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Higher input prices, economic challenges hit adidas Q1 results
06 May '09
5 min read
First quarter net sales growth by region
Including HQ/Consolidation.
Gross margin negatively impacted by higher input costs
The gross margin of the adidas Group decreased 4.0 percentage points to 45.2% in the first quarter of 2009 (2008: 49.1%). This development was mainly due to higher input costs, currency devaluation effects, in particular related to the Russian rouble, as well as a highly promotional retail environment. As a result, gross profit for the adidas Group declined 10% in the first quarter of 2009 to € 1.164 billion versus € 1.288 billion in the prior year.
Operating margin declines 8.5 percentage points
The operating margin of the adidas Group decreased 8.5 percentage points to 2.2% in the first quarter of 2009 (2008: 10.8%). The operating margin decline was due to the decrease in Group gross margin as well as higher other operating expenses as a percentage of sales. Other operating expenses as a percentage of sales increased 4.7 percentage points to 44.7% in the first quarter of 2009 from 40.0% in 2008, mainly as a result of higher expenses to support the Group's development in emerging markets.
Costs related to restructuring at Reebok, higher allowances for doubtful debts and the integration of the Ashworth business also contributed to this development. These one-time effects in nature and the non-recurrence of prior year book gains impacted net other operating expenses in an amount of € 80 million. As a result, Group operating profit decreased 79% to € 58 million versus € 282 million in 2008.
Income before taxes decreases 97%
Income before taxes (IBT) as a percentage of sales decreased 9.2 percentage points to 0.3% in the first quarter of 2009 from 9.6% in 2008. This was a result of the Group's operating margin decrease and higher net financial expenses. Net financial expenses were negatively impacted by foreign exchange losses in an amount of € 19 million resulting from the revaluation of balance sheet items in foreign currencies. IBT for the adidas Group declined 97% to € 9 million from € 250 million in 2008.
Net income attributable to shareholders declines 97%
The Group's net income attributable to shareholders decreased 97% to € 5 million in the first quarter of 2009 from € 169 million in 2008. The Group's lower operating profit was the primary reason for this development. The Group's tax rate increased 19.7 percentage points to 51.7% in the first quarter of 2009 (2008: 32.0%), mainly due to a less favourable regional earnings mix throughout the Group.
Basic and diluted earnings per share decrease 97% and 95% respectively
Basic earnings per share declined 97% to € 0.02 in the first quarter of 2009 versus € 0.84 in 2008. Diluted earnings per share in the first quarter of 2009 decreased 95% to € 0.04 from € 0.79 in the prior year.
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Including HQ/Consolidation.
Gross margin negatively impacted by higher input costs
The gross margin of the adidas Group decreased 4.0 percentage points to 45.2% in the first quarter of 2009 (2008: 49.1%). This development was mainly due to higher input costs, currency devaluation effects, in particular related to the Russian rouble, as well as a highly promotional retail environment. As a result, gross profit for the adidas Group declined 10% in the first quarter of 2009 to € 1.164 billion versus € 1.288 billion in the prior year.
Operating margin declines 8.5 percentage points
The operating margin of the adidas Group decreased 8.5 percentage points to 2.2% in the first quarter of 2009 (2008: 10.8%). The operating margin decline was due to the decrease in Group gross margin as well as higher other operating expenses as a percentage of sales. Other operating expenses as a percentage of sales increased 4.7 percentage points to 44.7% in the first quarter of 2009 from 40.0% in 2008, mainly as a result of higher expenses to support the Group's development in emerging markets.
Costs related to restructuring at Reebok, higher allowances for doubtful debts and the integration of the Ashworth business also contributed to this development. These one-time effects in nature and the non-recurrence of prior year book gains impacted net other operating expenses in an amount of € 80 million. As a result, Group operating profit decreased 79% to € 58 million versus € 282 million in 2008.
Income before taxes decreases 97%
Income before taxes (IBT) as a percentage of sales decreased 9.2 percentage points to 0.3% in the first quarter of 2009 from 9.6% in 2008. This was a result of the Group's operating margin decrease and higher net financial expenses. Net financial expenses were negatively impacted by foreign exchange losses in an amount of € 19 million resulting from the revaluation of balance sheet items in foreign currencies. IBT for the adidas Group declined 97% to € 9 million from € 250 million in 2008.
Net income attributable to shareholders declines 97%
The Group's net income attributable to shareholders decreased 97% to € 5 million in the first quarter of 2009 from € 169 million in 2008. The Group's lower operating profit was the primary reason for this development. The Group's tax rate increased 19.7 percentage points to 51.7% in the first quarter of 2009 (2008: 32.0%), mainly due to a less favourable regional earnings mix throughout the Group.
Basic and diluted earnings per share decrease 97% and 95% respectively
Basic earnings per share declined 97% to € 0.02 in the first quarter of 2009 versus € 0.84 in 2008. Diluted earnings per share in the first quarter of 2009 decreased 95% to € 0.04 from € 0.79 in the prior year.
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adidas Group
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