Byline: Thomas J. Ryan
NEW YORK — Despite sterling results in North America for the Adidas brand, Adidas-Salomon AG’s earnings in the second quarter took a hit primarily due to weak results at its recently acquired Salomon SA.
Adidas acquired the French ski and sporting goods manufacturer in September 1997.
Measured against Adidas alone last year, Adidas-Salomon’s profits fell 25.1 percent to $26.9 million, as problems integrating Salomon and weak sales at Salomon’s Taylor Made golf line offset strength in the Adidas brand. Sales surged 57 percent to $1.2 billion. Dollar figures are translated from the German mark at current exchange.
Excluding Salomon, profits at Adidas subgroup surged 59.7 percent to $54.9 million. Sales gained 39.8 percent to $1.1 billion.
The gains were fueled by a 101.9 percent hike in sales in North America to $375.2 million. Sales rose 27.9 percent in Europe to $633 million and climbed 66.5 percent in Latin America to $34.2 million, but slid 23.1 percent to $76.2 million in the Asia/Pacific region as a result of the economic and currency crisis.
By product, Adidas brand apparel sales grew 29.8 percent to $518 million, while footwear sales grew 48.6 percent to $554 million. Hardware and other sales for the Adidas brand gained 65.9 percent to $48.7 million.
Going forward, orders on hand for the Adidas brand for the next six months were $1.85 billion, up 31 percent from the year-ago period. The backlog increase was driven by a 69 percent increase in order volume in North America, Adidas said.
Meanwhile, the firm, based in Herzogenaurach, Germany, said the Salomon subgroup failed to meet expectations in the second quarter. While sales grew 37 percent for the Salomon brand and 36 percent for the Mavic brand, golf sales slid 2.6 percent due to declines in the Taylor Made brand name in the U.S. and Japan. Golf is a major part of the Salomon subgroup.
The golf weakness resulted in a lower than expected gross profit at Salomon, and Adidas said first measures to reduce costs at Salomon have not yet had a material impact.
In the half, Adidas-Salomon showed a net loss of $273 million largely due to a one-time charge of $404.9 million relating to the acquisition of in-process research and development tied to the Solomon acquisition. Before the charge, net earnings were $132.3 million, up 4 percent from Adidas alone last year.
First-half sales were up 58 percent to $2.7 billion..
Excluding Salomon, net profits at the Adidas subgroup grew 37.7 percent to $175 million. Sales gained 39 percent to $2.45 billion.
Adidas brand footwear sales were up 46 percent to $1.17 billion, apparel gained 32 percent, also to $1.17 billion, and hardware and other sales were up 40.2 percent to some $85.7 million.
By region, sales gained 85 percent to $756 million in North America, rose 309.5 percent to $1.46 billion in Europe, and 89.7 percent to $63.3 million in Latin America, but slid 17 percent to $161.5 million in the Asia/Pacific region.
Adidas noted that gross margins in the half at the Adidas subgroup remained unchanged at 42.4 percent and selling, general and administrative expenses were reduced to 31.2 percent of sales from 32 percent, leading to “the best results for operating activities that the Adidas subgroup has ever achieved.”
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