(Thomson Reuters ONE) - Currency-neutral Group sales decrease 7% in the first half year * First half financial results in line with guidance * Currency-neutral Group sales decline 8% in the second quarter * Inventory growth rate sequentially declines versus prior quarter * Group outlook confirmedSecond quarter adidas Group currency-neutral sales decrease 8%During the second quarter of 2009, Group sales declined 8% on acurrency-neutral basis due to sales declines in all segments with theexception of TaylorMade-adidas Golf. Currency-neutral adidas segmentrevenues decreased 9%. Growth in North America and in Latin Americawas offset by declines in most major European and Asian markets.Currency-neutral sales in the Reebok segment decreased 9% in thesecond quarter of 2009 versus the prior year due to negative salesdevelopment in most major markets. At TaylorMade-adidas Golf,currency-neutral revenues increased 3%, driven by growth in nearlyall regions and supported by the consolidation of the Ashworthbusiness. Currency movements positively impacted Group sales in euroterms. Group revenues decreased 3% in euro terms to ? 2.457 billionin the second quarter of 2009 from ? 2.521 billion in 2008.Second quarter diluted EPS ? 0.06The Group's gross margin decreased 5.1 percentage points to 45.0%(2008: 50.1%) in the second quarter as a result of higher inputcosts, currency devaluation effects, in particular related to theRussian rouble, as well as a highly promotional retail environment.Group gross profit decreased 13% to ? 1.105 billion (2008: ? 1.263billion). As a result of the lower gross margin as well as higherother operating expenses as a percentage of sales the Group'soperating margin decreased 5.3 percentage points to 2.9% in thesecond quarter of 2009 versus 8.2% in the prior year. Operatingprofit decreased 66% to ? 72 million versus ? 208 million in 2008. Inthe second quarter of 2009, the Group's net income attributable toshareholders decreased 93% to ? 9 million (2008: ? 116 million)mainly due to the Group's lower operating profit. Diluted earningsper share for the second quarter declined 90% to ? 0.06."The impacts of the economic downturn and repercussions on consumerspending are well documented and certainly continued to influence ourperformance in the second quarter", commented Herbert Hainer, adidasGroup CEO and Chairman. "However, the good news is that we did notsee any fundamental deterioration in our business since publishingour first quarter results. Our financials for the first half of 2009are exactly in line with the guidance we provided in May - if not alittle better. As a result, I believe we have seen the bottom in ourfinancial performance this year."adidas Group currency-neutral sales decline 7% in first halfIn the first half of 2009, Group revenues decreased 7% on acurrency-neutral basis, as a result of lower sales in all businesssegments. The adidas segment decreased 8%, the Reebok segment 6% andthe TaylorMade-adidas Golf segment 1%. Currency translation effectspositively impacted sales in euro terms. Group revenues in euro termsdeclined 2% to ? 5.034 billion in the first half of 2009 from ? 5.142billion in 2008.+-------------------------------------------------------------------+| | 1st Half | 1st Half | Change | Change || | Year | Year | y-o-y | y-o-y || | 2009 | 2008 | in | currency- || | | | euro | neutral || | | | terms | ||------------------------+----------+----------+--------+-----------|| | ? in | ? in | in % | in % || | millions | millions | | ||------------------------+----------+----------+--------+-----------|| adidas | 3,667 | 3,787 | (3) | (8) ||------------------------+----------+----------+--------+-----------|| Reebok | 907 | 923 | (2) | (6) ||------------------------+----------+----------+--------+-----------|| TaylorMade-adidas Golf | 449 | 417 | 8 | (1) ||------------------------+----------+----------+--------+-----------|| HQ/Consolidation | 11 | 16 | (27) | (32) ||------------------------+----------+----------+--------+-----------|| Total | 5,034 | 5,142 | (2) | (7) |+-------------------------------------------------------------------+First half year net sales growth by segmentCurrency-neutral sales decrease in nearly all regionsCurrency-neutral adidas Group sales declined in all regions exceptLatin America in the first half of 2009. Group sales in Europedecreased 8% on a currency-neutral basis, due to declines in mostmajor countries impacted by the non-recurrence of strong prior yearsales related to the UEFA EURO 2008(TM). In North America, Groupsales declined 10% on a currency-neutral basis due to declines inboth the USA and Canada. This was a result of lower consumer demandand clearance of excess inventories. Sales for the adidas Group inAsia decreased 9% on a currency-neutral basis, as a result ofdeclines in Japan and China. In Latin America, sales grew 24% on acurrency-neutral basis, with double-digit increases coming from mostof the region's major markets, supported by the new Reebok companiesin Brazil/Paraguay and Argentina. In euro terms, sales in Europedecreased 9% to ? 2.143 billion in the first half of 2009 from ?2.352 billion in 2008. Sales in North America grew 1% to ? 1.173billion from ? 1.160 billion in 2008. Revenues in Asia grew 3% to ?1.245 billion in the first half of 2009 from ? 1.214 billion in 2008.Sales in Latin America grew 16% to ? 443 million from ? 381 millionin the prior year.+-------------------------------------------------------------------+| | 1st Half | 1st Half | Change | Change || | Year | Year | y-o-y | y-o-y || | 2009 | 2008 | in euro | currency- || | | | terms | neutral ||-------------+-------------+-------------+-----------+-------------|| | ? in | ? in | in % | in % || | millions | millions | | ||-------------+-------------+-------------+-----------+-------------|| Europe | 2,143 | 2,352 | (9) | (8) ||-------------+-------------+-------------+-----------+-------------|| North | 1,173 | 1,160 | 1 | (10) || America | | | | ||-------------+-------------+-------------+-----------+-------------|| Asia | 1,245 | 1,214 | 3 | (9) ||-------------+-------------+-------------+-----------+-------------|| Latin | 443 | 381 | 16 | 24 || America | | | | ||-------------+-------------+-------------+-----------+-------------|| Total[1] | 5,034 | 5,142 | (2) | (7) |+-------------------------------------------------------------------+First half year net sales growth by region______________________________[1] Including HQ/Consolidation.Gross profit declines 11%The gross margin of the adidas Group decreased 4.6 percentage pointsto 45.1% in the first half of 2009 (2008: 49.6%). This developmentwas mainly due to higher input costs, currency devaluation effects,in particular related to the Russian rouble, as well as a highlypromotional retail environment. As a result, gross profit for theadidas Group declined 11% in the first half of 2009 to ? 2.269billion versus ? 2.552 billion in the prior year.Operating margin declines 7.0 percentage pointsThe operating margin of the adidas Group decreased 7.0 percentagepoints to 2.6% in the first half of 2009 (2008: 9.5%). The operatingmargin decline was due to the decrease in Group gross margin as wellas higher other operating expenses as a percentage of sales. Otheroperating expenses as a percentage of sales increased 2.7 percentagepoints to 44.3% in the first half of 2009 from41.7% in 2008, mainly as a result of higher expenses to support theGroup's development in emerging markets. As a result, Group operatingprofit decreased 74% to ? 129 million versus ? 490 million in 2008.Financial income down 55%Financial income decreased 55% to ? 7 million in the first half of2009 from ? 16 million in the prior year, mainly due to changes inthe fair value of financial instruments.Financial expenses increase 15%Financial expenses increased 15% to ? 99 million in the first half of2009 from ? 87 million in the prior year. This development wasprimarily due to negative exchange rate variances, which were onlypartly offset by lower interest expenses.Income before taxes decreases 91%Income before taxes (IBT) as a percentage of sales decreased 7.4percentage points to 0.7% in the first half of 2009 from 8.1% in2008. This was a result of the Group's operating margin decrease andhigher net financial expenses. IBT for the adidas Group declined 91%to ? 37 million from ? 419 million in 2008.Net income attributable to shareholders declines 95%The Group's net income attributable to shareholders decreased 95% to? 13 million in the first half of 2009 from ? 286 million in 2008.The Group's lower operating profit was the primary reason for thisdevelopment. The Group's tax rate increased 35.3 percentage points to66.8% in the first half of 2009 (2008: 31.5%), mainly due to a lessfavourable regional earnings mix.Basic and diluted earnings per share in line with guidanceBasic earnings per share decreased 95% to ? 0.07 in the first half of2009 versus ? 1.42 in 2008. The weighted average number of sharesused in the calculation of basic earnings per share decreased to193,515,512 in the first half of 2009 (2008 average: 200,415,758) dueto the share buyback programme from January to October 2008. Dilutedearnings per share in the first half of 2009 decreased 93% to ? 0.10from ? 1.35 in the prior year. The weighted average number of sharesused in the calculation of diluted earnings per share was 209,259,974(2008 average: 216,211,434).Currency-neutral Group inventories increase 8%Group inventories increased 13% to ? 2.041 billion at the end of June2009 versus ? 1.806 billion in 2008. On a currency-neutral basis,inventories grew 8%. This development was mainly a result ofaccelerated product shipments to Brazil and Argentina due to thethreat of higher import tariffs. Lower customer demand compared tothe Group's expectations when planning production for the first halfof 2009 and the consolidation of the Ashworth business since November2008 also contributed to the increase.Currency-neutral accounts receivable increase 4%At the end of June 2009, Group receivables increased 5% to ? 1.729billion (2008: ? 1.641 billion). On a currency-neutral basis,receivables grew 4%. This increase reflects slower receipt ofpayments due to the difficult economic situation in most markets.Net borrowings up ? 472 millionNet borrowings at June 30, 2009 amounted to ? 2.732 billion, whichrepresents an increase of ? 472 million, or 21%, versus ? 2.260billion at the end of June 2008. Higher working capital requirementswere the main reason for the net debt increase. In addition, sinceJune 30, 2008, cash in an amount of ? 136 million has been used forthe meanwhile completed share buyback programme. Currency translationeffects negatively impacted net borrowings by an amount of ? 110million. Consequently, the Group's financial leverage increased to85.7% at the end of June 2009 versus 82.3% in the prior year.adidas Group sales to decrease in 2009adidas Group sales are expected to decline at a low- to midsingle-digit rate on a currency-neutral basis in 2009. The Groupprojects a low- to mid-single-digit sales decline on acurrency-neutral basis for the adidas brand in 2009. Reebok segmentsales are now expected to decline at a low- to mid-single-digit ratecompared to the prior year on a currency-neutral basis in 2009.Currency-neutral sales at TaylorMade-adidas Golf are forecasted toincrease at a low-single-digit rate, supported by the consolidationof Ashworth for the full twelve-month period.Earnings per share to improve significantly in second half comparedto first half yearIn 2009, the adidas Group gross margin is forecasted to decline. Apromotional environment in mature markets, as well as expected highersourcing costs due to increased raw material and wage costs willcontribute to this development. Currency devaluation effects, inparticular from the depreciation of the Russian rouble, are expectedto also have a significant negative impact on gross margindevelopment in 2009. The Group's other operating expenses as apercentage of sales are expected to increase in 2009. Costs relatedto restructuring activities as well as higher expenses for controlledspace initiatives in the adidas and Reebok segments will drive thisdevelopment, partially compensated by positive effects fromefficiency improvements throughout the organisation.As a result of the expected Group gross margin decline and theprojected increase in other operating expenses as a percentage ofsales, the operating margin for the adidas Group is expected todecline. The adidas Group expects earnings per share to besignificantly more positive in the second half of 2009 compared tothe development in the first half year. Profitability will improvecompared to the first half year as a result of a more moderateincrease of input costs and positive impetus ahead of the 2010 FIFAWorld Cup(TM). However, earnings per share in the second half of theyear will not reach the levels achieved in the second half of theprior year. Tight working capital management and disciplinedinvestment activities are expected to help optimise the Group's freecash flow in 2009. Excess cash will largely be used to reduce netborrowings, which are forecasted to be below the prior year level atyear-end.Herbert Hainer stated: "Although there are still challenges ahead, Iam confident that our results will improve as we go through theremainder of the year. We expect to generate significantly positiveearnings per share in the second half of the year, albeit below therecord levels of the prior year. And we will make further progress onour inventories, setting our Group up for a fresh start to anevent-filled 2010." ***Contacts:Media Relations Investor RelationsJan Runau John-Paul O'MearaChief Corporate Communications Officer Head of Investor RelationsTel.: +49 (0) 9132 Tel.: +4984-3830 (0) 9132 84-2751Kirsten Keck Dennis WeberCorporate PR Manager Investor Relations ManagerTel.: +49 (0) 9132 84-6207 Tel.: +49 (0) 9132 84-4989Katja SchreiberCorporate PR ManagerTel.: +49 (0) 9132 84-3810Please visit our corporate website: www.adidas-Group.comhttp://hugin.info/139192/R/1332711/315684.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
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