adidas-Salomon to introduce growth and efficiency program – 15 percent annual growth in earnings from 2001 – program necessitates revised earnings forecast for the year 2000
Herzogenaurach, 27/01/2000 - At its meeting on January 26th, the Supervisory Board of adidas-Salomon AG approved an extensive growth and efficiency program as proposed by the Executive Board. The aim of the program is to increase earnings per share by 15 percent per annum from 2001 onwards. As a result of the additional expenditure connected with the plan, adidas-Salomon has revised accordingly its earnings forecast for 2000. The Group is anticipating a decline in pre-tax earnings which, compounded with an increased tax rate, will lead to an EPS decline of 20 percent.
The objective of the program is to restructure the Group. This will involve the following:
- Reorganize management structures in order to create clear and simple structures, allowing more transparent performance responsibilities and faster decision-making.
- Increase the flexibility, speed and cost efficiency of the global sourcing organization.
- Improve presence on the internet and accelerate the development of e-commerce.
- Streamline the product range, with the aim to reduce complexity and revitalize the market with innovative products.
- Expand significantly the sales and marketing activities of the Taylor Made and Salomon brands in order to create the conditions for increasing success in the marketplace.
The program aims to provide the Group with better perspectives for growth in the years ahead. Herbert Hainer, Chief Operating Officer of adidas-Salomon AG, said: "In the year 2000, we will be laying the foundations for stronger growth in subsequent years. With these measures, we will create a structure that is geared to the changed conditions within our business, allowing short reaction timelines and improving overall efficiency. This will enable us to increase earnings per share from 2001 by 15 percent per year."
The growth and efficiency program will involve additional expenditure of around DM 75 million. This will impact the operating result, causing earnings per share to deteriorate by about 20 percent compared to 1999. This is below the current market expectation, which anticipates a decline of around 10 percent, based on three main factors: a strong dollar, an unavoidable increase in the tax rate which alone accounted for half of the anticipated deterioration, and the non-recurrence of certain extraordinary hedging benefits which occurred in 1999.
The forecast for sales performance of the individual brands and regions remains unchanged.