First Quarter 2010 Results
(Thomson Reuters ONE) -
adidas AG / First Quarter 2010 Results processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.
For immediate release
Herzogenaurach, May 4, 2010
First Quarter 2010 Results:
Group sales increase 4% on a currency-neutral basis
Net income attributable to shareholders reaches ? 168 million
adidas Group increases 2010 financial outlook
* Comparable Retail store sales increase 7% on a currency-neutral basis
* adidas and Reebok brand sales increase 4% and 1% respectively on a
currency-neutral basis
* Group gross and operating margin increase 3.5 and 7.5 percentage points,
respectively
* Group inventories decrease 20% on a currency-neutral basis
adidas Group currency-neutral sales increase 4% in the first quarter of 2010
In the first quarter of 2010, Group revenues increased 4% on a currency-neutral
basis as a result of growth in the Wholesale and Retail segments as well as
sales increases in Other Businesses. Currency translation effects did not have a
significant impact on sales in euro terms. Group revenues grew 4% to ? 2.674
billion in the first quarter of 2010 from ? 2.577 billion in 2009.
"We had a great start to the year, achieving record first quarter sales driven
by growth in all segments," commented Herbert Hainer, adidas Group CEO. "Our
Retail segment, record football sales and a strong performance for adidas and
Reebok in North America were some of the main catalysts driving this
development."
Group sales increase driven by Retail segment
The adidas Group's sales increase in the first quarter of 2010 was driven by
double-digit growth in the Retail segment as well as higher sales in the
Wholesale segment and Other Businesses. Currency-neutral Wholesale revenues
increased 1% during the period due to higher adidas sales. Currency-neutral
Retail sales increased 16% versus the prior year as a result of double-digit
adidas and Reebok sales growth. Revenues in Other Businesses increased 8% on a
currency-neutral basis as a result of double-digit sales growth at
TaylorMade-adidas Golf.
Currency translation effects only had a minor impact on segmental sales in euro
terms. Wholesale revenues increased 1% to ? 1.898 billion in the first quarter
of 2010 from ? 1.874 billion in 2009. Retail sales increased 15% to ? 459
million versus ? 400 million in the prior year. Sales in Other Businesses grew
7% to ? 316 million in the first quarter of 2010 (2009: ? 295 million).
+-------------+-------------+-----------+---------------------+
|First quarter|First quarter| Change | Change y-o-y |
| 2010 | 2009 | y-o-y in | currency-neutral |
| | |euro terms | |
-----------------+-------------+-------------+-----------+---------------------+
|? in millions|? in millions| in % | in % |
+----------------+-------------+-------------+-----------+---------------------+
|Wholesale | 1,898 | 1,874 | 1 | 1 |
+----------------+-------------+-------------+-----------+---------------------+
|Retail | 459 | 400 | 15 | 16 |
+----------------+-------------+-------------+-----------+---------------------+
|Other Businesses| 316 | 295 | 7 | 8 |
+----------------+-------------+-------------+-----------+---------------------+
|Total(1)) | 2,674 | 2,577 | 4 | 4 |
+----------------+-------------+-------------+-----------+---------------------+
First quarter net sales growth by segment
1) Including HQ/Consolidation.
Currency-neutral sales increase in nearly all regions
In the first quarter of 2010, currency-neutral adidas Group sales increased in
all regions except Greater China and Other Asian Markets. Revenues in Western
Europe increased 4% primarily as a result of higher sales in the UK and Germany.
In European Emerging Markets, Group sales increased 1% on a currency-neutral
basis due to growth in most of the region's markets. Sales for the adidas Group
in North America increased 14% on a currency-neutral basis due to increases in
both the USA and Canada. Sales in Greater China decreased 15% on a
currency-neutral basis. Revenues in Other Asian Markets declined 3% primarily as
a result of decreases in Japan. In Latin America, sales grew 18% on a
currency-neutral basis, with increases in most of the region's major markets.
Currency translation effects had a mixed impact on regional sales in euro terms.
Group revenues in Western Europe increased 5% to ? 945 million in the first
quarter of 2010 from ? 899 million in 2009. In European Emerging Markets, sales
declined 1% to ? 290 million in the first quarter of 2010 from ? 293 million in
2009. Sales in North America increased 10% to ? 585 million from ? 532 million
in 2009. Revenues in Greater China decreased 20% to ? 198 million in the first
quarter of 2010 from ? 247 million in 2009. In Other Asian Markets, sales
increased 1% to ? 384 million versus ? 381 million in the prior year. Revenues
in Latin America grew 24% to ? 271 million from ? 218 million in the prior year.
+--------------+-------------+-----------+---------------------+
|First quarter |First quarter| Change | Change y-o-y |
| 2010 | 2009 | y-o-y | currency-neutral |
| | | in euro | |
| | | terms | |
----------------+--------------+-------------+-----------+---------------------+
|? in millions |? in millions| in % | in % |
+---------------+--------------+-------------+-----------+---------------------+
|Western Europe | 945 | 899 | 5 | 4 |
+---------------+--------------+-------------+-----------+---------------------+
|European | 290 | 293 | (1) | 1 |
|Emerging | | | | |
|Markets | | | | |
+---------------+--------------+-------------+-----------+---------------------+
|North America | 585 | 532 | 10 | 14 |
+---------------+--------------+-------------+-----------+---------------------+
|Greater China | 198 | 247 | (20) | (15) |
+---------------+--------------+-------------+-----------+---------------------+
|Other Asian | 384 | 381 | 1 | (3) |
|Markets | | | | |
+---------------+--------------+-------------+-----------+---------------------+
|Latin America | 271 | 218 | 24 | 18 |
+---------------+--------------+-------------+-----------+---------------------+
|Total(1)) | 2,674 | 2,577 | 4 | 4 |
+---------------+--------------+-------------+-----------+---------------------+
First quarter net sales growth by region
1) Including HQ/Consolidation.
Gross margin increases 3.5 percentage points
The gross margin of the adidas Group increased 3.5 percentage points to 48.6% in
the first quarter of 2010 (2009: 45.2%). This development was mainly due to
lower input costs, a larger share of higher-margin Retail sales, less clearance
sales as well as positive currency effects related to the appreciation of the
Russian rouble compared to the prior year. These positive effects more than
offset negative impacts from the increase of import duties in Latin America. As
a result, gross profit for the adidas Group grew 12% in the first quarter of
2010 to ? 1.300 billion versus ? 1.164 billion in the prior year.
Operating margin increases 7.5 percentage points
The operating margin of the adidas Group increased 7.5 percentage points to
9.7% in the first quarter of 2010 (2009: 2.2%). The operating margin increase
was primarily due to the higher gross margin as well as lower other operating
expenses as a percentage of sales. As a result, Group operating profit increased
349% to ? 260 million versus ? 58 million in 2009. Other operating expenses as a
percentage of sales decreased 3.3 percentage points to 41.5% in the first
quarter of 2010 from 44.7% in 2009. In absolute terms, other operating expenses
decreased 4% to ? 1.109 billion in the first quarter of 2010 (2009: ? 1.153
billion). Thereof, sales and marketing working budget expenditures amounted to ?
333 million, which represents an increase of 3% versus the prior year level
(2009: ? 324 million). The increase was primarily related to higher expenditures
for the Reebok brand. As a result of the higher Group sales base, however, sales
and marketing working budget expenditures as a percentage of sales decreased
0.1 percentage points to 12.4% from 12.6% in the prior year.
Financial income up 91%
Financial income increased 91% to ? 12 million in the first quarter of 2010 from
? 6 million in the prior year, mainly due to positive exchange rate effects.
Financial expenses decrease 48%
Financial expenses decreased 48% to ? 29 million in the first quarter of 2010
(2009: ? 56 million). The non-recurrence of prior year negative exchange rate
effects as well as lower interest expenses contributed to the decline.
Income before taxes increases strongly
Income before taxes (IBT) as a percentage of sales increased 8.8 percentage
points to 9.1% in the first quarter of 2010 from 0.3% in 2009. This was
primarily a result of the Group's operating margin increase and lower financial
expenses. IBT for the adidas Group increased to ? 243 million from ? 9 million
in 2009.
Net income attributable to shareholders reaches ? 168 million
The Group's net income attributable to shareholders increased to ? 168 million
in the first quarter of 2010 from ? 5 million in 2009. Higher operating profit
was the primary reason for this development. The Group's tax rate decreased
21.2 percentage points to 30.5% in the first quarter of 2010 (2009: 51.7%),
mainly due to a more favourable regional earnings mix compared to the prior
year. Net income attributable to non-controlling interests amounted to ? 1
million in the first quarter of 2010 versus negative ? 1 million in 2009.
Earnings per share reach ? 0.80
Following the full conversion of the Group's convertible bond in the fourth
quarter of 2009, the Group has no dilutive potential shares anymore. As a
result, diluted earnings per share equal basic earnings per share. In the first
quarter of 2010, basic and diluted earnings per share amounted to ? 0.80. In the
prior year period, basic earnings per share amounted to ? 0.02 and diluted
earnings per share to ? 0.04. The weighted average number of shares used in the
calculation was 209,216,186 in the first quarter of 2010. In the prior year
period, the number amounted to 193,515,512 for the calculation of basic earnings
per share and 209,260,662 for the calculation of diluted earnings per share.
Group inventories down 20% currency-neutral
Group inventories decreased 17% to ? 1.680 billion at the end of March 2010
versus ? 2.016 billion in 2009. On a currency-neutral basis, inventories
declined 20%. This was mainly a result of clearance of excess inventories at all
brands throughout the last twelve months.
Accounts receivable stable currency-neutral
At the end of March 2010, Group receivables increased 5% to ? 1.987 billion
(2009: ? 1.884 billion). On a currency-neutral basis, receivables remained
stable. This development compares to a currency-neutral Group sales increase of
4%, reflecting the strict discipline in implementing the Group's trade terms and
improved collection of receivables as the economic situation in most markets
continued to ease.
Net borrowings down ? 1.525 billion
Net borrowings at March 31, 2010 amounted to ? 1.359 billion, which represents a
decrease of ? 1.525 billion, or 53%, versus ? 2.883 billion at the end of March
2009. Lower working capital requirements and the complete conversion of the ?
400 million convertible bond in the fourth quarter of 2009 were the main reasons
for the net debt decline. These positive effects more than offset negative
currency translation effects in an amount of ? 5 million. Consequently, the
Group's ratio of net borrowings over 12-month rolling EBITDA decreased to 1.4 at
the end of March 2010 versus 2.7 in the prior year.
adidas Group increases 2010 financial outlook
Following the stronger than expected first quarter performance and improved
visibility into the second half of the year, Management decided to increase the
financial outlook published in March. Management now forecasts adidas Group
sales to increase at a mid-single-digit rate on a currency-neutral basis in
2010 (previously: low- to mid-single-digit). Positive impacts from the 2010 FIFA
World Cup(TM), the Group's high exposure to fast-growing emerging markets as
well as improvements at the Reebok brand are forecasted to support Group sales
growth. Currency-neutral Wholesale segment revenues are now projected to
increase at a low- to mid-single-digit rate compared to the prior year due to
higher adidas and Reebok sales (previously: low-single-digit). adidas Group
currency-neutral Retail segment sales are now projected to grow at a
low-double-digit rate in 2010 (previously: high-single-digit), mainly driven by
the expansion of the Group's own-retail store base. Revenues of Other Businesses
are expected to increase at a low-single digit rate on a currency-neutral basis.
Earnings per share to increase to a level between ? 2.05 and ? 2.30
In 2010, the adidas Group gross margin is now forecasted to increase to a level
between 46.5% and 47.5% versus 45.4% in 2009 (previously: increase to a level
between 46.0% and 47.0%). Improvements are expected in all segments. Group gross
margin will benefit from lower sourcing costs as a result of reduced material
costs and lower capacity utilisation among suppliers. In addition, a higher
share of sales from the Retail segment, which carry a higher gross margin, lower
levels of clearance sales compared to the prior year as well as the appreciation
of the Russian rouble are forecasted to contribute to margin increases. However,
these positive effects are expected to be partly offset by ongoing price
pressures from a highly competitive retail environment, less favourable hedging
terms and increased import duties in Latin America.
The Group's other operating expenses as a percentage of sales are expected to
decrease modestly (2009: 42.3%). Sales and marketing working budget expenses as
a percentage of sales are expected to increase versus the prior year to support
adidas presence at the 2010 FIFA World Cup(TM) as well as to sustain Reebok's
growth strategy in muscle toning and conditioning. However, this increase will
be more than offset by lower operating overhead expenditures as a percentage of
sales despite higher expenditures in the Retail segment.
As a result of gross margin improvements as well as lower other operating
expenses as a percentage of sales, operating margin for the adidas Group is
expected to be around 7.0% (2009: 4.9%; previously: around 6.5%). In addition,
financial expenses are projected to decline as a result of a lower average level
of net borrowings in 2010 compared to the prior year. The Group tax rate is
expected to be slightly below the prior year level (2009: 31.5%). As a result of
these developments, earnings per share are now expected to increase strongly to
a level between ? 2.05 and ? 2.30 (2009 diluted earnings per share: ? 1.22;
previously: increase to a level between ? 1.90 and ? 2.15).
Herbert Hainer stated: "This quarter's accomplishments are a real testament to
the strength of our brands and clearly demonstrate that our product and
marketing strategies are really making a difference. With the Reebok turnaround
gathering pace and the FIFA World Cup(TM) kicking off in a few weeks, we have a
lot of reasons to be optimistic. Therefore we feel confident to raise the bar
and increase our full-year guidance."
***
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 Dennis
Weber
Senior Corporate PR Manager Senior Investor
Relations Manager
Tel.: +49 (0) 9132 84-3810 Tel.: +49 (0)
9132 84-4989
Kirsten Keck
Corporate PR Manager
Tel.: +49 (0) 9132 84-6207
Please visit our corporate website: www.adidas-Group.com
[HUG#1411371]
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First Quarter 2010 Results: http://hugin.info/139192/R/1411371/363762.pdf
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Datum: 04.05.2010 - 07:32 Uhr
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