Gross margin grows 2.4 percentage points to record level of 50.1%
Net income attributable to shareholders up 6% to € 308 million
adidas Group confirms full year guidance
- TaylorMade-adidas Golf sales increase 13% currency-neutral
- Group operating margin up 1.1 percentage points
- Net borrowings down 72% to € 180 million at quarter-end
- Inventories decrease 2% on currency-neutral basis
adidas Group currency-neutral sales remain stable in the first quarter of 2013
In the first quarter of 2013, Group revenues were stable on a currency-neutral
basis as a result of sales increases in Retail and Other Businesses. Currency
translation effects had a negative impact on sales in euro terms. Group revenues
decreased 2% to € 3.751 billion in the first quarter of 2013 from € 3.824
billion in 2012.
Group sales supported by growth in Retail and Other Businesses
In the first quarter of 2013, currency-neutral
Wholesale revenues decreased 3% due
to double-digit sales declines at Reebok. Currency-neutral
Retail sales increased 6% versus the
prior year, driven by sales growth at both adidas and Reebok. Revenues in
Other Businesses were up 9% on a
currency-neutral basis, driven by double-digit sales increases at
TaylorMade-adidas Golf.
Currency translation effects had a negative impact on segmental sales in euro
terms. Wholesale revenues decreased
5% to € 2.481 billion in the first quarter of 2013 from € 2.614 billion in 2012.
Retail sales grew 4% to
€ 722 million versus € 693 million in the prior year. Sales in
Other Businesses rose 6% to € 548
million (2012: € 517 million).
First quarter
2013 |
First quarter
2012 |
Change y-o-y in euro terms
|
Change y-o-y currency-neutral
|
|
€ in millions
|
€ in millions
|
in %
|
in %
|
|
Wholesale
|
2,481
|
2,614
|
(5)
|
(3)
|
Retail
|
722
|
693
|
4
|
6
|
Other Businesses
|
548
|
517
|
6
|
9
|
Total1)
|
3,751
|
3,824
|
(2)
|
0
|
1) Rounding differences may arise in totals.
Currency-neutral sales increase in most regions
In the first quarter of 2013, currency-neutral adidas Group sales grew in all
regions except Western Europe and Other Asian Markets. Revenues in
Western Europe decreased 6% on a
currency-neutral basis, as growth in France and Poland was more than offset by
sales declines in Spain, Italy and the UK. In
European Emerging Markets, Group
sales increased 3% on a currency-neutral basis due to sales growth in the Middle
East, South Africa and Russia/CIS. Sales for the adidas Group in
North America grew 3% on a
currency-neutral basis, driven by 5% growth at adidas and 19% growth at
TaylorMade-adidas Golf. Sales in Greater
China increased 6% on a currency-neutral basis. Currency-neutral revenues in
Other Asian Markets declined 4%, as
double-digit increases in South Korea were more than offset by sales declines in
Japan. In Latin America, sales grew
12% on a currency-neutral basis, with double-digit increases in most of the
region’s major markets. Currency translation effects had a mixed impact on
regional sales in euro terms.
First quarter
2013 |
First quarter
2012 |
Change y-o-y in euro terms
|
Change y-o-y currency-neutral
|
|
€ in millions
|
€ in millions
|
in %
|
in %
|
|
Western Europe
|
1,096
|
1,174
|
(7)
|
(6)
|
European Emerging Markets
|
433
|
430
|
1
|
3
|
North America
|
890
|
869
|
2
|
3
|
Greater China
|
409
|
385
|
6
|
6
|
Other Asian Markets
|
533
|
594
|
(10)
|
(4)
|
Latin America
|
390
|
372
|
4
|
12
|
Total1)
|
3,751
|
3,824
|
(2)
|
0
|
First quarter net sales development by region
1) Rounding differences may arise in totals.
Group gross margin increases 2.4 percentage points
The gross margin of the adidas Group increased 2.4 percentage points to 50.1% in
the first quarter of 2013 (2012: 47.7%). The positive impact from a more
favourable pricing, product and regional sales mix as well as a larger share of
higher-margin Retail sales contributed to this development. Gross profit for the
adidas Group grew 3% in the first quarter of 2013 to € 1.881 billion versus €
1.826 billion in the prior year.
Operating margin improves 1.1 percentage points
Group operating profit increased 8% to € 442 million in the first quarter of
2013 versus € 409 million in 2012.
As a result, the operating margin of the adidas Group improved 1.1 percentage
points to 11.8% (2012: 10.7%). This was primarily due to the positive effects
from the increase in gross margin, which more than offset higher other operating
expenses as a percentage of sales. Other operating expenses as a percentage of
sales rose 1.2 percentage points to 39.5% in the first quarter of 2013 from
38.4% in 2012. In euro terms, other operating expenses increased 1% to € 1.482
billion (2012: € 1.467 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 € 437 million, which
represents an increase of 3% versus the prior year level (2012: € 426 million).
Financial income down 47%
Financial income decreased 47% to € 4 million in the first quarter of 2013 from
€ 8 million in the prior year, mainly due to a decrease in interest income.
Financial expenses decrease 30%
Financial expenses decreased 30% to € 19 million in the first quarter of 2013
(2012: € 28 million). The decrease in interest expenses mainly contributed to
the decline.
Income before taxes as a percentage of sales increases 1.2 percentage points
Income before taxes (IBT) for the adidas Group increased 10% to € 427 million
from € 389 million in 2012. IBT as a percentage of sales improved 1.2 percentage
points to 11.4% in the first quarter of 2013 from 10.2% in 2012. This was a
result of the Group’s operating margin increase and lower net financial
expenses.
Net income attributable to shareholders up 6%
The Group’s net income attributable to shareholders increased to € 308 million
in the first quarter of 2013 from € 289 million in 2012. This represents an
increase of 6% versus the prior year level. The Group’s tax rate increased 2.0
percentage points to 27.5% in the first quarter of 2013 (2012: 25.5%), mainly
due to a less favourable earnings mix.
Basic and diluted earnings per share reach € 1.47
In the first quarter of 2013, basic and diluted earnings per share amounted to €
1.47 (2012: € 1.38), representing an increase of 6%. The weighted average number
of shares used in the calculation of both basic and diluted earnings per share
was 209,216,186 (2012 average: 209,216,186) as there were no potential dilutive
shares in the quarter.
Group inventories decline 2% currency-neutral
Group inventories decreased 2% to € 2.346 billion at the end of March 2013
versus € 2.395 billion in 2012.
On a currency-neutral basis, inventories were also down 2%, reflecting the
Group’s ongoing strong focus on inventory management.
Accounts receivable increase 3% currency-neutral
At the end of March 2013, Group receivables increased 3% to € 2.328 billion
(2012: € 2.253 billion). On a currency-neutral basis, receivables were also up
3%. The reduction in allowances for doubtful debts contributed to this
development.
Net borrowings decrease € 460 million
Net borrowings at March 31, 2013 amounted to € 180 million, which represents a
decrease of € 460 million, or 72%, versus € 640 million at the end of March
2012. The decrease was driven by the strong operating cash flow development over
the past 12 months. Currency translation had a positive effect of € 37 million.
The Group’s ratio of net borrowings over 12-month rolling EBITDA decreased to
0.1 at the end of March 2013 versus 0.5 in the prior year.
adidas Group confirms guidance for the full year 2013
adidas Group sales are forecasted to increase at a mid-single-digit rate on a
currency-neutral basis in 2013. Currency translation is expected to negatively
impact top-line development in reported terms. Despite a high degree of
uncertainty regarding the global economic outlook and consumer spending, Group
sales development will be favourably impacted by the Group’s high exposure to
fast-growing emerging markets as well as the further expansion of Retail. In
addition, the Group’s strength in innovation will lead to major product launches
throughout 2013, which will more than offset the non-recurrence of sales related
to the UEFA EURO 2012 and the London 2012 Olympic Games. In terms of phasing,
sales growth is projected to be weighted towards the second half of the year.
In 2013, the adidas Group gross margin is forecasted to increase to a level
between 48.0% and 48.5% (2012: 47.7%). Improvements are expected in all
segments. Group gross margin will benefit from positive regional and channel mix
effects, as growth rates in high-margin emerging markets and Retail are
projected to be above growth rates in more mature markets and Wholesale. In
addition, improvements in the Retail segment as well as at the Reebok brand will
positively influence Group gross margin development. However, these positive
effects will be partly offset by less favourable hedging terms compared to the
prior year as well as increasing labour costs, which are expected to negatively
impact cost of sales.
In 2013, the Group’s other operating expenses as a percentage of sales are
expected to decrease modestly (2012: 41.3%). 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 to support new product
launches at all brands, as well as the expansion of Reebok’s activities in the
fitness category, will be offset by the non-recurrence of expenses in relation
to the UEFA EURO 2012 as well as the London 2012 Olympic Games. Operating
overhead expenditure as a percentage of sales is forecasted to decline modestly
in 2013. 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 2013, the Group expects the operating margin for the adidas Group to increase
to a level approaching 9.0% (2012 excluding goodwill impairment losses: 8.0%).
Improvements in the Group’s gross margin as well as lower other operating
expenses as a percentage of sales are expected to be the primary drivers of the
improvement. The Group tax rate is expected to be at a level between 28.0% and
28.5% and thus more favourable compared to the prior year tax rate of 29.3%
excluding goodwill impairment losses. As a result of these developments,
earnings per share are expected to increase at a rate of 12% to 16% to a level
between € 4.25 and € 4.40 (2012 excluding goodwill impairment losses: € 3.78).
This represents net income attributable to shareholders of € 890 million to €
920 million.
Herbert Hainer stated: “The strong first quarter results confirm our
expectations to deliver another year of double-digit earnings growth and strong
cash flow generation. Given the strong reception to our latest product
innovations and our full pipeline for the second half of 2013, I am confident
our earnings momentum will accelerate in line with our expectations as we move
through the year.”
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