First Half Year 2008 Results

8/5/2008, 7:30 AM (Source: GlobeNewswire)
Currency-neutral Group sales grow 12% in the first half year
First half year earnings per share increase 25%


* Currency-neutral Group sales grow 14% in the second quarter
* Q2 earnings per share grow 15%
* Full year gross and operating margin guidance increased


Second quarter adidas Group currency-neutral sales grow 14%
During the second quarter of 2008, Group revenues grew 14% on a
currency-neutral basis. All brand segments contributed to this
development with currency-neutral sales increasing 19% at adidas, 2%
at Reebok and 6% at TaylorMade-adidas Golf. Currency movements
negatively impacted Group sales in euro terms. Group revenues grew 5%
in euro terms to ¤ 2.521 billion in the second quarter of 2008 from ¤
2.400 billion in 2007.

Second quarter EPS increases 15%
The Group's gross margin increased 2.7 percentage points to a new
record level of 50.1% (2007: 47.4%) in the second quarter as a result
of an improving regional and product mix, further own-retail
expansion and favorable currency movements. Group gross profit
increased 11% to ¤ 1.263 billion (2007: ¤ 1.138 billion). As a result
of the strong gross margin increase in all brand segments and
operating profit growth in the HQ/Consolidation segment, the Group's
operating margin increased 0.4 percentage points to 8.2% in the
second quarter of 2008 versus 7.8% in the prior year. These effects
more than offset higher operating expenses as a percentage of sales
primarily as a result of the phasing of this year's marketing
expenses in the adidas segment. Operating profit grew 10% to ¤ 208
million versus ¤ 188 million in 2007. In the second quarter of 2008,
the Group's net income attributable to shareholders increased 12% to
¤ 116 million (2007: ¤ 104 million) due to the higher operating
profit as well as a lower tax rate. As a result of the lower weighted
average number of shares due to the share buyback program, earnings
per share increased at an even stronger rate. Basic EPS for the
second quarter grew 15% to ¤ 0.59.

adidas Group currency-neutral sales grow 12% in the first half of
2008
During the first six months of 2008, Group revenues increased 12% on
a currency-neutral basis, driven by double-digit sales growth in the
adidas and TaylorMade-adidas Golf segments. The adidas segment grew
16%, the Reebok segment decreased 2% and TaylorMade-adidas Golf
segment sales increased 11%. Currency movements negatively impacted
Group sales in euro terms. Group revenues grew 4% in euro terms to ¤
5.142 billion in the first half of 2008 from ¤ 4.938 billion in 2007.

"We are proud to report a strong set of financial results for the
first half of 2008. Our performance is nothing short of exceptional,
particularly in light of the tougher macroeconomic environment,"
commented adidas CEO and Chairman Herbert Hainer. "adidas and
TaylorMade-adidas Golf continue to show strong momentum and we have
laid the foundation at Reebok for continued improvement in the second
half of the year."


+---------------------------------------------------------------------+
| |1st Half |1st Half | Change | Change y-o-y |
| |Year 2008|Year 2007|y-o-y in| currency-neutral |
| | | | euro | |
| | | | terms | |
|-----------------+---------+---------+--------+----------------------|
| | ¤ in | ¤ in | in % | in % |
| |millions |millions | | |
|-----------------+---------+---------+--------+----------------------|
|adidas | 3,787 | 3,454 | 10 | 16 |
|-----------------+---------+---------+--------+----------------------|
|Reebok | 923 | 1,038 | (11) | (2) |
|-----------------+---------+---------+--------+----------------------|
|TaylorMade-adidas| 417 | 419 | (0) | 11 |
|Golf | | | | |
|-----------------+---------+---------+--------+----------------------|
|HQ/Consolidation | 16 | 28 | (44) | (38) |
|-----------------+---------+---------+--------+----------------------|
|Total | 5,142 | 4,938 | 4 | 12 |
+---------------------------------------------------------------------+

First half year net sales growth by segment

Strong sales increase in nearly all regions
adidas Group sales grew at double-digit rates in all regions except
North America where revenues declined. First half Group sales in
Europe grew 16% on a currency-neutral basis as a result of strong
increases in nearly all countries. In North America, Group revenues
declined by 8% on a currency-neutral basis due to lower adidas and
Reebok sales in the USA. Sales for the Group in Asia increased 25% on
a currency-neutral basis in the first half of 2008, driven by
particularly strong growth in China. In Latin America,
currency-neutral sales grew 29% in the first half of the year, with
double-digit increases coming from all of the region's major markets.
The development was supported by the first-time consolidation of
Reebok's joint ventures in the region. Currency translation effects
negatively impacted sales in euro terms in all regions. Sales in
Europe increased 11% in euro terms to ¤ 2.352 billion in 2008 from ¤
2.116 billion in 2007. Revenues in North America decreased 19% to ¤
1.160 billion in 2008 from ¤ 1.429 billion in the prior year. In
euro terms, revenues in Asia grew 17% to ¤ 1.214 billion in 2008 from
¤ 1.036 billion in 2007. Sales in Latin America grew 23% to ¤ 381
million in 2008 from ¤ 310 million in the prior year.

+-------------------------------------------------------------------+
| | 1st Half | 1st Half | Change | Change y-o-y |
| | Year 2008 | Year 2007 | y-o-y | currency-neutral |
| | | | in euro | |
| | | | terms | |
|----------+-----------+-----------+---------+----------------------|
| | ¤ in | ¤ in | in % | in % |
| | millions | millions | | |
|----------+-----------+-----------+---------+----------------------|
| Europe | 2,352 | 2,116 | 11 | 16 |
|----------+-----------+-----------+---------+----------------------|
| North | 1,160 | 1,429 | (19) | (8) |
| America | | | | |
|----------+-----------+-----------+---------+----------------------|
| Asia | 1,214 | 1,036 | 17 | 25 |
|----------+-----------+-----------+---------+----------------------|
| Latin | 381 | 310 | 23 | 29 |
| America | | | | |
|----------+-----------+-----------+---------+----------------------|
| Total[1] | 5,142 | 4,938 | 4 | 12 |
+-------------------------------------------------------------------+

First half year net sales growth by region
Record group gross margin
The gross margin of the adidas Group increased by 2.5 percentage
points to 49.6% of sales in the first half of 2008 (2007: 47.1%),
driven by improvements in all brand segments. This highest-ever first
half year rate was related to an improving regional and product mix,
increased own-retail activities as well as favorable currency
movements. Cost synergies resulting from the Reebok integration into
the adidas Group also continued to have a positive impact. Input
price increases had only a modest negative impact on the cost of
sales development in the first half of 2008. As a result of the
Group's strong top-line growth and gross margin improvement, gross
profit for the adidas Group rose 10% in the first half of 2008 to
reach ¤ 2.552 billion versus ¤ 2.326 billion in the prior year.

Operating margin increases by 1.1 percentage points
The Group's operating margin increased 1.1 percentage points to 9.5%
in the first half of 2008 (2007: 8.5%). This is the highest first
half operating margin since the acquisition of Reebok. Operating
expenses as a percentage of sales increased by 1.3 percentage points
to 40.9% in the first half of 2008 from 39.6% in 2007. This
development was primarily driven by higher marketing expenses as a
percentage of sales in the adidas segment in connection with this
year's major sporting events. Increased expenses to support growth in
emerging markets such as Russia in both the adidas and Reebok
segments also impacted this development. Operating profit for the
adidas Group increased 17% in the first half of 2008 to reach ¤ 490
million versus ¤ 417 million in 2007.

Net financial expenses decrease 3%
Net financial expenses decreased 3% to ¤ 71 million in the first
half of 2008 from ¤ 73 million in the prior year as a result of lower
average borrowings in 2008 compared to the first half of the prior
year.

Income before taxes increases by 22%
As a result of the Group's operating margin increase as well as lower
net financial expenses, income before taxes (IBT) as a percentage of
sales increased by 1.2 percentage points to 8.1% in 2008 from 7.0% in
2007. Income before taxes for the adidas Group grew 22% to ¤ 419
million in the first half of 2008 from ¤ 344 million in 2007.

Net income attributable to shareholders up 23%
The Group's net income attributable to shareholders increased 23% to
¤ 286 million in the first half of 2008 from ¤ 232 million in 2007.
The Group's tax rate decreased by 0.5 percentage points to 31.5% in
the first half of 2008 (2007: 32.0%) and thus also contributed to
this development. The Group's minority interests declined by 16% to
¤ 1 million in the first half of 2008 from ¤ 2 million during the
same period in the prior year.

Earnings per share increase 25%
Basic earnings per share increased 25% to ¤ 1.42 in the first half of
2008 versus ¤ 1.14 in the prior year. The weighted average number of
shares used in the calculation of basic earnings per share was
200,415,758 (2007 average: 203,565,047). Diluted earnings per share
in 2008 increased 24% to ¤ 1.35 from ¤ 1.09 in the prior year. The
weighted average number of shares used in the calculation of diluted
earnings per share was 216,211,434 (2007 average: 219,446,886).

3.3 million shares repurchased in the second quarter
On January 29, 2008, adidas AG announced the launch of a share
buyback program to repurchase up to 5% of the company's stock capital
until November 2008. During the second quarter, adidas AG purchased
over 3.3 million shares at an average price of ¤ 41.99. The buyback
volume amounted to ¤ 139 million in the second quarter. Over the
entire buyback period, since January 30 to date, adidas AG bought
back almost 7.7 million shares at an average price of ¤ 41.35. The
total buyback volume amounted to ¤ 318 million.

Working capital development supports further growth
Group inventories grew 5% to ¤ 1.806 billion at the end of the first
half of 2008 versus ¤ 1.716 billion in 2007. On a currency-neutral
basis, this represents an increase of 16%. This development is due to
business expansion in emerging markets and inventories related to the
newly established Reebok joint ventures in Latin America. Group
receivables decreased 3% to ¤ 1.641 billion at the end of the first
half of 2008 versus ¤ 1.689 billion in the prior year. On a
currency-neutral basis, receivables increased 5%, which is well below
net sales growth for the second quarter. This reflects ongoing strict
discipline in the Group's trade terms management and concerted
collection efforts in all segments.

Net borrowings reduced by ¤ 134 million
Net borrowings at June 30, 2008 were ¤ 2.260 billion, down 6% or
¤ 134 million versus ¤ 2.395 billion in the prior year. Strong
bottom-line profitability and currency effects positively impacted
this development and more than offset cash outflows related to the
share buyback program.

adidas backlogs grow 8% on a currency-neutral basis
Backlogs for the adidas brand at the end of the second quarter of
2008 increased 8% versus the prior year on a currency-neutral basis.
This improvement was supported by adidas' strength in most major
categories. In euro terms, adidas backlogs grew 1%. Footwear backlogs
grew 9% in currency-neutral terms (+2% in euros) with increases in
all regions. Apparel backlogs grew 9% on a currency-neutral basis
(+2% in euros), driven by strong double-digit increases in Asia and
high-single-digit growth in Europe. Hardware backlogs decreased due
to the non-recurrence of prior year orders related to the UEFA EURO
2008(TM).


+--------------------------------------------------------------------------------------+
| | Footwear | Apparel | Total[2] |
|---------+------------------------+-------------------------+-------------------------|
| |in ¤ | currency-neutral | in ¤ | currency-neutral | in ¤ | currency-neutral |
|---------+-----+------------------+------+------------------+------+------------------|
|Europe | 1 | 5 | 2 | 7 | 0 | 4 |
|---------+-----+------------------+------+------------------+------+------------------|
|North | (9) | 6 | (23) | (10) | (14) | 0 |
|America | | | | | | |
|---------+-----+------------------+------+------------------+------+------------------|
|Asia | 14 | 21 | 17 | 25 | 13 | 21 |
|---------+-----+------------------+------+------------------+------+------------------|
|Total | 2 | 9 | 2 | 9 | 1 | 8 |
+--------------------------------------------------------------------------------------+

Year-over-year development of adidas order backlogs by product
category and region as at June 30, 2008
(in %)
Reebok backlogs decline
Currency-neutral Reebok backlogs at the end of the second quarter of
2008 decreased 13% versus the prior year on a currency-neutral basis.
In euro terms, this represents a decline of 21%. Footwear backlogs
decreased 13% in currency-neutral terms (-21% in euros). Apparel
backlogs declined by 20% on a currency-neutral basis (-28% in euros).
Both of these developments reflect the short-term impact of strategic
initiatives to revitalize the Reebok brand in the USA, the UK and
Japan. Hardware backlogs were up at a double-digit rate due to
increases in the hockey category. Due to the exclusion of the
own-retail business and the high share of at-once business in
Reebok's sales mix, order backlogs in this segment are not indicative
of the expected 2008 sales development.


+---------------------------------------------------------------------------------------+
| | Footwear | Apparel | Total[3] |
|---------+-------------------------+-------------------------+-------------------------|
| | in ¤ | currency-neutral | in ¤ | currency-neutral | in ¤ | currency-neutral |
|---------+------+------------------+------+------------------+------+------------------|
|Europe | (13) | (9) | (27) | (22) | (15) | (10) |
|---------+------+------------------+------+------------------+------+------------------|
|North | (39) | (29) | (32) | (21) | (32) | (21) |
|America | | | | | | |
|---------+------+------------------+------+------------------+------+------------------|
|Asia | 2 | 8 | (1) | 3 | 1 | 6 |
|---------+------+------------------+------+------------------+------+------------------|
|Total | (21) | (13) | (28) | (20) | (21) | (13) |
+---------------------------------------------------------------------------------------+

Year-over-year development of Reebok order backlogs by product
category and region as at
June 30, 2008 (in %)

Gross and operating margin full year guidance increased
adidas Group sales in 2008 are expected to grow at a
high-single-digit rate on a currency-neutral basis. Currency-neutral
sales for brand adidas in 2008 are now forecasted to increase at a
low-double-digit rate (previously: high-single-digit rate). Sales
guidance for the Reebok and TaylorMade-adidas Golf segments remains
unchanged. Currency-neutral Reebok segment sales are projected to
grow at a mid- to high-single-digit rate in 2008. At
TaylorMade-adidas Golf, full year currency-neutral sales are
forecasted to increase at a mid-single-digit rate. As a result of
the Group's strong gross margin improvement during the first half of
the year, the full year gross margin is now expected to exceed 48.0%
(previously: 47.5 to 48.0%), driven by improvements in all three
brand segments. The operating margin is now also projected to be
higher than originally forecasted. Group operating margin is expected
to approach 10.0% in 2008 (previously: at least 9.5%). Full year net
income attributable to shareholders is projected to grow by at least
15% in 2008 versus the 2007 level of ¤ 551 million. This will
represent the eighth consecutive year of double-digit net income
growth for the Group.

Herbert Hainer stated: "Our performance in the first half of the year
puts us firmly on track to achieve all of our financial targets for
2008. We even expect to exceed some of our original goals and at the
upcoming Olympic Games we are ready to showcase the power of our
brands to audiences around the world."


***

Contacts:


Media Relations Investor
Relations
Jan Runau Natalie M. Knight
Chief Corporate Vice President
Communications Officer Investor
Relations
Tel.: +49 (0) 9132 84-3830 Tel.: +49 (0)
9132 84-2187

Anne Putz John-Paul O'Meara
Head of Corporate PR Senior Investor
Relations Manager
Tel.: +49 (0) 9132 84-2964 Tel.: +49 (0)
9132 84-2751

Kirsten Keck Dennis Weber
Corporate PR Manager Investor
Relations Manager
Tel.: +49 (0) 9132 84-6207 Tel.: +49 (0)
9132 84-4989


Please visit our corporate website: www.adidas-Group.com



[1] Including HQ/Consolidation.
[2] Includes hardware backlogs.

[3] Includes hardware backlogs.

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