FIANACIAL HEALTH OF ADIDAS

Fianacial Health Of Adidas

Fianacial Health Of Adidas

Introduction

Adidas was founded along with its identifying trademark, the three stripes. From its inception, Adidas has faithfully adhered to three guiding principles embedded deep into its DNA: produce the best shoe for the requirements of the sport, protect the athlete from injury, and make the product durable. As time has passed, Adidas has evolved and is now one of the premier global leaders in sporting brands offering athletic footwear, apparel and accessories. In this paper we will be looking at the Financial Health of Adidas for the year of 2007.

Fourth quarter net income attributable to shareholders up 63%

Fourth quarter gross margin increased 3.2 percentage points to 46.6% (2006: 43.4%) as a result of underlying improvements in all segments. Cost synergies resulting from the combination of Adidas and Reebok sourcing activities and, to a lesser extent, the non-recurrence of negative impacts from purchase price allocation in the Reebok segment also positively impacted gross margin development. Group gross profit increased 15% to EU 1.127 billion (2006: EU 976 million). Operating expenses as a percentage of sales increased mainly due to higher marketing expenses in the Adidas segment. As a result of the strong gross margin increase, which more than offset the increase in operating expenses, the Group's operating margin increased 0.2 percentage points to 2.5% in the fourth quarter of 2007 versus 2.3% in the prior year. Operating profit grew 18% to EU 61 million versus EU 52 million in 2006. The Group's net income attributable to shareholders increased 63% to EU 21 million (2006: EU 13 million) due to higher operating profit and lower net financial expenses. Net financial expenses decreased following the strong reduction of net borrowings. These positive effects more than offset a higher tax rate.

Adidas Group currency-neutral sales grow 7% in 2007

In 2007, Group revenues increased 7% on a currency-neutral basis, mainly as a result of sales growth in the Adidas segment. Currency movements negatively impacted Group sales in euro terms. Group revenues grew 2% to EU 10.299 billion in 2007 from EU 10.084 billion in 2006.

Sales increase in nearly all regions

Adidas Group sales grew in all regions except North America in 2007. Group sales in Europe grew 7% on a currency-neutral basis as a result of strong growth in the region's emerging markets. In North America, Group sales declined 2% on a currency-neutral basis due to lower Reebok sales in the USA. Sales for the Adidas Group in Asia increased 18% on a currency-neutral basis, driven in particular by strong growth in China. In Latin America, sales grew 38% on a currency-neutral basis, with increases coming from all of the region's major markets. Currency translation effects negatively impacted sales in euro terms in all regions. In euro terms, sales in Europe increased 5% to EU 4.369 billion in 2007 from EU 4.162 billion in 2006. Sales in North America decreased 9% to EU 2.929 billion in 2007 from EU ...