adidas AG: First Half 2012 Results
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adidas AG /
adidas AG: First Half 2012 Results
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For immediate release
London, August 2, 2012
First Half 2012 Results:
Group sales increase 11% on a currency-neutral basis
Net income attributable to shareholders up 30% to ? 455 million
adidas Group to achieve record sales and earnings in 2012
* adidas grows 14% currency-neutral year-to-date
* TaylorMade-adidas Golf sales increase 29% currency-neutral
* Operating margin up 0.7 percentage points despite gross margin decline
* Net borrowings down 63% to ? 318 million at quarter-end
* Inventory growth slows to 8% currency-neutral
adidas Group currency-neutral sales grow 7% in the second quarter of 2012
In the second quarter of 2012, Group revenues grew 7% on a currency-neutral
basis, driven by double-digit sales increases in Retail and Other Businesses.
Currency-neutral revenues in Western Europe increased 5%, supported by sustained
momentum at adidas as well as double-digit growth at TaylorMade-adidas Golf. In
European Emerging Markets, currency-neutral sales grew 18% as a result of strong
increases at both adidas and Reebok. Group sales in North America grew 10% on a
currency-neutral basis, supported by strong double-digit increases at
TaylorMade-adidas Golf and double-digit growth at adidas. In Greater China,
Group sales were up 13% on a currency-neutral basis, driven by double-digit
growth at adidas as well as growth at Reebok. Currency-neutral revenues in Other
Asian Markets increased 2% as double-digit growth at both adidas and TaylorMade-
adidas Golf was partly offset by a strong sales decline at Reebok. In Latin
America, currency-neutral sales decreased 2% as growth at adidas was more than
offset by a sales decrease at Reebok. From a brand perspective, second quarter
sales at adidas increased 11% currency-neutral. Sales in the TaylorMade-adidas
Golf segment grew 25% on a currency-neutral basis. Reebok sales declined 26% on
a currency-neutral basis, largely as a result of negative impacts from Reebok
India Company and the non-recurrence of prior-year licence sales. Currency
translation effects had a positive impact on sales in euro terms. Group revenues
grew 15% to ? 3.517 billion in the second quarter of 2012 from ? 3.064 billion
in 2011.
Second quarter gross margin decreases 90 basis points
The Group's gross margin decreased 0.9 percentage points to 48.2% (2011: 49.2%)
in the second quarter as product price increases, a more favourable product and
regional sales mix as well as a larger share of higher-margin Retail sales only
partly offset a significant increase in input costs. Group gross profit
increased 13% to ? 1.697 billion (2011: ? 1.506 billion). Other operating
expenses as a percentage of sales decreased 1.0 percentage points to 42.4%
compared to 43.3% the prior year, despite a 13% increase in the Group's
marketing expenditure. As a result of the lower other operating expenses as a
percentage of sales, which more than offset the lower gross margin, the Group's
operating margin increased to 7.3% from 7.1% in 2011. Operating profit increased
17% to ? 256 million compared to ? 219 million in 2011. The Group's net income
attributable to shareholders grew 18% to ? 165 million (2011: ? 140 million).
Diluted earnings per share for the second quarter increased 18% to ? 0.79 (2011:
? 0.67).
"We have delivered another winning financial performance in the first half of
2012," commented Herbert Hainer, adidas Group CEO. "Our clear victory in the
summer of football, our increased operating margin and our excellent inventory
management show we have the right formula to preserve and sustain our positive
earnings and cash flow trajectory."
adidas Group currency-neutral sales increase 11% in the first half of 2012
In the first half of 2012, Group revenues increased 11% on a currency-neutral
basis. Currency translation effects had a positive impact on sales in euro
terms. Group revenues grew 16% to ? 7.341 billion in the first half of 2012 from
? 6.337 billion in 2011.
First half Group sales increase driven by double-digit growth in Retail and
Other Businesses
The adidas Group's sales increase in the first half of 2012 was driven by
double-digit growth in Retail as well as in Other Businesses. Currency-neutral
Wholesale revenues increased 6% during the period, driven by double-digit sales
growth at adidas. Currency-neutral Retail sales increased 16% versus the prior
year as a result of double-digit sales growth at adidas and Reebok. Comparable
store sales grew 9% on a currency-neutral basis. Revenues in Other Businesses
increased 27% currency-neutral, mainly due to double-digit sales growth at
TaylorMade-adidas Golf and Reebok-CCM Hockey. Rockport sales also grew. Currency
translation effects had a positive impact on segmental sales in euro terms.
+---------------+---------------+-------------+---------------+
|First Half Year|First Half Year|Change y-o-y | Change y-o-y |
| 2012 | 2011 |in euro terms| currency- |
| | | | neutral |
-----------------+---------------+---------------+-------------+---------------+
| ? in millions | ? in millions | in % | in % |
+----------------+---------------+---------------+-------------+---------------+
|Wholesale | 4,727 | 4,292 | 10 | 6 |
+----------------+---------------+---------------+-------------+---------------+
|Retail | 1,547 | 1,258 | 23 | 16 |
+----------------+---------------+---------------+-------------+---------------+
|Other Businesses| 1,067 | 787 | 36 | 27 |
+----------------+---------------+---------------+-------------+---------------+
|Total(1)) | 7,341 | 6,337 | 16 | 11 |
+----------------+---------------+---------------+-------------+---------------+
First half net sales development by segment
1) Rounding differences may arise in totals.
Currency-neutral sales increase in all regions
In the first half of 2012, currency-neutral adidas Group sales grew in all
regions. Revenues in Western Europe increased 6% on a currency-neutral basis,
primarily as a result of double-digit sales growth in the UK and Poland. In
European Emerging Markets, Group sales increased 16% on a currency-neutral basis
due to double-digit growth in most of the region's markets. Sales for the adidas
Group in North America grew 11% on a currency-neutral basis due to increases in
both the USA as well as Canada. Sales in Greater China increased 19% on a
currency-neutral basis. Currency-neutral revenues in Other Asian Markets grew
13%, driven by strong double-digit increases in Japan and South Korea. In Latin
America, sales grew 6% on a currency-neutral basis, with double-digit increases
in most of the region's major markets. Currency translation effects had a
positive impact on sales in euro terms in most regions.
+---------------+---------------+-------------+---------------+
|First Half Year|First Half Year|Change y-o-y | Change y-o-y |
| 2012 | 2011 |in euro terms| currency- |
| | | | neutral |
-----------------+---------------+---------------+-------------+---------------+
| ? in millions | ? in millions | in % | in % |
+----------------+---------------+---------------+-------------+---------------+
|Western Europe | 2,098 | 1,961 | 7 | 6 |
+----------------+---------------+---------------+-------------+---------------+
|European | 917 | 751 | 22 | 16 |
|Emerging Markets| | | | |
+----------------+---------------+---------------+-------------+---------------+
|North America | 1,728 | 1,452 | 19 | 11 |
+----------------+---------------+---------------+-------------+---------------+
|Greater China | 732 | 552 | 33 | 19 |
+----------------+---------------+---------------+-------------+---------------+
|Other Asian | 1,162 | 956 | 22 | 13 |
|Markets | | | | |
+----------------+---------------+---------------+-------------+---------------+
|Latin America | 704 | 666 | 6 | 6 |
+----------------+---------------+---------------+-------------+---------------+
|Total(1)) | 7,341 | 6,337 | 16 | 11 |
+----------------+---------------+---------------+-------------+---------------+
First half net sales development by region
1) Rounding differences may arise in totals.
Group gross margin decreases 0.8 percentage points
The gross margin of the adidas Group decreased 0.8 percentage points to 48.0% in
the first half of 2012 (2011: 48.8%). The increase in input costs more than
offset the positive impact from product price increases, a more favourable
product and regional sales mix as well as a larger share of higher-margin Retail
sales. Gross profit for the adidas Group grew 14% in the first half of 2012 to ?
3.522 billion versus ? 3.093 billion in the prior year.
Operating margin improves 0.7 percentage points
Group operating profit increased 25% to ? 665 million in the first half of 2012
versus ? 532 million in 2011. As a percentage of sales, the operating margin of
the adidas Group was up 0.7 percentage points to 9.1% (2011: 8.4%). This was
primarily due to the positive effects from lower other operating expenses as a
percentage of sales, which more than offset the decrease in gross margin. Higher
royalty and commission income as well as higher other operating income also
contributed to this development. Other operating expenses as a percentage of
sales decreased 1.3 percentage points to 40.3% from 41.6% in 2011. In euro
terms, other operating expenses increased 12% to ? 2.956 billion (2011: ? 2.637
billion), as a result of the expansion of the Group's own-retail activities as
well as higher marketing expenditure. Thereof, sales and marketing working
budget expenditures amounted to ? 894 million, which represents an increase of
7% versus the prior year level (2011: ? 832 million).
Financial income grows 29%
Financial income increased 29% to ? 17 million in the first half of 2012 from
? 13 million in the prior year, mainly due to an increase in interest income.
Financial expenses decrease 10%
Financial expenses decreased 10% to ? 57 million in the first half of 2012
(2011: ? 63 million). The decrease in negative exchange rate effects contributed
to the decline.
Income before taxes as a percentage of sales increases 0.9 percentage points
Income before taxes (IBT) for the adidas Group increased 30% to ? 625 million
from ? 482 million in 2011. IBT as a percentage of sales improved
0.9 percentage points to 8.5% in the first half of 2012 from 7.6% in 2011. This
was a result of the Group's operating margin increase and lower net financial
expenses.
Net income attributable to shareholders up 30%
The Group's net income attributable to shareholders increased to ? 455 million
in the first half of 2012 from ? 349 million in 2011. This represents an
increase of 30% versus the prior year level. Higher IBT was the primary reason
for this development. The Group's tax rate decreased 0.1 percentage points to
27.4% in the first half of 2012 (2011: 27.5%), mainly due to a more favourable
earnings mix.
Basic and diluted earnings per share reach ? 2.17
In the first half of 2012, basic and diluted earnings per share amounted to
? 2.17 (2011: ? 1.67), representing an increase of 30%. The weighted average
number of shares used in the calculation of both basic and diluted earnings per
share was 209,216,186 (2011 average: 209,216,186) as there were no potential
dilutive shares in the half year.
Group inventories up 8% currency-neutral
Group inventories increased 14% to ? 2.702 billion at the end of June 2012
versus ? 2.376 billion in 2011. On a currency-neutral basis, inventories grew
8%, reflecting input cost increases as well as our expectations for continued
growth in the coming quarters.
Accounts receivable increase 5% currency-neutral
At the end of June 2012, Group receivables increased 11% to ? 2.245 billion
(2011: ? 2.023 billion) as a result of the Group sales growth. On a currency-
neutral basis, receivables were up 5%. This growth is only slightly higher than
the 4% currency-neutral wholesale-related sales increase in the second quarter
of 2012.
Net borrowings decrease ? 546 million
Net borrowings at June 30, 2012 amounted to ? 318 million, which represents a
decrease of ? 546 million, or 63%, versus ? 863 million at the end of June
2011. The decrease was driven by the strong operating cash flow development over
the past 12 months. Currency translation had a positive effect in an amount of ?
107 million. The Group's ratio of net borrowings over 12-month rolling EBITDA
decreased to 0.2 at the end of June 2012 versus 0.7 in the prior year.
adidas Group adjusts guidance for the full year 2012
The strong first half of 2012 has set the adidas Group up for another year of
record financial results. Compared to the previous guidance, Management has
decided to adjust the full year 2012 adidas Group sales guidance. Management
continues to forecast adidas Group sales to increase at a rate approaching 10%
on a currency-neutral basis in 2012. Despite the high degree of uncertainty
regarding the global economic outlook and consumer spending, Group sales
development will be favourably impacted by its high exposure to fast-growing
emerging markets as well as the further expansion of Retail. In addition, this
year's major sporting events will provide positive stimulus to Group sales.
Currency-neutral Wholesale segment revenues are now projected to increase at a
mid-single-digit rate compared to the prior year (previously: mid- to high-
single-digit rate). The lower growth expectation reflects the negative impact
from the commercial irregularities discovered at Reebok India Company. adidas
Group currency-neutral Retail segment sales are projected to grow at a low-teens
rate in 2012. Expansion of the Group's own-retail store base and comparable
store sales are expected to contribute at a similar rate to the revenue growth.
Revenues of Other Businesses are now expected to increase at a high-teens rate
(previously: low-teens rate) on a currency-neutral basis.
In 2012, the adidas Group gross margin is forecasted to be around 47.5% (2011:
47.5%). While gross margin in the Retail segment as well as Other Businesses is
expected to improve, gross margin in the Wholesale segment is forecasted to
decline. As in the prior year, gross margin development will be negatively
impacted by increasing input and labour costs year-over-year, particularly in
the first half of 2012. However, these negative influences will be largely
offset by positive regional mix effects, as growth rates in high-margin emerging
markets are projected to be above growth rates in more mature markets.
The adidas Group's other operating expenses as a percentage of sales are
expected to decrease modestly (2011: 41.4%). Sales and marketing working budget
expenses as a percentage of sales are projected to be at a similar level
compared to the prior year. Marketing investments will be centred around key
sporting events such as the UEFA EURO 2012(TM) and the London 2012 Olympic Games
to leverage the outstanding visibility of the adidas brand during these events.
Further, the Group will continue to support Reebok's growth strategy in the
men's and women's fitness category and will also invest in growing the Group's
key attack markets North America, Greater China and Russia/CIS. Operating
overhead expenditure as a percentage of sales is forecasted to decline in 2012.
Higher administrative and personnel expenses in the Retail segment due to the
planned expansion of the Group's store base will be offset by leverage in the
Group's non-allocated central costs.
In 2012, the operating margin for the adidas Group is expected to increase to a
level approaching 8.0% (2011: 7.6%) despite a projected negative impact of up to
? 70 million euro on Group operating profit related to the reorganisation and
changes to commercial activities at Reebok India Company. Lower other operating
expenses as a percentage of sales are expected to be the primary driver of the
operating margin improvement.
As a result, net income attributable to shareholders is now projected to
increase at a rate of 15% to 17% to a level between ? 770 million and
? 785 million (previously: increase at a rate of 12% to 17% to a level between ?
750 million and ? 785 million). This equates to basic earnings per share between
? 3.68 and ? 3.75 (previously: ? 3.58 and ? 3.75). Top-line improvement and an
increased operating margin will be the primary drivers of this positive
development. In addition, the Group expects lower interest rate expenses in
2012 as a result of a lower average level of gross borrowings. The Group tax
rate is expected to be slightly less favourable compared to the prior year, at a
level around 28.5% (2011: 27.7%).
Herbert Hainer stated: "Right at this very moment, we are capitalising on our
involvement in the London Olympic Games, an event that echoes the shared values
of our Group: performance, passion, integrity and diversity. I have no doubt
that this excellent event in London will inspire a generation to get into sport
and provide further impetus to the global mega-trend towards sport and healthier
living. We will harness this energy across our portfolio of brands and will use
it to sustain our success as we strive to achieve our Route 2015 aspirations."
***
Contacts:
Media Relations Investor Relations
Jan Runau John-Paul O'Meara
Chief Corporate Communication Officer Vice President Investor Relations
Tel.: +49 (0) 9132 84-3830 Tel.: +49 (0) 9132 84-2751
Katja Schreiber Christian Stoehr
Director External Corporate Communication Investor Relations Manager
Tel.: +49 (0) 9132 84-3810 Tel.: +49 (0) 9132 84-4989
Lars Mangels Johannes Fink
Corporate Communication Manager Investor Relations Manager
Tel.: +49 (0) 9132 84-2680 Tel.: +49 (0) 9132 84-3461
Please visit our corporate website: www.adidas-Group.com
Attachment: First Half 2012 Results:
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Source: adidas AG via Thomson Reuters ONE
[HUG#1631321]
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Datum: 02.08.2012 - 07:30 Uhr
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