adidas AG /
adidas Group Full Year 2010 Results
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For immediate release
          Herzogenaurach, March 2, 2011
Q4 2010 highlights:
* Currency-neutral Group sales up 9%
* adidas and Reebok sales increase 10% and 15% respectively
* Growth in all regions
* Comparable Retail store sales grow 15% currency-neutral
* Gross margin improves 0.3 percentage points
Full year 2010 highlights:
* Currency-neutral Group sales up 9%
* adidas and Reebok sales increase 9% and 12% respectively
* Group gross margin improves 2.4 percentage points to 47.8%
* Net income more than doubles to € 567 million
* Net borrowings down 76% to € 221 million at year-end
Outlook
* adidas Group sales to increase at a mid- to high-single-digit rate
* Operating margin to improve to a level between 7.5% and 8.0%
* Earnings per share to be in the range of € 2.98 to € 3.12
* Management to propose a dividend of € 0.80 per share
adidas Group currency-neutral sales increase 9% in the fourth quarter
During the fourth quarter of 2010, Group revenues increased 9% on a currency-
neutral basis. Currency-neutral revenues in the Wholesale and Retail segments
increased 8% and 23%, respectively. Sales for Other Businesses decreased 3%. By
brand, adidas and Reebok sales increased 10% and 15% currency-neutral,
respectively. Currency-neutral revenues in Western Europe increased 3% due to
growth in the Wholesale and Retail segments as well as Other Businesses.
Currency-neutral sales in European Emerging Markets rose 22%, driven by
significant growth in the Retail segment. Group sales in North America grew 12%
on a currency-neutral basis, driven by a 13% sales increase for adidas and a
24% sales increase for Reebok. Currency-neutral sales in Greater China grew
11%, driven by increases in both the Wholesale and Retail segments. Currency-
neutral sales in Other Asian Markets grew 7% as a result of increases in all
major markets. In Latin America, sales were up 8% on a currency-neutral basis,
driven by both Wholesale and Retail. Currency translation effects had a positive
impact on sales in euro terms. Group revenues grew 19% to € 2.931 billion in the
fourth quarter from € 2.458 billion in 2009.
Fourth quarter gross margin improves 0.3 percentage points
The Group's gross margin increased 0.3 percentage points to 46.5% (2009: 46.2%)
in the fourth quarter, mainly due to a larger share of higher-margin Retail
sales and less clearance sales. Group gross profit increased 20% to € 1.362
billion (2009: € 1.136 billion). Other operating expenses as a percentage of
sales increased 0.5 percentage points to 47.1% compared to the prior year (2009:
46.6%). This was mainly due to higher sales and marketing working budget
expenses. As a result of the higher other operating expenses as a percentage of
sales, the Group's operating margin decreased 0.8 percentage points to 1.0%.
Operating profit declined 33% to € 28 million compared to € 42 million in 2009.
In the fourth quarter of 2010, the Group's net income attributable to
shareholders decreased 64% to reach € 7 million (2009: € 19 million). Diluted
earnings per share went down to € 0.03 (2009: € 0.09).
"Our fourth quarter performance rounds off an excellent year for the adidas
Group," commented Herbert Hainer, adidas Group CEO. "Not only did we meet, but
we beat all our initial expectations for the year. All our brands scored with
consumers in an improving worldwide economy. We outgrew our major competitors,
achieving record sales of € 12 billion. Along the way, we generated an
outstanding operating cash flow of € 1.2 billion. Therefore, I am proud to
report that our Group is in fantastic shape."
adidas Group currency-neutral sales increase 9% in 2010
In 2010, Group revenues grew 9% on a currency-neutral basis, as a result of
sales increases in Wholesale, Retail and Other Businesses. This development
exceeded initial Management expectations of a low- to mid-single digit Group
sales increase. Currency translation effects had a positive impact on sales in
euro terms. Group revenues grew 15% to € 11.990 billion in 2010 from € 10.381
billion in 2009.
Wholesale and Retail segments drive strong sales growth in 2010
In 2010, currency-neutral sales grew in all segments. Currency-neutral Wholesale
revenues increased 8% during the period due to sales growth at both adidas and
Reebok. Currency-neutral Retail sales increased 18% versus the prior year as a
result of adidas and Reebok sales growth. Comparable Retail store sales improved
11% with the total number of stores growing to 2,270 by the end of the year
(2009: 2,212). Revenues in Other Businesses were up 2% on a currency-neutral
basis. Sales grew at TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey.
Currency translation effects had a positive impact on segmental sales in euro
terms. Wholesale revenues increased 14% to € 8.181 billion in 2010 from €7.164
billion in 2009. Retail sales rose 25% to € 2.389 billion versus € 1.906 billion
in the prior year. Sales in Other Businesses grew 10% to € 1.420 billion in
2010 (2009: € 1.293 billion).
+-------------+-------------+---------------+-----------------+
 | 2010 | 2009 |Change y-o-y in| Change y-o-y |
| | | euro terms |currency-neutral |
-----------------+-------------+-------------+---------------+-----------------+
 |€ in millions|€ in millions| in % | in % |
+----------------+-------------+-------------+---------------+-----------------+
|Wholesale | 8,181 | 7,164 | 14 | 8 |
+----------------+-------------+-------------+---------------+-----------------+
|Retail | 2,389 | 1,906 | 25 | 18 |
+----------------+-------------+-------------+---------------+-----------------+
|Other Businesses| 1,420 | 1,293 | 10 | 2 |
+----------------+-------------+-------------+---------------+-----------------+
|Total(1)) | 11,990 | 10,381 | 15 | 9 |
+----------------+-------------+-------------+---------------+-----------------+
2010 net sales development by segment
1) Including HQ/Consolidation.
Currency-neutral sales increase in nearly all regions
In 2010, currency-neutral adidas Group sales grew in all regions except Greater
China. Revenues in Western Europe increased 7% on a currency-neutral basis,
primarily as a result of double-digit sales growth in the UK, Germany and Spain.
In European Emerging Markets, Group sales increased 16% 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 grew 12% on a currency-neutral basis due
to strong increases in both the USA and Canada. By brand, adidas and Reebok
sales in this region grew by 14% and 22% respectively. Sales in Greater China
decreased 2% on a currency-neutral basis. Currency-neutral revenues in Other
Asian Markets grew 6% due to increases in most markets. In Latin America, sales
grew 14% 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.
+-------------+-------------+-------------+-----------------+
 | 2010 | 2009 |Change y-o-y | Change y-o-y |
| | |in euro terms|currency-neutral |
-------------------+-------------+-------------+-------------+-----------------+
 |€ in millions|€ in millions| in % | in % |
+------------------+-------------+-------------+-------------+-----------------+
|Western Europe | 3,543 | 3,261 | 9 | 7 |
+------------------+-------------+-------------+-------------+-----------------+
|European Emerging | 1,385 | 1,122 | 23 | 16 |
|Markets | | | | |
+------------------+-------------+-------------+-------------+-----------------+
|North America | 2,805 | 2,362 | 19 | 12 |
+------------------+-------------+-------------+-------------+-----------------+
|Greater China | 1,000 | 967 | 3 | (2) |
+------------------+-------------+-------------+-------------+-----------------+
|Other Asian | 1,972 | 1,647 | 20 | 6 |
|Markets | | | | |
+------------------+-------------+-------------+-------------+-----------------+
|Latin America | 1,285 | 1,006 | 28 | 14 |
+------------------+-------------+-------------+-------------+-----------------+
|Total(1)) | 11,990 | 10,381 | 15 | 9 |
+------------------+-------------+-------------+-------------+-----------------+
2010 net sales development by region
1) Including HQ/Consolidation.
Group gross margin improves 2.4 percentage points
The gross margin of the adidas Group increased 2.4 percentage points to 47.8% in
2010 (2009: 45.4%). This development was mainly due to lower input costs, less
clearance sales and a larger share of higher-margin Retail sales. As a result,
gross profit for the adidas Group grew 22% in 2010 to € 5.730 billion versus €
4.712 billion in the prior year.
Operating margin improves 2.6 percentage points
Group operating profit increased 76% to € 894 million versus € 508 million in
2009. As a result, the operating margin of the adidas Group improved
2.6Â percentage points to 7.5% in 2010 (2009: 4.9%). The operating margin
improvement was primarily due to the higher gross margin as well as lower other
operating expenses as a percentage of sales, which declined by 0.2Â percentage
points.
Financial income up 28%
Financial income increased 28% to € 25 million in 2010 from € 19 million in the
prior year, mainly due to an increase in interest income as well as positive
currency exchange rate effects.
Financial expenses decrease 34%
Financial expenses decreased 34% to € 113 million in 2010 (2009: € 169 million).
The non-recurrence of prior year negative currency exchange rate effects as well
as lower interest expenses contributed to the decline.
Group tax rate down to 29.5%
The Group's tax rate decreased 2.0 percentage points to 29.5% in 2010 (2009:
31.5%), mainly due to the non-recurrence of prior year charges related to the
write-down of deferred tax assets.
Net income attributable to shareholders more than doubles
In 2010, the Group's net income attributable to shareholders increased to
€ 567 million from € 245 million in 2009. This represents an increase of 131%
versus the prior year level. As a result, basic and diluted earnings per share
amounted to € 2.71 in 2010. In the prior year period, basic earnings per share
amounted to € 1.25 and diluted earnings per share to € 1.22. The weighted
average number of shares used in the calculation was 209,216,186 in 2010. In the
prior year period, the number amounted to 196,220,166 for the calculation of
basic earnings per share and 209,238,099 for the calculation of diluted earnings
per share.
Group inventories up 34% currency-neutral
Group inventories increased 44% to € 2.119 billion at the end of December 2010
versus € 1.471 billion in 2009. On a currency-neutral basis, inventories grew
34%, which reflects the Group's expectations for continued growth in the coming
quarters.
Accounts receivable increase 7% currency-neutral
At the end of December 2010, Group receivables increased 17% to € 1.667 billion
(2009: € 1.429 billion) as a result of the Group sales growth. On a currency-
neutral basis, receivables were up 7%. This growth is lower than the 9%
currency-neutral Group sales increase in the fourth quarter of 2010 and mirrors
strict discipline in the Group's trade terms management and concerted collection
efforts in all segments.
Net borrowings decrease by € 696 million
Net borrowings at December 31, 2010 amounted to € 221 million, which represents
a decrease of € 696 million, or 76%, versus € 917 million in the prior year.
Strong operating cash flow and lower capital expenditure than originally planned
positively influenced this development. Currency effects had a positive impact
of € 43 million on net borrowings development. At the end of 2010, the ratio of
net borrowings over EBITDA was 0.2 (ratio in 2009: 1.2) and thus well within the
Group's medium-term guideline of less than two times.
adidas Group currency-neutral sales to increase at a mid- to high-single-digit
rate in 2011
adidas Group sales are expected to increase at a mid- to high-single-digit rate
on a currency-neutral basis in 2011. The positive sales development will be
driven by rising consumer confidence as the global economy continues to improve.
The positive impacts of the Group's high exposure to fast-growing emerging
markets, the further expansion of Retail as well as continued momentum at the
Reebok brand will more than offset the non-recurrence of sales related to the
2010 FIFA World Cup. As a result, the adidas Group expects to outperform global
economic growth in 2011.
Earnings per share to increase to a level between € 2.98 and € 3.12
In 2011, the adidas Group gross margin is forecasted to be roughly in line with
the prior year, at a level between 47.5% and 48.0% (2010: 47.8%). 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. In 2011, Group
gross margin will benefit from positive regional mix effects, as growth rates in
emerging markets are projected to be above growth rates in more mature markets.
In addition, improvements in the Retail segment as well as at the Reebok brand
will positively influence Group gross margin development. However, these
positive effects will be offset by several factors. In particular, sourcing
costs will increase significantly compared to the prior year as a result of
rising raw material costs and capacity constraints. In addition, hedging terms
in 2011 will be slightly less favourable compared to the prior year.
In 2011, the Group's other operating expenses as a percentage of sales are
expected to decrease modestly (2010: 42.1%). Sales and marketing working budget
expenses as a percentage of sales are projected to decline modestly compared to
the prior year. Marketing investments to support Reebok's growth strategy in the
men's and women's fitness and training categories, as well as investments to
support growth in the Group's key attack markets North America, Greater China
and Russia/CIS will be offset by the non-recurrence of expenses in relation to
adidas' presence at the 2010 FIFA World Cup. Operating overhead expenditures as
a percentage of sales are forecasted to decline slightly in 2011. 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 and efficiency
gains in the Group's non-allocated central costs.
In 2011, the operating margin for the adidas Group is projected to increase to a
level between 7.5% and 8.0% (2010: 7.5%). Lower other operating expenses as a
percentage of sales are expected to be the primary driver of the improvement. In
addition, the Group expects lower interest rate expenses in 2011 due to a lower
average level of net borrowings. The Group tax rate is expected to be at a
similar level compared to the prior year level (2010: 29.5%). As a result of
these developments, earnings per share are expected to increase at a rate of
10% to 15% to a level between € 2.98 and € 3.12 (2010: € 2.71).
Excess cash to be used to support growth initiatives
In 2011, the Group expects continued positive cash flows from operating
activities. Cash will be used to finance working capital needs, investment
activities, as well as dividend payments. Management intends to largely use
excess cash to invest in the growth initiatives of the Group's strategic
business plan "Route 2015" and to further reduce net borrowings. Over the long
term, the Group aims to maintain a ratio of net borrowings over EBITDA of less
than two times as measured at year-end (2010 ratio: 0.2).
Management to propose dividend of € 0.80
In light of the strong cash flow generation in 2010 and the significantly
reduced level of net borrowings, Management will recommend paying a dividend of
€ 0.80 to shareholders at the Annual General Meeting (AGM) on May 12, 2011,
representing an increase of 129% compared to 2009 (2009: € 0.35). Subject to
shareholder approval, the dividend will be paid on May 13, 2011. The proposal
represents a payout ratio of 30% of net income, as in the prior year, and
complies with the Group's dividend policy, according to which Management intends
to pay out between 20% and 40% of net income attributable to shareholders
annually. Based on the number of shares outstanding at the end of 2010, the
dividend payout will increase to € 167 million compared to € 73 million in the
prior year.
Herbert Hainer stated: "2011 is shaping up to be another great year for the
adidas Group, and we are off to a fast start. We have every possible advantage a
company could wish for - strong brands, premium products, superior marketing,
tremendous global reach and a very healthy balance sheet. I am confident this
year will see us achieve important milestones as we embark on Route 2015."
***
Contacts:
Media Relations                                       Investor Relations
Jan Runau                                       John-Paul O'Meara
Chief Corporate Communication Officer           Vice President Investor
Relations
Tel.: +49 (0) 9132 84-3830Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Tel.: +49 (0)
9132 84-2751
Katja Schreiber                                       Johannes Fink
Senior Corporate PR Manager                             Junior Investor
Relations Manager
Tel.: +49 (0) 9132 84-3810Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Tel.: +49 (0)
9132 84-3461
Please visit our corporate website: www.adidas-Group.com
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