ADIDAS-SALOMON NET UP 11.1%

Byline: James Fallon / With contributions from Rosemary Feitelberg

LONDON — Adidas-Salomon AG Thursday reported an 11.1 percent increase in net income to $220.3 million, or $4.86 a share, for the year ended Dec. 31, 1999, but repeated its warning that its recently announced restructuring will cause net income to drop by 20 percent in 2000.
The footwear and apparel company said net sales rose 5.7 percent to $5.18 billion last year. This compares with net income of $198.5 million, or $4.38, on sales of $4.9 billion in 1998.
Chief executive Robert Louis-Dreyfus indicated that he would step down next year, but published reports that said he had already done so and that Herbert Hainer had been named chief executive officer were dismissed by the company’s American arm, Adidas America, on Friday.
Herbert Hainer became chief operating officer and took responsibility for day-to-day operations, as well as the company’s restructuring program, on Jan. 1. Although considered the likely successor to Louis-Dreyfus, who has reportedly been fighting an undisclosed illness, Hainer has neither assumed that role nor been designated as the next ceo.
While both the Adidas and Salomon brands performed strongly overall last year, the group saw a sharp slowdown in North America. The company said net sales in North America rose only 1.9 percent last year to $1.76 billion from $1.73 billion after being its fastest-growing market in 1998.
The slower growth resulted from a decline in sales of Adidas-branded apparel and footwear in the second half, as fashion tastes switched to brown shoes and non-athletic apparel. For the entire year, sales of Adidas products in North America fell 1 percent, the company said. Sales of Salomon and Taylor Made products rose 21 percent and 11 percent, respectively.
Overall, the company said its apparel sales fell 0.5 percent last year to $2.12 billion from $2.13 billion in 1998, while its footwear sales increased 8.5 percent to $2.15 billion from $1.98 billion. Hardware sales were up 15.3 percent to $911.9 million from $791 million as a result of stronger sales of the Salomon and Taylor Made brands.
Geographically, Adidas-Salomon saw strong growth in the Far East and Latin America, but registered a 1 percent drop in sales in its largest market of Europe, Africa and the Middle East because of changing consumer tastes. Sales in that region fell to $2.64 billion from $2.69 billion in 1998.
Adidas-Salomon moved to improve its performance by implementing a $38.4 million restructuring plan in January aimed at narrowing its product range, improving its supply chain and boosting its Internet sales. Part of the plan is designed to reinvigorate growth in the Adidas brand.

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