at this time, please press star one on your telephone keypad. That is star one to ask questions. We take our first question from Michael Kuhn of Deutsche Bank. Please go ahead.
Good afternoon, gentlemen. A few questions from my side. Firstly, on pricing environment. You mentioned price increases in the first half. Would be interested in a quantification of that statement and also looking into the second half and currency headwinds, price increases could be one part of the reaction. How do you see the environment at the moment and the potential for further price increases? Secondly, on your so-called key attack markets, Russia, China, U.S., all three with a relatively modest growth in the first half of the year. Maybe some impressions, what dynamics you expect into the second half of the year and what drivers you expect behind an expected recovery. Especially, I would be interested in the performance of adidas in the U.S. at the moment because there seemed to be some weakness lately.
Finally, you mentioned the combined production capacity of Springblade and Boost into next year as one of the drivers for the running category. It would be interesting to get an insight on how many units you plan for those categories. Thank you.
Michael, let me start with the first question on price increases. I guess your question was, in the difficult environment, are we able to bring price increases to the market, and how will this look like? I think as you have seen with Boost, with Springblade, with ATV, just to name a few of the products, not to forget Nitrocharge, whenever we bring innovative products to the market, we are able to charge higher prices because the innovation is so strong that the consumers are demanding this product and ready to pay the price. Of course, we also have areas where we have to be more conscious on pricing and be more aggressive. But we definitely will play this mix according to the consumer needs and demands, and we definitely will keep an eye on our strong gross margin going forward.
When you said in our key tech markets, U.S., Russia, and you mentioned also China, the results are not so good. Let me first and foremost make it clear that in China, I'm very happy with the result, +6%, and compared to all the others that you might have seen, this is excellent. In the U.S. and in Russia, we have two different phenomenons. In Russia, definitely there is an economic slowdown, there is no doubt. There are more malls built, this means more square meters, and therefore, traffic in some of the malls is down. As we are by far the clear market leader and have more or less stores in every of the key malls, this is impacting us.
We have ramped up our product offerings and bringing also more innovations to the Russian market, be it Boost, Springblade at the end of the month of August. We saw already in the second quarter that although the weather turned better, that we have already positive comp growth, I definitely do see improved trends in the second half. In the U.S., I think the second quarter was marked by the slower sales of the basketball market. Obviously, that Derrick Rose was not able to play in the background of the basketball season, this didn't help. We also had a lot of new products in the first half of 2012, which made the comparables a little bit tougher. Nevertheless, for the U.S., the same counts as I said for Russia. We're bringing a lot of new products into the market.
The second wave of Boost has already started end of June. Introduced Springblade in the last week, the results I'm sure you have seen already, they are outstanding, not only on e-com, also with our retail partners where we launched. We will further continue with Originals, then with basketball, and then with football during the second half of the year. China, I think, will continue to grow. Even there, it also becomes a little bit more challenging. But the research within the 60,000 consumers, which I mentioned within my speech, clearly showcases that since 2009, when the tough crisis was in the market, we are doing quarter by quarter the right steps to win the hearts and minds of the consumer in China back.
Therefore, we are going forward with much more success than most of all the other brands which are competing in the Chinese market. Last but not least, on volumes. For Boost, we have sold already around 500,000 pairs in the first half and planning another 1 million pair for the second half. For Springblade, we will give you the numbers later in the year for 2014 because we have a staggered approach. We have started in America, we have started in Brazil, we are going at the end of the month to Russia, then continue in 2014 in the rest of the world.
Just one quick follow-up on pricing. Any comment possible on the effects of price increases in the first half of the year?
No, okay.
Michael, I think as we've seen over the last few quarters, we've obviously had some benefit from price increases, but it's also the product mix, it's also the regional mix or some of the country mix that is helping us maintain a good margin despite negative hedging developments.
Okay, thanks.
Our next question comes from Matthias Eifert of MainFirst. Please go ahead.
Yes. Hi, Matthias Eifert from MainFirst. The first question is about Russia. Can you update us there about your store openings there at the moment? Where do you stand in terms of store count? If I take your comments into account in terms of payoff from IT investments, consolidation of the warehouse infrastructure there, it sounds like you might be even able to increase the profitability there going forward, I think you have already quite a high level of profitability there, or would it be already a good result if you are able to maintain your high level of profitability there? Would be interesting to hear your thoughts about Russia. Second, about Reebok. I was quite surprised about the strong growth rate you have shown us already in the second quarter.
From recent discussions and also discussions with Matula, I thought the progression would be a bit slower and the development more gradual. The 11% growth without the U.S. is already very remarkable. What have been the super high growth rates to get to that number, was there a bit of selling ahead of your launches, what should we expect going forward in terms of growth rates there? Also related to Reebok, I would be interested to hear why the wholesale gross margin at Reebok is just at a level of 26.6% in the second quarter compared to the adidas brand at nearly 43%. Is that the high share of sales coming from the U.S. or some effects like Latin America, where you still work with a distributor?
Can you explain why there's still such a big difference there in terms of gross margin compared to the adidas brand? That would be my questions for you.
Thanks, Matthias.
Hi, Matthias. Let me start with Russia first. Russia is a very profitable market for us, as you know, and we are by far market leader. We definitely think that there is still a lot of opportunities out by our internal work and optimizing what we are doing. Therefore, we have introduced a complete new IT system in Russia over the last 12 months, which will help us to be better connected to all our stores to get faster the data, what is selling. Therefore, combined with that, we have built a new warehouse that we can faster replenish. We want to have a more or less never out of stock in our stores because we found out that this is something which can be optimized, if we have the products permanently available in our stores, which was not always the case.
We are permanently working further and investing in becoming more sophisticated and even more professional in Russia. This will definitely help us to drive our growth and the profitability in Russia. I think to store openings, Robin, do you have the exact number?
We've had 96 stores open for the whole group net over the last six months. The majority of that will be in Russia. We have a total there at the end of the six months of about 990 stores, Matthias.
Including Reebok.
Thank you.
Including.
That's including Reebok, yeah. This brings me to Reebok, to your second question and the second quarter. It's nice to see 11%, Matthias. We should not overestimate it. The second quarter is a smaller one. We are happy with the increase, there is no doubt. What I'm even more happy is that we definitely see that the Reebok brand is coming back into the mind of the retailer and the consumer by the individual steps we are taking. I elaborated in my speech to a lot of them, be it the ATV product, be it the Shaqnosis , be it now the Reebok One, which we introduced.
Also when you see that we are able today that a company like Les Mills is connecting to us, this clearly shows you that they have confidence in what we are doing and what the Reebok brand can do for them, because you can be sure they have clearly analyzed before they went into a partnership with us. Now we have CrossFit, we have Les Mills, we have Spartan Race, we have The Color Run. These are the most spectacular and fastest-growing developments in terms of fitness in the U.S. and starting to travel around the world. We are partnered with it. Therefore I'm really happy about the way going forward. I know that we still have a lot of work to do to bring this to life in all the markets around the world.
The signs which we see, which we get from the market, also from the retailers for our sell-in for 2014, is definitely encouraging.
No, we're looking at the gross margin, Matthias, I mean, for the total, including both channels, we're at 39.7%, which is excellent considering where they are and what Herbert just said. There are differences between wholesale and retail, don't forget, in the wholesale, we've got the joint venture in Brazil, I think that would probably account for most of the difference.
Okay, great. Thank you.
Welcome.
The next question comes from Andreas Enders of Exane BNP Paribas. Please go ahead.
Good afternoon, everyone. I have three questions. The first one on your visibility. How good is your top-line visibility for H2? Maybe you can share with us your order backlog for the second half of the year. What's your expectations for the like-for-like development in own retail? That's my first question. The second question on own retail. You seem to be quite confident in your own retail business, given your store rollout plans, which doubled the number you initially planned. What has changed in your perception? Why do you double the number of retail stores in the current market environment? My third question is on the lifestyle offering. Very pleasing development in the second quarter compared to some of your competitors. What is your plan to keep the momentum going in the second half of the year and in 2014?
Maybe you can share with us a few initiatives. Thank you.
Andreas, first question, visibility for the second half year. Obviously, we have good visibility because we have all our pre-orders for the second half in, but we don't give any backlog numbers since I think several years. Be aware what we told in terms of sales development, you can be sure that we have brought the best thoughts into it. Second question on retail business. Our perception has not changed. We are definitely encouraged since several years by our own retail business. Still, we are learning day to day how to operate it better. When you look around the world, we have now close to 2,500 stores around the world, and we are quite successful. Especially with, I said before, what we do in Russia, that we get more visibility. We have started with our franchise partners in China.
If you might remember what I told you in 2010, that we get better visibility, that we can faster react and harmonize our systems to have a better offering and less inventory. This is what is encouraging. Obviously, when our opportunity is there for good locations, then we take it. We get more and more offerings from the big mall providers because they see what the adidas brand can do, and therefore they're offering us their locations. This goes along with the third question, the lifestyle offerings. I think we were able in the last seven, eight years to make especially the adidas brand very cool by focusing on the one hand on the performance side and being the most innovative brand, but also capturing the lifestyle consumer through a lot of different activities.
Be it our collaborations with big designers like Stella McCartney or Yohji Yamamoto, or be it our original own store rollout plan where we go to the coolest and hottest places in the big cities. This, obviously, we will continue to do. We have seen it in our numbers, plus 8% in the first half. I think we understand this business in the meantime very well, and this is what we will continue to do. You see it also with our NEO offering now where we go to a new consumer target group, and we are undefeated by, of course, great product, but also by ambassadors like Selena Gomez or Justin Bieber. This resonates once again with the consumer.
Okay. Thank you.
The next question comes from Andreas Riemann of Commerzbank. Please go ahead.
Good afternoon. Andreas Riemann, Commerzbank. Coming back to retail again, a few questions here. Comps growth was down significantly in Eastern Europe. You already mentioned less traffic, but my question would be, is lower comps growth also an effect of tough comps due to the Euro 2012 in this region? I.e., could things actually look better in the second half because of this comp effect? Also given more competition, but less traffic in Russia, you mentioned. Do you see the need to close some stores in Russia? Another one on the 84 openings. That's a big number, indeed. My question would be, in what regions did you open these 84 stores? Is this sustainable, or should we expect fewer openings in the coming quarters? That's it from my side.
Andreas, your anticipation is right. That we had tougher Comparable store sales in the first half, especially in Russia and CIS, and mainly in Ukraine, where the European Championship obviously helped us a lot in the first half of 2012, as the European Championship was in Ukraine together with Poland, and we were the sponsor of the Ukraine national team. As I have said, I see already positive Comparable store growth coming back in the last few weeks, because we're activating our stores in a different way with new innovative products. As I said, the weather also turned nicer, which helps a little bit. We definitely operated better. We're closing stores, of course, because malls go out of fashion if new malls are coming up. This will be a permanent process.
That's exactly right, Herbert, because as I said in my prepared comments, that we closed over 100 and something stores in this period. Of the stores that we opened, Andreas, about 80% of those were in the European emerging markets. In other areas where there's a lot of activities, obviously Latin America. I think at the moment you should accept that we're probably going to be opening a little bit more than we had originally planned for this year. Probably not quite at the level that we've had in the first half.
Okay, thanks.
You're welcome.
The next question comes from Allegra Perry of Cantor Fitzgerald. Please go ahead.
Yes, good afternoon. I have three questions, please. Firstly, on the full-year guidance on the amendment to sales outlook, I was wondering if you could give us a little more detail around how that affects the various segments guidance that you'd given previously. Secondly, on Reebok, you flagged the strength is in fitness and classics. I was wondering if you could update us on how much those categories represent, and perhaps comment on what's still in negative territory. Lastly, if you could give us an update on where you stand in terms of your hedging rate and position for full year 2014, please. Thank you.
Okay, Allegra. Let's start with the last one, which was the hedging rate. I think last year we enjoyed a hedging rate of around about 138. For this year, we're probably around the 132. Looking out, we're fairly much along those sort of lines for the next year in any case, with the majority of that now hedged. There shouldn't be major differences in 2014 on that level. Your first question was about sales outlook and whether this had any impact on the sales. There's not really much of a change there. As you noted, all we did really was widen the range a little bit. I think there we're reflecting also on TaylorMade's development. That would probably be the only major impact there. Your second question was something about categories, which I'm afraid I didn't quite hear.
I can help out. It was on Reebok Classic and training, I think your question was how much is it of our total business? It's approximately 50% of our total business.
Sorry, is that both of those categories together?
This is for both categories, yep.
Okay. Can you maybe comment on how the other categories performed that you didn't mention?
In Reebok or in adidas?
Sorry, I was referring to Reebok. Besides these two strengths, can you just give us a sense for how the other categories are performing and how you're repositioning those?
Yeah. We don't have so many more categories. We have the apparel business, because under training, we put a lot of apparel and footwear together, as you know. I can specifically talk to apparel, which is getting better and better. When you see the collections, especially Delta, the CrossFit collection, et cetera, this gets really traction. We still have to work that we get better presentations in the stores for our Reebok apparel collection. The products are really great at getting better and better. What else do we have? ATV, I spoke already, which is the running category, and with Reebok One, we're bringing new running products to the market. I think this is it more or less what we have in categories.
Great. Thank you very much.
You're welcome.
The next question comes from Antoine Belge of HSBC.
Yes. Good afternoon. It's actually Antoine Belge at HSBC. Three questions, if I may. First of all, in terms of input costs and in particular, wages in China, what's the current trend? Is it growing at a double digit? What's your outlook for second half or another for 2014? You mentioned that second question, so this fourth quarter would be stronger than usual. Can you maybe comment about the life cycle, especially for World Cup related products, especially maybe compared to four years ago to previous World Cup? Is it that, compared to the previous World Cup, you will be delivering maybe a bit more in Q4 than you did, or are there any sort of specific factors? Finally, my third question would be on China, and more specifically on the adidas NEO brand. Can you remind us what is adidas NEO bringing to you in China specifically?
Thank you.
Okay. On the input cost, yes. Obviously, that's a significant part of our calculations for our future earnings. I think for 2013, we've been very stable with what we had last year, and that's obviously helping us to generate these higher gross margins. There haven't been a lot of significant wage increases actually announced yet. You're absolutely right that when they come, they're normally double digit. We are on notice that there will be likely negative pressures coming in the second half of 2014, I haven't got any other details on that for you at the moment.
Let me just add to the wage increases what Robin said. This has a positive and a negative side. The negative side is that obviously cost is getting higher, but the positive side is there's more and more Chinese consumer getting income which can buy our product, which on the other hand will fuel the future growth. You asked about the life cycle products for football. There is no general change in the life cycle. We will introduce in the fourth quarter the jerseys of all the teams which will compete at the World Cup. We count that we will have between 8 and 10, obviously Germany, Spain, Russia, Argentina, Colombia, Mexico, Japan, et cetera. These jerseys normally run for two years. Obviously from October, November, when we introduce them until the World Cup, this is by far the strongest period.
The same is true for the official match ball, which we introduce in December, then we are permanently introducing on a monthly basis, new football footwear on our different silos, the F50, the Predator, et cetera. From a life cycle perspective, there is no major change. Last but not least, you asked about the Neo brand in China. The Neo brand in China is not different to that what the Neo brand should be all around the world. This should excite the younger consumer, the 14 to 19, mainly female-driven consumer, which we don't get access so far in a bigger way.
We do believe with this offering, we definitely will open a new consumer group to us and also bind the consumer in an earlier stage to our brand, which also should help us when they grow up then, and getting to all the other different parts of our collection, be it style, be it performance, be it sport, et cetera.
Thank you. Maybe just a clarification. Maybe could you quantify how much is Neo in terms of your total sales in China?
We don't give any specific sales number for NEO. I only can tell you that out of the 7,000 stores, around 1,000 is on NEO.
Thank you very much.
You're welcome.
The next question comes from Rogerio Fujimori of Credit Suisse. Please go ahead.
Hi, everyone. Two questions, please. Robin, could you update us on the raw material cost inflation outlook versus where we were earlier this year? My second question is on football sales. Would it be possible to give us an idea of the revenue base in the first half, just to help us to basically compare versus the EUR 2 billion target you set for next year? Thank you very much.
Actually we've been, as I said in the previous question, I think quite pleased. There's been a lot of stability this year over the significant increases we saw last year. Unfortunately, it all stabilized at a fairly high level for the raw material costs. As I said also, for the first half of next year, we think that stability continues, but we are at risk of having raw material price increases or wage increases, at least in the second half of the year. I have no significant quantification ability at the moment.
Rogerio, second question on football sales for the first half year. We don't give absolute numbers. What I told you, I'm happy that we were able to increase our footwear football sales by 6% in the first year. Obviously, apparel was down because we didn't have any new introduction on the jerseys, which we had last year at the same time, for the UEFA European Football Championship. What I definitely can give you is that our target for next year is to reach EUR 2 billion in football sales, and this will be by far the highest number which we have ever achieved.
Point taken. Thank you very much.
You're welcome.
Ladies and gentlemen, that completes our call for today. We'll be reporting our Q3 results on November 7th. In the next few days, you will receive an invitation to join us here in Herzogenaurach for what promises to be a very exciting event in December. With that, enjoy the rest of your summer.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may disconnect at this time.