06 Mar Adidas Expects Emerging Market Currencies to Impact 2014 Results
Adidas AG reported a narrower net loss in its fourth quarter, benefiting from sharply lower goodwill impairment charges, as well as higher net sales. Currency-neutral sales rose 12 percent in the period but only 3 percent on a recorded basis. Adidas also issued fiscal 2014 earnings and sales forecast, noting that the results would continue to be significantly impacted by currency movements.
Q4 2013 highlights:
- Currency-neutral Group sales increase 12 percent
- Group sales grow in all regions, channels and brands
- Adidas and Reebok brand sales increase 10 percent and 9 percent currency-neutral,
- respectively
- Comparable Retail store sales up 3 percent currency-neutral
Full year 2013 highlights:
- Currency-neutral Group sales up 3 percent on a currency-neutral basis
- Gross margin improves 1.5pp to 49.3 percent
- Goodwill impairment in an amount of €52 million ($7.14 mm)
- Operating margin excluding goodwill impairment improves to 8.7 percent
- Earnings per share excluding goodwill impairment increase 6 percent
- to a record level of €4.01
- Net cash position of €295 million ($405.2 mm) at year-end
- Management to propose dividend of €1.50 per share
Outlook
- Group results in 2014 to be significantly impacted by currency movements
- Currency-neutral Group sales to increase at a high-single-digit rate
- Operating margin to be at a level between 8.5 percent and 9.0 percent
- Net income attributable to shareholders to be at a level between
- €830 million and €930 million
“We finished 2013 with an exceptionally strong fourth quarter. Currency-neutral sales grew 12 percent, which was above our expectations,” commented Herbert Hainer, Adidas Group CEO. “This ensured that we met our revised full year targets from September, despite a further worsening of currency exchange rates. In the fourth quarter alone, negative currency effects cost us 9 percentage points on the top line.”
Adidas Group currency-neutral sales increase 12 percent in the fourth quarter
In the fourth quarter of 2013, Group revenues grew 12 percent on a currency-neutral basis. Currency-neutral sales in Retail and Other Businesses increased 15 percent and 28 percent, respectively. Sales in the Wholesale segment grew 8 percent on a currency-neutral basis. Currency-neutral revenues in Western Europe increased 3 percent, supported by strong double-digit growth at Reebok and TaylorMade-Adidas Golf. In European Emerging Markets, currency-neutral sales were up 11 percent as a result of double-digit revenue growth at both Adidas and Reebok. Group sales in North America increased 14 percent on a currency-neutral basis, driven by double-digit sales increases at Adidas, TaylorMade- Adidas Golf and Reebok-CCM Hockey. In Greater China, Group sales were up 8 percent on a currency-neutral basis, driven by strong double-digit sales gains at Adidas Originals & Sport Style. Currency-neutral revenues in Other Asian Markets grew 15 percent, due to double-digit increases at Adidas and TaylorMade-Adidas Golf. In Latin America, Adidas Group sales were up 32 percent on a currency-neutral basis driven by strong double-digit growth at Adidas and Reebok. Currency translation effects had a negative impact on sales in euro terms. Group revenues grew 3 percent to €3.479 billion ($4.78 bn) in the fourth quarter of 2013 from €3.369 billion in 2012.
Fourth quarter operating margin excluding goodwill impairment improves 2.0 percentage points The Group’s gross margin decreased 0.1 percentage points to 47.5 percent (2012: 47.6 percent) in the fourth quarter. Gross margin development was positively impacted by a more favourable pricing, product and regional sales mix as well as lower input costs during the fourth quarter. This, however, was more than offset by the negative effects resulting from a less favourable hedging rate. Group gross profit increased 3 percent to €1.652 billion ($2.27 bn) (2012: €1.603 billion). Other operating expenses as a percentage of sales decreased 2.5 percentage points to 46.5 percent (2012: 49.0 percent), as higher expenditure related to the Group’s expansion of own-retail activities was more than offset by lower marketing expenditure as well as a decrease in operating overhead expenses. In the fourth quarter of 2013, excluding goodwill impairment losses, operating profit increased significantly to €98 million (134.6 mm) compared to €26 million in the prior year. This represents an improvement in operating margin excluding goodwill impairment of 2.0 percentage points. Including goodwill impairment losses, the Group reported an operating profit of €45 million ($61.8 mm) compared to an operating loss of €239 million in 2012. Net income attributable to shareholders excluding goodwill impairment losses amounted to €42 million ($57.7 mm) versus net loss attributable to shareholders of €7 million last year.