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adidas-Salomon in the first half of 2000

Half year net income in line with expectations +++ Full year EPS outlook unchanged +++ Growth & Efficiency Program on track +++ Group sales up 7 percent, strongest growth in Taylor Made and Salomon

August 07, 2000

Herzogenaurach, 07/08/2000 - Net sales of adidas-Salomon in the first half of 2000 increased by 7 percent to Euro 2.8 billion, growing at a much higher rate than last year. However, the increase was substantially due to currency effects. At constant currency rates, net sales would have been virtually flat year-over-year. 

Sales in all three product divisions increased in the first half of the year. This growth was driven by Footwear and Hardware, which were up 4 and 25 percent in the second quarter, bringing first half increases to 6 and 32 percent respectively. The Footwear increase was driven by above-average growth in the basketball, soccer and adventure categories. Hardware improvements reflect the continued strength of Taylor Made and Salomon sales. Apparel sales were flat. 

Positive sales performance for all brands

Sales for brand adidas in the second quarter were up 2 percent, which brought sales for the first half to Euro 2.3 billion, a 3 percent increase year-over-year. adidas brand Footwear sales in the first half increased by 5 percent to Euro 1.2 billion. adidas Apparel sales were maintained at the previous year’s level. 

Taylor Made-adidas Golf increased net sales in the first half by 34 percent to Euro 264 million. These figures show the success of increased sales activities, the new SuperSteel clubs and golf footwear products. 

Salomon sales continued to show last year’s strong growth, increasing by 27 percent to reach Euro 154 million in the first half year. Particularly high increases of summer product categories were recorded in inline skates and outdoor footwear. 

Asia leads the way, growth in Europe continues, North America down

Asia continued to deliver the highest growth rates among the regions, with a net sales increase of 35 percent for the half year. With sales up 7 percent, Europe continues to be the core region, representing 51 percent of total Group sales. In North America, growth rates in the first half of 2000 did not match those of 1999, declining 2 percent. 

Gross margin strong despite weak Euro

The gross margin for the first half year was 43.4 percent, which was achieved despite the impact of the strong US Dollar. This gross margin - which exceeded management’s target range of 41 to 43 percent for the full year - was a result of a better mix of products, a lower rate of clearance sales and increased own-retail activities. 

Operating expenses up in line with expectations

Operating expenses were up 9 percent, in line with expectations. This was due to three factors: currency effects, the Growth and Efficiency Program expenses and marketing spending for the EURO 2000™ soccer championship. Without these factors, operating expenses year-over-year would have fallen roughly 4 percent. 

The operating profit at Euro 170 million declined 16 percent compared to the previous year. 

Income before taxes in line with expectationss

Income before taxes reached Euro 136 million. This represents a year-over-year decline of 17 percent. 

The financial result showed an improvement compared to the prior year due to positive currency effects. 

The tax rate rose slightly year-over-year to 40.2 percent. At the same time, minority interests increased significantly, due to improved joint venture performance. 

Net income for the first half was down by 22 percent to Euro 73 million, representing earnings per share of Euro 1.60. 

Order backlog up

At June 30, adidas order backlog was up 1 percent over the same period in 1999. Backlogs in Asia and Europe were up 42 percent and 5 percent respectively, continuing their growth trends. adidas backlog in North America (down 12 percent) remained depressed as a result of the lackluster orders in Apparel, but showed continued positive development for Footwear. 

2000 and beyond

Sales for the full year will be helped by positive currency effects, while the weak Euro will have a negative impact on other reported operating figures. 

We are pleased with the progress made in streamlining our business processes, which led to improved efficiency 

adidas-Salomon COO Herbert Hainer.

"To sustain long-term growth for the Group, the American market remains a key priority. In addition, our focus now is on driving growth world-wide by defining adidas' product groups more precisely, and on delivering the performance, innovation and heritage image that customers associate with the adidas, Salomon and Taylor Made brands." 

"With the expenses related to the successful Growth and Efficiency Program largely behind us, and a healthy-looking market for adidas in Europe and Asia, and Salomon and Taylor Made globally, our expectations for 2000 remain unchanged and we are on track to grow earnings by 15 percent per year for 2001 to 2003," commented Robin Stalker, adidas-Salomon's CFO.