First Half Year 2010 Results
(Thomson Reuters ONE) -
adidas AG / First Half Year 2010 Results processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.
For immediate release Herzogenaurach, August 4, 2010
First Half Year 2010 Results:
Currency-neutral Group sales grow 7% in the first half year
Net income attributable to shareholders reaches record level
adidas Group increases 2010 financial outlook
* adidas brand currency-neutral sales increase 13% in the second quarter
* Reebok brand currency-neutral sales grow 16% in the second quarter
* Comparable Retail store sales increase 8% on a currency-neutral basis in the
first half of 2010
* First half Group gross and operating margin increase 3.7 and 5.6 percentage
points respectively
* Group inventories decrease 11% on a currency-neutral basis
adidas Group currency-neutral sales increase at double-digit rate in the second
quarter
During the second quarter of 2010, Group revenues increased 11% on a
currency-neutral basis. Currency-neutral revenues in Western Europe increased
13% supported by strong growth in the football category. Currency-neutral sales
in European Emerging Markets increased 25% driven by double-digit growth in both
the Wholesale and Retail segments. Group sales in North America grew 8% on a
currency-neutral basis, driven by a 7% sales increase for adidas and a 30% sales
increase for Reebok in the region during the second quarter. Currency-neutral
sales in Greater China declined 18% due to the continued efforts to reduce
inventories in the market. Currency-neutral sales in Other Asian Markets and in
Latin America were up 11% and 27% on a currency-neutral basis, respectively.
Currency translation effects had a positive impact on segmental sales in euro
terms. Group revenues grew 19% to ? 2.917 billion in the second quarter of 2010
from ? 2.457 billion in 2009.
Second quarter diluted EPS at ? 0.60
The Group's gross margin increased 4.0 percentage points to 48.9% (2009: 45.0%)
in the second quarter mainly due to lower input costs, less clearance sales and
a larger share of higher-margin Retail sales as well as positive currency
effects, particularly related to the Russian rouble. Group gross profit
increased 29% to ? 1.427 billion (2009: ? 1.105 billion). Other operating
expenses as a percentage of sales were stable compared to the prior year at
43.9%. Higher marketing expenses were offset by a decline in operating overhead
expenditures as a percentage of sales. As a result of the higher gross margin,
the Group's operating margin increased 3.8 percentage points to 6.7% in the
second quarter of 2010 versus 2.9% in 2009. Operating profit increased 172% to
? 195 million in the second quarter of 2010 compared to ? 72 million in 2009. In
the second quarter of 2010, the Group's net income attributable to shareholders
amounted to ? 126 million (2009: ? 9 million). Diluted earnings per share for
the second quarter increased significantly to ? 0.60 (2009: ? 0.06)
"We had an outstanding first half year driven by the FIFA World Cup 2010(TM) and
the resurgence of the Reebok brand in North America," commented Herbert Hainer,
adidas Group CEO. "Sales momentum at both adidas and Reebok accelerated in the
second quarter with currency-neutral sales increasing 13% and 16% respectively."
adidas Group currency-neutral sales increase 7% in the first half of 2010
In the first half of 2010, Group revenues increased 7% on a currency-neutral
basis driven by growth in Wholesale, Retail and Other Businesses. Currency
translation effects had a positive impact on sales in euro terms. Group revenues
grew 11% to ? 5.590 billion in the first half of 2010 from ? 5.034 billion in
2009.
First half Group sales increase driven by the Wholesale and Retail segments
The adidas Group's sales increase in the first half of 2010 was driven by
double-digit growth in the Retail segment as well as higher sales in the
Wholesale segment and in Other Businesses. Currency-neutral Wholesale revenues
increased 6% during the period driven by higher adidas and Reebok 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 3% on a currency-neutral basis due to sales growth at
TaylorMade-adidas Golf.
Currency translation effects had a positive impact on segmental sales in euro
terms. Wholesale revenues increased 10% to ? 3.826 billion in the first half of
2010 from ? 3.480 billion in 2009. Retail sales increased 20% to ? 1.061 billion
versus ? 886 million in the prior year. Sales in Other Businesses grew 7% to ?
703 million in the first half of 2010 (2009: ? 657 million).
+-------------+-------------+-----------+---------------------+
| 1(st) Half | 1(st) Half | Change | Change y-o-y |
| Year 2010 | Year 2009 | y-o-y in | currency-neutral |
| | |euro terms | |
-----------------+-------------+-------------+-----------+---------------------+
|? in millions|? in millions| in % | in % |
+----------------+-------------+-------------+-----------+---------------------+
|Wholesale | 3,826 | 3,480 | 10 | 6 |
+----------------+-------------+-------------+-----------+---------------------+
|Retail | 1,061 | 886 | 20 | 16 |
+----------------+-------------+-------------+-----------+---------------------+
|Other Businesses| 703 | 657 | 7 | 3 |
+----------------+-------------+-------------+-----------+---------------------+
|Total(1)) | 5,590 | 5,034 | 11 | 7 |
+----------------+-------------+-------------+-----------+---------------------+
First half year net sales growth by segment
1) Including HQ/Consolidation.
Currency-neutral sales increase in nearly all regions
In the first half of 2010, currency-neutral adidas Group sales increased in all
regions except Greater China. Revenues in Western Europe increased 8% primarily
as a result of double-digit sales increases in the UK, Germany and Spain. In
European Emerging Markets, Group sales increased 13% on a currency-neutral basis
due to growth in most of the region's markets, in particular Russia. Sales for
the adidas Group in North America increased 10% on a currency-neutral basis due
to strong increases in both the USA and Canada. Sales in Greater China decreased
16% on a currency-neutral basis. Currency-neutral revenues in Other Asian
Markets grew 4% due to increases in most markets. In Latin America, sales grew
23% 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 regional sales in euro
terms. Group revenues in Western Europe increased 10% to ? 1.772 billion in the
first half of 2010 from ? 1.618 billion in 2009. In European Emerging Markets,
sales grew 15% to ? 633 million in the first half of 2010 from ? 549 million in
2009. Sales in North America increased 12% to ? 1.312 billion from ? 1.169
billion in 2009. Revenues in Greater China decreased 16% to ? 403 million in the
first half of 2010 from ? 481 million in 2009. In Other Asian Markets, sales
increased 14% to ? 868 million versus ? 764 million in the prior year. Revenues
in Latin America grew 36% to ? 601 million from ? 443 million in the prior year.
+--------------+-------------+-----------+---------------------+
| 1(st) Half | 1(st) Half | Change | Change y-o-y |
| Year 2010 | Year 2009 | y-o-y | currency-neutral |
| | | in euro | |
| | | terms | |
----------------+--------------+-------------+-----------+---------------------+
|? in millions |? in millions| in % | in % |
+---------------+--------------+-------------+-----------+---------------------+
|Western Europe | 1,772 | 1,618 | 10 | 8 |
+---------------+--------------+-------------+-----------+---------------------+
|European | 633 | 549 | 15 | 13 |
|Emerging | | | | |
|Markets | | | | |
+---------------+--------------+-------------+-----------+---------------------+
|North America | 1,312 | 1,169 | 12 | 10 |
+---------------+--------------+-------------+-----------+---------------------+
|Greater China | 403 | 481 | (16) | (16) |
+---------------+--------------+-------------+-----------+---------------------+
|Other Asian | 868 | 764 | 14 | 4 |
|Markets | | | | |
+---------------+--------------+-------------+-----------+---------------------+
|Latin America | 601 | 443 | 36 | 23 |
+---------------+--------------+-------------+-----------+---------------------+
|Total(1)) | 5,590 | 5,034 | 11 | 7 |
+---------------+--------------+-------------+-----------+---------------------+
First half year net sales growth by region
1) Including HQ/Consolidation.
Group gross margin increases 3.7 percentage points
The gross margin of the adidas Group increased 3.7 percentage points to 48.8% in
the first half of 2010 (2009: 45.1%). This development was mainly due to lower
input costs, less clearance sales and a larger share of higher-margin Retail
sales. Positive currency effects related to the appreciation of the Russian
rouble also had a minor effect on Group gross margin. As a result, gross profit
for the adidas Group grew 20% in the first half of 2010 to ? 2.727 billion
versus ? 2.269 billion in the prior year.
Operating margin increases 5.6 percentage points
The operating margin of the adidas Group increased 5.6 percentage points to
8.1% in the first half of 2010 (2009: 2.6%). 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
251% to ? 454 million versus ? 129 million in 2009. Other operating expenses as
a percentage of sales decreased 1.6 percentage points to 42.8% in the first half
of 2010 from 44.3% in 2009. In absolute terms, other operating expenses
increased 7% to ? 2.390 billion in the first half of 2010 (2009: ? 2.232
billion). Thereof, sales and marketing working budget expenditures amounted to ?
756 million, which represents an increase of 20% versus the prior year level
(2009: ? 630 million). The increase was primarily related to higher expenditures
to support adidas presence at the 2010 FIFA World Cup(TM). As a result of the
higher Group sales base, however, sales and marketing working budget
expenditures as a percentage of sales increased only 1.0 percentage points to
13.5% (2009: 12.5%).
Financial income up 217%
Financial income increased 217% to ? 23 million in the first half of 2010 from ?
7 million in the prior year, mainly due to positive exchange rate effects.
Financial expenses decrease 41%
Financial expenses decreased 41% to ? 58 million in the first half of 2010
(2009: ? 99 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 6.8 percentage
points to 7.5% in the first half of 2010 from 0.7% 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 ? 419 million from ? 37 million in 2009.
Net income attributable to shareholders reaches record level
The Group's net income attributable to shareholders increased to ? 295 million
in the first half of 2010 from ? 13 million in 2009. This is the highest ever
first half result achieved by the adidas Group. Higher operating profit was the
primary reason for this development. The Group's tax rate decreased 37.2
percentage points to 29.5% in the first half of 2010 (2009: 66.8%), mainly due
to a more favourable regional earnings mix compared to the prior year. Net
income attributable to non-controlling interests amounted to ? 0 million in the
first half of 2010 versus negative ? 1 million in 2009.
Earnings per share increase to ? 1.41
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
half of 2010, basic and diluted earnings per share amounted to ? 1.41. In the
prior year period, basic earnings per share amounted to ? 0.07 and diluted
earnings per share to ? 0.10. The weighted average number of shares used in the
calculation was 209,216,186 in the first half of 2010. In the prior year period,
the number amounted to 193,515,512 for the calculation of basic earnings per
share and 209,259,974 for the calculation of diluted earnings per share.
Group inventories decrease 11% currency-neutral
Group inventories remained stable at ? 2.049 billion at the end of June 2010
versus ? 2.041 billion in 2009. On a currency-neutral basis, inventories
declined 11%. This was mainly a result of clearance of excess inventories at all
of the Group's brands throughout the last twelve months, primarily in the second
half of 2009.
Accounts receivable increase 3% currency-neutral
At the end of June 2010, Group receivables increased 16% to ? 1.999 billion
(2009: ? 1.729 billion). On a currency-neutral basis, receivables grew 3%. This
development compares to a currency-neutral Group sales increase of 11% in the
second quarter of 2010, 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 improve.
Net borrowings down ? 1.642 billion
Net borrowings at June 30, 2010 amounted to ? 1.090 billion, which represents a
decrease of ? 1.642 billion, or 60%, versus ? 2.732 billion at the end of June
2009. Lower working capital requirements and the complete conversion of the
Group's ? 400 million convertible bond in the fourth quarter of 2009 were the
main reasons for the net debt decline. This positive development was partly
offset by negative currency translation effects in an amount of ? 35 million.
Consequently, the Group's ratio of net borrowings over 12-month rolling EBITDA
decreased to 1.0 at the end of June 2010 versus 2.9 in the prior year.
Management increases 2010 sales outlook for Wholesale and Retail segments
Following the stronger than expected first half performance and improved
visibility in the second half of the year, Management has decided to partially
increase the financial outlook published in May. Management continues to expect
adidas Group sales to increase at a mid-single-digit rate on a currency-neutral
basis in 2010. Positive impacts from the 2010 FIFA World Cup(TM), high exposure
to fast-growing emerging markets as well as strong improvements at the Reebok
brand are forecasted to support Group sales growth. Management now projects
currency-neutral Wholesale segment revenues to increase at a mid-single-digit
rate compared to the prior year (previously: low- to mid-single-digit). Order
backlog development as well as positive retailer and trade show feedback support
Management's growth expectations for the remainder of 2010. adidas Group
currency-neutral Retail segment sales are projected to grow at a
low-double-digit rate in 2010. Expansion of the Group's own-retail store base
will be the primary driver of the revenue increase. Comparable store sales are
now expected to increase at a mid-single-digit rate (previously: low- to
mid-single-digit rate) compared to the prior year. In 2010, revenues of Other
Businesses are expected to increase at a low-single-digit rate on a
currency-neutral basis.
Earnings per share now expected to increase to a level between ? 2.50 and ? 2.62
In 2010, the adidas Group gross margin is now forecasted to increase to a level
approaching 47.5% versus 45.4% in 2009 (previously: increase to a level between
46.5% and 47.5%). 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. This effect is expected to moderate
in the second half of the year. Also, a higher share of sales from the Retail
segment, which carry a higher gross margin, is forecasted to support Group gross
margin development. In addition, lower levels of clearance sales due to reduced
inventory levels 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 competitive retail environment, in particular in more mature markets, and
less favourable hedging terms compared to the prior year.
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.
As a result of gross margin improvements as well as lower other operating
expenses as a percentage of sales, the operating margin for the adidas Group is
now expected to be around 7.5% (2009: 4.9%; previously: around 7.0%). 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 ? 2.50 and ? 2.62 (2009 diluted earnings per share: ? 1.22;
previously: increase to a level between ? 2.05 and ? 2.30).
Herbert Hainer stated: "The record first half performance and the financial
strength of our Group provides us with plenty of firepower to accelerate our
marketing and investment offensive in the coming quarters. Whether it's toning,
lightweight technologies or lifestyle, our brands are right on the consumer
pulse. The energy we are creating in the market this year will be an important
catalyst in propelling our Group to new heights in the years to come."
***
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 Johannes Fink
Senior Corporate PR Manager Junior Investor Relations Manager
Tel.: +49 (0) 9132 84-3810 Tel.: +49 (0) 9132 84-3461
Kirsten Keck
Corporate PR Manager
Tel.: +49 (0) 9132 84-6207
Please visit our corporate website:www.adidas-Group.com
[HUG#1435677]
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Datum: 04.08.2010 - 07:30 Uhr
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