Adidas Ag · XETR:ADS
Adidas — H1 2011 Earnings Presentation
60 slides from Adidas's earnings presentation, Aug 9, 2011
Slide 1: Roadshow Presentation – H1/11
Roadshow Presentation – H1/11 London, August 9-10, 2011 Robin Stalker CFO, adidas Group
Slide 2: Agenda
Agenda • H1 2011 Highlights • Outlook • Appendix: 2015 Aspirations 2
Slide 3: adidas Group Delivers Record H1 Performance
adidas Group Delivers Record H1 Performance • Record sales of € 6.3 billion • Gross margin stable at 48.8% • Operating margin up 0.3pp to 8.4% • Net income and EPS increase 19% 3
Slide 4: H1 Sales Grow In All Regions
H1 Sales Grow In All Regions +10% Western European Markets1) +23% European Emerging Markets1) +15% North America1) +38% Greater China1) +6% Other Asian Markets1) +11% Latin America1) 1) Sales development on a currency-neutral basis 4
Slide 5: Group Sales In Greater China Expand 41% In Q2
Group Sales In Greater China Expand 41% In Q2 • Record first half year sales of € 552 million • Fresh and balanced inventory situation • Strong momentum in Running, Outdoor and Training • adidas Originals and adidas NEO capture lifestyle segment 5
Slide 6: Market Share Increases For adidas And Reebok In North America
Market Share Increases For adidas And Reebok In North America • Group sales up 15% currency-neutral in H1 • Sales at adidas grow 13% currency- neutral in Q2 • Solid increases in key categories Running, Basketball and Training • Strong double-digit sales growth in the mall and sporting goods channel
Slide 7: Reebok Helps Drive Stellar Performance In Japan
Reebok Helps Drive Stellar Performance In Japan • Group sales in Japan decline 1% in Q2 • Reebok sales increase 71% in Q2 • adidas Group takes further market share • Retail partners reopening stores • High-single-digit sales decline expected from April to December 7
Slide 8: H1 Wholesale Segmental Operating Margin Up 0.1pp
H1 Wholesale Segmental Operating Margin Up 0.1pp Wholesale H1 2011 Change Net sales (€ in millions) 4,292 13%1) Gross margin 41.5% (0.6pp) Segmental operating margin 32.3% +0.1pp 1) Currency-neutral 8
Slide 9: Retail Comparable Store Sales Increase 15% In H1
Retail Comparable Store Sales Increase 15% In H1 Retail H1 2011 Change Net sales (€ in millions) 1,258 21%1) adidas comp store sales 15%1) Reebok comp store sales 13%1) Total comp store sales 15%1) Gross margin 63.7% +1.6pp Segmental operating margin 20.8% +2.0pp 1) Currency-neutral 9
Slide 10: Other Businesses Grow 13% In H1
Other Businesses Grow 13% In H1 Other Businesses H1 2011 Change Net sales (€ in millions) 787 13%1) Gross margin 45.2% +0.6pp Segmental operating margin 28.0% +0.0pp 1) Currency-neutral 10
Slide 11: Strong Momentum At adidas And Reebok
Strong Momentum At adidas And Reebok Q2 2011 Change H1 2011 Change Net sales (€ in millions) 2,234 10%1) 4,673 14%1) Gross margin 47.2% (1.1pp) 47.5% (0.2pp) Net sales (€ in millions) 427 5%1) 904 14%1) Gross margin 36.2% 2.0pp 36.7% 1.6pp 1) Currency-neutral 11
Slide 12: adidas Sales Increase 14% Currency-Neutral
adidas Sales Increase 14% Currency-Neutral adidas Sport Performance adidas Sport Style Up 9% Up 30% 12
Slide 13: adidas Innovations Hit The Ground Running
adidas Innovations Hit The Ground Running • Lightweight running and ClimaCool Ride drive category sales up 25% in H1 13
Slide 14: Basketball Momentum Accelerates In Q2
Basketball Momentum Accelerates In Q2 • Q2 sales increase 25% c.n. • adiZero Crazylight, the lightest ever basketball shoe, lifts off 14
Slide 15: adidas Outdoor Wins Industry Award For Third Year
adidas Outdoor Wins Industry Award For Third Year • Sales at Outdoor jump almost 40% YTD • TERREX Fast R takes OutDoor Industry Award 15
Slide 16: adidas Sport Style Sales Grow 34% In Q2
adidas Sport Style Sales Grow 34% In Q2 16
Slide 17: Reebok Sales Increase 14% YTD
Reebok Sales Increase 14% YTD • Toning footwear sales drive global growth with category sales increasing 31% globally, despite US market weakness • Gross margins improve 1.6pp 17
Slide 18: ZigTech Continues Its Strong Performance
ZigTech Continues Its Strong Performance • Key driver of performance in North America • Online customisation via Your Reebok 18
Slide 19: RealFlex Attracts All Genders
RealFlex Attracts All Genders • RealFlex launched in North America in mid-April 19
Slide 20: TaylorMade-adidas Golf Revolutionises The Sport
TaylorMade-adidas Golf Revolutionises The Sport • Industry leader in golf market • Currency-neutral sales growth of 17% in the first half of 2011 • R11 brings US market share to over 40% in Metalwoods 20
Slide 21: Q2 Group Gross Margin Up 0.2pp
Q2 Group Gross Margin Up 0.2pp Q2 2011 H1 2011 Wholesale 39.5% 41.5% • Higher input costs (1.5pp) (0.6pp) Retail 65.8% 63.7% +0.7pp +1.6pp • Higher Retail sales at higher margins Other 44.9% 45.2% • Less clearance sales Businesses +0.6pp +0.6pp • Overproportionate growth in emerging markets 49.2%1)
Slide 22: H1 Group Operating Margin Increases 0.3pp
H1 Group Operating Margin Increases 0.3pp Q2 2011 H1 2011 Royalty and commission income € 22 million € 40 million (7%) (11%) Other operating income € 19 million € 36 million (25%) (50%) Other operating expenses € 1.328 billion € 2.637 billion +4% +10% Other operating expenses 43.3% 41.6% as a percen
Slide 23: Diluted EPS Up 19% In H1
Diluted EPS Up 19% In H1 Q2 2011 H1 2011 Financial income € 8 million € 13 million (22%) (43%) Financial expenses € 30 million € 63 million +2% +8% Income tax rate 29.0% 27.5% +0.9pp (2.0pp) Net income attributable to € 140 million € 349 million shareholders +11% +19% Diluted earnings per share € 0.
Slide 24: Operating Working Capital As A Percentage Of Sales Remains At A Strong Level
Operating Working Capital As A Percentage Of Sales Remains At A Strong Level • Inventories increase 26% on a 27 26.2 currency-neutral basis 26 25.6 • Low prior year comparison 25 24.3 (-10% in Q2 2010) 24 22.9 • Reflects growth expectations 23 22 21.7 • Receivables up 9% on a 20.9 20.8 20.7 currency
Slide 25: Net Debt Declines Year-Over-Year
Net Debt Declines Year-Over-Year • Net borrowings decrease 21% versus prior year to 3,000 2,732 € 863 million 2,500 2,294 • Ratio of net 2,000 borrowings/EBITDA decreases to 0.7 from 1.0 1,500 1,359 1,090 in 2010 1,000 917 903 914 863 • Equity ratio decreases 500 221 1.1 percentage points to 43.5% 0
Slide 26: Agenda
Agenda • H1 2011 Highlights • Outlook • Appendix: 2015 Aspirations 26
Slide 27: adidas Group Set For Record Year
adidas Group Set For Record Year Group sales (currency-neutral) increase around 10% Wholesale sales (currency-neutral) high-single-digit increase Retail sales (currency-neutral) mid-teens increase Other Businesses sales (currency-neutral) mid- to high-single-digit increase Gross margin 47.5% to 48.0
Slide 28: New Innovations To Drive adidas H2 Sales Growth
New Innovations To Drive adidas H2 Sales Growth 28
Slide 29: adidas Originals To Launch iPhone Application
adidas Originals To Launch iPhone Application 29
Slide 30: Strong Product Pipeline For Reebok With Zig And Flex
Strong Product Pipeline For Reebok With Zig And Flex 30
Slide 31: Reebok Classics Reethym Of Lite Campaign
Reebok Classics Reethym Of Lite Campaign • Reebok launches Classics campaign with music producer Swizz Beatz 31
Slide 32: TaylorMade To Assert Leading Position In Irons
TaylorMade To Assert Leading Position In Irons • Market share currently above 20% in Irons • New R11 series launched live on the web 32
Slide 33: Agenda
Agenda • H1 2011 Highlights • Outlook • Appendix: 2015 Aspirations 33
Slide 34: Global Brands Game Changing Growth Projects
Global Brands Game Changing Growth Projects REEBOK NEO ADIDAS FITNESS EMPIRE FAST FASHION RUNNING BASKETBALL CUSTOMIZATION INTERACTIVITY 34
Slide 35: Brand Architecture – Portfolio Strategy
Brand Architecture – Portfolio Strategy 8% 14 % 22 % 14 % 26 % 10 % 6% PURE ATHLETIC ATHLETIC BRAND SPORT STYLE STYLE PERFORMER STYLE CLASSIC DRIVEN INSPIRED ADOPTER SETTER COMPETITIVE SPORTS ACTIVE SPORTS CASUAL SPORTS SPORTS FASHION 12 % 78 % 10 % 35
Slide 36: Brand Architecture – Business Reality
Brand Architecture – Business Reality 8% 14 % 22 % 14 % 26 % 10 % 6% PURE ATHLETIC ATHLETIC BRAND SPORT STYLE STYLE PERFORMER STYLE CLASSIC DRIVEN INSPIRED ADOPTER SETTER COMPETITIVE SPORTS ACTIVE SPORTS CASUAL SPORTS SPORTS FASHION 12 % 78 % 10 % 36
Slide 37: Brand Differentiation
Brand Differentiation OLYMPIC AMERICAN SPORTS REGIONAL & FOOTBALL RUNNING BASKETBALL TENNIS SPORTS THE PERFORMANCE BRAND & MULTI SPORTS SPECIALIST “FIT FOR PERFORMANCE” FITNESS AND TRAINING FITNESS AND TRAINING CRICKET RUNNING HOCKEY BASKETBALL TENNIS SPORTS AMERICAN THE FITNESS & TRAINING BRAND “FI
Slide 38: adidas Sport Performance – Making The Athlete Better
adidas Sport Performance – Making The Athlete Better COOLER STRONGER FASTER NATURAL SMARTER 38
Slide 39: adidas Sport Style – Multi-Label Strategy
adidas Sport Style – Multi-Label Strategy 12 - 19 YEARS 16 - 24 YEARS 24 - 36 YEARS 24 - 36 YEARS 35+ YEARS FOR THE FROM THE FOR THE FOR THE FOR THE STYLE- TRENDSETTER STYLISH OUTWARDLY SOPHISTICAT ADOPTING TO THE ON-THE-GO CONFIDENT, ED, HIGH SCHOOL MAINSTREAM INDIVIDUAL FORWARD- ACTIVE MAN KID KID
Slide 40: adidas Originals – Iconic And Authentic Street Style
adidas Originals – Iconic And Authentic Street Style CLEAR CONSUMER FOCUS CONNECTING YOUTH CULTURE SPORT 16 - 24 YEARS FROM THE FASHION TRENDSETTER TO THE MAINSTREAM KID ART MUSIC 40
Slide 41: NEO Label Attributes And USP
NEO Label Attributes And USP THE FRESHEST CASUAL SPORTSWEAR LABEL FOR TODAY’S YOUNG CONSUMER New NEO provides constant newness – always visible in collection and stores Active Attracting a consumer who is fully engaged in life, be it through social networking, family, friends, outdoor, sports ... Ac
Slide 42: NEO Targets A Global Consumer With A Homogenous Fashion Style
NEO Targets A Global Consumer With A Homogenous Fashion Style Age ▪Core target consumer: 12 to 19 years ▪Appeal to broader group: 12 to 35 years Gender ▪Intended long-term split –Girls: 65% –Guys: 35% ▪Initial split: 50:50 Price ▪Consumer willing to pay a premium of ~10% above average market price f
Slide 43: Reebok – Brand Positioning
Reebok – Brand Positioning FUN + FITNESS WOMEN MEN GIRLS BOYS TRAINING TRAINING RUNNING RUNNING WALKING CLASSICS SPORTS 43
Slide 44: Three Elements Of Total Fitness
Three Elements Of Total Fitness Strength Conditioning Flexibility 44
Slide 45: Key Concepts Fitness/Training
Key Concepts Fitness/Training Strength Conditioning Flexibility 45
Slide 46: Reebok – The Fitness And Training Brand
Reebok – The Fitness And Training Brand Content Kids program Gyms Trainer/coach platform Web platform Fitness accessories Games / Events 46
Slide 47: Reebok Classics Strategy
Reebok Classics Strategy ▪ Fit for the Street - thru lens of music/dance ▪ Building holistic product offering ▪ Marketing communications ▪ Introduce over time an American Sportswear line 47
Slide 48: Global Brands Growth
Global Brands Growth 2010 2015 € 6.5 billion € 8.5 billion € 2.1 billion € 3.7 billion € 1.9 billion € 3.0 billion 48
Slide 49: Global Sales Strategic Priorities
Global Sales Strategic Priorities North America • Achieve controlled space of >45% Greater China • Integrated distribution Roadmap • Three “Attack” markets Russia to generate 50% of sales growth 49
Slide 50: Focus On The High School Consumer
Focus On The High School Consumer • 16.3m high school kids • $16.1bn spending • 20% industry spend • 80% higher spending than college kids • Influencers and purchasers of sport and fashion 50
Slide 51: Generation US Focus Sports
Generation US Focus Sports 7 Million High School Athletes Basketball Football Soccer Baseball Running Training 51
Slide 52: Chinese Consumer Becoming More Sophisticated
Chinese Consumer Becoming More Sophisticated 52
Slide 53: Category Attack In Higher Tier Cities
Category Attack In Higher Tier Cities WOMEN‘S TRAINING MEN‘S TRAINING RUNNING B E C O M E G A I N G A I N A BRAND LEADERSHIP LEADERSHIP OF CHOICE FOR W OMEN BY 2012 BY 2015 G A I N CHALLENGE EMBRACE BUILD LEADERSHIP LEADERSHIP NEW SOURCE UNEXPLOITED BY 2015 BY 2015 OPPORTUNITIES OF GROWTH FOOTBALL B
Slide 54: Time To Unleash Originals
Time To Unleash Originals —SLV adidas ORIGINALS
Slide 55: Increasing Store Footprint To Capture Growth
Increasing Store Footprint To Capture Growth • City-by-city footprint plan to match local retail environment • Segmentation to match purchase patterns of high vs. low spenders • Accessible pricing options to complement range • POS increase of 2,500 by 2015 55
Slide 56: Russia Driven By adidas And Reebok Own Retail
Russia Driven By adidas And Reebok Own Retail 700 stores in 2010 >80% of sales through own retail in 2010 Dec 2010 comparable store sales +27% Fully integrated joint operating model 56
Slide 57: Increase Store Base In Russia
Increase Store Base In Russia • Stand-alone stores Over 1,000 • Multi-brand factory outlets stores in 2015 • In existing and new malls 57
Slide 58: adidas Group Market Share To Increase By 2015
adidas Group Market Share To Increase By 2015 Total market share to be around 70% 1 2 3 58
Slide 59: Questions & Answers
adidas GROUP QUESTIONS & ANSWERS
Slide 60: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates Oct 10 to11, 2011 Investor Field Trip to Russia Nov 3, 2011 Nine Months 2011 Results Mar 7, 2012 Full Year 2011 Results May 3, 2012 First Quarter 2012 Results May 10, 2012 Annual General Meeting May 11, 2012 Dividend Paid1) Aug 2, 2012 First Half 2012 Results Nov 8