adidas AG

John-Paul O’Meara – VP, IR Herbert Hainer – Group CEO Robin Stalker – Group CFO

Antoine Belge – HSBC Jürgen Kolb – Kepler Cheuvreux Matthias Eifert – MainFirst Bank Andreas Inderst – Exane BNP Paribas John Guy – Berenberg Chiara Battistini – JP Morgan Andreas Riemann – Commerzbank Cedric Lecasble – Raymond James

Yes. Good afternoon, ladies and gentlemen, and welcome to our nine months results conference call.

Our presenters today are Herbert Hainer, Group CEO; and Robin Stalker, our Group CFO. To allow us for ease of comparison, all sales and revenue-related figures today will be discussed on a currency-neutral basis unless otherwise stated.

So let’s get started, and let me hand you over now to Herbert.

Thanks, JP, and good afternoon or good morning, ladies and gentlemen. It has been a busy, exciting but also challenging first nine months for the Adidas Group.

While I am obviously disappointed we have to reduce our 2013 full year guidance in September, on balance, we continue to make good progress on our most important Route 2015 strategic initiatives. Despite the mounting headwinds from negative currency movements, as well as a softer than originally expected performance in some of our key markets and segments, I am pleased to report that we delivered stable earnings for the first nine months.

The key financial highlights of the first nine months were as follows. Sales remain stable, currency-neutral, or declined 4% in euro terms to EUR 11 billion.

Gross margin increased 2.1 percentage points to a 9-month record level of 49.8%. Operating margin increased 40 basis points to 10.5%.

And earnings per share was virtually unchanged at EUR 3.81 or EUR 796. Starting with the negatives.

Three areas in particular obstructed our initial growth plans in the quarter and also for the year as a whole. Firstly and most severely, the persistent weakening of several currencies versus the euro throughout 2013 such as the Japanese yen, the Brazilian real, the Argentinian peso, the Turkish lira, the Russian ruble and the Australian dollar.

It has put a significant strain on our reported results in euro terms. In the third quarter alone, Group sales suffered a 7 percentage-point negative impact from currency movements.

Accumulated for the first 9 months, currencies wiped out EUR 500 million from our top line results. Secondly, in one of our most important Route 2015 market, Russia and the CIS, we had an unexpected short-term distribution constraint in Q3 as a result of the transition to our group’s new distribution facility in Chekhov, which is close to Moscow.

This significantly impacted the quantity of new product deliveries to stores, which was a major contributor to the double-digit comp store sales decline we saw in that market during the third quarter. Our global operations and local management teams have worked speedily to rectify the matter, and I’m pleased to report that we are making good progress on returning the shipping quantities back to normal levels.

And thirdly, due to the continued softness in the global golf market where TaylorMade-adidas Golf is the dominant leader, we took the decision in the third quarter to be more consequent and accelerate the rebalancing of inventories to healthier levels in the marketplace. As a result, sales declined 16% in the segment in the third quarter, and gross margins decreased over 10 percentage points due to additional markdowns and incentives.

This alone had a 70 basis-point negative impact on the Group’s gross margin performance in the third quarter. Again here, our actions have delivered the desired result.

I’m confident we will see a solid fourth quarter, which will be driven by recent product launches such as SLDR driver and fairway woods, as well as our new Speedblade family of irons. Quick and focused actions like these show our group’s determination to always be at the forefront of creating consumer excitement in our industry.

And while we had our challenges in the period under review, these were definitely outnumbered by considerable and broad-based successes in many of our categories and regions. And these successes include A the continuation of our industry leading momentum in key emerging markets with sales in Latin America and Greater China, increasing 15% and 7% respectively.

B, the strong growth in our focused Adidas performance categories. We are running revenues in particularly we’re up by healthy 14%, with growth in all regions, due to ground breaking product innovations such as Boost and Springblade’s.

And C continuous success in sports lifestyle with Originals & Sport Style sales up 4% driven by strong market share gains, in the actions sports category, where sales jumped over 60%. And D the further distribution rollout of our highly successful teenage level Adidas NEO with sales expanded 12%.

E and finally strong improvements again in the quality of say Reebok business. Sales grew 5% in the third quarter and gross margin expanded 6.4 percentage points to 48.4%, the highest level we ever achieved towards with the brand.

Excluding the NFL license impact the Reebok revenues are up 3% year-to-date and I can confirm that Reebok will grow for the year as a whole. These positive developments clearly highlights the effective execution of our strategy to fundamentally improve the long-term sustainable profitability of our brands and our Group.

To ensure we continue to drive these kinds of result in all of our key markets we have been working, diligently behind the scenes of the further implementation of organizational measures to drive sales and more efficient decision making processes as well as ensuring, we more fully leverage the power of our Group. As such to continue to lead the game in our home turf, we recently announced our decision to go forward, with one alliance strategy for Western Europe.

There is no question that Europe is changing country boarders are becoming less relevant for both consumers and customers. They are looking for the best product and they want it fast.

And this strategic initiative therefore will harness even more to potential of our initiative brands by driving higher levels of excellence in our routes of market and back-office functions. Similarly to maximize the potential of both Adidas and Reebok in North America, we are uniting both organizations and the one management team.

Our goal is to strengthen, invest and enable faster growth for both brands following the good work over the past three years, where we have been winning with our key consumers namely the High School Kid for Adidas, the Fit Generation for Reebok and the avid sports fan through our sports license division. To ensure our brands remain focused on their respective objectives Portland will remain the home of the Adidas brand in U.S and the Reebok brand will continue to be based in Canton.

Each location has a unique and powerful, culture, grounded in the respective brands, values and goals. And we want to continue to foster the positive effect of this energy and at the same time harness a collective power of those brands.

The dual location approach will also enable us to have a strong East and West Coast presence for our customers. I am convinced that those of these initiatives will drive our competitive position to new heights over the coming years.

And it will give us a stronger and more effective platform to further improve and extend our market shares. In terms of current trading in these important markets both have started to trend in the right direction.

In Western Europe where revenues were down 6% in Q3, since we are again impacted by the comparisons with last year’s sports events. In particular, products related to the London 2012 Olympic Games, accounted for approximately 2 percentage points also declined.

However, in co-countries, such as Germany, for example revenues have turned positive during the third quarter with running and [Inaudible] particularly strong. Moving into the fourth quarter and on into 2014, I am sure that positive trend will give the pace and become more right spread.

Moving over to North America, sales decreased 1% in the first nine months and 5% in Q3. Mainly due to the sales declined to TaylorMade-Adidas Golf.

While Adidas sales remain stable in the first nine months as closest Sport Performance led by training was offset by declines in other categories. As Reebok sales in North America, excluding the NFL Impact are up 2%, year-to-date, just like in Western Europe, also North America trends are picking up for both brands.

Particularly Adidas which saw running delivered double-digit growth in the third quarter. With more volume of Boost and Springblade hitting the market in the next few months, as well as the current the best expectations sales we are seeing on the D Rose 4 I am also confident that we will see momentum accelerate in North America as we turn into the new year.

So I will back to the fourth quarter in more detail in a moment but before that let me hand over to Robin that he will go through the rest of the nine months financials in more detail.

Great. Thanks very much Herbert and good afternoon ladies and gentleman.

We are looking into our key financial KPIs let me reiterate what Herbert’s has said that our Group’s discipline and focus on improving the fundamental of our business continue to show that we are making good progress. Each fundamentals are best represented by our gross margin which increased a strong 2.1 percentage points to 49.8% in the first nine months and 1.9 percentage points in the third quarter to 49.3%.

This performance was driven again by product and pricing mix as well as regional and channel mix which more than offset negative effects from an unfavorable hedging rate as well as lower margins to TaylorMade-Adidas Golf. The negative hedging effect is amounted to 50 basis points for the third quarter and 70 points in the first nine months.

The impact of mark down the TaylorMade-Adidas Golf reduced the Group’s gross margin by 70 basis points in Q3 and 40 basis points year-to-date. Now with the exception of TaylorMade-Adidas Golf gross margin increased in all brands and channels.

By channel gross margin for the wholesale segment was up 2.7 percentage point for the quarter and year-to-date driven by pricing as well as a more favorable product and regional mix. Retail gross margins increased 2.5 percentage points to 61.5% for the third quarter and 1.6 percentage points to 62.6% in the first nine months mainly due to more favorable pricing and product mix.

And looking at our operating expenses, other operating expenses as a percentage of sales were up 2.6 percentage points for the third quarter and 1.9 percentage points for the first nine months. This was due to firstly the accelerated pace of our own retail rollout, secondly investments in the Group’s infrastructure and thirdly the decreased leverage due to the lower top-line growth than originally expected.

Sales and marketing record budget as a percentage of sales increased 90 basis points to 11.7% for the third quarter and around 40 basis points to 12.1% for the nine months period. Nevertheless, due to the strong gross margin development year-to-date, group operating margin expanded 40 basis points to 10.5%.

In the third quarter, operating margin improved 10 basis points to 11.9% compared to a year ago. During the third quarter we added 69 stores to our retail portfolio bringing our net openings for the year to 165.

At the end of the third quarter our retail segment operated 2,611 stores. Of the total number of stores 1,483 were Adidas and 369 were Reebok branded.

In addition we operated 759 multi-branded factory outlets. During the first nine months we actually opened 375 new stores, 210 stores were closed and 86 stores were remodeled.

Now while on retail, revenues in the third quarter and first nine months grew 6%. Comp store sales however were down 3% for the quarter and 2% for the first nine months.

Beyond Russia, and CIS retail trading was however quite robust during the third quarter. As most of the regions, posted comp store sales increases with Latin America and Greater China being particularly strong.

By brand Adidas comp store sales were down 2% for the quarter and 1% year-to-date. Reebok comp store sales decreased 7% and 4% for the quarter in first nine months respectively.

Our e-commerce business continues to do extremely well with sales increasing 57% in the third quarter and 67% for the first nine months to EUR 166 million. Moving back over to P&L, looking briefly at the non-operating items of the P&L, net financial expenses decreased 7% in the first nine months.

Now while net interest expenses were down 21% due to lower gross borrowings this could good progress was partly offset by higher negative exchange rate variances which increased to EUR13 million from EUR 6 million at prior year. First nine months tax rate decreased 10 basis points to 27.7%.

Looking at the balance sheet, operating working capital as a percentage of sales increased 50 basis points to 20.6% due mainly to an increase in inventories. At quarter end, inventories were up 12% on the currency neutral basis which reflects an increase in goods in transit given our Group’s expectations for accelerated growth in the coming quarters as well as higher inventories in Russia, CIA due to our recent distribution center issues.

To rectify the matter, we’ve adjusted our 2014 inventory by accordingly. And I expect our inventory levels in Russia to normalize in the first half of 2014.

In terms of capital structure our operational performance over the last 12 months led to another period of good cash flow generation resulting in a further reduction in net debt and an increase in our equity ratio. At quarter end this is reflected in the 47% year-over-year decline in net debt to a level of only €118 million and to an equity ratio increased of 80 basis points to 49.3%.

To wrap up ladies and gentleman, we are showing disciplined progress on our journey toward long-term sustainable value creation. The star and finishes will create desirable brands and driving quality growth and now our margin shows we are doing just that.

This together with our strong control of inventories particularly in our most challenging markets, ensures we can readily exploit our opportunities in the coming quarters. Before on that note let me hand back now to Herbert who will give you a sneak preview of some of the exciting initiatives we have had.

Thanks very much, Robin. As I mentioned earlier with strong demand of our highlight concept and innovations upcoming initiatives around the 2014 FIFA World Cup and positive customer feedback to our spring/summer 2014 collections from all of our brands, momentum is clearly returning to our business.

We already see some notable improvements in several key markets therefore I can reconfirm the guidance we gave here in September, while we expect low single-digit growth and neutral sales growth for the year and earnings per share to increase at the rate between 4% and 7%. Driving these improvements will be our relentless pursuit of creating premium experiences for our athlete and consumers.

And I can assure you there is plenty more in the pipeline in the coming months. We are excited about all of which will fuel a much stronger result in 2014.

Just start a football way yesterday we kicked off a fully integrated global attack which you will see as built on each and every months up to end including the 2014 FIFA World Cup in Brazil across footwear, apparel and hardware. This will consist of our most comprehensive footwear offensive ever which was the center piece of yesterday’s campaign launch.

The campaign kick-off with all four of our key football boot silos being featured in a creative World Cup themed pack called the Samba Collection. This will be followed up next with the launch of say federation jerseys ended December the always highly anticipated, official match ball introduction.

In the fourth quarter we will also continue intensifying the rollout of our industry disruptive award winning boost technology by extending the technology into broader range of Adidas running franchises as well as the further roll outs of Springblade which is one of the hottest product in U.S market right now. In speaking of eye catching and disruptive technologies we will further unleash the potential of our interactive training and coaching technologies where our miCoach Smart Run is certainly a game center.

Smart Run is a most advanced and most intuitive wrist-based running device on the market today, completely eliminating the need for cable straps traps and additional sensors. Activated commercially for the first time at the New York City, Marathon which by the way was won by Adidas, Geoffrey Mutai in the adizero adios Boost.

This is a beginning of a wave of new miCoach technologies that I am sure will grow in prominent in 2014. Similarly this winter season changing our pace of attack in the apparel category with the introduction of say ClimaWarm+ range developed with Adidas Ambassador David Beckham.

By using hollow fibres that trap air to create insulation the technology not only increases warmth but also reduces the garment’s weight, giving the athlete an optimized warmth-to-weight ratio to maximize comfort and performance when training in cold conditions. In basketball we will leverage the return of Derrick Rose it’s a centerpiece of our basketball offensive.

And we will continue to add steps to opportunity by broadening our activities with our portfolio of next generation NBA stars to cultivate growth in apparel as well as in our key footwear technology in Silos such as Crazy Light. And finally for Reebok we will continue to amplify the brand’s holistic fitness positioning with global roll-out of our FitHub concept to own retail and shop-in-shops.

Designed to inspire the Fit Generation and to showcase the brand’s pinnacle footwear and apparel offering, Reebok FitHubs are changing consumer’s perception of brand by solidifying Reebok’s image and the fitness brand. In addition we will also continue bringing energy to Classics introducing several Silos to basketball as well as leveraging the girls’ strengths of the [Inaudible] which is one of the hottest products in the Lifestyle theme particularly in Asia this year.

So in summary ladies and gentleman, we have felt strictly and decisively with our challenges in 2013. Looking at the quality of our margin development there is no doubt that our industry leading innovations, strong partnerships activations and keen understanding of the global consumer are clearly enhancing our position as the premium multi sports company in the industry.

Great success is achieved by those with the ambition, desire and persistency to consistently improve, accept challenges as normal and openly embrace change. This mentality is at the core of the Adidas Group’s philosophy and while we are fully committed to the course we set out on with our Route 2015 strategic plan, I am confident in the plan.

And I am confident in our ability to execute against it. So I look forward to sharing more details on that front with you at our Investor Field Trip which were take place here in Herzogenaurach at the world of sport on December 2nd, and 3rd.

And with that ladies and gentlemen Robin and I are now happy to take all your questions.

Yes, hi it’s Antoine Belge. Three questions, first of all regarding Russia, I think you have come commented in the past that there was a lot of new services being added new malls et cetera which was putting pressure on traffic.

Do you think that this phenomenon will continue for a couple of quarters can you elaborate on that? Second question on pricing obviously there as impact on your gross margin level and it seem though especially in the U.S.

that maybe this aggressive pricing strategy may have led to a bit of pressure on volumes there have been the acceptance from the consumer but as may be some distributors like Foot Lockers to some of your recent innovation and this was the price increase associated to those innovation. Finally I think you rightly pointed to the evolution on the cash flow generation on the cash position.

So what’s the outlook maybe for the share buybacks and also in the share where they won’t be much earning rose what will be the division payout this year? Thank you.

Okay. Good afternoon, Antoine.

So I’ll take first the last question. Yes indeed there are traffic issues in Russia is likely to continue for that have highlighted also I think also in recent communication and we know that in Moscow alone there is going to be a next year also further opening of new malls and new square for the [Inaudible] retail space.

But we are working on that just we’ve said previously in closing the older shops and I think we’ll get that a little bit better during the years 2014 but it does remain a pressure at the moment. Just third point what I want in terms of the generation of cash it’s one the great talented group to be able continue to generate cash.

At the moment our aim is still to continue to pay down our debt and to be able to some in our dividend payout. We do not have any plans to have a share buyback at this stage.

We have got a very good and clearly communicated dividend payout ratio we had from 20-40%. We have up at the over 35% to 10% at the moment in the last year and I think you can look to us looking to continue to show growth in the dividend payout ratio.

Your second question was regarding pricing and this understand it correctly asking a [Inaudible] do innovative products in U.S. market to high end therefore don’t get the volume.

No, definitely not, because when you look to the sale through rate which we have especially when you look to Springblade, we have never had higher sale through rate as we had with Springblade and Boost is doing very well all over the world. So we definitely think we have put the right pricing in for the value which the product provide.

And as you might have heard that people are asking everywhere around the world for more volumes be it Boost or be it Springblade, I guess we have explained already in the last conference call that we have some limitation on the Boost material because it is exclusive from [Inaudible] for us but we continue to grow and then absolutely sure we have found the right pricing strategy.

Just a follow up on this and again more in the U.S. specifically is it may be fair to say that some you have different retail turnover in the U.S.

that some probably acted more positively to others to those based on pricing or maybe although it would take a bit longer to explain as a rationale behind the price increase?

First and foremost I think Antoine you always have it with our distribution strategy that we have retailers in the U.S. that everywhere around in the world who are very specific for some categories of footwear offering obviously in running you have running specialty stores you have some sporting goods stores et cetera where you put your running shoes for Springblade definitely Foot Locker is one of our key customer because it’s very attractive running shoe which goes not only for running but also for Lifestyle where young people using it.

So therefore we segment very clearly where we want to bring our products. But I can tell you ones wherever we had our Boost or running product in it sales were great.

Okay, thank you very much.

You are welcome.

Thank you very much. Three quick breaking up details maybe.

On the cost side first of all, could you give us some additional details as to how much these three reasons which led to the profit warning in September affected your third quarter are either Russian issue the Golf situation and currencies so that we got a other idea of how much of the additional cost you already put into the Q3 numbers? Then on the gross margin side obviously a great performance, you indicated two factors currencies but also obviously the TaylorMade thing, any additional breakdown as to what was the on the positive side broken down into individual factors?

And just a housekeeping one on the hedging side I think you should lastly be done for 2014 at what rate have you know hedged for ‘14? Thanks.

Okay. Thanks for those, yeah we obviously had this negative impact largely in the third quarter specifically for Russia I think we have already quantified that as being a contribution impact or an operating result impact of making around €30 million.

The TaylorMade one, we estimated a double-digit negative impact in the third quarter. We saw bit of development this year, the currency is difficult to quantify unfortunately you have to do that calculations itself I think we have been able to quantify obviously the top line.

It’s difficult to quantify write down to the operating margin but I think you can see from the significant mainly negatives on the top line that obviously had a significant impact on what we would have been able to generate as an operating result as well. In terms of the gross margin and the regional and channel mix is the biggest impact there that’s a been the fact over the last few quarters also obviously.

The rest is pretty much evenly spread and in terms of the hedging rate for 2013 were around 132 and as we were hedging 2014 don’t’ forget the euro was not too strong if it at the moment. And so if we get 132 again in 2014 which is what we are sort of looking at the moment we are not fully hedged ‘14 yet but we’re significantly hedged.

I think we’ll be doing pretty good if we’re around 132 also for ‘14.

Okay. And just on the Russian do you think that all those costs have all been allocated into Q3 or is there anything else coming in the fourth quarter?

The issue with the cost, I mean the costs are obviously in terms of the additional work we had to do get thing working Jürgen don’t forget that one of our issues here is that we didn’t have the right product at the right time in the market where we’re working well to get this sort of doubt we are still get a takedown necessary.

Understood.

Jürgen this is Herbert, let me test at what to what Robin tested. As I have said in my opening speech we are happy that we see progress into this year and that we’ll be back the to the levels to ship what the market demand but you should not forget that there is an effect of third quarter because we didn’t have full size around to do it have the right wanted to do in the store so it will still affect our fourth quarter going in and having the consumer excited by all the product lines as we headed before there were still some work to be done in the fourth quarter and we will see it.

But I am happy as I have said to say that we’re really making progress this year.

Okay, understood, thanks guys.

Welcome.

Yes I am Matthias from MainFirst. My first question would be about the U.S.

wholesale business which was down 5% in the quarter, in your wholesale division can you go a bit more in detail and what were the negative drivers there? And maybe question related to that in terms of basketball, can you give us an idea of the trends Q3 in the U.S.

for the Adidas brand and has there been how biggest could be the impact in the fourth quarter of D Rose coming back playing again? And then a question on your retail business would it be right to assume retail like-for-likes would have been positive excluding Russia?

These are my questions.

I think the second one is easy to answer. Yes there will be our retail like-for-likes.

The first question is as you indicated already the U.S. wholesale business is down because of basketball but definitely see improvement as I’ve said already is to rose the D Rose 4.0 which is excellent sale through rate and obviously that the direct role it’s playing is helping us a lot.

We also have been launched our Rose staff players as you might know Dwight Howard, Damian Lillard, John Wall, Ricky Rubio, [Inaudible] so we are building it up and this we can see already yeah we definitely do expect better sales in the first quarter.

And in terms of the direction with maybe double-digit decline in the third quarter we can maybe expect double-digit increase in the fourth quarter just a rough direction?

Well, we will grow our business in fourth quarter..

Okay. Thank you.

You are welcome.

Good afternoon gentlemen. I have three questions, the first one on your 2015 target sales target of 17 billion this implies high single-digit growth in the next two years, do you expect this to be evenly spread in 2014 and 2015 and what will be the key sales drivers?

It’s my first question. The second is question Robin, you mentioned earlier we didn’t have the right products at a right time this seems to be the case in Russia, this seems to be the case in U.S.

with the Springblade with the Boost, what are you doing to right now in terms of operational processes to get the products quicker to the market to get the products on time to the market? That’s my second question.

And the third question related to the other segment was down 45% in the third quarter or almost 60 million in EBIT, was it purely related to TaylorMade-adidas Golf or also to other segments and what would you expect in Q4 and in 2014? Thank you.

Okay, good Andreas. Just on the sales guidance that we gave as with all of the guidance we are giving 2015 is a reconfirmation of the 17 and the 11, I think we have seen obviously with the performance in ‘13 that it’s clearly not going to be linear.

And that we will obviously be expecting this growth to be significant in ‘14 but also obviously in ‘15 I mean I think ‘15 is the year where we clearly focused on getting that delivered. In terms of the third question here in terms of the other business being done that is just TaylorMade-adidas Golf I mean we have the other businesses Rose 4 and CCN slightly up in that period.

So, the significant negative is because of the TaylorMade.

So coming to the second question Andreas I think there must be a misunderstanding because you have never said both Springblade or Boost that we didn’t have the right quantity at the right time in the stores it’s just the other way around product was selling through say that we couldn’t replenish it but this was already as we said from the very beginning in Boost that we have a certain amount of peers which we can bring into the market in 2013 obviously much more in 2014 but this never had anything do with the DC issue neither Boost or Springblade. it was just limited by the raw material for boost it Springblade we have already set the quantities which we want to have in the market to release market and this is selling still very well but this doesn’t have anything to do with the DC.

Okay. Thank you.

Good afternoon gentlemen. Several questions from me please, first of all with regards to the inventory the 12% effects neutral increase, could you maybe talk about the splits there between the stock field ahead of the world cup and what so the split was for a little bit more stock than you would like within the Russian market?

And then my second question with regards to the dividend payouts, you said that you’re moving north of the 35% level last year up to say 40% why can’t you take it up to 50 or even higher because even if 50% your dividend will be covered as around two times? And my third question around the beast Boost say just in terms of rolling out across the USA, can you maybe just talk about how fully rolled out Boost is across all of the U.S.

states in all of your stores and whether or not these are now fully integrated in all the moves and all the channels. So there is still more to do I appreciate that some of you are limited by the raw materials.

Maybe just one more final one on distribution, could you may be update just to how many CDCs you have now compared to 2010 and where you think the headline cost saving might look like from the second half of 2014 and into 2015? Thanks very much.

Okay. John thanks very much I’ll take the first couple and then year outside inventories up 12% constant neutral year-over-year that a good 50% of that is goods in transit I don’t know how much exactly of that is related to lower cap but obviously that does play a role.

And the whole point about the goods in transit increase however is. But it’s obviously fresh product and it plays into our expectations that obviously fourth quarter is growing and obviously at the start of the next year..

So that’s the majority of it and Russia did play a role clearly of the out of 50% Russia is significant part of that but the rest of the markets are all very clean. There is a slight increase in deterioration the TaylorMade product but otherwise everything is looking very good inventory point of view.

And in terms of the dividend well we articulated this policy some time ago and at the time where we were very happy to get into the 20 rank. We are now obviously over 35 and it will be great if we can move that up over the next few years but we have no intention at the moment of having to change that policy we still think it’s a very fair distribution of the earning.

Coming to your third question it looks the boost roll-out especially in the U.S. as you have seen we did the homogeneous boost launch around the whole world and obviously we have selected the distribution channels as I said before the running specialists in the sporting goods stores.

And then some other distribution channels where we think that consumer is buying key running shoes. Overall with distribution in the U.S.

we’re happy we have reached the stores and the consumers, obviously what we are lacking is volume in each store but this was clear from the very beginning but we have created with this kind of strategy a lot of interest in the different distribution channels. So it’s not a sporting goods in the U.S.

it’s also a specialty we have great success with the boost running shoes and this what we’ll continue we will boost further in large to more products in the running category with bitter volumes going to the future and further more build out in the distribution channels which we have defined with higher volumes in 20014. So as I said I’m very happy about the Boost success Springblade as well and you can see it in our running numbers.

But it’s not only that we’re selling the product they also performed very well in the competition level. As I have said traffic I wonder New York milestone last week was Boost that Chicago Marathon Test two weeks before had the number one, the number three and the number four guys running in Boost.

And the Berlin Marathon also was won by a Kenyan runner in Boost. So the last three key Marathons all have been won in our new Boost shoe which we had never before.

And last question on the distribution centers. In 2010 we were at around 90 distribution centers and we’re now down to 50 and obviously we will first consolidate going forward.

Thanks very much, Herbert. Just to go back to your homogenous base roll-out throughout the year when we were around in China back in June it seems that certainly in Shanghai and Hong Kong they go Boost a little bit earlier than some of markets I mean there is a slight phasing in terms of delivery just to when which market receives the product or do you try very much to keeps it on the consistent roll-out basis?

Yeah this was not mentioned from when we started with Boost because as I said we had the roll out for Boost for globally around the world on the same day it would be that because of the distribution strategy as I have said that few customers have taken it to themselves a week or two weeks later but in 10 roll it was at the same time. Little bit different on Springblade, Springblade we started in the U.S.

went through Brazil to Russia and that’s a full roll-out then spring 2014 globally.

That’s great. Thank you very much.

You’re welcome.

Hi guys a couple of questions for me please. The first one on the Golf market and how you are seeing it in certainly going in quarter four and now we should think about it into next year for TaylorMade?

And then the second question on the growth margin improvement to follow up on the previous questions I mean the growth margin expansion continues to be very impressive how sustainably how should we think about that going into next year please? Thank you.

Yeah hi, so to the first question as Golf market yeah we definitely do believe that we will grow in the fourth quarter and going forward in the Golf market even there is no doubt it is more challenging market as I said before the market is growing especially because of first six months this year were around splayed were down in the U.S. by 9% and obviously this has an influence on the consumption.

But we are quite pleased with the market shares we enjoy close to 40% on the metalwoods side clearly over 20% on the iron side. And we’re making good traction we just brought out as I said the slight driver.

The third quarter now the fairway wood, new irons as we have an array of new innovative products coming in 2014. So I do believe that we will win further market shares in the Gulf market.

But obviously it would be much easier if the market would grow.

And Chiara talking about the gross margin and its sustainability it will be a big question, I’m not giving any guidance at the moment obviously on 2014 but fundamentally the factors that are improving our gross margin have been very inconsistent over the last few quarters also that is why we’re growing our retail business faster than wholesale, we are growing faster than some of the emerging markets. And they have positive effects on the gross margin.

I think the key thing that really impacts gross margin outside of those things is what happens with FLB. And so this year 2013 we haven’t had much negative development in FLB that’s good.

I can’t say anything about 2014 at the moment. Just in the short term we aware obviously that and I am talking here about fourth quarter the hedging is something it has got a bit more negative for us in the 2013 period compared to 2014 that’s fairly real negative we’ve had in the development at the moment.

But otherwise fundamentally good underlying gross margin pretty much talks our emphasis on the quality of the growth right sort of sales and the quality of this growth we would have that to continue.

Okay, perfect. Thank you very much.

Hi, good afternoon Andreas Riemann, Commerzbank. Three topics, firstly I’m trying on the gross margin again to speak about Springblade and Boost being sold at rather high price point does this imply that in 2014 favorable pricing should support to gross margin?

Question number one. Number two, on retail you accelerated initial expansion this year is it about attractive rental conditions or what is behind this?

And second question here is it fair to assume that we will also see around about 500 openings in the coming years that is what you’ve got from 2013? And third one Reebok wholesale, Reebok revenues were growing strongly in Q3 but like-for-like actually were down 7% it seems like sell in better than sell out in Reebok can shut some light on this diversion please?

That’s it from my side.

Okay. Thank you very much, Andreas.

Well I’m sure it’s good to talk about pricing and the positives of the Springblade a necessary thing. But I’m still not going to give any guidance for gross margin development on 2014.

Obviously it’s great that we’ve got some good product that is able to speak to our strategy here to have good quality product. Your same question was about retail and the growth of retail yes, it’s a bit higher than we expected but that’s because of the fact that we mentioned early about Russia.

We have been rebasing pretty much our retail base to be opening in various new locations from these mores are open and we have to be there. And that’s a part of the growth there for this particular period.

In terms of your third question, sorry you also asked about the whether there will be 500 openings next year. I think we’re looking at 100 to 150 or so would be net opening where the time back into the nine month period for 2013 but our guidance was around 100 to 150 for each year and that should be without giving any guidance again for ‘14 that should be the sort of area you should be looking at.

And the last question was about Reebok, that’s a Reebok retail issue there clearly base of it particularly heavily and compared to other countries also in Russia and because we have a very strong Reebok business in Russia and there has been some clearance in the effect on that business in the U.S. Otherwise as Herbert said in his prepared comments I think we’re very happy with the development of Reebok it’s going to grow this year and if you look at the gross margin and the positive development of that as well.

Yes, good afternoon gentlemen actually I have just few questions also. So first one is on China where you seem to continue to outperform the market can you tell us what is driving your good growth in China?

So second question on the Western Europe did you see any country turning positive which was negative and turning positive, what kind of changing momentum did you see in the quarter? And to that question is a follow up on inventories, could you go against the inventory situation into Gulf business I understood there was heavy de-stocking what makes you so confident that you would have a rebound as soon as Q4?

Are your inventories in Gulf now extremely clean just to be sure I got the answer. Thank you very much.

Okay. Let me see just China and they have to go back to 2009 you might remember after the Beijing Olympics when we ran into some challenges with higher inventories et cetera, et cetera.

And I told you already at that time that we will carefully build up the business in China for the long-term benefit. We installed IT systems with our retail partners to get better information from the stores what do we have to replenish what is selling both these in selling.

We are working very close on the market the research side really understands what the Chinese consumer wants. And this all together has helped us to outperform mainly our competitors on the Chinese market over the last two to three years.

We have significant inventory in the franchise stores around China and we are great into best profitability for them obviously because its sell through rates are good. And this is continuing and I might also say here that I am extremely happy with our management in China how they have built up the business and how carefully they read the market and work together with key franchise partners over there.

In Western Europe in the third quarter Germany has been positive obviously football is helping here with Munich and the whole enthusiasm which is coming up for the world cup. But also running is doing very well once again exclusive Springblade its whole momentum which we built around sorry it is Boost and the lot of other concepts which we brought to the market on the running side Springblade we haven’t in Germany.

But I think this as a two main drivers here in Germany and we definitely do believe that’s going into the fourth quarter we see momentum in much more markets because we have Germany, we have Spain, we have Russia they all qualified, football is coming alive to bring the official match ball so we definitely look positive into the first quarter for more tell us Western Europe environment..

On the situation with Gulf inventories we did a significant amount in the third quarter to rebalance the inventories there clear a lot that’s why we have we have a negative development in the gross margin in other business in the third quarter also. A part of the end of the third quarter is still a little bit higher same time last year for the aging is a little bit worst, confidence about the fourth quarter relates a lot to the timing of the product launches and we’re very confident we’ll back into a good growth in this fourth quarter independent of a little bit of hedging in inventory.

Thanks a lot.

Okay. Ladies and gentlemen, that completes our conference call for today as Herbert mentioned we’ve very much looking forward to having you all here in right from December 2nd and December 3rd for our Investor Field Trip.

As places are running fast please register as soon as you can in the next couple of weeks by contacting any of us here in the Investor Relations team. Have a very good day.