Adidas Group reported fourth-quarter earnings declined because of increased marketing expenses. But 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. The athletic footwear giant forecast EPS would increase 10% to 15% percent this year on a “mid to high single-digit” percentage revenue gain. Previously, it had guided for a mid-single digit gain.


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 €2.93 billion ($3.87 bn) in the fourth quarter from €2.46 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 €1.36 billion ($1.8 bn) from €1.14 billion) a year ago 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  ($37.9 mm) 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 ($9.2 mm) from €19 million)a year ago. 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 €8.2  billion ($10.8 bn) in 2010 from €7.2 billion in 2009. Retail sales rose 25% to €2.4  billion ($3.2 bn) versus €1.9 billion in the prior year. Sales in Other Businesses grew 10% to €1.42 billion ($1.87 bn) in 2010 (2009: € 1.293 billion).








































 


2010


2009


Change y-o-y in euro terms


Change y-o-y 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


Total1)


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
in euro terms


Change y-o-y currency-neutral


 


€ in millions


€ in millions


in %


in %


Western Europe


3,543


3,261


9


7


European Emerging Markets


1,385


1,122


23


16


North America


2,805


2,362


19


12


Greater China


1,000


967


3


(2)