Full Year 2008 Results

3/4/2009, 7:30 AM (Source: GlobeNewswire)
Record year for the adidas Group
Full year basic and diluted earnings per share up 20%
Group gross margin reaches new record level at 48.7%
Currency-neutral Group sales grow 9% in 2008


* Currency-neutral Group sales grow 4% in the fourth quarter

* Currency-neutral adidas and Reebok backlogs decline
* Group sales and earnings per share expected to decrease in 2009


Fourth quarter adidas Group currency-neutral sales grow 4%
Fourth quarter Group revenues grew 4% on a currency-neutral basis.
This development was due to higher sales in the adidas segment.
Reebok and TaylorMade-adidas Golf revenues declined. On a regional
basis, currency-neutral sales grew by double-digit rates in both Asia
and Latin America. Revenues in Europe remained stable on a
currency-neutral basis, while sales in North America decreased.
Currency movements had a positive impact on revenues in euro terms.
Group sales in euro terms increased 6% to ¤ 2.574 billion in the
fourth quarter of 2008 (2007: ¤ 2.419 billion).

Fourth quarter net income attributable to shareholders increases
strongly
Fourth quarter gross margin declined 0.2 percentage points to 46.4%
(2007: 46.6%). A higher gross margin in the adidas segment could not
offset declines in the Reebok segment as a result of higher clearance
sales at lower margins and in the TaylorMade-adidas Golf segment. At
TaylorMade-adidas Golf, a promotional golf retail environment had a
negative effect on gross margin development. Group gross profit grew
6% to ¤ 1.194 billion (2007: ¤ 1.127 billion). Net operating expenses
and income as a percentage of sales decreased mainly due to lower
marketing expenses in the adidas segment. The realisation of a book
gain in an amount of ¤ 21 million related to the acquisition of
Ashworth, Inc. was partially offset by restructuring costs and other
one-time expenses of ¤ 7 million. As a result, the Group's operating
margin increased 1.7 percentage points to 4.2% in the fourth quarter
of 2008 versus 2.5% in the prior year. Operating profit grew 77% to
¤ 107 million versus ¤ 61 million in 2007. The Group's net income
attributable to shareholders increased 151% to ¤ 54 million (2007:
¤ 21 million) due to higher operating profit and a lower tax rate.
The Group tax rate declined strongly as a result of one-time tax
benefits. Net financial expenses, however, increased primarily as a
result of net foreign currency exchange losses resulting from the
revaluation of balance sheet positions in foreign currencies.
adidas Group currency-neutral sales grow 9% in 2008
In 2008, Group revenues increased 9% on a currency-neutral basis, as
a result of strong sales growth in the adidas and TaylorMade-adidas
Golf segments. Currency translation effects negatively impacted Group
sales in euro terms. Group revenues grew 5% in euro terms to
¤ 10.799 billion in 2008 from ¤ 10.299 billion in 2007.

"2008 was another record year for our Group," commented Herbert
Hainer, adidas Group CEO and Chairman. "This performance is clearly a
testament to the underlying strength of our business model - being
global, diversified and consumer focused."

adidas and TaylorMade-adidas Golf segments drive top-line performance
The adidas segment was the most significant contributor to Group
sales growth in 2008. Currency-neutral adidas segment revenues
increased 14% during the period, driven by double-digit increases in
all major performance categories. Currency-neutral sales in the
Reebok segment decreased 2% versus the prior year. Growth in the
running category was offset by declines in most other categories. At
TaylorMade-adidas Golf, currency-neutral revenues increased 7%, due
to positive sales momentum in apparel, footwear, balls and putters.
Currency translation effects negatively impacted sales in all
segments in euro terms. adidas sales increased 10% to ¤ 7.821 billion
in 2008 from ¤ 7.113 billion in 2007. Sales at Reebok decreased 8% to
¤ 2.148 billion versus ¤ 2.333 billion in the prior year.
TaylorMade-adidas Golf sales increased 1% to ¤ 812 million in 2008
from ¤ 804 million in 2007.


+----------------------------------------------------------------------+
| | 2008 | 2007 | Change | Change y-o-y |
| | | | y-o-y | currency-neutral |
| | | | in euro| |
| | | |terms | |
|-------------------+----------+----------+--------+-------------------|
| | ¤ in | ¤ in | in % | in % |
| |millions |millions | | |
|-------------------+----------+----------+--------+-------------------|
|adidas | 7,821 | 7,113 | 10 | 14 |
|-------------------+----------+----------+--------+-------------------|
|Reebok | 2,148 | 2,333 | (8) | (2) |
|-------------------+----------+----------+--------+-------------------|
|TaylorMade-adidas | 812 | 804 | 1 | 7 |
|Golf | | | | |
|-------------------+----------+----------+--------+-------------------|
|HQ/Consolidation | 17 | 48 | (64) | (63) |
|-------------------+----------+----------+--------+-------------------|
|Total | 10,799 | 10,299 | 5 | 9 |
+----------------------------------------------------------------------+


Double-digit currency-neutral sales increases in nearly all regions
adidas Group sales grew at double-digit rates on a currency-neutral
basis in all regions except North America in 2008. Group sales in
Europe grew 11% on a currency-neutral basis as a result of strong
growth in emerging markets. In North America, Group sales declined 8%
on a currency-neutral basis due to lower sales in the USA. Sales for
the adidas Group in Asia increased 20% on a currency-neutral basis,
driven by particularly strong growth in China. In Latin America,
sales grew 42% on a currency-neutral basis, with double-digit
increases coming from most of the region's major markets, supported
by the new Reebok companies in Brazil/Paraguay and Argentina.
Currency translation effects negatively impacted sales in euro terms
in all regions. In euro terms, sales in Europe increased 7% to
¤ 4.665 billion in 2008 from ¤ 4.369 billion in 2007. Sales in North
America decreased 14% to ¤ 2.520 billion in 2008 from ¤ 2.929 billion
in the prior year. Revenues in Asia grew 18% to ¤ 2.662 billion in
2008 from ¤ 2.254 billion in 2007. Sales in Latin America grew 36% to
¤ 893 million in 2008 from ¤ 657 million in the prior year.


+-------------------------------------------------------------------+
| | 2008 | 2007 | Change | Change y-o-y |
| | | | y-o-y | currency-neutral |
| | | | in | |
| | | | euro | |
| | | | terms | |
|------------+-----------+-----------+---------+--------------------|
| | ¤ in | ¤ in | in % | in % |
| | millions | millions | | |
|------------+-----------+-----------+---------+--------------------|
| Europe | 4,665 | 4,369 | 7 | 11 |
|------------+-----------+-----------+---------+--------------------|
| North | 2,520 | 2,929 | (14) | (8) |
| America | | | | |
|------------+-----------+-----------+---------+--------------------|
| Asia | 2,662 | 2,254 | 18 | 20 |
|------------+-----------+-----------+---------+--------------------|
| Latin | 893 | 657 | 36 | 42 |
| America | | | | |
|------------+-----------+-----------+---------+--------------------|
| Total[1] | 10,799 | 10,299 | 5 | 9 |
+-------------------------------------------------------------------+

[1] Including HQ/Consolidation.

Gross margin reaches record level of 48.7%
The gross margin of the adidas Group increased 1.3 percentage points
to 48.7% in 2008 (2007: 47.4%). This is the highest annual gross
margin for the Group since the IPO in 1995. The improvement was
mainly due to an improving regional mix, further own-retail expansion
and a more favourable product mix. As a result, gross profit for the
adidas Group rose 8% in 2008 to reach ¤ 5.256 billion versus
¤ 4.882 billion in the prior year.

Operating margin improves 0.7 percentage points
The operating margin of the adidas Group increased 0.7 percentage
points to 9.9% in 2008 (2007: 9.2%). The operating margin increase
was a result of the gross margin improvement and higher other
operating income, which more than offset higher other operating
expenses as a percentage of sales. Other operating expenses as a
percentage of sales increased 0.6 percentage points to 40.5% in 2008
from 40.0% in 2007. Higher expenses to support the Group's growth in
emerging markets were partly offset by efficiency improvements and a
slight decrease in marketing working budget expenditure as a
percentage of sales. Group operating profit increased 13% in 2008 to
reach ¤ 1.070 billion versus ¤ 949 million in 2007.

Income before taxes increases 11%
Income before taxes grew 11% to ¤ 904 million in 2008 from ¤ 815
million in 2007. This was a result of the Group's operating margin
increase, which more than offset higher net financial expenses. Net
financial expenses increased 23% to ¤ 166 million in 2008 from ¤ 134
million in the prior year primarily due to foreign currency exchange
losses resulting from the revaluation of balance sheet positions in
foreign currencies.

Net income attributable to shareholders grows 16%
The Group's net income attributable to shareholders increased 16% to
¤ 642 million in 2008 from ¤ 551 million in 2007, representing the
eighth consecutive year of double-digit earnings growth. The Group's
higher operating profit, a lower tax rate and lower minority
interests contributed to this development. The Group's tax rate
decreased 3.0 percentage points to 28.8% in 2008 (2007: 31.8%) mainly
due to a more favourable regional earnings mix throughout the Group
as well as one-time tax benefits in the fourth quarter of 2008.

Basic and diluted earnings per share increase 20%
In 2008, earnings per share increased at a higher rate than the
Group's net income attributable to shareholders due to a decrease in
the number of shares outstanding related to the Group's share buyback
programme. Basic earnings per share increased 20% to ¤ 3.25 in 2008
versus ¤ 2.71 in 2007. Diluted earnings per share grew 20% to ¤ 3.07
from ¤ 2.57 in the prior year.

Higher Group inventories and receivables
Group inventories increased 22% to ¤ 1.995 billion at the end of 2008
versus ¤ 1.629 billion in 2007. On a currency-neutral basis,
inventories grew 21%. This was a result of a higher volume of product
shipments received from suppliers towards the end of the year.
Hesitant customer order patterns also impacted this development.
Inventory ageing, however, improved compared to the prior year. Group
receivables increased 11% to ¤ 1.624 billion (2007: ¤ 1.459 billion).
On a currency-neutral basis, receivables grew 13%. This increase
mainly reflects slower receipt of payments due to the difficult
economic situation in some markets.

Net borrowings increase
Net borrowings at December 31, 2008 amounted to ¤ 2.189 billion,
which represents an increase of ¤ 423 million, or 24%, versus
¤ 1.766 billion in the prior year. The Group's share buyback in an
amount of ¤ 409 million, higher working capital requirements and
negative currency effects contributed to this development.
Consequently, the Group's financial leverage increased to 64.6% at
the end of 2008 versus 58.4% in the prior year.

adidas backlogs decrease 6% currency-neutral
Backlogs for the adidas brand at the end of 2008 decreased 6% versus
the prior year on a currency-neutral basis. In euro terms, adidas
backlogs declined 4%. This development reflects the difficult retail
environment in many major markets. In addition, order backlogs in
Europe were negatively impacted by the non-recurrence of strong prior
year orders for football products supported by the UEFA EURO
2008(TM). Differences in order timing had a negative effect on the
development of backlogs in Asia. Footwear backlogs decreased 4% in
currency-neutral terms (-2% in euros). Growth in North America could
not offset declines in Europe and Asia. Apparel backlogs decreased 6%
on a currency-neutral basis (-4% in euros) with declines in all
regions.


+-------------------------------------------------------------------+
| | Footwear | Apparel | Total[2] |
|----------+------------------+------------------+------------------|
| | in | currency- | in | currency- | in | currency- |
| | ¤ | neutral | ¤ | neutral | ¤ | neutral |
|----------+-----+------------+-----+------------+-----+------------|
| Europe | (7) | (3) | (9) | (4) | (9) | (5) |
|----------+-----+------------+-----+------------+-----+------------|
| North | 8 | 4 | (1) | (5) | 4 | 0 |
| America | | | | | | |
|----------+-----+------------+-----+------------+-----+------------|
| Asia | (1) | (11) | 4 | (8) | 1 | (10) |
|----------+-----+------------+-----+------------+-----+------------|
| Total | (2) | (4) | (4) | (6) | (4) | (6) |
+-------------------------------------------------------------------+

Year-over-year development adidas order backlogs by product category
and region as at December 31, 2008
[2] Includes hardware backlogs.

Currency-neutral Reebok backlogs decline
Currency-neutral Reebok backlogs at the end of 2008 were down 17%
versus the prior year. In euro terms, this represents a decline of
18%. Footwear backlogs decreased 10% in currency-neutral terms (-11%
in euros) as a result of declines in all regions. Apparel backlogs
declined 33% on a currency-neutral basis (-33% in euros) driven by
lower orders for licensed apparel in particular in North America. 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 expected sales development.


+---------------------------------------------------------------------+
| | Footwear | Apparel | Total[3] |
|---------+-------------------+-------------------+-------------------|
| | in ¤ | currency- | in ¤ | currency- | in ¤ | currency- |
| | | neutral | | neutral | | neutral |
|---------+------+------------+------+------------+------+------------|
|Europe | (18) | (12) | (25) | (22) | (20) | (15) |
|---------+------+------------+------+------------+------+------------|
|North | (19) | (22) | (49) | (50) | (26) | (29) |
|America | | | | | | |
|---------+------+------------+------+------------+------+------------|
|Asia | (7) | (11) | (12) | (16) | (9) | (13) |
|---------+------+------------+------+------------+------+------------|
|Total | (11) | (10) | (33) | (33) | (18) | (17) |
+---------------------------------------------------------------------+

Year-over-year development Reebok order backlogs by product category
and region as at December 31, 2008
[3] Includes hardware backlogs.


Group business outlook affected by uncertain global macroeconomic
development
Expectations for the development of the global economy and its impact
on the sporting goods industry in 2009 are currently subject to a
high degree of uncertainty. Consequently, the effect global
macroeconomic developments could have on the adidas Group's business
outlook is difficult to forecast, especially with regard to the
second half of the year. In addition, due to current foreign exchange
rate volatility, it is difficult to quantify the impact negative
currency translation effects could have on the Group's top- and
bottom-line performance.

Group sales to decrease at a low- to mid-single-digit rate
adidas Group sales are forecasted to decline at a low- to
mid-single-digit rate on a currency-neutral basis in 2009. Revenues
in the adidas segment are projected to decrease at a low- to
mid-single-digit rate on a currency-neutral basis. Reebok segment
sales are expected to be at least stable compared to the prior year
on a currency-neutral basis. Currency-neutral TaylorMade-adidas Golf
sales are forecasted to grow at a low-single-digit rate due to the
consolidation of Ashworth, Inc. for the full 12-month period.

Earnings per share to decline in 2009
In 2009, the adidas Group gross margin is expected to decline
compared to the prior year. A promotional environment in mature
markets, as well as expected higher sourcing costs due to increased
raw material and wage costs, in particular in the first half of the
year, will contribute to this development. The Group's operating
expenses as a percentage of sales are expected to increase mainly as
a result of higher expenses for controlled space initiatives in the
adidas and Reebok segments. Consequently, the Group's operating
margin and earnings per share are projected to decline.

Management to propose unchanged dividend of ¤ 0.50
At the Annual General Meeting on May 7, 2009, the Executive Board
intends to propose an unchanged dividend per share of ¤ 0.50 for the
financial year 2008. Management has decided to maintain the dividend
level despite the tough business environment and the Group's focus on
reducing net borrowings. Based on the number of shares outstanding at
the end of 2008, the dividend payout will decrease 2% to ¤ 97 million
(2007: ¤ 99 million). This represents a payout ratio of 15% versus
18% in 2007.

Herbert Hainer: "We cannot ignore the unprecedented economic crisis
all global businesses are facing today. I believe the real winners of
this crisis will be the ones who remain consistent with their
long-term strategies. We have the resources and the energy to tackle
the challenges that come."


***

Contacts:


Media Relations Investor Relations
Jan Runau John-Paul O'Meara
Chief Corporate Head of Investor
Relations Manager
Communications Officer
Tel.: +49 (0) 9132 84-3830 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

Katja Schreiber
Corporate PR Manager
Tel.: +49 (0) 9132 84-3810


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


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