2009-11-04 07:34:08 -
London, November , 04, 2009
Significant improvement in financial position in the first nine
months of 2009
* Currency-neutral inventories down 8% versus the prior year
* Net borrowings reduced by 12% versus the prior year
* Currency-neutral Group sales decline 7% in Q3 and first nine
months
* Full year diluted EPS to reach level of € 1.15 to € 1.30
Third quarter adidas Group currency-neutral sales decrease 7%
During the third quarter of 2009, Group sales declined 7% on a
currency-neutral basis. Revenues for the adidas segment decreased 6%
on a currency-neutral basis. Growth in the Sport Style division could
not offset declines in major sports categories in the Sport
Performance division. Currency-neutral revenues in the Reebok segment
decreased 12% versus the prior year, as a result of declines in all
divisions. Third quarter revenues for the TaylorMade-adidas Golf
segment decreased 12% on a currency-neutral basis. This was mainly
due to the challenging macroeconomic environment and the
non-recurrence of sales related to several new product launches in
the prior year period. Currency movements positively impacted Group
sales in euro terms. Group revenues decreased 6% in euro terms to €
2.888 billion in the third quarter of 2009 from € 3.083 billion in
2008.
Third quarter diluted EPS € 1.03
The Group's gross margin decreased 3.7 percentage points to 45.3%
(2008: 49.0%) in the third quarter as a result of higher clearance
sales, higher input costs and currency devaluation effects, in
particular related to the Russian rouble. Group gross profit
decreased 14% to € 1.307 billion (2008: € 1.511 billion). As a result
of the lower gross margin as well as higher other operating expenses
as a percentage of sales, the Group's operating margin decreased 3.7
percentage points to 11.6% in the third quarter of 2009 versus 15.3%
in the prior year. Operating profit decreased 29% to € 336 million
versus € 473 million in 2008. In the third quarter of 2009, the
Group's net income attributable to shareholders decreased 30% to
€ 213 million (2008: € 302 million) mainly due to the Group's lower
operating profit. Diluted earnings per share for the third quarter
declined 29% to € 1.03.
"This year, our industry and our Group have faced unprecedented
challenges. However, we have tackled the challenges head-on,"
commented Herbert Hainer, adidas Group CEO. "We have successfully
adapted to our difficult surroundings. And our drive for operational
excellence has meant we have strongly improved our financial position
generating almost € 740 million in net cash from operations over the
last six months."
adidas Group currency-neutral sales decline 7% in first nine months
In the first nine months of 2009, Group revenues decreased 7% on a
currency-neutral basis, as a result of lower sales in all business
segments. The adidas segment decreased 7%, the Reebok segment 9% and
the TaylorMade-adidas Golf segment 5%. Currency translation effects
positively impacted sales in euro terms. Group revenues in euro terms
declined 4% to € 7.923 billion in the first nine months of 2009 from
€ 8.225 billion in 2008.
+-------------------------------------------------------------------+
| | Nine | Nine | Change | Change |
| | Months | Months | y-o-y | y-o-y |
| | 2009 | 2008 | in euro | currency- |
| | | | terms | neutral |
|-----------------------+----------+----------+---------+-----------|
| | € in | € in | in % | in % |
| | millions | millions | | |
|-----------------------+----------+----------+---------+-----------|
| adidas | 5,779 | 6,004 | (4) | (7) |
|-----------------------+----------+----------+---------+-----------|
| Reebok | 1,497 | 1,587 | (6) | (9) |
|-----------------------+----------+----------+---------+-----------|
| TaylorMade-adidas | 633 | 614 | 3 | (5) |
| Golf | | | | |
|-----------------------+----------+----------+---------+-----------|
| HQ/Consolidation | 13 | 20 | (32) | (36) |
|-----------------------+----------+----------+---------+-----------|
| Total | 7,923 | 8,225 | (4) | (7) |
+-------------------------------------------------------------------+
Nine months net sales growth by segment
Currency-neutral sales decrease in nearly all regions
Currency-neutral adidas Group sales declined in all regions except
Latin America in the first nine months of 2009. Group sales in Europe
decreased 8% on a currency-neutral basis, due to declines in most
major markets impacted by the non-recurrence of strong prior year
sales related to the UEFA EURO 2008(TM). In North America, Group
sales decreased 11% on a currency-neutral basis due to declines in
both the USA and Canada. Sales for the adidas Group in Asia decreased
9% on a currency-neutral basis, mainly as a result of declines in
Japan and China. In Latin America, sales grew 19% on a
currency-neutral basis, with double-digit increases in most of the
region's major markets, supported by the new Reebok companies in
Brazil/Paraguay and Argentina.
In euro terms, sales in Europe decreased 9% to € 3.442 billion in the
first nine months of 2009 from € 3.776 billion in 2008. Sales in
North America declined 3% to € 1.822 billion from € 1.871 billion in
2008. Revenues in Asia grew 1% to € 1.894 billion in the first nine
months of 2009 from € 1.875 billion in 2008. Sales in Latin America
grew 10% to € 713 million from € 647 million in the prior year.
+-------------------------------------------------------------------+
| | Nine Months | Nine Months | Change | Change |
| | 2009 | 2008 | y-o-y | y-o-y |
| | | | in euro | currency- |
| | | | terms | neutral |
|-------------+-------------+-------------+-----------+-------------|
| | € in | € in | in % | in % |
| | millions | millions | | |
|-------------+-------------+-------------+-----------+-------------|
| Europe | 3,442 | 3,776 | (9) | (8) |
|-------------+-------------+-------------+-----------+-------------|
| North | 1,822 | 1,871 | (3) | (11) |
| America | | | | |
|-------------+-------------+-------------+-----------+-------------|
| Asia | 1,894 | 1,875 | 1 | (9) |
|-------------+-------------+-------------+-----------+-------------|
| Latin | 713 | 647 | 10 | 19 |
| America | | | | |
|-------------+-------------+-------------+-----------+-------------|
| Total[1] | 7,923 | 8,225 | (4) | (7) |
+-------------------------------------------------------------------+
Nine months net sales growth by region
______________________________
[1] Including HQ/Consolidation.
Gross margin negatively impacted by higher clearance sales
The gross margin of the adidas Group decreased 4.3 percentage points
to 45.1% in the first nine months of 2009 (2008: 49.4%). This
development was mainly due to higher clearance sales, higher input
costs and currency devaluation effects, in particular related to the
Russian rouble. As a result, gross profit for the adidas Group
declined 12% in the first nine months of 2009 to € 3.576 billion
versus € 4.062 billion in the prior year.
Operating margin declines 5.8 percentage points
The operating margin of the adidas Group decreased 5.8 percentage
points to 5.9% in the first nine months of 2009 (2008: 11.7%). The
decline was due to the decrease in Group gross margin as well as
higher other operating expenses as a percentage of sales. Other
operating expenses as a percentage of sales increased 1.8 percentage
points to 41.0% in the first nine months of 2009 from 39.1% in 2008,
mainly as a result of higher expenses to support the Group's
development in emerging markets. As a result, Group operating profit
decreased 52% to € 465 million versus € 963 million in 2008.
Financial income down 37%
Financial income decreased 37% to € 15 million in the first nine
months of 2009 from € 23 million in the prior year, mainly due to
changes in the fair value of financial instruments.
Financial expenses increase 1%
Financial expenses increased 1% to € 137 million in the first nine
months of 2009 (2008: € 136 million). Negative exchange rate
variances were partly offset by a decline in interest expenses.
Income before taxes decreases 60%
Income before taxes (IBT) as a percentage of sales decreased 6.0
percentage points to 4.3% in the first nine months of 2009 from 10.3%
in 2008. This was mainly a result of the Group's operating margin
decrease. IBT for the adidas Group declined 60% to € 343 million from
€ 850 million in 2008.
Net income attributable to shareholders declines 62%
The Group's net income attributable to shareholders decreased 62% to
€ 226 million in the first nine months of 2009 from € 588 million in
2008. The Group's lower operating profit was the primary reason for
this development. The Group's tax rate increased 3.7 percentage
points to 34.2% in the first nine months of 2009 (2008: 30.5%),
mainly due to a less favourable regional earnings mix.
Basic and diluted earnings per share decrease 61% and 59%
respectively
Basic earnings per share decreased 61% to € 1.17 in the first nine
months of 2009 versus € 2.96 in 2008. The weighted average number of
shares used in the calculation of basic earnings per share decreased
to 193,515,512 in the first nine months of 2009 (2008 average:
198,868,061) due to the share buyback programme from January to
October 2008. Diluted earnings per share in the first nine months of
2009 decreased 59% to € 1.13 from € 2.78 in the prior year. The
weighted average number of shares used in the calculation of diluted
earnings per share was 209,247,568 (2008 average: 214,671,394). The
dilutive effect largely results from approximately sixteen million
additional potential shares that could be created in relation to the
Group's convertible bond.
Currency-neutral Group inventories down 8%
Group inventories decreased 9% to € 1.652 billion at the end of
September 2009 versus € 1.812 billion in 2008. On a currency-neutral
basis, inventories were down 8%. This development was mainly due to
reduced production volumes as well as clearance of excess inventories
at all brands, partly offset by higher inventories in Latin America.
Currency-neutral accounts receivable decrease 7%
At the end of September 2009, Group receivables decreased 9% to
€ 1.866 billion (2008: € 2.055 billion). On a currency-neutral basis,
receivables were down 7%. This decrease reflects the decline in sales
as well as strict discipline in the Group's trade terms management
despite the difficult economic situation in most markets.
Net borrowings reduced by € 299 million
Net borrowings at September 30, 2009 amounted to € 2.294 billion,
which represents a decrease of € 299 million, or 12%, versus € 2.593
billion at the end of September 2008. Lower working capital
requirements were the main reason for the net debt decline. This
positive effect more than offset cash outflows in an amount of € 32
million in relation to the meanwhile completed share buyback
programme as well as negative currency translation effects in an
amount of € 5 million. Consequently, the Group's financial leverage
decreased to 70.2% at the end of September 2009 versus 78.5% in the
prior year.
adidas Group sales to decrease in 2009
adidas Group sales are expected to decline at a low- to
mid-single-digit rate on a currency-neutral basis in 2009. Sales
development will be negatively impacted by weaker consumer demand due
to low levels of consumer confidence and rising unemployment in many
major markets. The Group projects a low- to mid-single-digit sales
decline on a currency-neutral basis for the adidas brand in 2009.
Reebok segment sales are also expected to decline at a low- to
mid-single-digit rate compared to the prior year on a
currency-neutral basis in 2009. Currency-neutral sales at
TaylorMade-adidas Golf are now projected to decline at a low- to
mid-single-digit rate, despite the consolidation of Ashworth for the
full twelve-month period.
adidas Group earnings per share to decrease in 2009
In 2009, the adidas Group gross margin is forecasted to decline to a
level between 45.0% and 45.5%. Higher sourcing costs due to increased
raw material and labour costs, in particular in the first half of the
year, as well as currency devaluation effects, primarily from the
depreciation of the Russian rouble, will contribute to this
development. A promotional environment in mature markets is expected
to also have a negative impact on gross margin development in 2009.
The Group's other operating expenses as a percentage of sales are
expected to increase in 2009. Higher expenses for controlled space
initiatives in the adidas and Reebok segments as well as costs
related to reorganisation activities will drive this development,
partially compensated by positive effects from efficiency
improvements throughout the organisation. As a result of the expected
Group gross margin decline and the projected increase in other
operating expenses as a percentage of sales, the operating margin for
the adidas Group is expected to decline to a level around 5.0%. Net
income attributable to shareholders and earnings per share are
projected to decline in 2009. Due to a more moderate increase of
input costs and positive impetus ahead of the 2010 FIFA World
Cup(TM), Group profitability will be significantly better in the
second half compared to the first half of the year. Full year diluted
earnings per share are expected to reach a level between € 1.15 and €
1.30.
Working capital management to improve balance sheet
Tight working capital management and disciplined investment
activities are expected to help optimise the Group's free cash flow
in 2009. Group inventories are expected to be significantly below the
prior year level at the end of 2009 as a result of the clearance of
excess inventories and a significant reduction of sourcing volumes in
the second half of 2009. Excess cash will largely be used to reduce
net borrowings, which are forecasted to be below the prior year
level.
Herbert Hainer stated: "Consumer and retailer sentiment still hovers
between fear and optimism. However, we are well prepared to face any
challenges thrown our way and I am cautiously optimistic. With a firm
grip on inventories, a better financial position and a leaner
organisation, we turn into the 2010 event year with innovative
products, exciting concepts and clear focus on the tasks at hand."
***
Contacts:
Media Relations Investor
Relations
Jan Runau John-Paul
O'Meara
Chief Corporate Communications Officer Head of
Investor
Relations
Tel.: +49 (0) 9132 Tel.: +49
84-3830 (0) 9132
84-2751
Katja Schreiber Dennis Weber
Corporate PR Manager Investor
Relations
Manager
Tel.: +49 (0) 9132 84-3810 Tel.: +49
(0) 9132
84-4989
Please visit our corporate website: www.adidas-Group.com
hugin.info/139192/R/1352448/327200.pdf
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
