adidas AG — Earnings Release 1999

Apr 12, 1999

News Details

Ad-hoc | 12 April 1999 08:13

Ad hoc-Service: adidas-Salomon AG Englisch

Ad-hoc Mitteilung übermittelt durch die DGAP. Für den Inhalt der Mitteilung ist allein der Emittent verantwortlich. —————————————————————————— For immediate release Herzogenaurach, April 12, 1999 adidas-Salomon: As expected, first quarter sales at last year’s level, but earnings below previous year – improvement anticipated in second half year – forecast for the full year remains positive and unchanged from last announcement on March 9 Deterioration of Taylor Made sales impedes top-line growth in first quarter Based on the preliminary figures available so far, adidas- Salomon group sales in the first quarter of 1999 are approximately at the same level as in the previous year (DM 2.7 billion). While the adidas brand showed slight growth and the Salomon brand achieved a strong increase, net sales under the Mavic brand were slightly below last year’s level and Taylor Made experienced a significant decline in sales. Although Taylor Made’s 1999 product range met with a positive response from retailers, the new products were not launched on the market until the beginning of February, after the Orlando trade fair. In the comparable period last year, however, the brand reported one of the best quarters in its history, driven by already well established products. As a result, Taylor Made sales fell by around one quarter, which in itself equals a nearly 2% decrease in group sales in the first quarter of 1999. As this decline had been anticipated adidas-Salomon has not changed the expectation of flat to slightly positive growth in net sales for the full year 1999. Decline in first quarter earnings distorted by unfavorable year-over-year comparisons Based on preliminary figures, adidas-Salomon AG expects income before taxes in the first quarter to be around 35 – 40 per cent below the previous year (DM 299 million). This situation again reflects unfavorable Taylor Made comparatives. Although adidas-Salomon expects Taylor Made to end 1999 with an improved operating result, in the first quarter the brand will probably report an operating result of approximately DM 35 million below last year’s extremely good figures. Additionally, operating expenses in the first quarter have not yet been brought in line with the more moderate growth track. Most measures initiated in the first three months to cut costs will become effective in the consecutive quarters. In particular, promotional and advertising expenditure was substantially up compared to the previous year. New signings with top European soccer clubs as well as increased marketing spending in the USA and in Japan have, amongst others, led to an increase of approximately DM 70 million in this expenditure. However, this has to be viewed as an investment in the brands and thus in the Company’s future. Furthermore, comparatives are impacted by the fact that the acquisition of Salomon was not completed until toward the end of the first quarter of 1998. This means that the first three months of last year were not yet burdened by the full financing expenses. This aspect alone distorts the quarterly comparison by around DM 10 million. Outlook for the full year remains unchanged Notwithstanding the adverse developments of the first quarter, which had already been indicated at the annual press conference on March 9, adidas-Salomon reiterates its expectation that it should achieve a significant improvement in income before taxes for the full year in 1999. The Company anticipates that in the quarters to come comparisons with the prior year will be significantly more positive, particularly in the second half, as Taylor Made’s operating contribution will grow, the synergy effects resulting from the Salomon integration will become substantially more perceptible over time, and improvement of cost control will make further progress as the year goes on. Additionally, adidas-Salomon expects that gross margin will improve, that the newly established sales organization in Japan will contribute to the operating result, and that the financial result will be improved through a reduction in borrowings and the non-recurrence of one-off items such as charges related to hedging activities. adidas-Salomon AG will release detailed final results for the first quarter of 1999 on May 11. Contact: Dr. Rolf-Dieter Grass adidas-Salomon AG/Investor Relations Tel:+49 (0) 9132 84-2187 Fax:+49 (0) 9132 84-3127 Internet: www.adidas.de Ende der Mitteilung