Adidas Ag · XETR:ADS
Adidas — FY2010 Earnings Presentation
51 slides from Adidas's earnings presentation, Mar 2, 2011
Slide 1: 2010 Full Year Results Analyst Presentation
2010 Full Year Results Analyst Presentation Herzogenaurach March 2, 2011
Slide 2: Introduction
INTRODUCTION John-Paul O’Meara Vice President Investor Relations 2
Slide 3: Operational Highlights
OPERATIONAL HIGHLIGHTS Herbert Hainer adidas Group CEO 3
Slide 4: adidas Group Beats All Targets For 2010
adidas Group Beats All Targets For 2010 • adidas Group achieves record sales of € 12 billion • Group gross margin increases 2.4pp to 47.8% • Net income up 131% to € 567 million • Net debt reduced to € 221 million, one tenth of the level 24 months ago 4
Slide 5: All Segments Contribute To Strong Performance
All Segments Contribute To Strong Performance • Wholesale increases 8% driven by adidas Sport Style and Reebok • Retail grows 18% with 11% increase in comparable store sales • Other Businesses up 2%, with growth in all segments 5
Slide 6: Marketing Investment Drives Brand Growth In 2010
Marketing Investment Drives Brand Growth In 2010 • Commitment to the consumer • Innovative products • Compelling brand stories • Marketing investment returned to pre-crisis levels: 13.3% of sales in 2010 6
Slide 7: adidas Achieves Record Football Sales
adidas Achieves Record Football Sales • adidas Group witnesses most successful World Cup in South Africa • Record football sales of over € 1.5 billion • adiZero F50 top-scoring and top-selling boot • adidas long-term partner Spain secures first World Cup title 7
Slide 8: adidas Rebounds In Basketball
adidas Rebounds In Basketball • adidas positioned as fastest and lightest brand • Derrick Rose and Dwight Howard commercials resonate with young consumers • Best sell-throughs for years 8
Slide 9: adidas Gains Traction In Running And Outdoor
adidas Gains Traction In Running And Outdoor • Outstanding growth in running with sales increasing 8% • adiZero, Supernova and Response categories all grow at double-digit rates • adidas Outdoor sales up 21% for the year and 40% in Q4 9
Slide 10: adidas Breaks New Ground In Personalisation
adidas Breaks New Ground In Personalisation • Interactive and customisation considered as key cross-category growth drivers • miCoach helps athletes to train and perform smarter • miCoach app downloaded over one million times • Best consumer product at American Business Awards 10
Slide 11: adidas Sport Style Sales Up 23% Currency-Neutral
adidas Sport Style Sales Up 23% Currency-Neutral • adidas Sport Style up 23% to a record € 2.2 billion • adidas Originals with over 7.1 million followers on Facebook • Expansion of adidas NEO in emerging markets 11
Slide 12: Reebok Takes Toning Global
Reebok Takes Toning Global • Consumers around the globe celebrate Reebok’s toning products • Reebok sales increase 12% currency-neutral, reaching € 1.9 billion in 2010 12
Slide 13: Reebok Creates Second Growth Engine With ZigTech
Reebok Creates Second Growth Engine With ZigTech • Reebok celebrates phenomenal success with ZigTech • Largest ever online pre- launch campaign • Reebok amongst top three selling footwear brands during the holiday period in the USA 13
Slide 14: TaylorMade-adidas Golf On Top Of The World
TaylorMade-adidas Golf On Top Of The World • TaylorMade-adidas Golf becomes the biggest golf company • Sales reach € 909 million in 2010 • No. 1 driver brand on the world‘s major professional golf tours 14
Slide 15: adidas Group Exceeds Targets In North America
adidas Group Exceeds Targets In North America, Growing 12% • Currency-neutral adidas and Reebok sales increase 14% and 22%, respectively • Lightweight, Originals, Toning and ZigTech resonate right across consumer spectrum • Focus on next generation athletes 15
Slide 16: adidas Group Returns To Growth In Greater China
adidas Group Returns To Growth In Greater China, Up 10% In H2 • Greater China currency-neutral sales increase 10% in H2 2010 • Inventories back on healthy levels and store base rationalised 16
Slide 17: Market Share Gains In Europe And Japan
Market Share Gains In Europe And Japan +7% Western European Markets1) +16% European Emerging Markets1) +12% North America1) -2% Greater China1) +6% Other Asian Markets1) +14% Latin America1) 1) Sales development on a currency-neutral basis 17
Slide 18: adidas Group Achieves All Key Operational Goals In 2010
adidas Group Achieves All Key Operational Goals In 2010 9 • Convert excitement of the FIFA World Cup into record sales for adidas Football 9 • Accelerate adidas Sport Style momentum • Achieve healthy growth for 9 Reebok brand • Improve the Group‘s 9 performance in North America and Greater China 18
Slide 19: Financial Highlights
FINANCIAL HIGHLIGHTS Robin Stalker adidas Group CFO 19
Slide 20: Currency-Neutral Group Sales Up 9% In Q4
Currency-Neutral Group Sales Up 9% In Q4 Q4 2010 FY 2010 8% 8% Wholesale 17% 14% 23% 18% Retail 34% 25% Other (3%) 2% Businesses 8% 10% 9% 9% 19% 15% (5%) 5% 15% 25% 35% 0% 10% 20% 30% In euros Currency-neutral 20
Slide 21: Wholesale Revenues Driven By Improvements In Nearly All Regions in Q4
Wholesale Revenues Driven By Improvements In Nearly All Regions in Q4 Wholesale Q4 2010 Change FY 2010 Change Net sales (€ in millions) 1,934 8%1) 8,181 8%1) Gross margin 39.1% (2.4pp) 41.3% (0.3pp) Segmental operating 27.2% (5.3pp) 31.4% (1.2pp) margin 1) Currency-neutral 21
Slide 22: Retail Comparable Store Sales Increase 11% In 2010
Retail Comparable Store Sales Increase 11% In 2010 Retail Q4 2010 Change FY 2010 Change Net sales (€ in millions) 664 23%1) 2,389 18%1) adidas comp store sales 17%1) 11%1) Reebok comp store sales 10%1) 11%1) Total comp store sales 15%1) 11%1) Gross margin 62.1% 1.4pp 61.8% 3.2pp Segmental operating
Slide 23: Other Businesses Grow 2% In 2010
Other Businesses Grow 2% In 2010 Q4 2010 Change FY 2010 Change Net sales (€ in 333 (3%)1) 1,420 2%1) millions) Gross margin 39.4% (2.6pp) 43.5% 4.2pp Segmental operating 18.5% (6.7pp) 26.0% 4.1pp margin 1) Currency-neutral 23
Slide 24: Group Sales Grow In All Regions In Q4
Group Sales Grow In All Regions In Q4 Q4 2010 FY 2010 3% 7% Western Europe 5% 9% Europ. Emerging 22% 16% Markets 34% 23% 12% 12% North America 22% 19% 11% (2%) Greater China 25% 3% Other Asian 7% 6% Markets 24% 20% 8% 14% Latin America 21% 28% 9% 9% 19% 15% (5%) 5% 15% 25% 35% (5%) 5% 15% 25% 35% In
Slide 25: Group Gross Margin Improves Slightly In Q4
Group Gross Margin Improves Slightly In Q4 Q4 2010 FY 2010 Q4 and FY gross margin increase driven by Wholesale 39.1% 41.3% (2.4pp) (0.3pp) • lower input costs • less clearance sales Retail 1.4pp 62.1% 3.2pp 61.8% • higher share of Retail sales at better margins Other 39.4% 43.5% (2.6pp) 4.2pp Busine
Slide 26: Full Year Group Operating Margin Increases 2.6pp
Full Year Group Operating Margin Increases 2.6pp Q4 2010 FY 2010 Royalty and commission income € 28 million € 100 million 21% 16% Other operating income € 19 million € 110 million (32%) 10% Other operating expenses € 1.381 billion € 5.046 billion 21% 15% Other operating expenses 47.1% 42.1% as a per
Slide 27: Full Year Diluted EPS More Than Doubles
Full Year Diluted EPS More Than Doubles Q4 2010 FY 2010 Financial income € 4 million € 25 million (14%) 28% Financial expenses € 25 million € 113 million (20%) (34%) Income tax rate 6.7% 29.5% 33.9pp (2.0pp) Net income attributable to € 7 million € 567 million shareholders (64%) 131% Diluted earning
Slide 28: Operating Working Capital As A Percentage Of Sales Down At Historic Lows
Operating Working Capital As A Percentage Of Sales Down At Historic Lows • Inventories increase 34% on a 27 26.2 currency-neutral basis 26 25.6 25.6 • Mirrors growth expectations 25 24.5 24.3 for next quarters 24 22.9 • Receivables up 7% on a 23 currency-neutral basis 22 21.7 20.9 20.8 • Increase be
Slide 29: Other Key Balance Sheet Ratios Improve Significantly
Other Key Balance Sheet Ratios Improve Significantly • Net borrowings decrease 76% versus 3,000 2,883 2,732 prior year to 2,500 2,294 € 221 million 2,189 2,000 • Ratio of net borrowings/EBITDA 1,500 1,359 1,090 decreases to 0.2 from 1,000 917 903 1.2 in 2009 500 • Equity ratio increases 221 0 1.0 pe
Slide 30: Proposed Dividend Represents Significant Increase
Proposed Dividend Represents Significant Increase • adidas Group highly cash generative 0.90 0.80 • Proposed dividend of 0.80 0.70 € 0.80 per share 0.60 reflects 129% increase 0.50 0.50 0.50 0.42 versus prior year 0.40 0.35 0.33 0.33 • Payout ratio remains 0.30 0.25 0.25 0.20 at 30% 0.10 • In line w
Slide 31: Strategic Outlook & Initiatives
STRATEGIC OUTLOOK & INITIATIVES Herbert Hainer adidas Group CEO 31
Slide 32: Well Positioned To Tackle Gross Margin Headwinds
Well Positioned To Tackle Gross Margin Headwinds • Increasing raw material, labour • Optimised product creation, and transportation costs manufacturing and distribution • Favourable regional mix as we expect to grow faster in the emerging markets • Increasing portion of higher– margin retail sales •
Slide 33: adidas Group Increases Growth Target For 2011
adidas Group Increases Growth Target For 2011 • Strong start expected to the first year of “Route 2015” • Improving economic environment • Great feedback from retailer partners • Group sales to increase at a mid- to high-single-digit rate 33
Slide 34: Greater China And North America To Drive Wholesale Segment Growth
Greater China And North America To Drive Wholesale Segment Growth • Wholesale segment sales to increase at a mid-single-digit rate • Greater China and North America key growth engines • Greater China driven by strong sequential comp improvements at franchisees • Plan to add at least 500 points of sa
Slide 35: Retail Growth To Be Roughly Split Between Comp And New Store Openings
Retail Growth To Be Roughly Split Between Comp And New Store Openings • Retail sales to increase at a low-double-digit rate • Net increase of store base by 100 • Opening of 200 stores • Closing of 100 stores • Remodelling of 220 stores • Focus on emerging markets 35
Slide 36: Group Bottom Line To Grow Between 10% And 15%
Group Bottom Line To Grow Between 10% And 15% • Operating margin to increase to a level between 7.5% and 8.0% • EPS between € 2.98 and € 3.12 • Continuation of positive cash flows from operating activities • Financing working capital needs • Investment activities related to Route 2015 initiatives •
Slide 37: adidas Will Bring "all adidas" To Life
adidas Will Bring “all adidas” To Life • “all adidas” to be launched in March 2011 • Largest ever global brand campaign • Fusion of sport, music and fashion 37
Slide 38: adidas Targets Double-Digit Growth In Running
adidas Targets Double-Digit Growth In Running • Exciting product pipeline for 2011 • Launch of adiZero F50 Runner and Clima CC Ride • Continued focus on lightweight 38
Slide 39: adidas To Extend Leadership In Football
adidas To Extend Leadership In Football • adidas to build on the success of 2010 • Introducing adiZero F50 Prime – the lightest adidas football boot ever • Redesigned Predator to be launched later this year 39
Slide 40: adidas Making Basketball Even Faster
adidas Making Basketball Even Faster • adidas positioned as fastest and lightest brand in basketball • adiZero Crazylight to be launched in 2011 40
Slide 41: Strong adidas Basketball In-Store Presence During All Star Weekend
Strong adidas Basketball In-Store Presence During All Star Weekend 41
Slide 42: adidas Sport Style Full Pipeline Including Denim
adidas Sport Style Full Pipeline Including Denim • Originals to launch its own denim collection • Alongside new instalments of Mega and adidas Originals by Jeremy Scott • NEO to be extended in Greater China and Russia • 10th anniversary of Y-3 42
Slide 43: Reebok Toning Category Set For Growth Globally
Reebok Toning Category Set For Growth Globally • We are convinced of longevity of the toning category • Extension of toning platform into apparel • “Tone while you live” campaign to be launched in 2011 43
Slide 44: Reebok At Finish Line In February
Reebok At Finish Line In February • Retail presence with Zig becoming bigger and bolder • 680 Finish Line stores ReeZig’d in February 2011 44
Slide 45: Reebok Classics ReeBorn
Reebok Classics ReeBorn • Reebirth of Reebok Classics in 2011 • Key product concept: Reebok Lite • Collection combines lightweight, trend-right materials and Reebok technologies • Artist, designer and producer Swizz Beatz as brand ambassador 45
Slide 46: TaylorMade Paints Golf A New Colour
TaylorMade Paints Golf A New Colour • Currency-neutral Other Businesses sales expected to increase at mid-single-digit rate • TaylorMade-adidas Golf as key growth driver 46
Slide 47: Leveraging Major Sporting Events In 2011
Leveraging Major Sporting Events In 2011 • Cricket World Cup • Rugby World Cup • Copa América • FIFA Women’s World Cup • IAAF World Championship 47
Slide 48: adidas Group To Achieve Important Milestones In 2011
adidas Group To Achieve Important Milestones In 2011 • Fit for Route 2015 • Fit for Growth • Fit to Win • Fit for the Future 48
Slide 49: Questions & Answers
adidas QUESTIONS & ANSWERS
Slide 50: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates May 5, 2011 First Quarter 2011 Results May 12, 2011 Annual General Meeting May 13, 2011 Dividend paid1) Aug 4, 2011 First Half 2011 Results Nov 3, 2011 Nine Months 2011 Results 1) Subject to Annual General Meeting approval 50
Slide 51: Strong adidas and Reebok Brand Momentum
Strong adidas and Reebok Brand Momentum Q4 2010 Change FY 2010 Change Net sales (€ in millions) 2,090 10%1) 8,714 9%1) Gross margin 45.8% (1.4pp) 47.2% 0.4pp Net sales (€ in millions) 517 15%1) 1,913 12%1) Gross margin 35.9% 1.8pp 35.9% 4.0pp 1) Currency-neutral 51