Adidas Ag · XETR:ADS
Adidas — Q1 2015 Earnings Presentation
47 slides from Adidas's earnings presentation, Nov 21, 2015
Slide 1: Q1 2015 Results Roadshow Presentation
Q1 2015 Results Roadshow Presentation MAKE A DIFFERENCE
Slide 2: Operational Highlights
OPERATIONAL HIGHLIGHTS 2
Slide 3: Rockport Divestiture
ROCKPORT DIVESTITURE • Definitive agreement to sell the Rockport business for a total consideration of up to $ 280 million • Focus on core brands: adidas, Reebok and TaylorMade • Transaction expected to be completed in the second half of 2015 3
Slide 4: Share Buyback Programme
SHARE BUYBACK PROGRAMME 1st tranche successfully completed: • 4,889,142 shares repurchased at average price of € 61.36 per share 2nd tranche started: • Total volume up to € 300 million • Starting March 6, 2015 and ending latest on July 3, 2015 • Currently, more than two million shares repurchased 4
Slide 5: Creating the New
CREATING THE NEW 5
Slide 6: Our Strategy for Creating the New
OUR STRATEGY FOR CREATING THE NEW OPEN SOURCE TOP LINE & MARKET SHARE GROWTH BRAND GROSS MARGIN DESIRE EXPANSION OPERATING LEVERAGE 6
Slide 7: Strong Start into 2015
STRONG START INTO 2015 • Sales increase 9% currency-neutral or 17% in euro terms to € 4.1 billion • adidas and Reebok grow 11% and 9% currency-neutral, respectively • Gross margin stable at 49.2% • Operating margin reaches 8.9% • Net income from continuing operations grows 22% to € 255 million 7
Slide 8: adidas and Reebok with Robust Momentum
ADIDAS AND REEBOK WITH ROBUST MOMENTUM Q1 2015 CHANGE NET SALES (€ IN MILLIONS) 3,352 +11%1) GROSS MARGIN 47.9% +0.4pp NET SALES (€ IN MILLIONS) 411 +9%1) GROSS MARGIN 38.8% (0.8pp) 1) Currency-neutral. 8
Slide 9: Strong Sales Growth in Nearly All Markets
STRONG SALES GROWTH IN NEARLY ALL MARKETS (3%) RUSSIA/CIS + 11% WESTERNEUROPE + 7% JAPAN + 7% NORTH AMERICA +21% GREATER CHINA + 10% MEAA + 6% LATINAMERICA Currency-neutral. Figures reflect combined revenues of the adidas and Reebok businesses. 9
Slide 10: Marketing Campaigns Create Brand Desire
MARKETING CAMPAIGNS CREATE BRAND DESIRE 10
Slide 11: Running
RUNNING • Currency-neutral Running sales increase 13% • Double-digit sales increases in both footwear and apparel • Double-digit sales growth in most markets • Introducing the best running shoe ever: ULTRA BOOST 11
Slide 12: Football
FOOTBALL • Currency-neutral sales for Football footwear grow 16% • Strong momentum in Western Europe as well as in North America • Football sales in retail increase 7% on currency-neutral basis • Successful launch of the 'THERE WILL BE HATERS' campaign 12
Slide 13: Training
TRAINING • Currency-neutral Training sales increase 8% • Strong double-digit growth in Latin America, Greater China and MEAA • Growth driven by double-digit sales increases in apparel • adidas by Stella McCartney celebrates 10 years of being at the cutting edge of advanced athletic style 13
Slide 14: Basketball
BASKETBALL • Currency-neutral Basketball sales increase 1% • Succesful launch of the first Damian Lillard signature shoe • Outstanding presence during the 2015 NBA All-Star Game in NYC • Andrew Wiggins honoured as ‘Rookie Of The Year’ 14
Slide 15: Originals
ORIGINALS • Sales at adidas Originals increase 29% currency-neutral • Footwear sales at adidas Originals increase 44%, driven by strong silhouettes such as the Superstar, Tubular and ZX Flux • Strong double-digit increase in most markets 15
Slide 16: NEO
NEO • adidas NEO sales increase 18% currency-neutral • Double-digit growth in both footwear and apparel • adidas NEO enjoys strong momentum in most markets • Successful launch of the spring 2015 Selena Gomez Collection 16
Slide 17: Reebok
REEBOK • Reebok revenues up 9% currency-neutral • 8th consecutive quarter of growth • Double-digit growth rates in the Training and Studio categories • Successful introduction of the Reebok ZPump Fusion franchise 17
Slide 18: TMAG
TMAG • Currency-neutral sales down 9%, due to sales declines in metalwoods and irons • R15 and AeroBurner successfully introduced to the market • First stand-alone TMaG factory outlet opened during Q1 • Strong product pipeline and a cleaner market environment put TMaG up for growth going forward 18
Slide 19: Financial Highlights
FINANCIAL HIGHLIGHTS 19
Slide 20: New Segmental Reporting Structure
NEW SEGMENTAL REPORTING STRUCTURE WESTERN EUROPE NORTH AMERICA GREATER CHINA RUSSIA/CIS OTHER BUSINESSES LATIN AMERICA JAPAN MEAA OTHER CENTRALLY MANAGED BUSINESSES 20
Slide 21: Western Europe
WESTERN EUROPE • Revenues up 11% currency-neutral • Double-digit sales growth in most of the region‘s major markets • Double-digit sales growth at both adidas (+11%) and Reebok (+16%) • Growth at adidas supported by sales increases in Running, Football and at adidas Originals • Marketing and sales w
Slide 22: North America
NORTH AMERICA • Sales grow 7% currency-neutral • Revenues at adidas up 9%, supported by double-digit increases in Football and at adidas Originals • Reebok sales decrease 3%, due to ongoing efforts to streamline the brand‘s factory outlet business • Significant investments in brand- building activit
Slide 23: Greater China
GREATER CHINA • Currency-neutral sales grow 21%, with double-digit increases at both adidas and Reebok • adidas up 21%, mainly due to strong double-digit sales increases in key performance categories such as Training and Running • adidas Originals and adidas NEO continue to grow at double-digit rate
Slide 24: Russia/CIS
RUSSIA/CIS • Currency-neutral sales down 3% • Mid-single-digit growth at Reebok more than offset by sales declines at adidas • Significant reduction of operating expenses, primarily due to lower sales expenditure • Close to 30 net store closures during Q1 2015 24
Slide 25: Latin America
LATIN AMERICA • Sales grow 6% currency-neutral • Double-digit increases in most markets, in particular Argentina • Sales up 5% at adidas, fuelled by double-digit growth in Training, Running and at adidas Originals • Reebok grows 16%, supported by double-digit sales increases in Running and Training
Slide 26: Japan
JAPAN • Currency-neutral sales up 7%, driven by growth at both adidas and Reebok • adidas up 3%, mainly due to double- digit sales increases in Running and at adidas Originals • Retail revenues grow at double-digit rate, supported by significant sales increases in eCom 26
Slide 27: MEAA
MEAA • Revenues in Q1 up 10% currency- neutral driven by double-digit growth at adidas • United Arab Emirates, South Korea and Turkey are main contributors to the sales increase • Double-digit sales growth at adidas (+10%), driven by increases in Training, Running and at adidas Originals 27
Slide 28: Profitability of Other Businesses Improves
PROFITABILITY OF OTHER BUSINESSES IMPROVES Other Businesses Q1 2015 CHANGE NET SALES € 377 million (1%)1) GROSS MARGIN 37.5% (0.6pp) OPERATING MARGIN (1.4%) +4.9pp 1) Currency-neutral. Figures reflect continuing operations as a result of the planned divestiture of the Rockport business. 28
Slide 29: Group Operating Margin Grows 0.1pp
GROUP OPERATING MARGIN GROWS 0.1PP Q1 2015 GROSS PROFIT € 2,008 million +17% GROSS MARGIN 49.2% +0.0pp OTHER OPERATING EXPENSES € 1,700 million +15% OTHER OPERATING EXPENSES AS A PERCENTAGE OF SALES 41.6% (0.8pp) OPERATING PROFIT € 363 million +18% OPERATING MARGIN 8.9% +0.1pp Excluding goodwill imp
Slide 30: Net Income Grows 22%
NET INCOME GROWS 22% Q1 2015 FINANCIAL INCOME € 16 million +132% FINANCIAL EXPENSES € 16 million (22%) INCOME BEFORE TAXES € 363 million +24% INCOME TAX RATE 29.8% +0.9pp NET INCOME FROM CONTINUING OPERATIONS € 255 million +22% DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS € 1.24 +27% Exclud
Slide 31: Retail Profitability Improves Strongly
RETAIL PROFITABILITY IMPROVES STRONGLY Q1 2015 CHANGE NET SALES € 895 million +14%1) ADIDAS COMP STORE SALES +5% 1) REEBOK COMP STORE SALES (2%)1) TOTAL COMP STORE SALES +4%1) GROSS MARGIN 59.9% (0.1pp) OPERATING MARGIN 16.0% +2.8pp 1) Currency-neutral. 31
Slide 32: Retail Store Development
RETAIL STORE DEVELOPMENT • 2,895 stores operated at quarter-end • Net decrease of 18 stores versus 2,913 at the end of 2014 • 49 new stores opened, 67 stores closed, 23 stores remodelled • 1,604 adidas and 436 Reebok branded; 855 factory outlets 32
Slide 33: Strong Focus on Inventory Management
STRONG FOCUS ON INVENTORY MANAGEMENT • Inventories from continuing 23% operations remain stable (c.n.) 18% 18% 16% • Receivables from continuing 13% operations up 2% (c.n.) 13% • Payables from continuing 7% operations increase 1% (c.n.) 8% • Average OWC in % of sales 3% 2% increases 0.3pp to 21.9% 0
Slide 34: Net Debt of € 542 Million
NET DEBT OF € 542 MILLION 500 • Net borrowings increase to 295 € 542 million (2014: € 254 million), mainly as a result of the utilisation 100 of cash for the share buyback programme • Ratio of net borrowings/EBITDA (94) (180) (180) amounts to 0.4 (2014: 0.2) (185) -300 (254) • Equity ratio decreases
Slide 35: adidas Group Confirms FY 2015 Outlook
ADIDAS GROUP CONFIRMS FY 2015 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 MARGIN1) BETWEEN 6.5% AND 7.0% NET INCOME FROM CONTINUING OPERATIONS1) TO INCREASE AT A RATE OF 7% TO
Slide 36: Strategic Initiatives and Outlook
STRATEGIC INITIATIVES AND OUTLOOK 36
Slide 37: Sport 15 Continues to Demonstrate Our DNA
SPORT 15 CONTINUES TO DEMONSTRATE OUR DNA 37
Slide 38: Andrew Wiggins: Rookie of the Year
ANDREW WIGGINS: ROOKIE OF THE YEAR 38
Slide 39: adidas Increases Visibility in US Sports
ADIDAS INCREASES VISIBILITY IN US SPORTS 39
Slide 40: Climachill Campaign Launched
CLIMACHILL CAMPAIGN LAUNCHED 40
Slide 41: Introducing Roland Garros Collection by Y-3
INTRODUCING ROLAND GARROS COLLECTION BY Y-3 41
Slide 42: New Football Silos to Be Introduced
NEW FOOTBALL SILOS TO BE INTRODUCED GAMECHANGER PLAYMAKER 42
Slide 43: Originals Creates More Excitement
ORIGINALS CREATES MORE EXCITEMENT 43
Slide 44: Reebok Launches CrossFit Nano 5.0
REEBOK LAUNCHES CROSSFIT NANO 5.0 44
Slide 45: 2015 AeroBurner Line-up
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Slide 46: adidas and Spotify to Launch adidas go
ADIDAS AND SPOTIFY TO LAUNCH ADIDAS GO 46
Slide 47: Upcoming Events
UPCOMING EVENTS MAY 7, 2015 ANNUAL GENERAL MEETING MAY 8, 2015 DIVIDEND PAYMENT1) JUNE 24, 2015 IR TUTORIAL WORKSHOP AUGUST 6, 2015 FIRST HALF 2015 RESULTS NOVEMBER 5, 2015 NINE MONTHS 2015 RESULTS 1) Subject to Annual General Meeting Approval. 47