adidas-Salomon Group sales increased 3.0% on a currency-neutral basis for the first quarter of 2004, but declined 2.8% in Euro terms to €1.62 billion in Q1 2004 from €1.67 billion in the year-ago period.

Brand adidas currency-neutral sales increased by 3%, driven by increases in the Sport Performance division. In the Salomon segment, revenues increased by 2% on a currency-neutral basis in the first quarter of 2004, largely due to gains in the cycling, nordic and apparel categories. Revenues at TaylorMade-adidas Golf decreased 4% on a currency-neutral basis, but inched up 0.8% measured in U.S. dollars. This was mainly related to the timing of 2004 product launches.

Currency effects from a strong euro, especially versus the U.S. dollar, negatively impacted sales at all brands in euro terms. As a result, adidas sales in euro terms declined 2% to €1.38 billion ($1.72 bn) in the first quarter of 2004 from €1.41 billion ($1.51 bn) in 2003. Salomon sales in euros were down 1% to €122 million $152.4 mm) in Q1 from €124 million ($133.0 mm) in the prior year. TaylorMade-adidas Golf sales in euro terms declined 13% to €116 million ($144.9 mm) in 2004 from €134 million ($143.8 mm)in 2003.

From a regional perspective, Group sales in Europe grew 4% on a currency-neutral basis, boosted by solid increases in France, Iberia, the U.K. and the emerging markets. In North America, Group sales declined 7% on a currency-neutral basis due to a decrease in footwear sales in the adidas Sport Performance division. In Asia, currency-neutral sales increased 6% driven by double-digit growth in Japan, China and Australia. In Latin America, where revenues are generated predominately by adidas, currency-neutral sales increased 43% in the first quarter, making it the fastest growing region within the Group. Higher sales in Argentina, Brazil and Mexico were the main drivers of this improvement.

In euro terms, currency translation effects negatively impacted sales in the first three months in all regions. Sales in Europe increased 2% in euro terms to €951 million ($1.19 bn) in Q1 2004 from €933 million ($1.0 bn) in the prior year. In North America, sales in euros declined 19% to €328 million ($409.7 mm) in 2004 versus €405 million ($434.5 mm) in 2003. In euro terms, sales in Asia were down 2% to €276 million ($344.8 mm) in 2004 from €281 million ($301.5 mm) in 2003. In Latin America, sales in euros grew 36% to €49 million ($61.2 mm) in 2004 from €36 million ($38.6 mm) in the prior year.

adidas-Salomon gross margin grew 340 basis points to 45.9% in the first quarter of 2004 versus 42.5% in the year-ago quarter. This represents the highest first quarter gross margin in the history of the Group and reflects the improving product mix and increased adidas own-retail activities, as well as favorable currency effects. As a result, gross profit for the Group rose 5% in the first quarter of 2004 to €744 million ($929.4 mm) versus €708 million ($759.6 mm) in 2003.

Net income for the Group increased 41% to €72 million ($89.9 mm) in the first quarter of 2004 from €51 million ($54.7 mm) in 2003. Solid currency-neutral sales growth and the improving gross and operating margins, supported by lower financial expenses, were the drivers of this improvement. Minority interests were down 23% to €5 million in 2004 from €6 million in the prior year. Basic earnings per share increased by 41% to €1.58 ($1.97) for the first three months of 2004 versus €1.13 ($1.21) in 2003.

Currency-neutral order backlogs for adidas grew 3% at the end of the first quarter of 2004. Apparel orders increased 13% on a currency-neutral basis, reflecting the Group's successful “Apparel Breakthrough” initiative to grow sales in this product category. Footwear backlogs declined 5% on a currency-neutral basis, mainly as a result of lower, but compared to former quarters significantly improving orders in North America. In euro terms, adidas total order backlogs increased 1%.

        	  Footwear	  Apparel	   Total
% Change 	euros   C-N	euros	C-N	euros	C-N
--------        -----  -----    -----  -----    -----  -----
Europe	        (6%)	(6%)	 10%	10%	  1%	 2%
N.America       (23%)	(14%)	  1%	12%	(14%)   (4%)
Asia	         15%	16%	 23%	24%	 20%	21%
Total	        (8%)	(5%)	 10%	13%	  1%	 3%

As a result of the Group's first quarter performance and business expectations for the rest of 2004, adidas-Salomon is confirming the sales guidance provided with the 2003 full year results and increasing the Group's earnings target. Group revenues are expected to increase by 3 to 5% on a currency-neutral basis, with double-digit currency-neutral growth in Asia and Latin America and mid-single-digit sales growth in Europe. Positive sales development is also expected in North America during the second half of the year. Group gross margin is projected to be at least 45% and operating margin will improve versus the prior year's level. As a result of strong first quarter performance, Group earnings for the full year are now expected to grow by 10 to 15%.

Herbert Hainer said: “The steps we've taken all along, and particularly those we took to overcome the challenges of last year, are paying off. Our margins have strengthened sharply, we have boosted our net income and we're starting to see measurable progress in North America. With a great quarter like this as a start, we are confident that the full year performance in 2004 will be better than we had originally expected.”