Adidas Group reported a loss in the fourth quarter as it wrote down the value of its struggling Reebok brand. But it gave an upbeat outlook for the current year, predicting sales and earnings would rise with sales increasing in the mid-single digit range. It also raised its dividend payment by 35 percent.
Q4 2012 highlights:
- Currency-neutral Group sales up 1 percent
- TaylorMade-Adidas Golf sales increase 15 percent
- Greater China and European Emerging Markets grow 12 percent and 9 percent, respectively
Full year 2012 highlights:
- Currency-neutral Group sales up 6 percent to a new record level of
- €14.9 billion ($18.6 bn)
- Adidas and TaylorMade-Adidas Golf sales increase 10 percent and 20 percent, respectively
- Gross margin improves 0.2pp to 47.7 percent despite significant pressure from input costs
- Goodwill impairment in an amount of €265 million ($331 mm)
- Operating margin excluding goodwill impairment improves to 8.0 percent
- Earnings per share excluding goodwill impairment increase 29 percent to a record level of €3.78
- Net cash position of €448 million ($560 mm) at year-end
- Group inventories down 1 percent at year-end
- Management to propose a 35 percent higher dividend of €1.35 per share
Outlook
- Group sales to increase at a mid-single-digit rate
- Operating margin to improve to a level approaching 9.0 percent
- Earnings per share to be in the range of €4.25 to €4.40
2012 has been another successful year for the Adidas Group, commented Herbert Hainer, Adidas Group CEO. Our products and brands were again at the fore, not only being the most visible at the years major sports events, but also enjoying several important market share victories along the way. The resulting margin improvements and significant cash flow generation underpin the trajectory and value we are unlocking with our Route 2015 strategic plan.
Commercial irregularities discovered at Reebok India Company
As announced in an ad hoc release on April 30, 2012, commercial irregularities were discovered at Reebok India Company. The discovery of these irregularities resulted in the identification of material errors in the prior period financial statements of Reebok India Company. As a consequence of these errors, material misstatements are also included in the consolidated financial statements of Adidas AG for the 2011 financial year and for previous financial years, which have to be corrected in accordance with IAS 8. These corrections are reflected in the consolidated financial statements as at December 31, 2012, in which the comparative figures for the year 2011 are restated and the opening balance sheet for 2011 is corrected to the extent that earlier periods are affected. The results of these restatements led to a reduction of net income attributable to shareholders of €58 million ($73 mm) for 2011. In addition, shareholders equity of the opening balance sheet for 2011 is negatively impacted by €153 million ($191 mm).
Adidas Group currency-neutral sales increase 1 percent in the fourth quarter
In the fourth quarter of 2012, Group revenues grew 1 percent on a currency-neutral basis. Currency-neutral sales in Retail and Other Businesses increased 9 percent and 7 percent, respectively. Sales in the Wholesale segment were down 4 percent on a currency-neutral basis. Currency-neutral revenues in Western Europe decreased 4 percent, primarily as a result of high prior year comparisons due to the sell-in of event-related products for the UEFA EURO 2012 and the London 2012 Olympic Games. In European Emerging Markets, currency-neutral sales were up 9 percent as a result of double-digit revenue growth at Reebok. Group sales in North America were down 8 percent on a currency-neutral basis, as growth at Adidas and TaylorMade-Adidas Golf was more than offset by declines at Reebok, mainly due to the non-recurrence of prior year related NFL licence sales. In Greater China, Group sales were up 12 percent on a currency-neutral basis, driven by strong double-digit sales gains at Adidas Sport Style. Currency-neutral revenues in Other Asian Markets grew 4 percent, due to increases at Reebok and TaylorMade-Adidas Golf. In Latin America, Adidas Group sales were up 4 percent on a currency-neutral basis driven by growth at Adidas and TaylorMade-Adidas Golf. Currency translation effects had a positive impact on sales in euro terms. Group revenues grew 4 percent to €3.369 billion ($4.21 bn) in the fourth quarter of 2012 from €3.241 billion in 2011.
Fourth quarter operating profit negatively impacted by goodwill impairment of €265 million
The Groups gross margin increased 2.0 percentage points to 47.6 percent (2011: 45.6 percent) in the fourth quarter, as the positive impact from product price increases, a more favourable product and regional sales mix as well as a larger share of higher-margin Retail sales more than offset the increase in input costs. Group gross profit increased 8 percent to €1.603 billion ($2.0 bn) (2011: €1.478 billion). Other operating expenses as a percentage of sales increased 1.5 percentage points to 49.0 percent compared to 47.5 percent in the prior year, primarily due to higher marketing investments as a percentage of sales as well as an increase in operating overhead expenses. For the fourth quarter, the Group reported an operating loss of €239 million ($298.8), as a result of goodwill impairment losses in an amount of €265 million ($331.3 mm), which more than offset the positive effects of an increase in gross margin. Excluding goodwill impairment losses, operating profit amounted to €26 million ($32.5 mm) compared to €18 million last year. Net loss attributable to shareholders excluding goodwill impairment losses amounted to €7 million ($8.8 mm) versus net income attributable to shareholders of €3 million last year.
Adidas Group currency-neutral sales grow 6 percent
In 2012, Group revenues grew 6 percent on a currency-neutral basis, as a result of double-digit sales increases in Retail and Other Businesses. Currency translation effects had a positive impact on sales in euro terms. Group revenues grew 12 percent to €14.883 billion ($18.6 bn) in 2012 from €13.322 billion in 2011.
Group sales increase driven by double-digit growth in Retail and Other Businesses
In 2012, currency-neutral Wholesale revenues increased 2 percent, as sales growth at Adidas more than offset sales declines at Reebok. Currency-neutral Retail sales increased 14 percent versus the prior year, driven by 7 percent comparable store sales growth as well as new store openings in line with the Groups retail expansion. Revenues in Other Businesses were up 17 percent on a currency-neutral basis, mainly driven by a strong double-digit sales increase at TaylorMade-Adidas Golf. Currency translation effects had a positive impact on segmental sales in euro terms.
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€ in millions |
in % |
in % |
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Wholesale |
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8,949 |
7 |
2 |
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Retail |
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2,793 |
21 |
14 |
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Other Businesses |
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1,580 |
25 |
17 |
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2012 net sales development by segment
1) Restated according to IAS 8.
2) Rounding differences may arise in totals.
Currency-neutral sales increase in all regions
In 2012, revenues in Western Europe increased 3 percent on a currency-neutral basis, primarily as a result of double-digit sales increases in the UK and Poland. In European Emerging Markets, Group sales increased 15 percent on a currency-neutral basis due to double-digit growth in most of the regions markets, in particular Russia/CIS. Sales for the Adidas Group in North America grew 2 percent on a currency-neutral basis, with sales increases in both the USA and Canada. Sales in Greater China increased 15 percent on a currency-neutral basis. Currency-neutral revenues in Other Asian Markets grew 7 percent, driven by strong increases in Japan and South Korea. In Latin America, sales grew 8 percent on a currency-neutral basis, with double-digit increases in most of the regions major markets, in particular Argentina. Currency translation effects had a mixed impact on regional sales in euro terms.
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Western Europe |
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3,922 |
4 |
3 |
