Adidas Ag · XETR:ADS
Adidas — FY2014 Earnings Presentation
51 slides from Adidas's earnings presentation, March 2015
Slide 1: Full Year 2014 Results Roadshow Presentation
Full Year 2014 Results Roadshow Presentation
Slide 2: Operational Highlights, Financial Highlights, Strategic Initiatives and Outlook
OPERATIONAL HIGHLIGHTS FINANCIAL HIGHLIGHTS STRATEGIC INITIATIVES AND OUTLOOK
Slide 3: adidas Group Reaches Adjusted Full Year 2014 Targets
3 adidas Group Reaches Adjusted Full Year 2014 Targets • Sales increase 6% currency- neutral to € 14.5 billion1) • adidas and Reebok grow 11% and 5% currency-neutral • Retail sales up 21% currency- neutral with double-digit growth in all regions • Underlying net income reaches adjusted target of € 6
Slide 4: Strong Brand Momentum At adidas Throughout 2014
4 Strong Brand Momentum At adidas Throughout 2014 Q4 2014 Change FY 2014 Change Net sales (€ in millions) 2,870 +11%1) 11,774 +11%1) Gross margin 45.7% (1.1pp) 46.7% (1.4pp) Net sales (€ in millions) 420 +1%1) 1,578 +5%1) Gross margin 33.3% (6.0pp) 37.0% (2.6pp) 1) Currency-neutral.
Slide 5: Football With Strong Growth In 2014
5 Football With Strong Growth In 2014 Football • Football sales up 21% in 2014 • Record football revenues of € 2.1 billion in 2014 • Strong double-digit growth rates in most regions • Over 3 million German national team jerseys sold in 2014
Slide 6: Boost Drives Growth At adidas Running
6 Boost Drives Growth At adidas Running Running • Sales grow 17% in Q4 and 15% in 2014 • 4th consecutive year of double-digit growth at adidas Running • adizero Adios Boost wins 27 major marathons in 2014
Slide 7: adidas Originals & Sport Style Sales Accelerate In Q4
7 adidas Originals & Sport Style Sales Accelerate In Q4 • adidas Originals & Sport Style sales increase 19% currency-neutral in Q4 • Revenues up 12% to € 3.4 billion in 2014 • adidas NEO currency-neutral sales grow 27% in 2014
Slide 8: Reebok With Its 7th Consecutive Quarter Of Growth
8 Reebok With Its 7th Consecutive Quarter Of Growth • Reebok sales up 5% currency-neutral in 2014 • 7th consecutive quarter of growth • Double-digit growth rates in Fitness Training and Studio Categories
Slide 9: TMaG Negatively Impacted By Weakness In Golf
9 TMaG Negatively Impacted By Weakness In Golf Golf Market • Sales decline 28% currency-neutral in 2014 • Operating profit negatively impacted by around € 200 million versus prior year period • Strong focus on cleaning retail inventories • Major elements of restructuring programme at TMaG completed
Slide 10: Consumer Sentiment In Russia/CIS Negatively Impacted
10 Consumer Sentiment In Russia/CIS Negatively Impacted Russia/CIS • Higher promotional activities caused by weakening consumer sentiment • Operating profit negatively impacted by around € 130 million • Accelerating real estate and inventory management initiatives
Slide 11: Currencies Significantly Impact Financial Performance
11 Currencies Significantly Impact Financial Performance • Negative currency translation effect of around Currencies € 550 million on Group revenues in 2014 • Group’s contribution affected by around € 170 million
Slide 12: Initiatives Taken To Improve Performance
12 Initiatives Taken To Improve Performance • Stabilise underperforming areas, particularly at TMaG • Reorganisation of marketing and sales organisations • Adjust investment to account for current market risks • Increasing investments in brands
Slide 13: Operational Highlights, Financial Highlights, Strategic Initiatives and Outlook
OPERATIONAL HIGHLIGHTS FINANCIAL HIGHLIGHTS STRATEGIC INITIATIVES AND OUTLOOK
Slide 14: Emerging Markets Enjoy Robust Sales Growth In 2014
14 Emerging Markets Enjoy Robust Sales Growth In 2014 +8% Western Europe +19% (6%) European Emerging Markets North America +10% Greater China +19% +2% Latin America Other Asian Markets Sales development on a currency-neutral basis. Figures reflect continuing operations as a result of the planned div
Slide 15: Western Europe Grows 13% In Q4
15 Western Europe Grows 13% In Q4 • adidas and Reebok grow at double-digit rates each in 2014 • Growth supported by 2014 FIFA World Cup • Sales in Football and Running up 18% and 22%, respectively, in 2014
Slide 16: Latin America Fastest-Growing Region In 2014
16 Latin America Fastest-Growing Region In 2014 • Currency-neutral sales up 19% in 2014 with double- digit growth in all major markets • Revenues grow 12% currency-neutral in Q4 • Strong double-digit growth in Football, Training, Running and Originals in 2014
Slide 17: Growth In Greater China Remains Robust
17 Growth In Greater China Remains Robust • Sales up 10% currency-neutral in 2014 • Strong year-end finish with revenues up 11% in Q4 • adidas Originals & Sport Style grow 26% in 2014 • Retail sales increase 26% in 2014
Slide 18: North America Down 4% In Q4
18 North America Down 4% In Q4 • Revenues at adidas grow 4% currency-neutral in Q4, supported by sales increases in Training, Football and Originals • Growth at adidas more than offset by double-digit sales declines at Reebok and TMaG • Retail sales up 15% currency-neutral in 2014
Slide 19: Group Gross Margin Down 1.7pp In 2014
19 Group Gross Margin Down 1.7pp In 2014 • Overproportionate growth in Q4 2014 FY 2014 emerging markets Wholesale 39.7% 41.7% • More favourable product mix (1.0pp) (1.0pp) Retail 59.2% 59.4% (1.8pp) (2.8pp) • Less favourable hedging rates Other Businesses 31.2% 34.7% (6.3pp) (5.1pp) • Higher input c
Slide 20: Group Operating Margin Declines 2.1pp In 2014
20 Group Operating Margin Declines 2.1pp In 2014 Q4 2014 FY 2014 Royalty and commission income € 26 million € 102 million (3%) (1%) Other operating income € 34 million € 138 million (7%) (3%) Other operating expenses € 1,642 million € 6,203 million +3% +3% Other operating expenses 45.5% 42.7% as a p
Slide 21: Goodwill Impairment Of € 78 Million Recognised In 2014
21 Goodwill Impairment Of € 78 Million Recognised In 2014 300 • Impairment of goodwill related to the cash- 265 generating unit Retail Russia/CIS 250 • Goodwill impairment mainly caused by 200 adjusted growth assumptions due to the 150 significant deterioration of the Russian 100 rouble 78 52 50 • N
Slide 22: Net Income From Continuing Operations Of € 642 Million
22 Net Income From Continuing Operations Of € 642 Million Q4 2014 FY 2014 Financial income € 5 million € 19 million (56%) (27%) Financial expenses € 18 million € 67 million (37%) (28%) Income before taxes € 25 million € 913 million (63%) (22%) Income tax rate 61.6% 29.7% +9.3pp +0.5pp Net income fro
Slide 23: Underlying Net Income Reaches Target Of € 650 Million
23 Underlying Net Income Reaches Target Of € 650 Million Net income attributable to shareholders excluding the impact from the planned divestiture of the Losses from discontinued operations Rockport business composition Income from Losses from € 14m Rockport discontinued € 650m Book loss operations
Slide 24: Wholesale Revenues Grow 6% In 2014
24 Wholesale Revenues Grow 6% In 2014 Wholesale Q4 2014 Change FY 2014 Change Net sales (€ in millions) 2,217 +5%1) 9,376 +6%1) Gross margin 39.7% (1.0pp) 41.7% (1.0pp) Segmental operating margin 29.9% (0.9pp) 33.1% (0.8pp) 1) Currency-neutral.
Slide 25: Retail Comparable Store Sales Increase 9%
25 Retail Comparable Store Sales Increase 9% Retail Q4 2014 Change FY 2014 Change Net sales (€ in millions) 1,043 +20%1) 3,842 +21%1) adidas comp store sales +10% 1) +10% 1) Reebok comp store sales +1%1) +1%1) Total comp store sales +9%1) +9%1) Gross margin 59.2% (1.8pp) 59.4% (2.8pp) Segmental oper
Slide 26: Retail Store Development In 2014
26 Retail Store Development In 2014 • 2,913 stores operated at year-end • Net increase of 173 or 6% versus 2,740 in the prior year • 409 new stores opened, 236 stores closed, 145 stores remodelled • 1,616 adidas and 446 Reebok branded; 851 factory outlets
Slide 27: Other Businesses Down 19% Currency-Neutral In 2014
27 Other Businesses Down 19% Currency-Neutral In 2014 Other Businesses Q4 2014 Change FY 2014 Change Net sales (€ in millions) 350 (16%)1) 1,316 (19%)1) Gross margin 31.2% (6.3pp) 34.7% (5.1pp) Segmental operating 17.7% (8.6pp) 19.3% (8.1pp) margin 1) Currency-neutral. Figures reflect continuing ope
Slide 28: High Focus On Reducing Inventory Growth Rate
28 High Focus On Reducing Inventory Growth Rate • OWC in % of sales increases 23% 1.0 percentage points to 22.4% 18% • Inventories from continuing 18% 16% operations increase 2% (c.n.) 13% 12% 13% • Receivables from continuing operations up 5% (c.n.) 8% 7% • Payables from continuing 3% 2% operations
Slide 29: Net Borrowings Impacted By Higher Capital Expenditure
29 Net Borrowings Impacted By Higher Capital Expenditure 500 448 • Net borrowings of € 185 million compared to net cash of 295 € 295 million at the end of 2013 100 • Capital expenditure increases 16% to € 554 million (94) • Ratio of net borrowings/EBITDA (180) (180) (185) amounts to 0.1 (2013: (0.2)
Slide 30: Dividend Proposal Of € 1.50 Per Share
30 Dividend Proposal Of € 1.50 Per Share 1,60 1,50 1,50 1,40 1,35 • adidas Group highly cash generative 1,20 • Proposed dividend of € 1.50 per 1,00 1,00 share and thus stable versus prior 0,80 year 0,80 • Payout ratio increases to 53.9% 0,60 0,42 0,50 0,50 (2013: 37.4%) excluding goodwill 0,40 0,33
Slide 31: adidas Group Continues Shareholder Return Programme
31 adidas Group Continues Shareholder Return Programme • Announcement of € 1.5 billion shareholder return programme on October 1, 2014 • 1st tranche • successfully completed (November 7, 2014 to December 12, 2014) • 4,889,142 shares repurchased at average price of € 61.36 per share • 2 tranche nd •
Slide 32: Operational Highlights, Financial Highlights, Strategic Initiatives and Outlook
OPERATIONAL HIGHLIGHTS FINANCIAL HIGHLIGHTS STRATEGIC INITIATIVES AND OUTLOOK
Slide 33: Top Priorities And Initiatives In 2015
33 Top Priorities And Initiatives In 2015 Gaining traction in North America Returning TMaG to Best consumer experience profitability Securing margins in Increasing investments Russia/CIS in brands Strengthening brand leadership
Slide 34: Gaining Traction In North America
34 Gaining Traction In North America North America • New management team to bring North America back on track • Increasing visibility in US sports • Improving execution at point of sale
Slide 35: Returning TMaG To Profitability
35 Returning TMaG To Profitability Golf • Cleaner trading environment at retail • Major product launches in metalwoods and irons: R15 & Aero Burner enter golf market • Boost franchise integrated into golf footwear • TMaG factory outlets in US to be opened
Slide 36: Securing Margins In Russia/CIS
36 Securing Margins In Russia/CIS Russia/CIS • Accelerating real estate and inventory management initiatives • Cost reduction and price increase to mitigate headwinds • Net store closures to compensate for near-term challenges • Strong focus on capital and risk management in 2015
Slide 37: Strengthening Brand Leadership
37 Strengthening Brand Leadership
Slide 38: Gaining Market Share Through Best Consumer Experience
38 Gaining Market Share Through Best Consumer Experience eCommerce Wholesale Own Retail
Slide 39: Increasing Investment In Brands
39 Increasing Investment In Brands
Slide 40: 'Sport 15' To Inspire Young Athletes
40 ‘Sport 15’ To Inspire Young Athletes
Slide 41: adidas Launches New Global Football Campaign
41 adidas Launches New Global Football Campaign
Slide 42: 'Be More Human' With Reebok
42 ‘Be More Human’ With Reebok
Slide 43: adidas With Strong Product Pipeline In 2015
43 adidas With Strong Product Pipeline In 2015
Slide 44: Manifesting BOOST As THE Cushioning Technology
44 Manifesting BOOST As THE Cushioning Technology
Slide 45: 2015 The Year Of The Superstar
45 2015 The Year Of The Superstar
Slide 46: Yeezy Boost Creates More Hype For adidas Originals
46 Yeezy Boost Creates More Hype For adidas Originals
Slide 47: Introducing ClimaCool Aeroknit Apparel Collection
47 Introducing ClimaCool Aeroknit Apparel Collection
Slide 48: Reebok Running Is Getting Pumped
48 Reebok Running Is Getting Pumped
Slide 49: adidas Group 2015 Full Year Outlook
49 adidas Group 2015 Full Year Outlook Group sales (currency-neutral) mid-single-digit increase Gross margin 47.5% to 48.5% Other operating expenses (in % of sales) around prior year level Operating margin between 6.5% and 7.0% Net income from continuing operations to increase at a rate of 7% to 10%
Slide 50: Questions & Answers
QUESTIONS & ANSWERS
Slide 51: Upcoming Event Dates
51 Upcoming Event Dates March 25 - 26, 2015 Investor Day 2015 May 5, 2015 First Quarter 2015 Results May 7, 2015 Annual General Meeting May 8, 2015 Dividend Payment1) August 6, 2015 First Half 2015 Results November 5, 2015 Nine Months 2015 Results 1) Subject to Annual General Meeting Approval.