adidas Group: First Half Year 2008 Results

Currency-neutral Group sales grow 12% in the first half year

First half year earnings per share increase 25%

-- Currency-neutral Group sales grow 14% in the second quarter

-- Q2 earnings per share grow 15%

-- Full year gross and operating margin guidance increased
HERZOGENAURACH, Germany--(Business Wire)--
Second quarter adidas Group currency-neutral sales grow 14%

During the second quarter of 2008, Group revenues grew 14% on a
currency-neutral basis. All brand segments contributed to this
development with currency-neutral sales increasing 19% at adidas, 2%
at Reebok and 6% at TaylorMade-adidas Golf. Currency movements
negatively impacted Group sales in euro terms. Group revenues grew 5%
in euro terms to EUR 2.521 billion in the second quarter of 2008 from
EUR 2.400 billion in 2007.

Second quarter EPS increases 15%

The Group's gross margin increased 2.7 percentage points to a new
record level of 50.1% (2007: 47.4%) in the second quarter as a result
of an improving regional and product mix, further own-retail expansion
and favorable currency movements. Group gross profit increased 11% to
EUR 1.263 billion (2007: EUR 1.138 billion). As a result of the
strong gross margin increase in all brand segments and operating
profit growth in the HQ/Consolidation segment, the Group's operating
margin increased 0.4 percentage points to 8.2% in the second quarter
of 2008 versus 7.8% in the prior year. These effects more than offset
higher operating expenses as a percentage of sales primarily as a
result of the phasing of this year's marketing expenses in the adidas
segment. Operating profit grew 10% to EUR 208 million versus EUR
188 million in 2007. In the second quarter of 2008, the Group's net
income attributable to shareholders increased 12% to EUR 116 million
(2007: EUR 104 million) due to the higher operating profit as well as
a lower tax rate. As a result of the lower weighted average number of
shares due to the share buyback program, earnings per share increased
at an even stronger rate. Basic EPS for the second quarter grew 15% to
EUR 0.59.

adidas Group currency-neutral sales grow 12% in the first half of
2008

During the first six months of 2008, Group revenues increased 12%
on a currency-neutral basis, driven by double-digit sales growth in
the adidas and TaylorMade-adidas Golf segments. The adidas segment
grew 16%, the Reebok segment decreased 2% and TaylorMade-adidas Golf
segment sales increased 11%. Currency movements negatively impacted
Group sales in euro terms. Group revenues grew 4% in euro terms to EUR
5.142 billion in the first half of 2008 from EUR 4.938 billion in
2007.

"We are proud to report a strong set of financial results for the
first half of 2008. Our performance is nothing short of exceptional,
particularly in light of the tougher macroeconomic environment,"
commented adidas CEO and Chairman Herbert Hainer. "adidas and
TaylorMade-adidas Golf continue to show strong momentum and we have
laid the foundation at Reebok for continued improvement in the second
half of the year."

-0-
*T
1st Half 1st Half Change Change y-
Year Year y-o-y o-y
2008 2007 in currency-
euro neutral
terms
-------------------------------------
EUR in EUR in in % in %
millions millions
---------------------------------------------------------------------
adidas 3,787 3,454 10 16
---------------------------------------------------------------------
Reebok 923 1,038 (11) (2)
---------------------------------------------------------------------
TaylorMade-adidas Golf 417 419 (0) 11
---------------------------------------------------------------------
HQ/Consolidation 16 28 (44) (38)
---------------------------------------------------------------------
Total 5,142 4,938 4 12
---------------------------------------------------------------------

First half year net sales growth by segment
*T

Strong sales increase in nearly all regions

adidas Group sales grew at double-digit rates in all regions
except North America where revenues declined. First half Group sales
in Europe grew 16% on a currency-neutral basis as a result of strong
increases in nearly all countries. In North America, Group revenues
declined by 8% on a currency-neutral basis due to lower adidas and
Reebok sales in the USA. Sales for the Group in Asia increased 25% on
a currency-neutral basis in the first half of 2008, driven by
particularly strong growth in China. In Latin America,
currency-neutral sales grew 29% in the first half of the year, with
double-digit increases coming from all of the region's major markets.
The development was supported by the first-time consolidation of
Reebok's joint ventures in the region. Currency translation effects
negatively impacted sales in euro terms in all regions. Sales in
Europe increased 11% in euro terms to EUR 2.352 billion in 2008 from
EUR 2.116 billion in 2007. Revenues in North America decreased 19% to
EUR 1.160 billion in 2008 from EUR 1.429 billion in the prior year. In
euro terms, revenues in Asia grew 17% to EUR 1.214 billion in 2008
from EUR 1.036 billion in 2007. Sales in Latin America grew 23% to
EUR 381 million in 2008 from EUR 310 million in the prior year.

-0-
*T
1st Half 1st Half Change Change y-
Year Year y-o-y o-y
2008 2007 in currency-
euro neutral
terms
-------------------------------------
EUR in EUR in in % in %
millions millions
---------------------------------------------------------------------
Europe 2,352 2,116 11 16
---------------------------------------------------------------------
North America 1,160 1,429 (19) (8)
---------------------------------------------------------------------
Asia 1,214 1,036 17 25
---------------------------------------------------------------------
Latin America 381 310 23 29
---------------------------------------------------------------------
Total(1) 5,142 4,938 4 12
---------------------------------------------------------------------

First half year net sales growth by region

(1) Including HQ/Consolidation.
*T

Record group gross margin

The gross margin of the adidas Group increased by 2.5 percentage
points to 49.6% of sales in the first half of 2008 (2007: 47.1%),
driven by improvements in all brand segments. This highest-ever first
half year rate was related to an improving regional and product mix,
increased own-retail activities as well as favorable currency
movements. Cost synergies resulting from the Reebok integration into
the adidas Group also continued to have a positive impact. Input price
increases had only a modest negative impact on the cost of sales
development in the first half of 2008. As a result of the Group's
strong top-line growth and gross margin improvement, gross profit for
the adidas Group rose 10% in the first half of 2008 to reach EUR 2.552
billion versus EUR 2.326 billion in the prior year.

Operating margin increases by 1.1 percentage points

The Group's operating margin increased 1.1 percentage points to
9.5% in the first half of 2008 (2007: 8.5%). This is the highest first
half operating margin since the acquisition of Reebok. Operating
expenses as a percentage of sales increased by 1.3 percentage points
to 40.9% in the first half of 2008 from 39.6% in 2007. This
development was primarily driven by higher marketing expenses as a
percentage of sales in the adidas segment in connection with this
year's major sporting events. Increased expenses to support growth in
emerging markets such as Russia in both the adidas and Reebok segments
also impacted this development. Operating profit for the adidas Group
increased 17% in the first half of 2008 to reach EUR 490 million
versus EUR 417 million in 2007.

Net financial expenses decrease 3%

Net financial expenses decreased 3% to EUR 71 million in the first
half of 2008 from EUR 73 million in the prior year as a result of
lower average borrowings in 2008 compared to the first half of the
prior year.

Income before taxes increases by 22%

As a result of the Group's operating margin increase as well as
lower net financial expenses, income before taxes (IBT) as a
percentage of sales increased by 1.2 percentage points to 8.1% in 2008
from 7.0% in 2007. Income before taxes for the adidas Group grew 22%
to EUR 419 million in the first half of 2008 from EUR 344 million in
2007.

Net income attributable to shareholders up 23%

The Group's net income attributable to shareholders increased 23%
to EUR 286 million in the first half of 2008 from EUR 232 million in
2007. The Group's tax rate decreased by 0.5 percentage points to 31.5%
in the first half of 2008 (2007: 32.0%) and thus also contributed to
this development. The Group's minority interests declined by 16% to
EUR 1 million in the first half of 2008 from EUR 2 million during the
same period in the prior year.

Earnings per share increase 25%

Basic earnings per share increased 25% to EUR 1.42 in the first
half of 2008 versus EUR 1.14 in the prior year. The weighted average
number of shares used in the calculation of basic earnings per share
was 200,415,758 (2007 average: 203,565,047). Diluted earnings per
share in 2008 increased 24% to EUR 1.35 from EUR 1.09 in the prior
year. The weighted average number of shares used in the calculation of
diluted earnings per share was 216,211,434 (2007 average:
219,446,886).

3.3 million shares repurchased in the second quarter

On January 29, 2008, adidas AG announced the launch of a share
buyback program to repurchase up to 5% of the company's stock capital
until November 2008. During the second quarter, adidas AG purchased
over 3.3 million shares at an average price of EUR 41.99. The buyback
volume amounted to EUR 139 million in the second quarter. Over the
entire buyback period, since January 30 to date, adidas AG bought back
almost 7.7 million shares at an average price of EUR 41.35. The total
buyback volume amounted to EUR 318 million.

Working capital development supports further growth

Group inventories grew 5% to EUR 1.806 billion at the end of the
first half of 2008 versus EUR 1.716 billion in 2007. On a
currency-neutral basis, this represents an increase of 16%. This
development is due to business expansion in emerging markets and
inventories related to the newly established Reebok joint ventures in
Latin America. Group receivables decreased 3% to EUR 1.641 billion at
the end of the first half of 2008 versus EUR 1.689 billion in the
prior year. On a currency-neutral basis, receivables increased 5%,
which is well below net sales growth for the second quarter. This
reflects ongoing strict discipline in the Group's trade terms
management and concerted collection efforts in all segments.

Net borrowings reduced by EUR 134 million

Net borrowings at June 30, 2008 were EUR 2.260 billion, down 6% or
EUR 134 million versus EUR 2.395 billion in the prior year. Strong
bottom-line profitability and currency effects positively impacted
this development and more than offset cash outflows related to the
share buyback program.

adidas backlogs grow 8% on a currency-neutral basis

Backlogs for the adidas brand at the end of the second quarter of
2008 increased 8% versus the prior year on a currency-neutral basis.
This improvement was supported by adidas' strength in most major
categories. In euro terms, adidas backlogs grew 1%. Footwear backlogs
grew 9% in currency-neutral terms (+2% in euros) with increases in all
regions. Apparel backlogs grew 9% on a currency-neutral basis (+2% in
euros), driven by strong double-digit increases in Asia and
high-single-digit growth in Europe. Hardware backlogs decreased due to
the non-recurrence of prior year orders related to the UEFA EURO
2008(TM).

-0-
*T
Footwear Apparel Total(2)
---------------------------------------------
in currency- in currency- in currency-
EUR neutral EUR neutral EUR neutral
---------------------------------------------------------------------
Europe 1 5 2 7 0 4
---------------------------------------------------------------------
North America (9) 6 (23) (10) (14) 0
---------------------------------------------------------------------
Asia 14 21 17 25 13 21
---------------------------------------------------------------------
Total 2 9 2 9 1 8
---------------------------------------------------------------------

Year-over-year development of adidas order backlogs by product
category and region as at June 30, 2008
(in %)

(2) Includes hardware backlogs.
*T

Reebok backlogs decline

Currency-neutral Reebok backlogs at the end of the second quarter
of 2008 decreased 13% versus the prior year on a currency-neutral
basis. In euro terms, this represents a decline of 21%. Footwear
backlogs decreased 13% in currency-neutral terms (-21% in euros).
Apparel backlogs declined by 20% on a currency-neutral basis (-28% in
euros). Both of these developments reflect the short-term impact of
strategic initiatives to revitalize the Reebok brand in the USA, the
UK and Japan. Hardware backlogs were up at a double-digit rate due to
increases in the hockey category. Due to the exclusion of the
own-retail business and the high share of at-once business in Reebok's
sales mix, order backlogs in this segment are not indicative of the
expected 2008 sales development.

-0-
*T
Footwear Apparel Total(3)
---------------------------------------------
in currency- in currency- in currency-
EUR neutral EUR neutral EUR neutral
---------------------------------------------------------------------
Europe (13) (9) (27) (22) (15) (10)
---------------------------------------------------------------------
North America (39) (29) (32) (21) (32) (21)
---------------------------------------------------------------------
Asia 2 8 (1) 3 1 6
---------------------------------------------------------------------
Total (21) (13) (28) (20) (21) (13)
---------------------------------------------------------------------

Year-over-year development of Reebok order backlogs by product
category and region as at June 30, 2008 (in %)

(3) Includes hardware backlogs.
*T

Gross and operating margin full year guidance increased

adidas Group sales in 2008 are expected to grow at a
high-single-digit rate on a currency-neutral basis. Currency-neutral
sales for brand adidas in 2008 are now forecasted to increase at a
low-double-digit rate (previously: high-single-digit rate). Sales
guidance for the Reebok and TaylorMade-adidas Golf segments remains
unchanged. Currency-neutral Reebok segment sales are projected to grow
at a mid- to high-single-digit rate in 2008. At TaylorMade-adidas
Golf, full year currency-neutral sales are forecasted to increase at a
mid-single-digit rate. As a result of the Group's strong gross margin
improvement during the first half of the year, the full year gross
margin is now expected to exceed 48.0% (previously: 47.5 to 48.0%),
driven by improvements in all three brand segments. The operating
margin is now also projected to be higher than originally forecasted.
Group operating margin is expected to approach 10.0% in 2008
(previously: at least 9.5%). Full year net income attributable to
shareholders is projected to grow by at least 15% in 2008 versus the
2007 level of EUR 551 million. This will represent the eighth
consecutive year of double-digit net income growth for the Group.

Herbert Hainer stated: "Our performance in the first half of the
year puts us firmly on track to achieve all of our financial targets
for 2008. We even expect to exceed some of our original goals and at
the upcoming Olympic Games we are ready to showcase the power of our
brands to audiences around the world."

adidas Group
Media Relations:
Chief Corporate Communications Officer
Jan Runau, +49 (0) 9132 84-3830
or
Head of Corporate PR
Anne Putz, +49 (0) 9132 84-2964
or
Corporate PR Manager
Kirsten Keck, +49 (0) 9132 84-6207
or
Investor Relations:
Vice President, Investor Relations
Natalie M. Knight, +49 (0) 9132 84-2187
or
Senior Investor Relations Manager
John-Paul O'Meara, +49 (0) 9132 84-2751
or
Investor Relations Manager
Dennis Weber, +49 (0) 9132 84-4989
www.adidas-Group.com

Copyright Business Wire 2008