Adidas Ag · XETR:ADS
Adidas — FY2010 Earnings Presentation
68 slides from Adidas's earnings presentation, Mar 16, 2011
Slide 1: Roadshow Presentation – Q4/10, Edinburgh
Roadshow Presentation – Q4/10 Edinburgh, March 16, 2011 John-Paul O’Meara – VP Investor Relations, adidas Group
Slide 2: Agenda
Agenda • Full Year 2010 Highlights • Outlook • Appendix: 2015 Aspirations 2
Slide 3: 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 • EPS at € 2.71 at top end of guidance range • Net debt reduced to € 221 million, one tenth of the level 24 months ago 3
Slide 4: 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 5: adidas Group Exceeds Targets In North America, Growing 12%
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 5
Slide 6: adidas Group Returns To Growth In Greater China, Up 10% In H2
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 6
Slide 7: 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 7
Slide 8: 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 8
Slide 9: 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 10: 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 10
Slide 11: 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 11
Slide 12: 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 12
Slide 13: 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 13
Slide 14: 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 14
Slide 15: 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 15
Slide 16: 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 16
Slide 17: 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 17
Slide 18: 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 18
Slide 19: 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 19
Slide 20: 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 21: 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 22: 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 23: 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 24: Agenda
Agenda • Full Year 2010 Highlights • Outlook • Appendix: 2015 Aspirations 24
Slide 25: 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 25
Slide 26: 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 27: 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 27
Slide 28: 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 28
Slide 29: 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 29
Slide 30: 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 30
Slide 31: 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 31
Slide 32: 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 32
Slide 33: 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 33
Slide 34: 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 34
Slide 35: 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 35
Slide 36: 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 36
Slide 37: 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 37
Slide 38: 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 39: 2011 Guidance
2011 Guidance Group sales (currency-neutral) mid- to high-single digit increase Wholesale sales (currency-neutral) mid-single-digit increase Retail sales (currency-neutral) low-double-digit increase Other Businesses sales (currency-neutral) mid-single-digit increase Gross margin between 47.5% - 48.0
Slide 40: adidas Group To Achieve Important Milestones In 2011
adidas Group To Achieve Important Milestones In 2011 • Fit for Growth • Fit to Win • Fit for the Future • Fit for Route 2015 40
Slide 41: Questions & Answers
QUESTIONS & ANSWERS 41
Slide 42: 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 42
Slide 43: Agenda
Agenda • Full Year 2010 Highlights • Outlook • Appendix: 2015 Aspirations 43
Slide 44: Global Brands Game Changing Growth Projects
Global Brands Game Changing Growth Projects REEBOK NEO ADIDAS FITNESS EMPIRE FAST FASHION RUNNING BASKETBALL CUSTOMIZATION INTERACTIVITY 44
Slide 45: 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 % 45
Slide 46: 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 % 46
Slide 47: Brand Differentiation
Brand Differentiation OLYMPIC FOOTBALL AMERICAN SPORTS REGIONAL & RUNNING TENNIS BASKETBALL SPORTS THE PERFORMANCE BRAND & MULTI SPORTS SPECIALIST “FIT FOR PERFORMANCE” FITNESS AND TRAINING FITNESS AND TRAINING CRICKET RUNNING TENNIS HOCKEY BASKETBALL SPORTS AMERICAN THE FITNESS & TRAINING BRAND “FI
Slide 48: adidas Sport Performance – Making The Athlete Better
adidas Sport Performance – Making The Athlete Better COOLER STRONGER FASTER NATURAL SMARTER 48
Slide 49: 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 50: 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 50
Slide 51: 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 52: 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 53: Reebok – Brand Positioning
Reebok – Brand Positioning FUN + FITNESS WOMEN MEN GIRLS BOYS TRAINING TRAINING RUNNING RUNNING WALKING CLASSICS SPORTS 53
Slide 54: Three Elements Of Total Fitness
Three Elements Of Total Fitness Strength Conditioning Flexibility 54
Slide 55: Key Concepts Fitness/Training
Key Concepts Fitness/Training To be launched in April 2011 Strength Conditioning 55
Slide 56: 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 56
Slide 57: 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 57
Slide 58: Global Brands Growth
Global Brands Growth 2010 2015 € 6.2 billion € 8.5 billion € 2.0 billion € 3.7 billion € 1.9 billion € 3.0 billion 58
Slide 59: 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 59
Slide 60: 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 60
Slide 61: Generation US Focus Sports
Generation US Focus Sports 7 Million High School Athletes Basketball Football Soccer Baseball Running Training 61
Slide 62: Chinese Consumer Becoming More Sophisticated
Chinese Consumer Becoming More Sophisticated 62
Slide 63: 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 WOMEN BY 2012 BY 2015 G A I N CHALLENGE E M B R AC E BUILD LEADERSHIP LEADERSHIP NEW SOURCE UNEXPLOITED BY 2015 BY 2015 OPPORTUNITIES OF GROWTH FOOTBA
Slide 64: Time To Unleash Originals
Time To Unleash Originals 64
Slide 65: 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 65
Slide 66: 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 66
Slide 67: 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 67
Slide 68: 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 68