adidas-Salomon in the first half of 2001

Group sales up 10 percent in Q2 with growth in all product divisions

Herzogenaurach, 07/08/2001 - adidas-Salomon net sales in the first half of 2001 increased by 6 percent to € 2.9 billion, exceeding the sales growth targets of 3 to 5 percent for the year. The sales increase in the second quarter was 10 percent to € 1.4 billion. All product divisions developed positively. Footwear sales increased 7 percent to € 1.4 billion in the first six months. Apparel grew 1 percent to € 1.0 billion. Hardware sales grew an impressive 14 percent to € 512 million.

Positive sales performance in all brands

adidas brand sales increased 8 percent in the second quarter, driving sales for the Group’s core brand for the first half up 4 percent to € 2.4 billion. TaylorMade-adidas Golf increased net sales during the first six months by 23 percent to € 325 million year-over-year. Salomon sales increased 6 percent to € 163 million.

Impressive Q2 regional development

adidas-Salomon sales in Europe grew 12 percent in the second quarter and 8 percent in the first half to reach € 1.5 billion, further strengthening adidas-Salomon’s leadership position in this region. The largest sales improvements came from France, Germany and Italy. In Asia, sales grew 20 percent in the second quarter and 18 percent for the half to € 429 million. The biggest growth contributors were Japan, New Zealand and China. In Latin America, net sales increased 20 percent to € 82 million. An important component of this growth came from Colombia, where sales were up 75 percent versus the same period last year. Double-digit sales increases were also delivered by Argentina, Brazil and Chile.

In North America, net sales declined 1 percent in the second quarter and 4 percent year-to-date to € 885 million. Group strategy for this region in 2001 forecasts qualitative improvements first, to be followed by renewed sales growth in absolute terms from 2002.

Gross margin at 45.2 percent in Q2

In the second quarter, the gross margin increased 0.1 percentage points to 45.2 percent. The gross margin in the first half of 2001 was maintained at 43.3 percent despite the impact of the strong US Dollar and the challenging promotional environment in North America.

Strict cost control leads to improved operating profit and margin

SG&A expenses as a percent of sales declined 0.8 percentage points to 35.2 percent in the first half. As a result, operating profit increased 17 percent to € 198 million compared to the previous year.

IBT increases 34 percent in Q2

Income before taxes increased 34 percent in the second quarter and 2 percent for the half to reach €139 million as a result of strong sales development, stable margins and strict cost control. This increase occurred despite higher financial expenses.

EPS increases 22 percent in Q2

Net income increased 22 percent in the second quarter, despite a higher tax rate, to € 24 million or € 0.54 per share. Net income for the first half reached € 71 million, in line with expectations, and earnings per share were € 1.56.

Working capital higher, but aging of inventories and receivables improves

Inventories for the Group increased 22 percent at the end of June versus the previous year, however over one third of this increase was currency-related. At the end of June, receivables were up 20 percent year-over-year, supported by sales growth in the second quarter. The aging structure of both inventories and receivables has improved.

Order situation continues to improve

The order backlogs for the adidas brand again showed positive growth. At the end of June, orders increased 2 percent above the previous year’s level. In Europe, backlogs grew by 6 percent. Asia backlogs increased 3 percent in constant currency. adidas backlogs in North America declined 2 percent with significant improvements in the apparel backlog.

Outlook

The results recorded for the first half of 2001 are in line with expectations and support the outlook for the full year. adidas-Salomon continues to expect consolidated sales growth of 3 to 5 percent for 2001. adidas-Salomon expects the gross margin to be in the top half of the target corridor of 41 to 43 percent. Group operating expenses will be reduced versus the previous year’s level. As a result of these developments, adidas-Salomon reconfirms its target of 15 percent earnings growth for 2001.

Herbert Hainer, adidas-Salomon CEO, stated: “The first half and especially the second quarter of 2001 have been very successful for adidas-Salomon. This is an impressive achievement in light of the difficult market conditions. It shows clearly the momentum our company has regained. Our excellent product offering for 2002 has received very positive customer feedback worldwide. We are confident that we will continue to drive the company’s growth going forward.”