adidas reports third quarter group revenues grew 3% on a currency-neutral basis driven by sales increases at both adidas and TaylorMade-adidas Golf. Reebok sales, however, declined. On a regional basis, sales grew solidly in all regions except North America. Currency movements negatively impacted revenues in euro terms. Group sales in euro terms declined 0.3% to € 2.94 billion ($4.04 bn) in the third quarter of 2007, compared to € 2.95 billion ($3.76 bn) last year.

Third quarter gross margin increased 3.6 percentage points to 48.6% from 45.0% last year as a result of underlying improvements in all segments. Cost synergies resulting from the combination of adidas and Reebok sourcing activities and, to a lesser extent, the non-recurrence of negative impacts from purchase price allocation in the Reebok segment also positively impacted gross margin development. Group gross profit increased 8% to € 1.43 billion ($1.96 bn) from € 1.33 billion ($1.69 bn) in the year-ago quarter. As a result of the strong gross margin increase, which more than offset higher operating expenses as a percentage of sales, the Group’s operating margin increased 2.2 percentage points to 16.0% in the third quarter of 2007 versus 13.9% in the prior year. Operating profit grew 15% to € 471 million ($647.2 mm) versus € 409 million ($521.5 mm) in 2006. The group’s net income attributable to shareholders increased 22% to € 298 million ($409.5 mm) compared to € 244 million ($311.1 mm) last year due to higher operating profit as well as lower net financial expenses which more than offset a higher tax rate.

“Our third quarter performance is clear evidence that we are on track to achieve all of our full year targets,” commented adidas AG Chairman and CEO Herbert Hainer. “We are continuing to realize material net benefits from the Reebok integration process. Brand adidas is in top shape and has the highest backlog growth in over nine years. Our Group’s strong margin and earnings improvements reflect our focused commitment to drive long-term sustainable growth.”

Currency-neutral Group sales grow 5% in the first nine months of 2007
During the first nine months of 2007, Group revenues increased 5% on a currency-neutral basis, driven by sales growth in the adidas segment, the inclusion of an additional month in the Reebok segment versus the prior year and underlying sales increases at TaylorMade-adidas Golf. On a reported basis, however, TaylorMade-adidas Golf revenues declined, negatively impacted by the divestiture of the Greg Norman Collection (GNC) wholesale business. From a regional perspective, adidas Group currency-neutral sales grew in all regions except North America. Currency movements negatively impacted Group sales in euro terms. In the first nine months of 2007, Group revenues grew 1% in euro terms to € 7.88 billion ($10.59 bn) from € 7.84 billion ($9.76 bn) in 2006. On a like-for-like basis, including Reebok’s revenues for the full nine-month periods of both years and excluding the effect from the divestiture of the GNC wholesale business, sales increased 4%.

adidas segment drives top-line growth in the first nine months of 2007
The adidas segment set the pace for the Group’s organic sales growth in the first nine months of 2007. Currency-neutral adidas segment revenues increased 8% during the period. Currency-neutral sales in the Reebok segment grew 2%, driven by the inclusion of January, which was not consolidated in 2006. On a like-for-like basis, sales declined 4%. This comparison reflects sales for the full nine-month periods of both years and excludes the transfer of the NBA and Liverpool licensed businesses to brand adidas completed in the first half of 2006. At TaylorMade-adidas Golf, currency-neutral revenues decreased 1%, negatively impacted by the divestiture of the GNC wholesale business. On a like-for-like basis, TaylorMade-adidas Golf sales increased 8%. Currency translation effects negatively impacted sales at all brands in euro terms. adidas sales increased 4% to € 5.47 billion ($7.35 bn) in the first nine months of 2007 from € 5.25 billion ($6.53 bn) in 2006. Sales at Reebok decreased 3% to € 1.77 billion ($2.37 bn) versus € 1.83 billion ($2.28 bn) in the prior year. TaylorMade-adidas Golf sales declined 8% to € 609 million ($818.8 mm) in 2007 from € 658 million ($819.2 mm) in 2006.

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Nine Months
2007

Nine Months 2006

Change y-o-y in euro terms

Change y-o-y currency-neutral

€ in millions

€ in millions

in %

in %

adidas

5,465

5,248

4

8

Reebok[1]

1,765

1,828

(3)

2

TaylorMade-adidas Golf[2]

609

658

(8)

(1)

HQ/Consolidation

40

101

(61)

(58)

Total

7,879

7,836

1

5

Nine months net sales growth by segment


[1] Reebok nine months 2006 results only included eight months of the nine-month period.

[2] Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

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Sales increase in nearly all regions adidas Group sales grew in all regions except North America. This growth was driven by positive development at adidas and TaylorMade-adidas Golf as well as the consolidation of nine months of Reebok’s revenues in 2007 versus only eight months in the prior year. adidas Group sales in Europe during the first nine months of 2007 grew 5% on a currency-neutral basis. In North America, Group sales declined 3% on a currency-neutral basis. Sales for the adidas Group in Asia increased 15% on a currency-neutral basis. In Latin America, currency-neutral sales increased 35%. Currency translation effects negatively impacted sales in euro terms in all regions. Sales in Europe increased 3% in euro terms to € 3.46 billion($4.65 bn) in 2007 from € 3.34 billion ($4.16 bn) in 2006. Sales in North America decreased 10% to € 2.25 billion ($3.02 bn) in 2007 from € 2.49 billion ($3.10 bn) in the prior year. Revenues in Asia grew 8% to € 1.62 billion ($2.17 bn) in 2007 from € 1.49 billion ($1.86 bn) in 2006. Sales in Latin America grew 29% to € 484 million ($650.8 mm) in 2007 from € 375 million ($466.9 mm) in the prior year.

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Nine Months
2007

Nine Months 2006

Change y-o-y in euro terms

Change y-o-y currency-neutral

€ in millions

€ in millions

in %

in %

Europe

3,455

3,339

3

5

North America

2,248

2,492

(10)

(3)

Asia

1,616

1,494

8

15

Latin America

484

375

About The Author

Teresa Hartford

Teresa Hartford Editorial & Creative Director | SGB Media teresa@sgbonline.com | 704.651.5741

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