Adidas 1998 Annual Report Download - page 21

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Management Discussion and Analysis 19
Jan.1998 Dec.1998
(Indexed, January 2 = 100)
150
140
130
120
110
100
90
80
70
nadidas-Salomon
nDAX
nS&P SC Footwear
adidas-Salomon SHARE PRICE
VS. DAX AND INDUSTRY INDEX
THE SHARE
FOLLOWING A SHARP RISE IN THE SHARE PRICE IN THE FIRST HALF OF THE YEAR THERE WAS AN EQUALLY
SHARP FALL SHORTLY AFTER INCLUSION IN THE DAX, WHICH CONTINUED UNTIL THE END OF THE YEAR. AT
THE BEGINNING OF THE NEW YEAR THE adidas-Salomon SHARE HAD LOST ALMOST A QUARTER OF ITS
VALUE, COMPARED
TO THE BEGINNING OF 1998.
DESPITE A DECLINE IN EARNINGS, IT IS PROPOSED THAT
THE DIVIDEND PAYMENT REMAINS UNCHANGED
AT DM 1.65 PER SHARE.
STOCK MARKET PERFORMANCE MIXED 1998 was a year of strong share
price fluctuation for the stock markets in Europe. The DAX, comprising Germany’s 30
largest quoted companies, had increased an amazing 44% by July as a result of the stock
market boom. However, the Russian economic and currency crisis triggered an almost
equally strong slide in share prices that was intensified by worsening expectations for the
global economy and fears of a crisis in South America.
Towards the end of the year the DAX recovered to finish 1998 at around 5000 points,
an increase of 16% compared to the previous year.
SHARE PRICE DECLINED IN SECOND HALF YEAR By the middle of the
year, the adidas-Salomon share had increased by around 38%, to a high of DM 329,
fueled by good results, high expectations following the take-over of the Salomon group
and the strength of the overall stock market.
In July, during the Soccer World Cup, the share price began to decline. The golf
business was not meeting the high expectations, the integration of Salomon was progress-
ing slowly at this point and sales and order backlogs no longer showed the traditional high
growth rates.
The worsening financial position of our main competitors also led to
a downturn in
the overall industry’s share prices. In addition, it became increasingly apparent that retail
chains in the USA specializing in sporting goods had expanded too quickly and now
needed to consolidate. Their shares also fell rapidly, as indicated by the S&P SC Footwear
index. adidas-Salomon could not escape the industry trend.
The adidas-Salomon share closed the year at DM 182. The share price had
virtually
halved compared to its all-time high and had declined by DM 56 or 24% compared
to the
start of the year.
Market capitalization at the end of the year stood at DM 8.3 billion (previous year:
DM 10.4 billion).
INCLUDED IN THE GERMAN SHARE INDEX
In June 1998 the adidas-
Salomon share was admitted to the DAX. With its inclusion, adidas-Salomon moved up to
the premier league of listed German companies, bringing greater visibility to the share.