Reebok International Ltd. (NYSE:RBK) today reported net income for the first quarter ended March 31, 2003 of $41 million, or $.63 per diluted share, an earnings per share increase of 9% when compared to last year's first quarter net income (before the
cumulative effect of the adoption of the accounting standard regarding goodwill) of $37 million, or
$.58 per diluted share.
Net sales for the 2003 first quarter were $798 million, an increase of 8.5% from 2002 sales
of $736 million. Foreign currency exchange rate fluctuations favorably impacted sales comparisons.
On a constant dollar basis, first quarter 2003 sales increased approximately 2.5% over the prior
year's first quarter sales. For the Reebok Brand, worldwide sales in the 2003 first quarter increased
9% to $668 million.
In the U.S., sales for the Reebok Brand increased 9% in the first quarter of 2003 as
compared with 2002's first quarter. Reebok's U.S. footwear sales in the first quarter of 2003 were
$257 million, an increase of 4% when compared with 2002's first quarter U.S. footwear sales of
$247 million. Apparel sales in the U.S. were $89 million, an increase of 24%. The Company's
international sales of Reebok branded products amounted to $321 million in the quarter, an increase
of 10% over 2002's first quarter.
Sales for the Company's Rockport subsidiary were $90 million in the first quarter of 2003
compared with 2002's first quarter sales of $87 million. Sales for the Company's other brands;
Ralph Lauren Footwear and The Greg Norman Collection, were $41 million in the first quarter of
2003, an increase of 11% from the prior year's first quarter.
The Company reported that its total worldwide backlog of open customer orders scheduled
for delivery from April 2003 through September 2003 for the Reebok Brand increased 15% from
the prior year's comparable amount. On a constant dollar basis, worldwide backlog of open
customer orders for the Reebok Brand increased by 9%.
Paul Fireman, the Company's Chairman and Chief Executive Officer said, #'I am pleased
with our performance this quarter and with the improvement in our open backlog position, especially
in light of the difficult economic conditions which affected several of our key consumer markets. In
our U.S. footwear business we are generating market share gains in the athletic specialty channel and
this improvement is fueling the growth in our backlog. We have been successful in executing our
strategy to grow this important influential segment of the U.S. market. The improvement in our
European backlog is evidence that the rollout of our unified product and marketing strategies for
Europe is starting to provide us with a foundation from which we believe we can generate long-term
sales and profit growth for this region.''
#'We were able to achieve our strategic and financial goals for the quarter despite the
geopolitical environment, the challenging conditions at retail and the lack of travel to many important
markets around the world,'' Fireman noted. #'And we were able to generate sales growth in all of
our brands during the quarter, an indication that our management team is up to the challenge of these
difficult times. In addition, we remain on target to achieve an earnings per share improvement of
approximately 15% for the full year 2003 which is in line with our previous guidance.''
#'Our successful introduction last year of our new Rbk products is gaining momentum around
the world. These products are being effectively presented to the consumer with integrated marketing
and retail presence in most of the key geographic areas in which we do business. Our Rbk products
and related marketing are reaching our target consumers in an effective way and we believe there is
strong consumer response to these programs resulting in healthy retail sell-throughs. We are
expanding our Rbk product offerings to include additional product categories for expanded points of
distribution and we are offering a wider range of price points to reach a broader base of consumers.
These products continue to be fashion forward and cutting edge and we believe they will become a
greater percentage of our product offerings and our sales throughout 2003. At the same time, we
are implementing our previously announced strategy to focus additional efforts on our performance
products which leverage our on-field authenticity and provide athletes with authentic technologies
that enhance their performance. During the quarter we successfully launched our new Premier Series
running program worldwide. These products were recently tested and evaluated by Runner's
World, a well respected industry source, and received very high marks. Our Premier running
products are selling through well at key specialty running shops and we are very encouraged by the
success of this initial launch. Throughout 2003 and beyond we plan to expand the number of
Premier product offerings, price points, and retailers who carry this product. And, we plan to invest
behind our Premier running program with appropriate advertising and marketing support. Our
intention is to regain a healthy share of the running market over the next several years. We have a
strong heritage in running, dating back to the very beginnings of our Company, and we believe that
the running category is an important global opportunity for the Reebok Brand,'' Fireman said.
#'During the first quarter we were successful in evolving our marketing support for the
Reebok Brand, thereby creating some excitement in the marketplace and generating demand for our
products. Our Terry Tate Super Bowl commercial was an outstanding success and we have
generated a lot of interest in the Brand as a result of this new campaign. Over 10 million films of
Terry Tate have been downloaded from the internet since we ran the initial ad. We are planning to
launch a comprehensive Terry Tate campaign during the back-to-school period beginning in July,
2003. In addition to Terry Tate we have several other successful marketing campaigns supporting
our Rbk, Vector and Classic products. Our �Sounds and Rhythm of Sport'' campaign continues to
evolve and includes many exciting sports and entertainment personalities. And our recent association
with Shakira has been successful in supporting our Classic products. We have utilized Shakira in a
print campaign during the first quarter of 2003 and we plan to introduce her in a new television
commercial soon. Our marketing is focused, effective and global. We believe that we have
energized the Reebok Brand, generated a strong and open dialog with our consumers, and we are
very pleased with the results we have achieved to date,� Fireman stated.
The Company reported that its gross margin for the first quarter of 2003 was 37.4%, an
improvement of 20 basis points when compared with the gross margin of 37.2% in the first quarter
of 2002. Worldwide inventories at March 31, 2003 totaled $418 million compared to $350 million
at March 31, 2002.
#'In summary, I am satisfied with the overall improvement in our business because I see this
as an affirmation that both our strategic initiatives and the execution of those initiatives is working.
We are on target to achieve our sales and earnings plans for the year. Our goal with respect to 2003
is to grow quality market share for all our brands and I believe we have the management team in
place to achieve these goals,'' Fireman concluded.