EvEry Product tElls a story

Transcription

Q1Q2 Q3
First Quarter Report
2010
adidas Group
Every Product
tells a Story
Table of Contents
Financial Highlights �� 3
Operational and Sporting Highlights �� 4
Interview with the CEO �� 5
Our Share �� 9
Interim Group Management Report
Group Business Performance �� 11
Economic and Sector Development �� 11
Income Statement �� 12
Balance Sheet and Cash Flow Statement �� 16
Business Performance Wholesale �� 18
Business Performance Retail �� 20
Business Performance Other Businesses �� 23
Subsequent Events and Outlook �� 25
Interim Consolidated Financial Statements (IFRS)
Consolidated Balance Sheet �� 29
Consolidated Income Statement �� 30
Consolidated Statement of Comprehensive Income and Expense �� 31
Consolidated Statement of Changes in Equity �� 32
Consolidated Statement of Cash Flows �� 33
Notes to Interim Consolidated Financial Statements �� 34
Executive and Supervisory Boards �� 37
Financial Calendar 2010 �� 38
Publishing Details/Contact �� 39
N°-
First Quarter Results at a Glance
01
€ in millions
First quarter 2010
First quarter 2009
Change
Wholesale
Net sales
Gross profit
Gross margin
Segmental operating profit
Segmental operating margin
1,898
818
43.1%
626
33.0%
1,874
798
42.6%
614
32.8%
1.3%
2.5%
0.5pp
2.0%
0.2pp
Retail
Net sales
Gross profit
Gross margin
459
267
58.2%
52
11.3%
400
218
54.5%
15
3.6%
14.9%
22.7%
3.7pp
256.5%
7.6pp
Other Businesses
Net sales
Gross profit
Gross margin
316
142
45.0%
92
29.0%
295
116
39.4%
43
14.6%
7.0%
22.4%
5.7pp
112.2%
14.4pp
Group
Net sales
Gross profit
Gross margin
Operating profit
Operating margin
2,674
1,300
48.6%
260
9.7%
2,577
1,164
45.2%
58
2.2%
3.7%
11.7%
3.5pp
349.0%
7.5pp
1,998
376
223
56
21
1,917
374
194
60
24
4.2%
0.5%
14.9%
(6.9%)
(14.4%)
Sales by Brand
adidas
Reebok
TaylorMade-adidas Golf
Rockport
Reebok-CCM Hockey
Rounding differences may arise in percentages and totals.
adidas Group First Quarter Report 2010 2
N°-
Financial Highlights (IFRS)
Operating Highlights (€ in millions)
Net sales
Operating profit
Net income attributable to shareholders
Key Ratios (%)
Gross margin
Operating expenses as a percentage of net sales
Operating margin
Effective tax rate
Net income attributable to shareholders as a percentage of net sales
Operating working capital as a percentage of net sales 1)
Equity ratio
Financial leverage
First Quarter Net sales
02
€ in millions
First quarter 2010
First quarter 2009
Change
2,674
260
168
2,577
58
5
3.7%
349.0%
3,385.1%
48.6%
41.5%
9.7%
30.5%
6.3%
22.9%
44.6%
31.9%
45.2%
44.7%
2.2%
51.7%
0.2%
25.6%
35.6%
81.8%
3.5pp
(3.3pp)
7.5pp
(21.2pp)
6.1pp
(2.7pp)
9.0pp
(49.8pp)
Balance Sheet and Cash Flow Data (€ in millions)
Total assets
Inventories
Receivables and other current assets
Working capital
Net borrowings
Shareholders’ equity
Capital expenditure
Net cash used in operating activities
9,531
1,680
2,673
1,896
1,359
4,254
26
(430)
9,904
2,016
2,733
1,977
2,883
3,525
56
(617)
(3.8%)
(16.7%)
(2.2%)
(4.1%)
(52.9%)
20.7%
(53.9%)
30.2%
Per Share of Common Stock (€)
Basic earnings
Diluted earnings
Operating cash flow
Share price at end of period
0.80
0.80
(2.06)
39.60
0.02
0.04
(3.19)
25.06
3,123.5%
1,967.1%
35.5%
58.0%
39,155
209,216,186
209,216,186
38,227
193,515,512
193,515,512
2.4%
8.1%
8.1%
Other (at end of period)
Number of employees
Number of shares outstanding
Average number of shares
To Our Shareholders Financial Highlights
N°-
03
2006
2007
2008
2009
2010
2,459
2,538
2,621
2,577
2,674
First Quarter Net income attributable to
shareholders € in millions
2006
2007
2008
2009
2010
N°-
04
144
128
169
5
168
All Group figures comprise the brand segments and HQ/Consolidation.
1) Twelve-month trailing average.
Operational and Sporting Highlights
05
06
01
03
02
04
First Quarter 2010
07.01. adidas unveils the new miCoach, a digital coach and
05.02. Reebok Global Ambassadors Thierry Henry and Lewis
interactive training service developed to motivate runners and
enable them to reach their individual training goals Picture 01. 12.01. adidas Originals launches its new STAR WARS™ collection
consisting of footwear, apparel and accessories for men, women
and kids Picture 02. 12.01. Reebok announces its partnership
with the successful TV show “Germany’s next Topmodel” which will
be used to promote Reebok’s groundbreaking shoe EasyTone™.
14.01. TaylorMade introduces the Burner® SuperFast driver and
fairway woods. The driver weighs an amazingly light 284 grams,
promoting faster swing speed and more distance Picture 03. 15.01. Giorgio Armani S.p.A. and Reebok announce a global alliance
to create a special collection, combining active style with sport and
technology Picture 04. 28.01. Reinhold Messner and adidas
Outdoor announce their renewed partnership and introduce the
latest version of the legendary SUPER TREKKING boot.
Hamilton present Reebok’s revolutionary training shoe ZigTech™. 06.02. Reebok launches its “Reefreshed” website www.reebok.com
as part of the brand’s new “Ree” marketing platform. To kick off
the “Ree” campaign, the brand has created TV spots highlighting
the two key products, EasyTone™ and ZigTech™. 08.02. adidas
and tennis ace Ana Ivanovic announce the long-term extension
of their partnership. 12.02. Olympic and World Champion gold
medallist and former Canadian women’s ice-hockey captain Cassie
Campbell will act as a Rockport Brand Ambassador going forward. 22.02. adidas Golf presents POWERBAND 3.0, the first golf
shoe in the customisable mi adidas product family Picture 05. 25. 02. Reebok and Cirque du Soleil launch JUKARI Fit to Flex™, the
second innovative workout to come out of the groundbreaking partnership Picture 06. 28.02. The Vancouver 2010 Olympic Games
are a huge success for the adidas Group with 42 medals (16 gold,
14 silver, 12 bronze) won by adidas Group athletes out of a possible
108 medals.
To Our Shareholders Operational and Sporting Highlights
09.03. adidas presents the “Finale Madrid“, the official match ball
for the UEFA Champions League Final in Madrid. 10.03. Lewis
Hamilton and Reebok unveil the alternate reality game “Lewis
Hamilton: Secret Life” in which Lewis features as the central
character. 18.03. adidas Originals launches its new TV campaign,
“The street where originality lives”, where icons like David Beckham
and Snoop Dogg show their individual appreciation of originality. 23.03. adidas and Yohji Yamamoto present their spring/summer
2010 collection, with a star-studded event at the K11 Art Mall,
Tsimshatsui, Y-3’s new Hong Kong retail destination. 24.03. adidas
and the National Basketball Association (NBA) announce the
extension of their global partnership giving adidas exclusive rights
to all NBA apparel in Europe beginning with the 2010/11 NBA
season. 26.03. TaylorMade is the dominating brand at the GolfMagazin Awards 2010, taking the honours for best driver, best hybrid
and best golf footwear.
Interview with the CEO
The adidas Group has had a strong start in the first quarter, generating record sales and achieving a significant improvement
in profitability compared to the prior year. As key brand initiatives continue to gain momentum and with the excitement of the
FIFA World Cup™ just weeks away, the Group has a solid foundation from which to achieve its 2010 targets.
In the following interview, Herbert Hainer, adidas Group CEO, reviews the first quarter of 2010 and discusses the Group’s
strategic and financial outlook.
Question
Herbert, you have had very positive
first quarter results. Can you describe
how the year started from a financial
perspective?
To Our Shareholders Interview with the CEO
Herbert Hainer
We began the year with confidence that our product and marketing strategies
for 2010 could make a real difference in an improving economic environment.
And the results speak for themselves. We achieved record first quarter sales of
€ 2.7 billion, an increase of 4% currency-neutral, driven by growth in all segments.
More importantly, our profitability improved substantially, with a healthy gross
margin improvement of 3.5 percentage points to 48.6% due to lower input costs,
a larger share of Retail sales, less clearance sales as well as positive currency
effects related to the appreciation of the Russian rouble compared to the prior
year. This, combined with operating expense leverage and supported by the
cost-saving initiatives put in place last year, helped first quarter net income jump
to € 168 million from € 5 million in the prior year. And, on top of that, we have
kept a close eye on maintaining a healthy balance sheet with net debt down 53%
compared to a year ago and average operating working capital as a percentage of
sales at an all-time low of 22.9%.
Question
Herbert Hainer
Was there anything in this
performance that particularly
surprised you?
The recovery in consumer spending that gained traction in many regions as the
quarter progressed into February and March was definitely a nice surprise. And
this is really visible in our Retail segment’s performance. Sales were up 16%
currency-neutral, with both adidas and Reebok posting double-digit growth rates.
Comparative store sales increased 7%, which is certainly better than we had
anticipated. North America and European Emerging Markets grew 15% and 26%
respectively and were particularly strong as the consumer recovery in the USA and
Russia gathered pace. On a store format basis, we saw big improvements in our
concept stores and other retail formats. Comparable concept store sales increased
12% and other retail formats, which include e-commerce, grew 43%, with online
sales almost doubling. This translated into a significant profitability increase as the
Retail segment’s operating margin expanded 7.6 percentage points over the prior
year. This demonstrates the leverage we have in our retail operations. And taking
this together with the work we are doing this year in the Retail segment to create
greater efficiency and improve our retail competency, I am convinced we will be able
to continue to drive higher returns on our retail investments over the medium term.
Question
Herbert Hainer
Many observers are getting more
bullish on underlying market trends.
Do you share these views?
The first quarter has seen genuine global growth. However, there is still a lot of
divergence regionally. North America is probably the one market that stands out at
the moment. We had a particularly strong first quarter with sales up 14% currencyneutral. While the magnitude of the increase was partly timing-related, retailers in
general have been enjoying a good start to the year, driven by increasing consumer
confidence and of course the incredible growth of the toning market. In Europe,
we’ve seen more of a mixed picture. Countries like the UK and Germany are doing
very well for our Group, which is a trend I expect to continue. Nonetheless, other
markets such as France, Italy and several of the region’s emerging markets have
not seen a material change in trading conditions. Nonetheless, the football category
will certainly provide a boost over the coming months in the region. In Asia, there
are different dynamics at play. In China, we are seeing improvements in underlying
conditions which, together with our strategy to run down inventory at retail in the
first half, will allow us a very definite return to growth in the second half of 2010.
Japan, however, is still rather depressed and is likely to remain challenging for the
coming quarters. Finally, in Latin America, sales growth continues to be robust,
driven by most major markets. In summary, looking at the global environment,
while I agree there is some merit for higher optimism, at the same time we are
still in the early days of economic recovery and it is still rather fragile. So I am sure
there will still be some challenges ahead.
Question
Herbert Hainer
Can you talk about the adidas brand
performance in the first quarter? Was
growth primarily driven by football?
The adidas brand revenues grew 4% currency-neutral in the first quarter, with
football and adidas Sport Style propelling the brand forwards. In football, we picked
up just where we left off in 2009, leveraging our involvement with the FIFA World
Cup 2010™ and utilising our convincing portfolio of products to incredible success.
So much so, we generated record first quarter sales in the football category with
growth of 26% currency-neutral. And we still have plenty more in the pipeline with
the highly anticipated launch of the new F50 football boot due next week. While
adidas is passionate about football and no event is bigger and more anticipated than
the FIFA World Cup™, there was still a lot more to the brand’s performance in the
first quarter typified by the adidas Sport Style division. It is our goal to continuously
engage the consumer with unique and creative concepts that keep them coming
back to adidas day after day, year after year. Collections such as STAR WARS™,
Originals by Originals and A.039 drove sales growth of 22% in the quarter, our
highest growth rate in almost three years.
Herbert Hainer
Question
There is growing confidence in the
investor community on Reebok’s
turnaround. Can you give an update
on recent developments?
The Reebok turnaround is gathering pace and I am delighted to report that we
saw positive sales growth of 1% currency-neutral in the first quarter. Momentum
continues to build in North America as sales in the region increased 6% currencyneutral driven by the toning category. We are well on track to selling at least five
million pairs of toning footwear in the US alone this year. But we are not stopping
there, and our second major product innovation is already proving to be a winner.
On March 11, we launched the ZigTech™ training shoe at retail in the US, supported
by an aggressive marketing campaign including TV, print and digital communication. Sell-through rates have been so strong that I believe we will easily sell over
one million pairs of the shoe in the US in 2010. These great products give a clear
demonstration of our intention with Reebok to secure our territory and lead in
fitness and training. It is with confidence that I can say today that Reebok will grow
at a double-digit rate in North America this year. And with such premium products
becoming a bigger piece of our sales, this is starting to have a major impact on
brand profitability. In the first quarter, Reebok gross margins increased almost
900 basis points. As growth rates accelerate in North America, and as we also start
intensifying our efforts internationally, I am particularly excited about the prospects
for the brand and its impact on our Group in the coming years.
Question
Herbert Hainer
In Other Businesses, TaylorMadeadidas Golf has had a strong quarter.
What drove this development and
what are your expectations for the golf
industry this year?
Similar to last year, the golf industry is off to a weak start in 2010, with most major
markets around the world contracting at a high-single-digit rate. However, with
our strength in innovation and dominating positions in several golf categories,
particularly metalwoods, we are in a fortunate position with TaylorMade-adidas
Golf, which is now the largest golf company in the world. In the first quarter, we
led the industry with currency-neutral revenue growth of 16%. This was driven by
strong double-digit increases in metalwoods, footwear and irons. And in golf balls
we are really starting to challenge the premium end of the market with growth
of over 50% in the first quarter. Our Penta TP ball ranked number three in tour
ball sales in the USA during the month of March. Visibility for TaylorMade also
remains very high across the important tour events where TaylorMade was the
No. 1 driver brand at every event on the US and European PGA tours during the
first quarter, driven by the popularity of the R9™ SuperTri and Burner® SuperFast
drivers. While all of this is encouraging, I do believe there are still some challenges
ahead for the golf industry, and the second quarter is likely to dictate the direction
for the year. However, I remain confident we will again achieve important market
share wins in several categories this year as we continue to dominate the premium
end of the sport.
Question
Finally, you have increased your
guidance for the full year. What are
your new expectations and the main
drivers for this change?
Herbert Hainer
Our performance in the first quarter and the good visibility we now have into the
important third quarter allow us to increase our guidance for the full year. We
forecast that full year sales will increase at a mid-single-digit rate currency-neutral
due to a stronger than expected performance in both the Wholesale and Retail
segments, which we now project to grow at a low- to mid-single-digit rate and a
low-double-digit rate, respectively. Gross margin will improve to a range of between
46.5% and 47.5%, and operating margin will be around 7.0%. This translates into
earnings per share of € 2.05 to € 2.30 compared to our original expectations of
€ 1.90 to € 2.15. This still gives us the flexibility we need to carry out the marketing
investments I outlined in detail earlier this year to accelerate our momentum if
opportunities arise. Looking out to the coming quarters, we certainly have many
reasons to be optimistic and plenty to look forward to. As the Reebok turnaround
gathers pace and with the FIFA World Cup™ kicking off in just a few weeks, we have
a great platform to build brand momentum for the remainder of the year.
Herbert, thank you for this interview.
Our Share
In the first quarter of 2010, international stock markets increased, maintaining the positive momentum from previous quarters.
The continuation of liberal monetary policies adopted by many central banks, positive news flow during the 2009 full year earnings
season and growing confidence in an economic upturn drove this development. As a result, the DAX-30 gained 3% compared to the
end of December 2009. The adidas AG share outperformed the index over the three-month period and rose by 5%.
Global stock markets rise
in the first quarter
After a weak start to the new year,
international stock markets improved
over the course of the first quarter.
During the first weeks of 2010, concerns
over the Euro Zone’s peripheral
countries’ sovereign debt weighed
on investor sentiment. In addition,
worries about increasing governmental
regulation for financial institutions and
China’s surprising move to increase
reserve requirements for banks
contributed to lacklustre stock market
performance. From mid-February
onwards, however, international equity
markets recovered, fuelled by the continuation of liberal monetary policies
adopted by the Fed and the ECB and
positive news flow during the 2009 full
year earnings season. In addition, more
and more indicators signalled that most
economies have finally turned towards
a sustainable recovery, which positively
contributed to investor confidence. As a
result, many international stock indices
climbed to 18-month highs.
The DAX-30 increased 3% and closed the
first quarter at 6,154 points. The MSCI
World Textiles, Apparel & Luxury Goods
Index, which comprises the Group’s main
competitors, gained 9% during the same
period supported by the high share of
luxury goods companies in the index,
which on average outperformed sporting
goods companies.
The results release of one of our
competitors in the second half of March
also contributed positively to this
development. Accordingly, the adidas AG
share finished the three-month period
at € 39.60, representing an increase
of 5% compared to the end of December
2009 and thereby outperforming the
DAX-30 see 06.
adidas AG share price
outperforms DAX-30
The adidas AG share price gained
strongly and outperformed its peers and
the general market at the beginning of
January as investor confidence in the
successful turnaround of the Reebok
brand increased. However, in line with
overall market trends, our share price
declined from mid-January onwards.
In February, the adidas AG share traded
sideways in anticipation of the publication
of full year results. Within the results,
the Group’s net debt reduction and the
progress in operating working capital
management significantly exceeded the
expectations of analysts and investors.
Nevertheless, the 2010 profit outlook
resulted in share price declines on the
day of the earnings release. In line with
rising equity markets, and with positive
analyst commentary adding to improving
sentiment, the adidas AG share regained
momentum towards the end of the first
quarter.
Number of ADRs increases
The number of Level 1 ADRs (American
Depository Receipts) increased during
the three-month period compared to
the end of 2009, underlining improving
North American investor sentiment.
At March 31, 2010, 5.5 million ADRs
were outstanding (December 31,
2009: 5.4 million). Nevertheless, this
represents a decline compared to March
31, 2009, when 8.9 million ADRs were
outstanding. The Level 1 ADR closed
the quarter at US$ 26.70, reflecting a
2% decrease compared to the end of
December 2009. The decrease, which
compares to an ordinary share price
increase, was due to the appreciation
of the US dollar during the first quarter.
N°-
The adidas AG Share
05
Number of shares outstanding
First quarter average
At March 31 1)
Type of share
Free float
Initial Public Offering
Share split
Stock exchange
Stock registration number (ISIN)
Stock symbol
Important indices
209,216,186
209,216,186
No-par-value share
100%
November 17, 1995
June 6, 2006 (in a ratio of 1: 4)
All German stock exchanges
DE0005003404
ADS, ADSG.DE
DAX-30
MSCI World Textiles,
Apparel & Luxury Goods
Deutsche Börse Prime Consumer
Dow Jones STOXX
Dow Jones EURO STOXX
Dow Jones Sustainability
FTSE4Good Europe
Ethibel Index Excellence Europe
ASPI Eurozone Index
ECPI Ethical Index EMU
1) All shares carry full dividend rights.
Historical performance of adidas AG share 1)
and important indices at March 31, 2010 in %
adidas AG
DAX-30
MSCI World Textiles,
Apparel & Luxury Goods
N°-
06
YTD
1 year
3 years
5 years
Since IPO
5
3
58
51
(3)
(11)
29
42
310
180
9
85
(1)
50
160
1) Source: Bloomberg.
To Our Shareholders Our Share
Dividend proposal of € 0.35 per share
The adidas AG Executive and Supervisory
Boards will recommend paying a dividend
of € 0.35 per share for the financial year
2009 (2008: € 0.50). Subject to approval
by our shareholders at the Annual
General Meeting on May 6, 2010, the
dividend will be paid on May 7, 2010.
As a result of the decline in the Group’s
net income attributable to shareholders
in 2009, Management has taken the
decision to lower the dividend amount.
However, in light of the strong cash
flow generation in 2009 and the significantly reduced level of net borrowings,
Management has decided to change its
dividend policy and increase the payout
ratio. Going forward, we intend to pay
out between 20% and 40% of net income
attributable to shareholders (previously:
15% to 25%). The total payout of
€ 73 million (2008: € 97 million) reflects
an increase of our payout ratio to 30% of
net income compared to 15% in the prior
year.
Changes in shareholder base
In the first quarter of 2010, the Group
received ten voting rights notifications
according to article 21, section 1 of
the German Securities Trading Act
(Wertpapierhandelsgesetz – WpHG)
see 07. All voting rights notifications
received in the first quarter of 2010
and thereafter can be viewed on our
corporate website www.adidas-Group.com/
voting_rights_notifications.
Directors’ dealings reported
on corporate website
The purchase or sale of adidas AG shares
(ISIN DE0005003404) or related financial
instruments, as defined by article 15a
WpHG, conducted by members of our
Executive or Supervisory Boards, by
key executives or by any person in close
relationship with these persons, is
reported on our website www.adidasGroup.com/directors_dealings. In the first
quarter of 2010, adidas AG received
notification that Christian Tourres,
member of the adidas AG Supervisory
Board, had sold 100,000 shares on
January 6, 2010.
N°-
SHAREHOLDER RIGHTS NOTIFICATIONs RECEIVED IN Q1 2010
07
Date of
notification
Notifying
party
Threshold
crossed
Voting rights of total shares
outstanding
Date of
change
Jan. 5, 2010
BlackRock, Inc.
>5%
10,521,736
(5.03%)
Dec. 9, 2009
Jan. 28, 2010
BlackRock, Inc.
<5%
10,458,560
(4.99%)
Jan. 25, 2010
Feb. 5, 2010
The Bank of New York
Mellon Corporation
<3%
6,260,660
(2.99%)
Feb. 3, 2010
Feb. 12, 2010
Mellon Corporation
>3%
6,284,824
(3.004%)
Feb. 9, 2010
Feb. 23, 2010
Mellon Corporation
<3%
6,268,928
(2.996%)
Feb. 22, 2010
Mar. 4, 2010
Mellon Corporation
>3%
6,277,382
(3.0004%)
Mar. 2, 2010
Mar. 5, 2010
Mellon Corporation
<3%
6,263,552
(2.9938%)
Mar. 4, 2010
Mar. 15, 2010
Mellon Corporation
>3%
6,432,398
(3.0745%)
Mar. 12, 2010
Mar. 16, 2010
BlackRock, Inc. and others
>5%
10,904,232 and 10,533,558, resp.
(5.21% and 5.03%, resp.)
Mar. 12, 2010
Mar. 19, 2010
Euro Pacific Growth Fund
<5%
10,157,771
(4.86%)
Mar. 16, 2010
share price development in 2010 1)
Dec. 31, 2009
N°-
08
Mar. 31, 2010
110
105
100
95
90
— adidas AG — DAX-30 — MSCI World Textiles, Apparel & Luxury Goods Index
1) Index: December 31, 2009 = 100.
To Our Shareholders Our Share
Group Business Performance
In the first quarter of 2010, the adidas Group results improved strongly compared to the prior year period. Currency-neutral
Group sales increased 4% as a result of growth in the Wholesale and Retail segments as well as in Other Businesses. In euro
terms, adidas Group revenues grew 4% to € 2.674 billion from € 2.577 billion in 2009. The Group’s gross margin increased
3.5 percentage points to 48.6% (2009: 45.2%), supported by lower input costs, a larger share of higher-margin Retail sales, less
clearance sales and positive currency effects. Consequently, the Group’s gross profit increased 12% to € 1.300 billion in the
first quarter of 2010 versus € 1.164 billion in 2009. The Group’s operating margin increased 7.5 percentage points to 9.7% from
2.2% in 2009, primarily due to the higher gross margin as well as lower other operating expenses as a percentage of sales. The
Group’s operating profit grew to € 260 million in the first quarter of 2010 versus € 58 million in 2009. The Group’s net income
attributable to shareholders increased to € 168 million from € 5 million in 2009. Diluted earnings per share grew to € 0.80 in
the first quarter of 2010 versus € 0.04 in 2009.
Economic and Sector
Development
Global economic recovery in the
first quarter of 2010
In the first quarter of 2010, the global
economic environment improved, spurred
by increasingly stabilising unemployment
rates and rising consumer confidence
in most parts of the world. In Western
Europe, industrial output grew in the first
quarter. This was due to low inflationary
pressures, the depreciation of the
euro and low interest rates. European
emerging markets such as Russia
benefited from increasing commodity
prices although consumer spending in
the region remained lacklustre in light
of the high levels of unemployment. In
the USA, encouraging signs from the
financial sector as well as increasing
private investment and consumer
spending indicated a steady recovery
of the economy.
In China, economic expansion advanced
in the first months of 2010. However,
increasing inflation and soaring real
estate prices raised concerns about a
potential overheating of the Chinese
economy. In the other Asian markets,
most countries posted healthy GDP
growth except Japan, where economic
improvement was modest. In Latin
America, the increasing global demand
for commodities had a positive effect on
overall economic development.
Positive trends in the global sporting
goods industry
In the first quarter of 2010, the global
sporting goods industry returned to
growth in most regions, helped by
lean inventories and considerably
less promotional activity compared
to the same period in the prior year.
Nevertheless, consumers remained
relatively cautious and continued to
demand value for money.
From a category perspective, the
emerging toning category was one of the
main contributors to improving sporting
goods sales. In Western Europe, sales
related to the 2010 FIFA World Cup™
supported modest growth. In European
emerging markets, sporting goods sales
were challenging. In North America, the
sporting goods industry benefited from
strong growth rates in the emerging
toning category. In China, sporting goods
sales improved compared to the prior
year although inventory levels remained
high. In Japan, the sporting goods
industry remained depressed, however
most other Asian economies performed
well in the first quarter. Latin America
again outperformed the overall industry
average, which was in part also attributable to the relatively strong importance
of the Football World Cup in this region.
Interim GROUP MANAGEMENT REPORT Group Business Performance Economic and Sector Development
N°-
Quarterly consumer confidence
development by region
USA 1)
Euro Zone 2)
Japan 3)
09
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
26.9
(34)
29.6
49.3
(25)
38.1
53.4
(19)
40.7
53.6
(16)
37.9
52.2
(17)
41.0
1) Source: Conference Board.
2) Source: European Commission.
3) Source: Economic and Social Research Institute, Government of Japan.
N°-
Exchange rate development 1)
10
€ 1 equals
USD
GBP
JPY
Average
rate 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Average
rate 2010
1.3932
0.8912
130.23
1.4134
0.8521
135.51
1.4643
0.9093
131.07
1.4406
0.8881
133.16
1.3479
0.8898
125.93
1.3856
0.8867
125.64
1) Spot rates at quarter-end.
Income Statement
Segmental reporting
comparatives updated
Following minor changes to the adidas
Group’s organisational structure in the
first quarter of 2010, the assignment
of certain functions has been changed
compared to the Group’s prior year
annual financial statements. This
development has a limited effect on the
Group segmental structure. To ensure
full comparability of Group financial
results in 2010, the Group has decided to
adjust the segmental reporting for 2009
retrospectively. While these adjustments
have no effect on total Group financial
results, first quarter 2009 Wholesale
revenues now amount to € 1.874 billion
(instead of € 1.876 billion reported).
Sales of Other Businesses amount to
€ 295 million (instead of € 294 million
reported). 2009 Retail revenues now
amount to € 400 million (instead of
€ 399 million reported). First quarter
operating profit for 2009 now amounts to
€ 614 million in the Wholesale segment
(instead of € 615 million reported)
and € 15 million in the Retail segment
(instead of € 17 million reported).
Operating profit of Other Businesses
remains unchanged. In the financial
statements for the first quarter of 2010,
these adjustments have already been
reflected in the 2009 comparison base.
adidas Group currency-neutral sales
increase 4% in the first quarter of 2010
In the first quarter of 2010, Group
revenues increased 4% on a currencyneutral basis as a result of growth in the
Wholesale and Retail segments as well
as sales increases in Other Businesses.
Currency translation effects did not
have a significant impact on sales in
euro terms. Group revenues grew 4% to
€ 2.674 billion in the first quarter of 2010
from € 2.577 billion in 2009 see 11.
Group sales increase driven
by Retail segment
The adidas Group’s sales increase in
the first quarter of 2010 was driven by
double-digit growth in the Retail segment
as well as higher sales in the Wholesale
segment and Other Businesses.
Currency-neutral Wholesale revenues
increased 1% during the period due to
higher adidas sales. Currency-neutral
Retail sales increased 16% versus
the prior year as a result of doubledigit adidas and Reebok sales growth.
Revenues in Other Businesses increased
8% on a currency-neutral basis as a
result of double-digit sales growth at
TaylorMade-adidas Golf.
Interim GROUP MANAGEMENT REPORT Group Business Performance Income Statement
Currency translation effects only had a
minor impact on segmental sales in euro
terms. Wholesale revenues increased 1%
to € 1.898 billion in the first quarter of
2010 from € 1.874 billion in 2009. Retail
sales increased 15% to € 459 million
versus € 400 million in the prior year.
Sales in Other Businesses grew 7% to
€ 316 million in the first quarter of 2010
(2009: € 295 million).
Currency-neutral sales increase
in nearly all regions
In the first quarter of 2010, currencyneutral adidas Group sales increased
in all regions except Greater China
and Other Asian Markets. Revenues in
Western Europe increased 4% primarily
as a result of higher sales in the UK
and Germany. In European Emerging
Markets, Group sales increased 1% on
a currency-neutral basis due to growth
in most of the region’s markets. Sales
for the adidas Group in North America
increased 14% on a currency-neutral
basis due to increases in both the USA
and Canada. Sales in Greater China
decreased 15% on a currency-neutral
basis. Revenues in Other Asian Markets
declined 3% primarily as a result of
decreases in Japan. In Latin America,
sales grew 18% on a currency-neutral
basis, with increases in most of the
region’s major markets see 13.
N°-
First Quarter Net sales
11
€ in millions
2006
2007
2008
2009
2010
2,459
2,538
2,621
2,577
2,674
First Quarter net sales by segment 1)
12% Other Businesses N°-
12
71% Wholesale
17% Retail 1) HQ/Consolidation accounts for less than 1% of sales.
Currency translation effects had a mixed
impact on regional sales in euro terms.
Group revenues in Western Europe
increased 5% to € 945 million in the first
quarter of 2010 from € 899 million in
2009. In European Emerging Markets,
sales declined 1% to € 290 million in the
first quarter of 2010 from € 293 million in
2009. Sales in North America increased
10% to € 585 million from € 532 million
in 2009. Revenues in Greater China
decreased 20% to € 198 million in the
first quarter of 2010 from € 247 million
in 2009. In Other Asian Markets,
Revenues in Latin America grew 24% to
€ 271 million from € 218 million in the
prior year see 14.
N°-
First Quarter net sales growth 1)
(currency-neutral) by segment and region in %
Western Europe
European Emerging
Markets
North America
Greater China
Other Asian Markets
Latin America
Total
1) Versus the prior year.
Group sales increase in all
product categories
In the first quarter of 2010, sales
increased in all product categories on
a currency-neutral basis. Currencyneutral footwear sales increased 2%
during the period. This development
was due to increases in Retail and
Other Businesses. Footwear sales in
the Wholesale segment were stable
compared to the prior year. Apparel
revenues increased 1% on a currencyneutral basis. Double-digit growth in the
Retail segment was offset by declines
in Wholesale and Other Businesses.
Currency-neutral hardware sales
increased 33% compared to the prior
year due to double-digit growth in
Wholesale and Other Businesses which
more than compensated for declines
in Retail.
N°-
First Quarter net sales growth 1)
13
14
(in €) by segment and region in %
Wholesale
Retail
Other
Businesses
Total
4
4
0
4
(19)
16
(22)
(5)
16
1
26
15
53
(3)
39
16
0
11
20
6
21
8
1
14
(15)
(3)
18
4
Wholesale
Retail
Other
Businesses
Total
5
5
1
5
(19)
11
(26)
(1)
22
1
21
10
46
0
47
15
2
8
14
9
17
7
(1)
10
(20)
1
24
4
Western Europe
European Emerging
Markets
North America
Greater China
Other Asian Markets
Latin America
Total
1) Versus the prior year.
First Quarter net sales by region 1)
7% Greater China N°-
15
36% Western Europe
10% Latin America 11% European Emerging Markets
14% Other Asian Markets 22% North America
1) Excluding HQ/Consolidation.
Currency translation effects only had a
minor impact on sales in euro terms.
Footwear sales in euro terms increased
2% to € 1.272 billion in the first quarter of
2010 (2009: € 1.244 billion). Apparel sales
were virtually stable at € 1.130 billion
in the first quarter of 2010 (2009:
€ 1.129 billion). Hardware sales
increased 33% to € 272 million in the
in 2009.
Gross margin increases
3.5 percentage points
The gross margin of the adidas Group
increased 3.5 percentage points to
48.6% in the first quarter of 2010 (2009:
45.2%) see 17. This development
was mainly due to lower input costs, a
larger share of higher-margin Retail
sales, less clearance sales as well as
positive currency effects related to
the appreciation of the Russian rouble
compared to the prior year. These
positive effects more than offset negative
impacts from the increase of import
duties in Latin America. As a result, gross
profit for the adidas Group grew 12% in
the first quarter of 2010 to € 1.300 billion
versus € 1.164 billion in the prior year
see 16.
Currency-neutral royalty and
commission income grows
Royalty and commission income for
the adidas Group increased 7% to
from € 20 million in the prior year. On
a currency-neutral basis, royalty and
commission income increased 10% as a
result of higher licensee sales as well as
higher average royalty rates.
Other operating income increases
Other operating income includes
items such as releases of accruals and
provisions and gains from the disposal
of fixed assets. Other operating income
first quarter of 2010 from € 27 million in
2009. This development was mainly due
to the settlement of a lawsuit and the
divestiture of a trademark, each of which
had a positive low-double-digit million
euro impact on the Group’s financial
results.
Other operating expenses decline
as a percentage of sales
Other operating expenses, including
depreciation and amortisation, consist
of items such as sales working budget,
marketing working budget and operating
overhead costs. Other operating
expenses as a percentage of sales
decreased 3.3 percentage points to
41.5% in the first quarter of 2010 from
44.7% in 2009. In absolute terms, other
operating expenses decreased 4% to
€ 1.109 billion in the first quarter of
2010 (2009: € 1.153 billion) see 18.
Thereof, sales and marketing working
budget expenditures amounted to
€ 333 million, which represents an
increase of 3% versus the prior year level
(2009: € 324 million). The increase was
primarily related to higher expenditures
for the Reebok brand. As a result of
the higher Group sales base, however,
sales and marketing working budget
expenditures as a percentage of sales
decreased 0.1 percentage points to 12.4%
from 12.6% in the prior year.
Number of Group employees
increases 2%
At the end of the first quarter of 2010,
the Group employed 39,155 people. This
represents an increase of 2% versus the
prior year level of 38,227. New hirings
related to the expansion of the Group’s
own-retail store base were the main
driver of this development. These more
than offset declines due to reorganisation
initiatives and a hiring freeze the Group
implemented for all non-retail-related
functions. On a full-time equivalent basis,
the number of employees also increased
2% to 33,963 at the end of the first
quarter of 2010 (2009: 33,291).
Operating margin increases
The operating margin of the adidas Group
increased 7.5 percentage points to 9.7%
in the first quarter of 2010 (2009: 2.2%)
see 20. The operating margin increase
was primarily due to the higher gross
margin as well as lower other operating
expenses as a percentage of sales. As a
result, Group operating profit increased
349% to € 260 million versus € 58 million
in 2009 see 19.
First Quarter Gross Profit
€ in millions
2009
2010
N°-
16
1,164
1,300
First Quarter gross margin
in %
N°-
17
2009
2010
45.2
48.6
First Quarter Other Operating Expenses
€ in millions
N°-
18
1,153
1,109
2009
2010
First Quarter Operating Profit
€ in millions
2009
2010
58
260
First Quarter operating margin
in %
2009
2010
N°-
19
N°-
20
2.2
9.7
Financial income up 91%
Financial income increased 91% to
from € 6 million in the prior year, mainly
due to positive exchange rate effects.
Financial expenses decrease 48%
Financial expenses decreased 48% to
(2009: € 56 million) see 21. The
non-recurrence of prior year negative
exchange rate effects as well as lower
interest expenses contributed to the
decline.
Income before taxes increases strongly
Income before taxes (IBT) as a percentage
of sales increased 8.8 percentage points
to 9.1% in the first quarter of 2010 from
0.3% in 2009. This was primarily a result
of the Group’s operating margin increase
and lower financial expenses. IBT for the
adidas Group increased to € 243 million
from € 9 million in 2009 see 22.
Net income attributable to
shareholders reaches € 168 million
The Group’s net income attributable to
shareholders increased to € 168 million
in the first quarter of 2010 from
€ 5 million in 2009 see 23. Higher
operating profit was the primary reason
for this development. The Group’s tax
rate decreased 21.2 percentage points to
30.5% in the first quarter of 2010 (2009:
51.7%), mainly due to a more favourable
regional earnings mix compared to the
prior year. Net income attributable to
non-controlling interests amounted to
versus negative € 1 million in 2009.
Earnings per share reach € 0.80
Following the full conversion of the
Group’s convertible bond in the fourth
quarter of 2009, the Group has no dilutive
potential shares anymore. As a result,
diluted earnings per share equal basic
earnings per share. In the first quarter
of 2010, basic and diluted earnings per
share amounted to € 0.80 see 24.
In the prior year period, basic earnings
per share amounted to € 0.02 and
diluted earnings per share to € 0.04.
The weighted average number of shares
used in the calculation was 209,216,186
in the first quarter of 2010. In the prior
year period, the number amounted to
193,515,512 for the calculation of basic
earnings per share and 209,260,662 for
the calculation of diluted earnings per
share.
N°-
First Quarter financial expenses
21
€ in millions
2009
2010
56
29
First Quarter Income Before Taxes
€ in millions
2009
2010
9
243
First Quarter Net income attributable to
shareholders € in millions
2006
2007
2008
2009
2010
144
169
5
168
in €
N°-
23
128
First quarter diluted earnings per share
2006
2007
2008
2009
2010
N°-
22
N°-
24
0.67
0.60
0.79
0.04
0.80
Balance Sheet and
Cash Flow Statement
Total assets decrease 4%
At the end of March 2010, total assets
decreased 4% to € 9.531 billion versus
€ 9.904 billion in the prior year. This was
the result of a decline in both current
and non-current assets. Compared
to December 31, 2009, total assets
increased 7%.
Group inventories down 17%
Group inventories decreased 17% to
€ 1.680 billion at the end of March 2010
versus € 2.016 billion in 2009 see 27.
On a currency-neutral basis, inventories
declined 20%. This was mainly a result
of clearance of excess inventories at all
our brands throughout the last twelve
months.
Accounts receivable increase 5%
At the end of March 2010, Group
receivables increased 5% to
€ 1.987 billion (2009: € 1.884 billion)
see 28. On a currency-neutral basis,
receivables remained stable. This
development compares to a currencyneutral Group sales increase of 4%,
reflecting our strict discipline in
implementing the Group’s trade terms
and improved collection of receivables as
the economic situation in most markets
continued to ease.
Other current financial
assets down 20%
Other current financial assets decreased
20% to € 210 million at the end of March
2010 from € 263 million in 2009. This
development was mainly due to the
decrease of the fair value of current
forward contracts.
Other current assets down 21%
Other current assets decreased 21% to
€ 401 million at the end of March 2010
from € 508 million in 2009, mainly as a
result of a decrease in prepayments.
Fixed assets decline 5%
Fixed assets decreased 5% to
€ 3.995 billion at the end of March
2010 versus € 4.194 billion in 2009.
Additions in an amount of € 221 million
were mainly related to the continued
expansion of our own-retail activities
and investment into the Group’s IT
infrastructure. Additions were more than
offset by depreciation and amortisation
amounting to € 294 million, disposals
of € 50 million and a net transfer of
fixed assets to assets held-for-sale
totalling € 50 million. In addition,
negative currency translation effects in
an amount of € 25 million on fixed assets
denominated in currencies other than
the euro impacted this development.
Compared to December 31, 2009, fixed
assets increased 5%.
Assets held-for-sale increase 236%
At the end of March 2010, assets heldfor-sale increased 236% to € 77 million
compared to € 23 million in 2009, due to
additional assets now being in the scope
of a sale. Assets held-for-sale primarily
relate to the planned sale of land and
buildings in Herzogenaurach, Germany,
as well as certain office buildings and
warehouses in various other locations.
Other non-current assets decline 6%
Other non-current assets decreased
6% to € 122 million at the end of the
in 2009, mainly driven by a decline in
prepaid promotion contracts.
Accounts payable increase 29%
Accounts payable were up 29% to
versus € 880 million in 2009 see 29.
On a currency-neutral basis, accounts
payable increased 25%. This development
was mainly attributable to increased
production volumes compared to the
prior year as well as improved terms with
our suppliers.
Other current financial liabilities
increase 78%
increased 78% to € 78 million at the
end of March 2010 from € 44 million in
2009, primarily as a result of an increase
in the negative fair value of financial
instruments.
N°-
Balance sheet structure 1)
25
in % of total assets
Assets
March 31, 2010
March 31, 2009
2.4
Cash and cash equivalents ...............................4.1
19.0
Accounts receivable ........................................20.8
20.4
Inventories ......................................................17.6
Fixed assets ....................................................41.9
42.3
Other assets ....................................................15.6
15.9
Total assets
9,531
(€ in millions)
9,904
1) For absolute figures see Consolidated Balance Sheet (IFRS), p. 29.
N°-
Balance sheet structure 1)
26
in % of total liabilities and equity
Liabilities and equity
March 31, 2010
March 31, 2009
7.4
Short-term borrowings . ...................................3.2
Accounts payable ............................................11.9
8.9
Long-term borrowings ...................................16.1
25.4
Other liabilities ...............................................24.1
22.7
Total equity ......................................................44.7
Total liabilities and equity
(€ in millions)
35.6
9,531
9,904
1) For absolute figures see Consolidated Balance Sheet (IFRS), p. 29.
Interim GROUP MANAGEMENT REPORT Group Business Performance Balance Sheet and Cash Flow Statement
Accrued liabilities increase 6%
Accrued liabilities increased 6% to
€ 672 million at the end of the first
quarter of 2010 from € 634 million
in 2009, mainly due to an increase
in accruals for payment of goods and
services not yet invoiced.
Other current liabilities grow 10%
Other current liabilities were up 10% to
€ 265 million at the end of March 2010
from € 241 million in 2009, mainly due
to increases in tax liabilities other than
income taxes.
Equity growth supported by full
conversion of convertible bond
Shareholders’ equity rose 21% to
versus € 3.525 billion in 2009 see 30.
The full conversion of our convertible
bond and the net income generated
during the last twelve months were the
main contributors to this development.
Currency translation effects positively
impacted this development but were
partly offset by declines in the fair value
of financial instruments and the dividend
paid during the period.
Cash flow reflects improved
Group profitability
In the first quarter of 2010, net cash
outflow from operating activities was
€ 430 million (2009: € 617 million).
The decrease in cash used in operating
activities compared to the prior year was
primarily due to the improved Group
profitability. Net cash outflow from
investing activities was € 37 million
(2009: € 53 million) and was mainly
related to spending for property, plant
and equipment such as investments in
the furnishing and fitting of stores in our
Retail segment, in new office buildings
and in IT systems. Net cash inflows from
financing activities totalled € 75 million
(2009: € 663 million). Cash inflows from
financing activities were related to an
increase in long-term borrowings in an
amount of € 225 million, which was partly
offset by the repayment of short-term
borrowings totalling € 150 million.
Exchange rate effects in an amount
of € 5 million positively impacted the
Group’s cash position in the first quarter
of 2010 (2009: negative € 1 million).
As a result of all these developments,
cash and cash equivalents decreased by
€ 387 million to € 388 million at the end
of March 2010 compared to € 775 million
at the end of December 2009.
Net borrowings down € 1.525 billion
Net borrowings at March 31, 2010
amounted to € 1.359 billion, which
represents a decrease of € 1.525 billion,
or 53%, versus € 2.883 billion at the
end of March 2009 see 31. Lower
working capital requirements and the
complete conversion of our € 400 million
convertible bond in the fourth quarter of
2009 were the main reasons for the net
debt decline. These positive effects more
than offset negative currency translation
effects in an amount of € 5 million.
Consequently, the Group’s ratio of net
borrowings over 12-month rolling EBITDA
decreased to 1.4 at the end of March 2010
versus 2.7 in the prior year.
N°-
Inventories 1)
€ in millions
27
2009
2010
1,680
2,016
1) At March 31.
N°-
Receivables 1)
28
€ in millions
1,884
1,987
2009
2010
1) At March 31.
N°-
Accounts Payable 1)
29
€ in millions
2009
2010
880
1,133
1) At March 31.
N°-
Shareholders’ Equity 1)
30
€ in millions
3,525
2009
2010
4,254
1) At March 31.
N°-
Net Borrowings 1)
31
€ in millions
2009
2010
2,883
1,359
1) At March 31.
Interim GROUP MANAGEMENT REPORT Group Business Performance Balance Sheet and Cash Flow Statement
Business Performance Wholesale
The Wholesale segment comprises the adidas and Reebok business activities with retailers. In the first quarter of 2010,
currency-neutral sales in the Wholesale segment increased 1%. In euro terms, Wholesale sales improved 1% to €1.898 billion
from € 1.874 billion in the prior year. Gross margin increased 0.5 percentage points to 43.1% (2009: 42.6%). This was mainly
a result of lower input costs and a higher gross margin at Reebok. Gross profit was up 3% to € 818 million in the first quarter
of 2010 from € 798 million in 2009. Segmental operating costs as a percentage of sales increased 0.3 percentage points to
10.1% (2009: 9.8%). As a result of the gross margin increase, which more than offset higher segmental operating costs as
a percentage of sales, segmental operating margin improved 0.2 percentage points to 33.0% in the first quarter of 2010 versus
32.8% in the prior year. In absolute terms, segmental operating profit grew 2% to € 626 million in the first quarter of 2010
versus € 614 million in 2009.
Currency-neutral segmental
sales grow 1%
In the first quarter of 2010, revenues
for the Wholesale segment increased
1% on a currency-neutral basis. adidas
Sport Performance and Reebok sales
declined compared to the prior year while
revenues at adidas Sport Style increased
strongly. Currency translation effects did
not have a significant impact on revenues
in euro terms. Sales in the Wholesale
segment were up 1% to € 1.898 billion
in the first quarter of 2010 from
€ 1.874 billion in 2009 see 33.
Currency-neutral Wholesale sales with
mixed regional development
Currency-neutral sales for the Wholesale
segment recorded a mixed regional
development in the first quarter of 2010.
Currency-neutral revenues in Western
Europe increased 4%, primarily due to
sales growth in the UK and Germany,
which more than offset declines in other
markets.
Revenues in European Emerging
Markets decreased 19% on a currencyneutral basis due to declines in Russia.
Currency-neutral Wholesale sales in
North America grew 16% due to doubledigit growth in both the USA and Canada.
Revenues in Greater China decreased
22% on a currency-neutral basis. Sales
in Other Asian Markets declined 5% on
a currency-neutral basis primarily due
to decreases in Japan, which more than
offset increases in several other markets.
In Latin America, currency-neutral sales
were up 16%, supported by double-digit
increases in most major markets.
Currency translation effects had
a mixed impact on regional sales in
euro terms. Sales in Western Europe
improved 5% in the first quarter of 2010
to € 797 million (2009: € 756 million).
In European Emerging Markets, sales
decreased 19% to € 128 million from
€ 159 million in 2009. Revenues in North
America increased 11% to € 333 million
in the first quarter of 2010 versus
€ 301 million in the prior year.
Interim GROUP MANAGEMENT REPORT Business Performance Wholesale
In Greater China, revenues decreased
26% to € 164 million in the first quarter
of 2010 (2009: € 222 million). Sales
in Other Asian Markets declined 1%
to € 242 million in the first quarter of
2010 from € 245 million in 2009, while
revenues in Latin America improved 22%
2010 (2009: € 192 million) see 34.
Currency-neutral adidas Sport
Performance sales decline 6%
In the first quarter of 2010, adidas
Sport Performance wholesale revenues
decreased 6% on a currency-neutral
basis. Revenues declined in all major
categories, except the football category,
which was positively impacted by sales
related to the 2010 FIFA World Cup™.
Currency translation had a positive
effect on revenues in euro terms. In
the first quarter of 2010, adidas Sport
Performance sales decreased 5% to
€ 1.192 billion from € 1.255 billion in the
prior year.
N°-
Wholesale at a glance
32
€ in millions
Net sales
Gross profit
Gross margin
First quarter
2010
First quarter
2009
Change
1,898
818
43.1%
626
33.0%
1,874
798
42.6%
614
32.8%
1%
3%
0.5pp
2%
0.2pp
Wholesale First Quarter Net sales
€ in millions
2008
2009
2010
N°-
33
1,968
1,874
1,898
adidas Sport Style sales increase
22% on a currency-neutral basis
Currency-neutral adidas Sport Style
wholesale revenues grew 22% in the
first quarter of 2010. The increase was
driven by strong momentum in both the
Style Essentials collection and Originals.
Currency translation effects positively
impacted revenues in euro terms. Sport
Style sales grew 23% to € 409 million
€ 331 million).
Reebok sales decline 3% on a
currency-neutral basis
In the first quarter of 2010, Reebok
wholesale revenues decreased 3% on a
currency-neutral basis. This was a result
of declines in the Classics business,
which was partly offset by sales growth
in the walking category. In euro terms,
Reebok sales also decreased 3% to
from € 307 million in 2009.
Gross margin positively impacted
by lower input costs
Wholesale gross margin increased
0.5 percentage points to 43.1% in the first
quarter of 2010 from 42.6% in 2009. This
was mainly due to lower input costs and
a higher Reebok gross margin supported
by positive product mix effects and less
clearance sales. adidas brand wholesale
gross margin declined 0.6 percentage
points to 45.0% in the first quarter of
2010 (2009: 45.6%). Wholesale gross
margin of the Reebok brand increased
5.7 percentage points to 32.7% in the first
quarter of 2010 versus 27.0% in the prior
year. As a result, Wholesale gross profit
improved 3% to € 818 million in the first
quarter of 2010 versus € 798 million in
2009.
Segmental operating costs
as a percentage of sales up
Segmental operating costs in Wholesale
primarily relate to sales working budget
expenses as well as expenditures
for sales force, administration and
logistics. Segmental operating costs
as a percentage of sales increased
0.3 percentage points to 10.1% (2009:
9.8%). This was primarily due to higher
sales working budget expenditures as
well as increased warehousing and
distribution expenditures. In euro terms,
segmental operating costs grew 4% to
N°-
Wholesale net sales by Region
34
€ in millions
Western Europe
European Emerging Markets
North America
Greater China
Other Asian Markets
Latin America
Total 1)
First quarter
2010
First quarter
2009
Change
Change
currency-neutral
797
128
333
164
242
234
1,898
756
159
301
222
245
192
1,874
5%
(19%)
11%
(26%)
(1%)
22%
1%
4%
(19%)
16%
(22%)
(5%)
16%
1%
1) Rounding differences may arise in totals.
N°-
Wholesale net sales by quarter
35
€ in millions
increases 2%
In the first quarter of 2010, segmental
operating margin increased
32.8%). This was a result of the gross
margin increase, which was partly offset
by higher segmental operating costs
as a percentage of sales. Segmental
operating profit improved 2% to
versus € 614 million in the prior year
see 36.
Interim GROUP MANAGEMENT REPORT Business Performance Wholesale
Q1 2009
Q1 2010
Q2 2009
Q2 2010
Q3 2009
Q3 2010
Q4 2009
Q4 2010
1,874
1,898
1,605
2,036
1,648
N°-
Wholesale Segmental Operating Profit
by quarter € in millions
Q1 2009
Q1 2010
Q2 2009
Q2 2010
Q3 2009
Q3 2010
Q4 2009
Q4 2010
36
614
626
490
703
534
Business Performance Retail
The Retail segment comprises the own-retail activities of the adidas and Reebok brands. In the first quarter of 2010, currencyneutral Retail sales increased 16%. In euro terms, Retail sales grew 15% to € 459 million (2009: € 400 million). Currency-neutral
comparable store sales increased 7% versus the prior year. Gross margin increased 3.7 percentage points to 58.2% (2009:
54.5%). This was mainly a result of positive currency effects related to the Russian rouble as well as lower input costs. Gross
profit increased 23% to € 267 million in the first quarter of 2010 from € 218 million in 2009. As a result of the increase in gross
margin and lower segmental operating costs as a percentage of sales, segmental operating margin increased 7.6 percentage
points to 11.3% (2009: 3.6%). In absolute terms, segmental operating profit grew 256% to € 52 million in the first quarter of 2010
Currency-neutral segmental
sales increase 16%
In the first quarter of 2010, Retail
revenues increased 16% on a currencyneutral basis. Concept store, factory
outlet and other retail format sales were
all up at double-digit rates versus the
prior year. Currency translation effects
had a minor negative impact on segment
revenues in euro terms. Sales grew 15%
to € 459 million from € 400 million in the
prior year see 38. Currency-neutral
comparable store sales grew 7% versus
the prior year, with increases in all store
formats except factory outlets, where
comparable store sales remained stable.
Own-retail store base increases
At March 31, 2010, the adidas Group
Retail segment operated 2,228 stores.
This represents a net increase of 16 or
1% versus the year-end level of 2,212.
Over the course of the first quarter, the
Group opened 57 new stores. 41 stores
were closed. The number of concept
stores increased by 16 to 1,219 at the end
of the first quarter of 2010 (December
31, 2009: 1,203). The number of factory
outlets grew by 9 to 764 at the end of
the period (December 31, 2009: 755).
Concession corners declined by 9 to 235
(December 31, 2009: 244). Other formats,
which include e-commerce, remained
unchanged at 10 (December 31, 2009:
10). Of the total number of stores, 1,625
were adidas and 603 Reebok branded
(December 31, 2009: 1,626 adidas, 586
Reebok).
Interim GROUP MANAGEMENT REPORT Business Performance Retail
Currency-neutral Retail sales increase
in nearly all regions
Currency-neutral Retail sales increased
in all regions except Other Asian Markets.
Retail revenues in Western Europe
increased 4% on a currency-neutral
basis mainly due to increases in Italy,
Iberia and France. Sales in European
Emerging Markets increased 26% on a
currency-neutral basis, driven by strong
growth across all markets. Currencyneutral Retail sales in North America
grew 15% due to increases in the USA
and Canada. Retail revenues in Greater
China increased 53% on a currencyneutral basis, primarily as a result of
sales increases in factory outlets related
to the clearance of excess inventories
in this market. Sales in Other Asian
Markets declined 3% on a currencyneutral basis primarily as a result of
decreases in Japan. In Latin America,
currency-neutral Retail sales grew 39%
due to double-digit increases in all major
markets.
N°-
Retail at a glance
37
€ in millions
Net sales
Gross profit
Gross margin
First quarter
2010
First quarter
2009
Change
459
267
58.2%
52
11.3%
400
218
54.5%
15
3.6%
15%
23%
3.7pp
256%
7.6pp
Retail First Quarter Net sales
€ in millions
2008
2009
2010
N°-
38
360
400
459
Segmental sales in Western Europe
increased 5% to € 89 million in the first
quarter of 2010 (2009: € 84 million).
In European Emerging Markets,
Revenues in North America grew 10%
2010 from € 73 million in 2009. In
Greater China, sales increased 46% to
€ 30 million versus € 20 million in the
prior year. Sales in Other Asian Markets
remained virtually stable at € 71 million
€ 70 million), while revenues in Latin
America improved 47% to € 34 million
€ 23 million in the prior year see 39.
Concept store sales increase 22%
on a currency-neutral basis
Concept store revenues include sales
from adidas Sport Performance, adidas
Sport Style and Reebok concept stores.
In the first quarter of 2010, concept store
revenues increased 22% on a currencyneutral basis. Sales increased at doubledigit rates at both adidas and Reebok.
In euro terms, concept store sales
in 2009. Currency-neutral comparable
concept store sales increased 12%.
Factory outlet sales grow 10%
Factory outlet revenues include sales
from adidas and Reebok factory outlets.
In the first quarter of 2010, factory outlet
revenues increased 10% on a currencyneutral basis. Sales increased at both
adidas and Reebok. In euro terms,
factory outlet sales increased 9% to
from € 206 million in 2009. Comparable
factory outlet sales remained stable.
Currency-neutral sales from other
retail formats increase 43%
Revenues from other retail formats
include adidas and Reebok concession
corners and e-commerce operations.
In the first quarter of 2010, sales from
other retail formats increased 43%
on a currency-neutral basis. Growth
was driven by improvements in both
concession corners and e-commerce.
In euro terms, revenues from other retail
formats increased 42% to € 21 million in
the first quarter of 2010 from € 15 million
in 2009. Currency-neutral comparable
sales from other formats increased 43%.
N°-
Retail net sales by Region
39
€ in millions
Western Europe
North America
Greater China
Other Asian Markets
Latin America
Total 1)
First quarter
2010
First quarter
2009
Change
Change
currency-neutral
89
155
81
30
71
34
459
84
128
73
20
70
23
400
5%
21%
10%
46%
0%
47%
15%
4%
26%
15%
53%
(3%)
39%
16%
N°-
Retail net sales by quarter
40
€ in millions
Q1 2009
Q1 2010
Q2 2009
Q2 2010
Q3 2009
Q3 2010
Q4 2009
Q4 2010
400
524
497
N°-
Retail Segmental Operating Profit
by quarter € in millions
Q1 2009
Q1 2010
Q2 2009
Q2 2010
Q3 2009
Q3 2010
Q4 2009
Q4 2010
459
486
15
41
52
82
99
64
adidas and Reebok branded
retail sales increase
In the first quarter of 2010, adidas Group
Retail sales increased at both adidas and
Reebok. Currency-neutral adidas Sport
Performance revenues grew 13% in the
period. adidas Sport Style retail sales
increased 24% versus the prior year
on a currency-neutral basis. Currencyneutral Reebok sales were 21% higher
compared to the prior year. Comparable
store sales at the adidas brand increased
5%, whereas Reebok sales grew 15%.
Currency translation effects had a
minor negative impact on revenues in
euro terms. adidas Sport Performance
own-retail sales increased 12% to
from € 239 million in 2009. adidas Sport
Style own-retail sales were up 23% to
from € 90 million in 2009. Own-retail
sales of Reebok branded products grew
18% to € 79 million in the first quarter of
2010 (2009: € 66 million).
Retail gross margin increases
Gross margin in the Retail segment
increased 3.7 percentage points to 58.2%
in the first quarter of 2010 from 54.5%
in 2009. This was mainly a result of
positive currency effects related to the
Russian rouble as well as lower input
costs. Gross margin increased across all
store formats. By brand, adidas gross
margin grew 2.8 percentage points to
60.0% (2009: 57.3%) and Reebok’s gross
margin increased 8.8 percentage points
to 49.5% (2009: 40.7%). Retail gross profit
in 2009.
Segmental operating costs as
a percentage of sales down
Segmental operating costs in Retail
primarily relate to personnel and
logistics expenses as well as the sales
working budget. Segmental operating
costs as a percentage of sales declined
50.9%). This was a result of the strong
sales expansion which more than offset
the effect from higher expenditures
related to the improvement and harmon
isation of the Group’s retail processes
and systems. In euro terms, segmental
operating costs increased 6% to
Segmental operating margin increases
margin increase and lower segmental
operating costs as a percentage of
sales. In absolute terms, segmental
operating profit increased 256% to
versus € 15 million in the prior year
see 41.
Business Performance Other Businesses
Other Businesses primarily include the TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey segments. In addition, the
segment Other Centrally Managed Brands, which comprises brands such as Y-3, is also included. In the first quarter of 2010,
currency-neutral sales of Other Businesses increased 8%. In euro terms, sales grew 7% to € 316 million (2009: € 295 million).
Gross margin increased 5.7 percentage points to 45.0% (2009: 39.4%). This was mainly a result of positive product mix effects and
less clearance sales in the TaylorMade-adidas Golf segment. Gross profit increased 22% to € 142 million in the first quarter of
2010 from € 116 million in 2009. As a result of the increase in gross margin and lower segmental operating costs as a percentage
of sales, segmental operating margin increased 14.4 percentage points to 29.0% (2009: 14.6%). In absolute terms, segmental
operating profit grew 112% to € 92 million in the first quarter of 2010 versus € 43 million in 2009.
Currency-neutral sales of Other
Businesses grow 8%
In the first quarter of 2010, revenues
for Other Businesses increased 8% on
a currency-neutral basis. Growth was
driven by double-digit revenue increases
at TaylorMade-adidas Golf. Sales declined
at Rockport, Reebok-CCM Hockey and
at Other Centrally Managed Brands.
Currency translation effects negatively
impacted revenues in euro terms. Sales
of Other Businesses increased 7% to
(2009: € 295 million) see 43.
Businesses increase in nearly all
regions
Businesses increased in all regions
except Western Europe and European
Emerging Markets.
Currency-neutral sales in Western
Europe were virtually stable as higher
TaylorMade-adidas Golf and Rockport
sales were offset by declines at
Reebok-CCM Hockey and Other Centrally
Managed Brands. Revenues in European
Emerging Markets were stable on a
currency-neutral basis, primarily due
to higher TaylorMade-adidas Golf sales
which offset declines at Reebok-CCM
Hockey. Currency-neutral sales in North
America increased 11% due to strong
sales increases at TaylorMade-adidas
Golf, partly offset by declines at Rockport
and Reebok-CCM Hockey. Revenues
in Greater China increased 20% on a
currency-neutral basis as a result of
higher TaylorMade-adidas Golf sales.
Sales in Other Asian Markets grew 6%
on a currency-neutral basis, primarily
supported by increases at TaylorMadeadidas Golf. In Latin America, currencyneutral sales grew 21%, mainly as a
result of increases at TaylorMade-adidas
Golf.
Interim GROUP MANAGEMENT REPORT Business Performance Other Businesses
Sales in Western Europe increased 1%
to € 60 million (2009: € 59 million). In
European Emerging Markets, sales
grew 2% to € 6 million in the first
quarter of 2010 from € 6 million in 2009.
Revenues in North America increased
of 2010 versus € 158 million in the prior
year. In Greater China, revenues grew
of 2010 (2009: € 5 million). Sales in
Other Asian Markets increased 9%
2010 from € 65 million in 2009, and
revenues in Latin America were up 17%
to € 3 million in the first quarter of 2010
(2009: € 3 million) see 44.
N°-
Other Businesses at a glance
42
€ in millions
Net sales
Gross profit
Gross margin
First quarter
2010
First quarter
2009
Change
316
142
45.0%
92
29.0%
295
116
39.4%
43
14.6%
7%
22%
5.7pp
112%
14.4pp
Other Businesses First Quarter Net sales
€ in millions
2008
2009
2010
N°-
43
286
295
316
Currency-neutral TaylorMade-adidas
Golf sales increase 16%
In the first quarter of 2010, TaylorMadeadidas Golf revenues increased 16% on
a currency-neutral basis. Growth was
driven by strong double-digit revenue
increases in metalwoods, footwear
and irons. Currency translation effects
negatively impacted sales in euro terms.
In the first quarter of 2010, TaylorMadeadidas Golf revenues increased 15% to
€ 223 million from € 194 million in the
prior year.
Currency-neutral Rockport sales
decrease 5%
In the first quarter of 2010, Rockport
revenues decreased 5% on a currencyneutral basis. This was due to declines
in the footwear category. Currency
translation effects negatively impacted
sales in euro terms. Revenues in the
Rockport segment decreased 7% to
Reebok-CCM Hockey sales decline 17%
Currency-neutral Reebok-CCM Hockey
sales decreased 17% in the first quarter
of 2010. This development was due to
lower licensed apparel and hardware
sales. Currency translation effects
positively impacted sales in euro terms.
Reebok-CCM Hockey revenues decreased
14% to € 21 million in the first quarter of
2010 from € 24 million in 2009.
Gross margin increases significantly
Gross margin of Other Businesses
increased 5.7 percentage points to
45.0% in the first quarter of 2010 from
39.4% in 2009. This was mainly due to
a strong gross margin improvement
at TaylorMade-adidas Golf as a result
of positive product mix effects and
less clearance sales. In addition, the
Rockport gross margin increased signifi
cantly versus the prior year. In absolute
terms, gross profit increased 22% to
Segmental operating costs as
a percentage of sales down
operating costs as a percentage of sales
decreased 8.7 percentage points to
16.0% (2009: 24.7%). The non-recurrence
of prior year expenses related to the
integration of Ashworth and the
divestiture of the Gekko business were
the primary drivers of the improvement.
In absolute terms, segmental operating
costs decreased 31% to € 51 million in
the first quarter of 2010 from € 73 million
in 2009.
Segmental operating margin increases
margin increase and lower operating
costs as a percentage of sales. In
absolute terms, segmental operating
profit increased 112% to € 92 million
€ 43 million in the prior year see 46.
Interim GROUP MANAGEMENT REPORT Business Performance Other Businesses
N°-
Other Businesses net sales by Region
44
€ in millions
Western Europe
North America
Greater China
Other Asian Markets
Latin America
Total 1)
First quarter
2010
First quarter
2009
Change
Change
currency-neutral
60
6
171
5
71
3
316
59
6
158
5
65
3
295
1%
2%
8%
14%
9%
17%
7%
0%
0%
11%
20%
6%
21%
8%
Other Businesses net sales by quarter
€ in millions
N°-
45
Q1 2009
Q1 2010
Q2 2009
Q2 2010
Q3 2009
Q3 2010
Q4 2009
Q4 2010
295
316
Other Businesses Segmental Operating
Profit by quarter € in millions
46
Q1 2009
Q1 2010
Q2 2009
Q2 2010
Q3 2009
Q3 2010
Q4 2009
Q4 2010
362
326
310
N°-
43
92
85
76
78
Subsequent Events and Outlook
In 2010, consumer spending is expected to recover gradually from the recessionary development in the prior year, although it
is forecasted to lag behind GDP growth. Based on our extensive pipeline of new product and marketing initiatives, we expect
top- and bottom-line improvements in our Group’s financial results compared to the prior year. Our forecast for the development
of Group financial results has changed compared to the outlook on 2010 published in March. We now forecast adidas Group
sales to increase at a mid-single-digit rate (previously: low- to mid-single-digit) on a currency-neutral basis due to growth in
the Wholesale and Retail segments as well as in Other Businesses. Group gross margin is now expected to increase to a level
between 46.5% and 47.5% (previously: between 46.0% and 47.0%), primarily as a result of lower input costs, a larger share
of higher-margin Retail sales, less clearance sales and positive currency effects. Operating margin is now forecasted to be
around 7.0% (previously: around 6.5%). As a result, we project earnings per share to grow to a level between € 2.05 and € 2.30
(previously: between € 1.90 and € 2.15).
Subsequent Events
Outlook
No subsequent events
Since the end of the first quarter of 2010,
there have been no significant organisational, management, economic, sociopolitical, legal or financing changes
which we expect to influence our
business materially going forward.
Global economy forecasted
to grow in 2010
During the first quarter of 2010, governmental agencies and economic institutes
have to a large extent revised growth
forecasts upwards. According to the IMF,
the global economy is now expected
to grow 4.2% in 2010, driven mainly by
expansion in the emerging markets,
in particular China, India and Latin
America. High unemployment as well as
low levels of consumer confidence and
private consumption means economic
forecasts for many developed economies
nevertheless remain subdued.
Interim GROUP MANAGEMENT REPORT Subsequent Events and Outlook
In Europe, GDP in the Euro Zone is
expected to grow at a rate of around
1.0% in 2010, benefiting from fiscal and
monetary policy measures to increase
domestic consumption. However, tight
credit markets and high sovereign debt
levels remain a concern. European
emerging markets are estimated to
grow at around 3.1% in 2010, driven
mainly by Russia and Turkey. In North
America, GDP is projected to return to
growth of approximately 3.0% versus the
prior year. Buoyed by the unprecedented
government stimulus package, private
consumption and corporate investment
are expected to increase during 2010.
In Asia, growth rates are expected to
accelerate in most emerging economies
in 2010, with China, India and Indonesia
most positively affected by a rebound
in exports. As a result, China’s GDP is
forecasted to grow by around 9.6% in
2010. Japan, however, is expected to
expand by only 2.0% in 2010. In Latin
America, growth rates are likely to
increase to a level of around 5.0% in
2010. Private consumption, export activity
and capital expenditures are expected to
increase in most major Latin American
markets.
Global sporting goods industry to
expand only moderately
In 2010, we expect the global sporting
goods industry to expand. However,
growth is forecasted to be moderate
with considerable regional differences.
Developed Western European markets
such as France, Germany and the UK
are expected to benefit from the 2010
FIFA World Cup™. However, increases
in the football category are likely to be
partly offset by declining sales in other
sports categories. After a decrease
of sporting goods sales in European
emerging markets in 2009, industry
sales are expected to improve in 2010,
albeit moderately. The North American
sporting goods market is forecasted to
grow modestly compared to the prior
year. The outlook for the different sports
categories is mixed. While traditional
categories such as basketball and
Classics are forecasted to decline
slightly, the emerging toning category is
forecasted to grow strongly. In Greater
China, the sporting goods industry’s
footprint is expected to continue
expanding in 2010, albeit at considerably
lower rates compared to 2008, the year
of the Olympic Games. While the first half
year development will be more moderate
due to the clearance of excess inventory
at retail, growth is likely to be more
pronounced in the second half.
In other Asian markets, sporting goods
sales development is expected to differ
from region to region. While sales in
Japan are forecasted to decline slightly
as a result of the negative effects from
low levels of private consumption and
consumer confidence, emerging Asian
countries such as India or Vietnam are
projected to post solid growth. In Latin
America, growth of the sporting goods
industry is expected to continue in 2010,
also fuelled by the positive impact of
sales related to the 2010 FIFA World
Cup™ in South Africa. Nevertheless,
higher import duties in key markets
such as Brazil are forecasted to dampen
industry growth prospects for international manufacturers.
adidas Group sales to increase at a
mid-single-digit rate in 2010
We now forecast adidas Group sales
to increase at a mid-single-digit rate
on a currency-neutral basis in 2010
(previously: low- to mid-single-digit).
Despite the projected global economic
recovery, sales development will
be negatively tempered by a slow
turnaround in consumer demand and
continuing cautious retailer buying
behaviour. This will be a result of
sustained high unemployment rates in
many major markets and only moderate
improvements in consumer confidence.
However, positive impacts from the 2010
FIFA World Cup™, our high exposure to
fast-growing emerging markets as well
as improvements at the Reebok brand
are forecasted to more than offset these
negative effects.
Currency-neutral Wholesale revenues
expected to increase
We now project currency-neutral
Wholesale segment revenues to increase
at a low- to mid-single-digit rate
compared to the prior year (previously:
low-single-digit). Order backlog
development as well as positive retailer
and trade show feedback support our
growth expectations for 2010. Currencyneutral adidas Sport Performance sales
are forecasted to increase, supported by
strong football sales in connection with
the 2010 FIFA World Cup™, for which
adidas is an Official Sponsor. Sales in
other major categories are expected
to decline. adidas Sport Style revenues
are projected to increase on a currencyneutral basis, mainly as a result of
increasing momentum in new product
lines such as adidas Style Essentials.
Currency-neutral Reebok sales are
expected to increase due to doubledigit revenue growth in Women’s Fitness
as well as improvements in the Men’s
Training category.
Retail sales to increase at a
low-double-digit rate on a
currency-neutral basis
adidas Group currency-neutral Retail
segment sales are now projected to
grow at a low-double-digit rate in 2010
(previously: high-single-digit). Expansion
of the Group’s own-retail store base will
be the primary driver of the revenue
increase. The Group expects a net
increase of its store base by around
125 adidas and Reebok stores in 2010,
depending on the timing and availability
of desired locations. New stores will
primarily be located in emerging markets
in Eastern Europe. Comparable store
sales are now expected to increase at a
low- to mid-single-digit rate compared
to the prior year (previously: low-singledigit rate). Due to ongoing high price
sensitivity of consumers, factory outlets
are expected to perform better than
concept stores as a result of lower
average price points.
Currency-neutral sales of
Other Businesses to increase
at a low-single-digit rate
In 2010, revenues of Other Businesses
are expected to increase at a low-singledigit rate on a currency-neutral basis.
TaylorMade-adidas Golf revenues are
projected to be stable compared to the
prior year. The positive effect from new
TaylorMade product launches in core
categories such as metalwoods and irons
will be offset by the non-recurrence
of prior year Ashworth sales from a
licensing agreement with a competitor
that was terminated in the first half
of 2009. Revenues at Rockport and
Reebok-CCM Hockey are forecasted to
increase as a result of improvements in
the brands’ product portfolio and better
consumer reception.
adidas Group sales development
expected to differ regionally
We expect Group currency-neutral
revenue development to differ regionally
in 2010. In Western Europe, we expect
a positive stimulus for Group revenues
from sales related to the 2010 FIFA
World Cup™. However, we believe
macroeconomic pressures on consumer
spending will continue to have an adverse
effect on Group sales development in this
region.
In European Emerging Markets, the
stabilisation of the Russian rouble
compared to 2009, as well as gradual
improvements in underlying consumption
trends in several of the region’s markets
are expected to have a positive impact
on Group sales development. In North
America, we expect to benefit from our
strong market position in the emerging
toning category. As a result, full year
Group sales in this region are projected
to exceed the prior year level. In Greater
China, further initiatives to manage
inventory levels at retail are expected
to result in declining sales versus the
prior year in the first half of 2010. In
the second half year, Group revenues in
this region are forecasted to increase
again. In Other Asian Markets, overall
macroeconomic challenges in the
Japanese market will burden Group sales
development while the region’s emerging
markets are expected to perform
robustly. Lastly, in Latin America, the
strong positioning of our brands as well
as positive impetus from sales associated
with the 2010 FIFA World Cup™ are
projected to result in revenue growth for
the Group in 2010.
Group gross margin to improve in 2010
In 2010, the adidas Group gross
margin is now forecasted to increase
to a level between 46.5% and 47.5%
versus 45.4% in 2009 (previously:
increase to a level between 46.0% and
47.0%). Improvements are expected
in all segments. Group gross margin
will benefit from lower sourcing costs
as a result of reduced material costs
and lower capacity utilisation among
suppliers. This effect will be more
pronounced in the first half compared
to the second half. Also, a higher share
of sales from the Retail segment,
which carry a higher gross margin, is
forecasted to support Group gross margin
development. In addition, lower levels of
clearance sales due to reduced inventory
levels compared to the prior year as well
as the appreciation of the Russian rouble
are forecasted to contribute to margin
increases. However, these positive
effects are expected to be partly offset
by several negative impacts. Ongoing
price pressures from a highly competitive
retail environment, in particular in more
mature markets, are forecasted to have
a negative impact on gross margin. In
addition, hedging terms in 2010 will be
less favourable compared to the prior
year. Finally, increased import duties
in Latin America are also projected to
negatively affect Group gross margin.
Group other operating expenses to
decrease as a percentage of sales
In 2010, the Group’s other operating
expenses as a percentage of sales are
expected to decrease modestly (2009:
42.3%). Sales and marketing working
budget expenses as a percentage of
sales are expected to increase versus the
prior year to support adidas presence
at the 2010 FIFA World Cup™ as well
as to sustain Reebok’s growth strategy
in muscle toning and conditioning.
However, this increase will be more
than offset by lower operating overhead
expenditures as a percentage of
sales. This will be largely due to the
continued hiring freeze in non-retailrelated functions and various efficiency
improvement measures introduced in
2009, such as the implementation of
joint operating models for the adidas and
Reebok brands and the elimination of
regional headquarters. These efficiency
gains will outweigh higher administrative and personnel expenses in the
Retail segment as a result of the build-up
of management expertise, the planned
expansion of the Group’s store base and
expenditures related to the improvement
and harmonisation of the Group’s retail
processes and systems.
Operating margin to show improvement
In 2010, we now expect the operating
margin for the adidas Group to be around
7.0% (2009: 4.9%; previously: around
6.5%). Gross margin improvements as
well as lower other operating expenses
as a percentage of sales are expected to
contribute to the improvement compared
to the prior year.
Earnings per share to increase to a
level between € 2.05 and € 2.30
Earnings per share are now expected
to increase strongly to a level between
€ 2.05 and € 2.30 (2009 diluted earnings
per share: € 1.22; previously: increase
to a level between € 1.90 and € 2.15).
Top-line improvement and an increased
operating margin will be the primary
drivers of this positive development. In
addition, we expect lower interest rate
expenses as a result of a lower average
level of net borrowings in 2010 compared
to the prior year. The Group tax rate is
expected to be slightly below the prior
year level (2009: 31.5%) as a result of the
non-recurrence of prior year charges
related to the write-down of deferred tax
assets.
Operating working capital as a
percentage of sales to improve
Improving operating working capital
management continues to be a priority
in our efforts to optimise cash flow from
operations. In 2010, our goal is to reduce
average operating working capital as
a percentage of sales (2009: 24.3%).
Optimisation of order volumes based on
expected sales development and rigorous
monitoring of inventory ageing are at
the forefront of our activities. We will
also focus on tightly managing accounts
receivable and payment terms with our
suppliers.
Excess cash to be used
to reduce net debt
In 2010, we expect continued positive
cash flows from operating activities.
Investments in tangible and intangible
assets are expected to amount to
€ 300 million to € 400 million (2009:
€ 240 million). Investments will focus
on adidas and Reebok controlled space
initiatives, in particular in emerging
markets. We intend to largely use excess
cash to further reduce net borrowings,
which we forecast to be below the
prior year level at year-end. We aim
to maintain a ratio of net borrowings
over EBITDA of less than two times as
measured at year-end (2009 ratio: 1.2).
adidas Group 2010 Outlook
Currency-neutral sales
Gross margin
Operating margin
Earnings per share
N°-
47
mid-single-digit increase
46.5% to 47.5%
around 7.0%
€ 2.05 to € 2.30
N°-
adidas AG Consolidated Balance Sheet (IFRS)
48
€ in millions
Mar. 31, 2010
Mar. 31, 2009
Change in %
Dec. 31, 2009
Cash and cash equivalents
Short-term financial assets
Accounts receivable
Other current financial assets
Inventories
Income tax receivables
Other current assets
Assets classified as held for sale
Total current assets
Property, plant and equipment
Goodwill
Trademarks
Other intangible assets
Long-term financial assets
Other non-current financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
388
92
1,987
210
1,680
76
401
77
4,911
782
1,530
1,434
158
91
75
428
122
4,620
9,531
236
121
1,884
263
2,016
78
508
23
5,129
907
1,540
1,452
198
97
65
387
129
4,775
9,904
64.6
(23.5)
5.4
(20.1)
(16.7)
(1.9)
(21.3)
236.3
(4.3)
(13.8)
(0.6)
(1.2)
(20.6)
(5.5)
16.1
10.7
(5.8)
(3.2)
(3.8)
775
75
1,429
160
1,471
89
360
126
4,485
723
1,478
1,342
160
91
58
412
126
4,390
8,875
Short-term borrowings
Accounts payable
Income taxes
Provisions
Accrued liabilities
Other current liabilities
Liabilities classified as held for sale
Total current liabilities
Long-term borrowings
Other non-current financial liabilities
Pensions and similar obligations
Deferred tax liabilities
Non-current provisions
Non-current accrued liabilities
Other non-current liabilities
Total non-current liabilities
Share capital
Reserves
Retained earnings
Shareholders' equity
Non-controlling interests
Total equity
Total liabilities and equity
307
1,133
78
220
338
672
265
1
3,014
1,533
13
161
461
23
35
30
2,256
209
527
3,518
4,254
7
4,261
9,531
729
880
44
305
319
634
241
0
3,152
2,511
17
133
475
30
24
32
3,222
194
126
3,205
3,525
5
3,530
9,904
(57.9)
28.7
78.5
(27.9)
5.7
6.1
10.5
n.a.
(4.4)
(39.0)
(20.2)
21.4
(3.0)
(24.7)
44.8
(4.1)
(30.0)
8.1
315.0
9.8
20.7
49.2
20.7
(3.8)
198
1,166
101
194
320
625
232
0
2,836
1,569
25
157
433
29
22
28
2,263
209
212
3,350
3,771
5
3,776
8,875
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (IFRS) Consolidated Balance Sheet
N°-
adidas AG Consolidated Income Statement (IFRS)
49
€ in millions
Net sales
Cost of sales
Gross profit
(% of net sales)
Royalty and commission income
Other operating income
Other operating expenses
(% of net sales)
Operating profit
(% of net sales)
Financial income
Financial expenses
Income before taxes
(% of net sales)
Income taxes
(% of income before taxes)
Net income
(% of net sales)
Net income attributable to shareholders
(% of net sales)
Net income attributable to non-controlling interests
Basic earnings per share (in €)
Diluted earnings per share (in €)
First quarter 2010
First quarter 2009
Change
2,674
1,374
1,300
48.6%
22
47
1,109
41.5%
260
9.7%
12
29
243
9.1%
74
30.5%
169
6.3%
168
6.3%
1
2,577
1,414
1,164
45.2%
20
27
1,153
44.7%
58
2.2%
6
56
9
0.3%
4
51.7%
4
0.2%
5
0.2%
(1)
3.7%
(2.8%)
11.7%
3.5pp
6.6%
75.2%
(3.9%)
(3.3pp)
349.0%
7.5pp
90.7%
(48.3%)
2,734.9%
8.8pp
1,574.4%
(21.2pp)
3,976.7%
6.2pp
3,385.1%
6.1pp
224.6%
0.80
0.80
0.02
0.04
3,123.5%
1,967.1%
Interim Consolidated Financial Statements (IFRS) Consolidated Income Statement
N°-
adidas AG Consolidated Statement of Comprehensive Income and Expense
50
€ in millions
First quarter 2010
First quarter 2009
Net income after taxes
169
4
Net gain on cash flow hedges, net of tax
Actuarial gains of defined benefit plans and asset ceiling effect (IAS 19), net of tax
Currency translation
Other comprehensive income
80
4
232
316
19
1
114
134
Total comprehensive income
485
138
Attributable to shareholders of adidas AG
Attributable to non-controlling interests
483
2
139
(1)
Interim Consolidated Financial Statements (IFRS) Consolidated Statement of Comprehensive Income and Expense
N°-
adidas AG Consolidated Statement of Changes in Equity (IFRS)
51
€ in millions
Balance at December 31, 2008
Share
capital
Capital
reserve
Cumulative
translation
adjustments
Hedging
reserves
Other
reserves 1)
Retained
earnings
Total
shareholders’
equity
Non-controlling
interests
Total equity
194
338
(432)
91
(5)
3,201
3,386
14
3,400
114
19
1
5
139
(1)
138
(11)
3
(0)
0
0
(0)
(11)
3
(0)
Acquisition of shares from non-controlling interest shareholders
Newly created non-controlling interests
Reclassifications of non-controlling interests in accordance with IAS 32
Balance at March 31, 2009
194
338
(318)
110
(4)
3,205
3,525
5
3,530
Balance at December 31, 2009
209
722
(451)
(41)
(18)
3,350
3,771
5
3,776
231
80
4
168
483
2
485
(0)
(0)
3,518
4,254
Reclassifications of non-controlling interests in accordance with IAS 32
Balance at March 31, 2010
209
722
(220)
39
(14)
(0)
7
4,261
1) Reserves for actuarial gains/losses and share option plans.
Interim Consolidated Financial Statements (IFRS) Consolidated Statement of Changes in Equity
N°-
adidas AG Consolidated Statement of Cash Flows (IFRS)
52
€ in millions
First quarter 2010
First quarter 2009
243
9
58
22
(6)
29
(13)
333
(510)
(165)
3
(339)
(29)
(62)
(430)
69
13
(6)
37
(2)
120
(259)
(25)
(364)
(528)
(48)
(41)
(617)
(4)
14
(28)
4
0
0
(16)
(13)
6
(37)
(8)
0
(46)
5
(13)
(4)
20
(13)
6
(53)
Financing activities:
Proceeds from long-term borrowings
Cash repayments of short-term borrowings
Net cash generated from financing activities
225
(150)
75
891
(228)
663
Effect of exchange rates on cash
Net decrease of cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
5
(387)
775
388
(1)
(8)
244
236
Operating activities:
Income before taxes
Adjustments for:
Depreciation and amortisation
Unrealised foreign exchange losses, net
Interest income
Interest expense
Gains on sale of property, plant and equipment, net
Operating profit before working capital changes
Increase in receivables and other current assets
Increase in inventories
Increase/(decrease) in accounts payable and other current liabilities
Cash used in operations before interest and taxes
Interest paid
Income taxes paid
Net cash used in operating activities
Investing activities:
Purchase of trademarks and other intangible assets
Proceeds from sale of trademarks and other intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of further investments in subsidiaries
Acquisition of subsidiaries and other business units net of cash acquired
(Purchase of)/proceeds from sale of short-term financial assets
Purchase of investments and other long-term assets
Interest received
Net cash used in investing activities
Interim Consolidated Financial Statements (IFRS) Consolidated Statement of Cash Flows
Notes to Interim Consolidated Financial Statements (IFRS)
As at March 31, 2010
Basis of preparation
01
The interim consolidated financial statements of adidas AG and its subsidiaries (collectively
the “Group”) for the first three months ending March 31, 2010 are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union. The Group
applied all International Financial Reporting Standards and Interpretations of the International
Financial Reporting Interpretations Committee (IFRIC) effective as at March 31, 2010, with the
exception of IFRS 7 “International Financial Reporting Standard No. 7 – Financial Instruments:
Disclosures”, which is not obligatory for interim financial reporting.
The accounting policies used in the preparation of the interim financial statements are consistent
with those in the annual consolidated financial statements for the year ending December 31, 2009
and are in line with IAS 34 “International Accounting Standard No. 34 – Interim Financial
Reporting”. The interim financial statements also comply with GAS 16 “German Accounting
Standard No. 16 – Interim Financial Reporting”. The interim financial statements and the interim
management report have not been audited in accordance with section 317 German Commercial
Code (Handelsgesetzbuch – HGB) or reviewed by an auditor.
The Group believes that the application of new/revised standards and interpretations which are
effective for financial years starting from January 1, 2010 does not have a material impact on the
Group’s financial position, results of operations or cash flows. The Group is currently analysing the
potential impacts of new/revised standards and interpretations that will be effective for financial
years after December 31, 2010.
Costs that are incurred unevenly during the financial year are anticipated or deferred in the
interim financial statements only if it would be also appropriate to anticipate or defer such costs
at the end of the financial year.
These interim consolidated financial statements should be read in conjunction with the 2009
annual consolidated financial statements. The notes contained therein also apply to the quarterly
financial statements for 2010 and are not repeated unless explicit reference is made to certain
changes. The results of operations for the first three months ending March 31, 2010 are not
necessarily indicative of results to be expected for the entire year.
Interim Consolidated Financial Statements (IFRS) Notes to Interim Consolidated Financial Statements
02
Seasonality
The sales of the Group in certain product categories are seasonal and therefore revenues and
attributable earnings may vary within the fiscal year. As adidas and Reebok brand sales account
for approximately 90% of the Group’s net sales, sales and earnings tend to be strongest in the first
and third quarters of the fiscal year. However, shifts in the share of sales and attributable earnings
of particular product categories, brands or the regional composition may occur throughout the
year.
03
Assets/liabilities classified as held-for-sale
With the exception of assets in the USA which were previously classified as held-for-sale as a
result of the intention to sell and the existence of a purchase offer, the composition of assets/
liabilities classified as held-for-sale is unchanged versus December 31, 2009.
04
Shareholders’ equity
In the period from January 1, 2010 to March 31, 2010, the nominal capital of adidas AG did
not change. Consequently, on March 31, 2010, the nominal capital of adidas AG amounted to
€ 209,216,186, divided into 209,216,186 no-par-value bearer shares (“shares”).
Other operating income and other operating expenses
05
Other operating income mainly includes income from the release of accruals and provisions and
other revenues.
Other operating expenses include expenses for marketing, sales and research and development,
as well as for logistics and central finance and administration. In addition, they include
depreciation on tangible and amortisation on intangible assets, with the exception of other
depreciation and amortisation which is included in the cost of sales. In the first three months of
2010, depreciation and amortisation amounted to € 57 million (2009: € 67 million).
06
Earnings per share
Basic earnings per share are calculated by dividing net income by the weighted average number of
outstanding shares during the period after deduction of treasury shares.
As a result of the Management Share Option Plan of adidas AG (MSOP), which was introduced in
1999, and the convertible bond issued in October 2003, which met the required conversion criteria
at the balance sheet date, dilutive potential shares existed in the first quarter of 2009.
Following the full conversion of the Group’s convertible bond in the fourth quarter of 2009 and
as no share options are outstanding anymore from the MSOP, the Group has no dilutive potential
shares in the first quarter of 2010.
N°-
Earnings per share
Net income attributable to shareholders (€ in millions)
Weighted average number of shares
Basic earnings per share (in €)
Net income attributable to shareholders (€ in millions)
Interest expense on convertible bond, net of taxes (€ in millions)
Net income used to determine diluted earnings per share (€ in millions)
Weighted average number of shares
Weighted share options
Weighted assumed conversion convertible bond
Weighted average number of shares for diluted earnings per share
Diluted earnings per share (in €)
53
First quarter
2010
First quarter
2009
168
209,216,186
0.80
168
0
168
209,216,186
0
0
209,216,186
0.80
5
193,515,512
0.02
5
3
8
193,515,512
60,835
15,684,315
209,260,662
0.04
07
Segmental reporting
Due to the Group’s reorganisation in 2009, the Group is now managed by six operating segments,
namely Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey and Other
Centrally Managed Brands.
The adidas and Reebok brands are reported under the segments Wholesale, Retail and Other
Centrally Managed Brands.
The TaylorMade-adidas Golf segment includes the brands TaylorMade, adidas Golf and Ashworth.
Rockport and Reebok-CCM Hockey were formerly part of the Reebok segment.
Certain centralised Group functions do not meet the definition of IFRS 8 “International Financial
Reporting Standard No. 8 – Operating Segments” for an operating segment. This includes
functions such as central treasury, worldwide sourcing as well as other headquarters departments. Income and expenses relating to these corporate functions are presented together with
other non-allocable items and intersegment eliminations in the reconciliation of segmental
operating profit.
N°-
Segmental Information
54
€ in millions
Wholesale
Net sales (non-Group)
Segmental assets
Retail
Other Businesses
Total Segments
2010
2009
2010
2009
2010
2009
2010
2009
1,898
626
454
1,874
614
452
459
52
2,623
400
15
2,658
316
92
546
295
43
618
2,673
770
3,623
2,569
672
3,728
Reconciliation
N°-
55
€ in millions
Segmental operating profit for reportable segments
Segmental operating profit for Other Businesses
Segmental operating profit for HQ/Consolidation
Marketing working budget
Other operating expenses
Royalty income
Operating profit
Financial income
Financial expenses
Income before taxes
Following minor changes to the adidas Group’s organisational structure in the first quarter of
2010, the assignment of certain functions has been changed compared to the Group’s prior
year annual financial statements. This development has a limited effect on the Group segmental
structure. To ensure full comparability of Group financial results in 2010, the Group has decided to
adjust the segmental reporting for 2009 retrospectively. While these adjustments have no effect on
total Group financial results, first quarter 2009 Wholesale revenues now amount to € 1.874 billion
(instead of € 1.876 billion reported). Sales of Other Businesses amount to € 295 million (instead
of € 294 million reported). 2009 Retail revenues now amount to € 400 million (instead of
€ 399 million reported). First quarter operating profit for 2009 now amounts to € 614 million
in the Wholesale segment (instead of € 615 million reported) and € 15 million in the Retail
segment (instead of € 17 million reported). Operating profit of Other Businesses remains
unchanged. In the financial statements for the first quarter of 2010, these adjustments have
already been reflected in the 2009 comparison base.
Subsequent events
First quarter 2010
First quarter 2009
678
92
59
271
320
22
260
12
29
243
629
43
15
262
387
20
58
6
56
9
08
Between the end of the first quarter of 2010 and the finalisation of the consolidated financial
statements on April 29, 2010, there were no major Group-specific matters which we expect to
influence our business materially going forward.
Herzogenaurach, April 29, 2010
The Executive Board of adidas AG
Executive and Supervisory Boards
Executive Board
Supervisory Board
Herbert Hainer
Chief Executive Officer
Igor Landau
Chairman
Glenn Bennett
Global Operations
Sabine Bauer 1)
Deputy Chairwoman
Robin J. Stalker
Finance
Willi Schwerdtle
Deputy Chairman
Erich Stamminger
Global Brands
Dieter Hauenstein 1)
Biographical information on our Executive Board members
as well as on mandates of the members of the Executive Board
and the members of the Supervisory Board is available at
www.adidas-Group.com/executive-board and www.adidas-Group.
com/supervisory-board.
Dr. Wolfgang Jäger 1)
Dr. Stefan Jentzsch
Herbert Kauffmann
Roland Nosko 1)
Alexander Popov
Hans Ruprecht 1)
Heidi Thaler-Veh 1)
Christian Tourres
1) E
mployee representative.
Executive and Supervisory Boards
Financial Calendar
Financial Calendar
2010
First Quarter 2010 Results
Press release, conference call and webcast
May 4, 2010
Annual General Meeting Fürth (Bavaria), Germany
Webcast
May 6, 2010
Dividend paid
(Subject to Annual General Meeting approval)
May 7, 2010
First Half 2010 Results
August 4, 2010
Investor Day
Herzogenaurach, Germany
Webcast
September 9, 2010
Nine Months 2010 Results
November 4, 2010
Publishing Details/Contact
adidas AG
Adi-Dassler-Str. 1
91074 Herzogenaurach
Germany
Tel: + 49 (0) 91 32 84 - 0
Fax:+ 49 (0) 91 32 84 - 22 41
www.adidas-Group.com
Investor Relations
Tel: + 49 (0) 91 32 84 - 21 87
Fax:+ 49 (0) 91 32 84 - 31 27
Email: [email protected]
www.adidas-Group.com/investors
adidas Group is a member of DAI (German Share Institute),
DIRK (German Investor Relations Association) and NIRI
(National Investor Relations Institute, USA).
This report is also available in German.
For further adidas Group publications, please see our corporate website.
Concept and Design
HunterLebron, Munich
©2010 adidas AG. adidas, Reebok, TaylorMade, adidas Golf, Ashworth, Rockport and CCM are registered trademarks of the adidas Group.
Publishing Details/Contact

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