adidas AG: First Quarter 2012 Results
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adidas AG /
adidas AG: First Quarter 2012 Results
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For immediate release
Herzogenaurach, May 3, 2012
First Quarter 2012 Results:
Group sales increase 14% on a currency-neutral basis
Net income attributable to shareholders up 38% to ? 289 million
adidas Group increases full year guidance
* Comparable Retail store sales grow 9% currency-neutral
* TaylorMade-adidas Golf sales increase 32% currency-neutral
* Operating margin up 1.1 percentage points despite gross margin decline
* Net borrowings down 30% to ? 640 million at quarter-end
* Inventory growth moderates to 13% currency-neutral
adidas Group currency-neutral sales increase 14% in the first quarter of 2012
In the first quarter of 2012, Group revenues increased 14% on a currency-neutral
basis as a result of double-digit sales increases in Wholesale, Retail and Other
Businesses.. Currency translation effects had a positive impact on sales in euro
terms. Group revenues grew 17% to ? 3.824 billion in the first quarter of 2012
from ? 3.273 billion in 2011.
"We are off to a fast start in 2012 and there is still plenty to come as adidas
takes centre-stage at the UEFA EURO 2012 and the London 2012 Olympics,"
commented Herbert Hainer, adidas Group CEO. "We have worked hard to keep
inventories at industry-low levels. With the backdrop of clean markets, you will
see us push forward with a whole host of new innovative product and brand
experiences that will continue to excite consumers and customers around the
world."
Group sales increase driven by double-digit sales growth in all segments
In the first quarter of 2012, currency-neutral Wholesale revenues increased 10%
due to double-digit sales growth at adidas. Currency-neutral Retail sales
increased 16% versus the prior year, driven by 9% comparable store sales growth.
Revenues in Other Businesses were up 32% on a currency-neutral basis, driven by
strong double-digit sales increases at TaylorMade-adidas Golf and Reebok-CCM
Hockey.
Currency translation effects had a positive impact on segmental sales in euro
terms. Wholesale revenues increased 13% to ? 2.614 billion from ? 2.320 billion
in 2011. Retail sales rose 20% to ? 693 million versus ? 577 million in the
prior year. Sales in Other Businesses grew 37% to ? 517 million (2011: ? 376
million).
+-------------+-------------+---------------+-----------------+
|First quarter|First quarter|Change y-o-y in| Change y-o-y |
| 2012 | 2011 | euro terms |currency-neutral |
+-------------+-------------+---------------+-----------------+
|? in millions|? in millions| in % | in % |
+----------------+-------------+-------------+---------------+-----------------+
|Wholesale | 2,614 | 2,320 | 13 | 10 |
+----------------+-------------+-------------+---------------+-----------------+
|Retail | 693 | 577 | 20 | 16 |
+----------------+-------------+-------------+---------------+-----------------+
|Other Businesses| 517 | 376 | 37 | 32 |
+----------------+-------------+-------------+---------------+-----------------+
|Total(1)) | 3,824 | 3,273 | 17 | 14 |
+----------------+-------------+-------------+---------------+-----------------+
First quarter net sales development by segment
1) Rounding differences may arise in totals.
Currency-neutral sales increase in all regions
In the first quarter of 2012, currency-neutral adidas Group sales grew in all
regions. Revenues in Western Europe increased 7% on a currency-neutral basis,
primarily as a result of sales growth in the UK, Italy, Poland, Spain and
Germany. In European Emerging Markets, Group sales increased 15% on a currency-
neutral basis due to double-digit growth in most of the region's markets. Sales
for the adidas Group in North America grew 11% on a currency-neutral basis due
to strong increases in the USA. Sales in Greater China increased 26% on a
currency-neutral basis. Currency-neutral revenues in Other Asian Markets grew
26%, driven by strong double-digit increases in Japan and South Korea. In Latin
America, sales grew 14% on a currency-neutral basis, with double-digit increases
in most of the region's major markets. In most regions, currency translation
effects had a positive impact on sales in euro terms.
+-------------+-------------+--------------+-----------------+
|First quarter|First quarter| Change y-o-y | Change y-o-y |
| 2012 | 2011 |in euro terms |currency-neutral |
+-------------+-------------+--------------+-----------------+
|? in millions|? in millions| in % | in % |
+-----------------+-------------+-------------+--------------+-----------------+
|Western Europe | 1,174 | 1,094 | 7 | 7 |
+-----------------+-------------+-------------+--------------+-----------------+
|European Emerging| 430 | 370 | 16 | 15 |
|Markets | | | | |
+-----------------+-------------+-------------+--------------+-----------------+
|North America | 869 | 751 | 16 | 11 |
+-----------------+-------------+-------------+--------------+-----------------+
|Greater China | 385 | 284 | 36 | 26 |
+-----------------+-------------+-------------+--------------+-----------------+
|Other Asian | 594 | 446 | 33 | 26 |
|Markets | | | | |
+-----------------+-------------+-------------+--------------+-----------------+
|Latin America | 372 | 328 | 14 | 14 |
+-----------------+-------------+-------------+--------------+-----------------+
|Total(1)) | 3,824 | 3,273 | 17 | 14 |
+-----------------+-------------+-------------+--------------+-----------------+
First quarter net sales development by region
1) Rounding differences may arise in totals.
Group gross margin decreases 0.7 percentage points
The gross margin of the adidas Group decreased 0.7 percentage points to 47.7% in
the first quarter of 2012 (2011: 48.5%). The increase in input costs more than
offset the positive impact from a more favourable product and regional sales mix
as well as a larger share of higher-margin Retail sales. Gross profit for the
adidas Group grew 15% to ? 1.826 billion versus ? 1.587 billion in the prior
year.
Operating margin improves 1.1 percentage points
Group operating profit increased 30% to ? 409 million in the first quarter of
2012 versus ? 313 million in 2011. As a percentage of sales, the operating
margin of the adidas Group was up 1.1 percentage points to 10.7% (2011: 9.6%).
This was primarily due to the positive effects from lower other operating
expenses as a percentage of sales, which more than offset the decrease in gross
margin. Higher royalty and commission income as well as higher other operating
income also contributed to this development. Other operating expenses as a
percentage of sales decreased 1.6 percentage points to 38.4% from 40.0% in
2011. In euro terms, other operating expenses increased 12% to ? 1.467 billion
(2011: ? 1.309 billion), as a result of higher marketing expenditure as well as
the expansion of the Group's own-retail activities. Thereof, sales and marketing
working budget expenditures amounted to ? 426 million, which represents an
increase of 2% versus the prior year level (2011: ? 417 million).
Financial income grows 78%
Financial income increased 78% to ? 8 million in the first quarter of 2012 from
? 5 million in the prior year, mainly due to an increase in interest income.
Financial expenses decrease 16%
Financial expenses decreased 16% to ? 28 million in the first quarter of 2012
(2011: ? 33 million). The decrease in negative exchange rate effects contributed
to the decline.
Income before taxes as a percentage of sales increases 1.5 percentage points
Income before taxes (IBT) for the adidas Group increased 36% to ? 389 million
from ? 285 million in 2011. IBT as a percentage of sales improved
1.5 percentage points to 10.2% in the first quarter of 2012 from 8.7% in 2011.
This was a result of the Group's operating margin increase and lower net
financial expenses.
Net income attributable to shareholders up 38%
The Group's net income attributable to shareholders increased to ? 289 million
in the first quarter of 2012 from ? 209 million in 2011. This represents an
increase of 38% versus the prior year level. Higher IBT was the primary reason
for this development. The Group's tax rate decreased 1.0 percentage points to
25.5% (2011: 26.5%), mainly due to a more favourable earnings mix.
Basic and diluted earnings per share reach ? 1.38
In the first quarter of 2012, basic and diluted earnings per share amounted to
? 1.38 (2011: ? 1.00), representing an increase of 38%. The weighted average
number of shares used in the calculation of both basic and diluted earnings per
share was 209,216,186 (2011 average: 209,216,186) as there were no potential
dilutive shares in the quarter.
Group inventories up 13% currency-neutral
Group inventories increased 17% to ? 2.375 billion at the end of March 2012
versus ? 2.033 billion in 2011. On a currency-neutral basis, inventories grew
13%, reflecting input cost increases as well as expectations for continued
growth in the coming quarters.
Accounts receivable increase 8% currency-neutral
At the end of March 2012, Group receivables increased 10% to ? 2.366 billion
(2011: ? 2.155 billion) as a result of the Group sales growth. On a currency-
neutral basis, receivables were up 8%. This growth is lower than the 13%
currency-neutral wholesale-related sales increase in the first quarter of 2012
and mirrors strict discipline in the Group's trade terms management and
concerted collection efforts.
Net borrowings decrease ? 274 million
Net borrowings at March 31, 2012 amounted to ? 640 million, which represents a
decrease of ? 274 million, or 30%, versus ? 914 million at the end of March
2011. The decrease was driven by the strong operating cash flow development over
the past 12 months. Currency translation had a positive effect in an amount of ?
71 million. The Group's ratio of net borrowings over 12-month rolling EBITDA
decreased to 0.5 at the end of March 2012 versus 0.8 in the prior year.
adidas Group increases guidance for the full year 2012
The exceptional start to 2012 has set the adidas Group up for another strong
year of financial performance. Management now forecasts adidas Group sales to
increase at a rate approaching 10% on a currency-neutral basis in 2012
(previously: mid- to high-single-digit rate). Despite the high degree of
uncertainty regarding the global economic outlook and consumer spending, Group
sales development will be favourably impacted by its high exposure to fast-
growing emerging markets as well as the further expansion of Retail. In
addition, this year's major sporting events will provide positive stimulus to
Group sales. Currency-neutral Wholesale segment revenues are now projected to
increase at a mid- to high-single-digit rate compared to the prior year
(previously: mid-single-digit rate). adidas Group currency-neutral Retail
segment sales are projected to grow at a low-teens rate in 2012. Expansion of
the Group's own-retail store base and comparable store sales are expected to
contribute at a similar rate to the revenue growth. Revenues of Other Businesses
are now expected to increase at a low-teens rate (previously: low- to mid-
single-digit rate) on a currency-neutral basis.
In 2012, the adidas Group gross margin is forecasted to be around 47.5% (2011:
47.5%). While gross margin in the Retail segment as well as Other Businesses is
expected to improve, gross margin in the Wholesale segment is forecasted to
decline. As in the prior year, gross margin development will be negatively
impacted by increasing input and labour costs year-over-year, particularly in
the first half of 2012. However, these negative influences will be largely
offset by positive regional mix effects, as growth rates in high-margin emerging
markets are projected to be above growth rates in more mature markets.
The adidas Group's other operating expenses as a percentage of sales are
expected to decrease modestly (2011: 41.4%), despite negative one-time charges
of up to ? 70 million related to the potential restructuring and changes to
commercial activities in India. Sales and marketing working budget expenses as a
percentage of sales are projected to be at a similar level compared to the prior
year. Marketing investments will be centred around key sporting events such as
the UEFA EURO 2012(TM) and the London 2012 Olympic Games to leverage the
outstanding visibility of the adidas brand during these events. Further, the
Group will continue to support Reebok's growth strategy in the men's and women's
fitness category and will also invest in growing the Group's key attack markets
North America, Greater China and Russia/CIS. Operating overhead expenditure as a
percentage of sales is forecasted to decline in 2012. Higher administrative and
personnel expenses in the Retail segment due to the planned expansion of the
Group's store base will be offset by leverage in the Group's non-allocated
central costs.
In 2012, the operating margin for the adidas Group is expected to increase to a
level approaching 8.0% (2011: 7.6%). Lower other operating expenses as a
percentage of sales are expected to be the primary driver of the improvement.
As a result, net income attributable to shareholders is now projected to
increase at a rate of 12% to 17% to a level between ? 750 million and ? 785
million. This equates to basic earnings per share between ? 3.58 and ? 3.75
(previously: increase at a rate of 10% to 15% to a level between ? 3.52 and ?
3.68; 2011: ? 3.20). Top-line improvement and an increased operating margin will
be the primary drivers of this positive development. In addition, the Group
expects lower interest rate expenses in 2012 as a result of a lower average
level of gross borrowings. The Group tax rate is expected to be slightly less
favourable compared to the prior year, at a level around 28.5% (2011: 27.7%).
Herbert Hainer stated: "We have set ourselves ambitious, yet realistic growth
and profit targets with our strategic business plan Route 2015. We are making
great progress as we implement this plan which will secure long-term quality
growth and enduring success for our Group."
***
Contacts:
Media Relations Investor Relations
Jan Runau John-Paul O'Meara
Chief Corporate Communication Officer Vice President Investor Relations
Tel.: +49 (0) 9132 84-3830 Tel.: +49 (0) 9132 84-2751
Katja Schreiber Christian Stoehr
Director Corporate Communication Investor Relations Manager
Tel.: +49 (0) 9132 84-3810 Tel.: +49 (0) 9132 84-4989
Lars Mangels Johannes Fink
Corporate Communication Manager Investor Relations Manager
Tel.: +49 (0) 9132 84-2680 Tel.: +49 (0) 9132 84-3461
Please visit our corporate website: www.adidas-Group.com
Attachment: Press release Q1 2012 adidas Group:
http://hugin.info/139192/R/1608268/510392.pdf
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Source: adidas AG via Thomson Reuters ONE
[HUG#1608268]
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