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Business

Adidas-Salomon Sees Further Growth in 2002

With business set to receive a boost from the Winter Olympics and the soccer World Cup, the world's second-largest sportswear producer is expecting to see further growth in sales and earnings this year.

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Looking good.

German sportswear and equipment maker Adidas-Salomon AG said on Thursday that it expects to remain on the growth path this year, with its business set to receive a boost from the Winter Olympics and the World Cup soccer tournament.

"We aim to improve on our result in terms of both sales and profits," said a spokeswoman for the company, which by sales is second only to U.S. giant Nike among the world's sportswear firms. The company left open whether it would be able to maintain the growth pace established in full-year 2001.

It intends to provide a detailed outlook when it presents its final figures for 2001 at its results conference, scheduled for 7 March. The provisional figures announced by Adidas-Salomon on Thursday were in line with market expectations.

Full-year sales rose by 5% to 6.1 billion euros, and net income rose 15% to 208 million euros.

Cutting down on marketing

As to the reason why earnings growth had outpaced sales growth Adidas pointed to its success in bringing down costs. As part of its efforts in this direction, it had cut its marketing budget, which in 2001 accounted for 9% of total annual sales revenue, as opposed to 13.7% in 2000.

The net income also benefitted from a reduction in the total tax bill. This was reflected in the fact that growth in pretax earnings, at 9% to 376 million euros, failed to keep pace with the growth in net income.

Adidas-Salomon said revenues had increased on all key markets with the exception of North America. But the spokeswoman added that the company had repositioned itself in North America, and sales revenues on the difficult U.S. market were set to rise this year.

Weak euro hurt Adidas

For the sportswear industry, the gross income margin is seen as a key indicator of success. The weakness of the euro has been a problem for Adidas-Salomon, since it does most of its buying in U.S. dollars but makes most of its sales within the euro-zone.

But despite this burden, and despite the growing pressure on prices arising from the difficult competitive environment, Adidas-Salomon managed to keep its gross income margin at 42.6%.

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