Adidas Ag · XETR:ADS
Adidas — 9M 2011 Earnings Presentation
60 slides from Adidas's earnings presentation, Nov 8, 2011
Slide 1: Roadshow Presentation – 9M/11
Roadshow Presentation – 9M/11 London, November 8-10, 2011 Robin Stalker CFO, adidas Group
Slide 2: Agenda
Agenda • 9M 2011 Highlights • Outlook • Appendix: 2015 Aspirations 2
Slide 3: adidas Group Delivers Record Nine Months Performance
adidas Group Delivers Record Nine Months Performance • Record sales of € 10.1 billion • Gross margin stable at 48.2% • Operating margin up 0.1pp to 9.7% • Net income and EPS increase 16% 3
Slide 4: Sales Grow In All Geographic Areas YTD
Sales Grow In All Geographic Areas YTD +10% Western European Markets1) +23% European Emerging Markets1) +14% North America1) +28% Greater China1) +7% Other Asian Markets1) +14% Latin America1) 1) Sales development on a currency-neutral basis 4
Slide 5: Expansion Of Market Leadership In Russia/CIS
Expansion Of Market Leadership In Russia/CIS • adidas and Reebok both grow at 23% in Q3 • Comp store sales up 26% in Q3 and 31% YTD • adidas clearly setting the pace with key categories such as Training, Running and Outdoor • Reebok exploits strong momentum 5
Slide 6: adidas Clearly Outperforming In Greater China
adidas Clearly Outperforming In Greater China • Record nine months sales of € 900 million • adidas Sport Performance enjoys strong momentum in Running, Training and Outdoor • adidas Originals and adidas NEO Label drive Sport Style sales up 22% • Reebok sales advance 29% in Q3 although from a low bas
Slide 7: adidas And TMaG Drive Growth In North America
adidas And TMaG Drive Growth In North America • Group sales up 13% currency-neutral in Q3 • adidas and TaylorMade-adidas Golf grow at strong double-digit rates • Reebok returns to growth • Presence in the mall and sporting goods channel further improved 7
Slide 8: Q3 Wholesale Sales Up 10% Currency-Neutral
Q3 Wholesale Sales Up 10% Currency-Neutral Wholesale Q3 2011 Change 9M 2011 Change Net sales (€ in 2,577 10%1) 6,869 12%1) millions) Gross margin 40.4% (1.5pp) 41.1% (0.9pp) Segmental operating 31.6% (2.0pp) 32.0% (0.7pp) margin 1) Currency-neutral 8
Slide 9: Retail Comparable Store Sales Increase 14% In Q3
Retail Comparable Store Sales Increase 14% In Q3 Retail Q3 2011 Change 9M 2011 Change Net sales (€ in millions) 757 21%1) 2,015 21%1) adidas comp store sales 14%1) 15%1) Reebok comp store sales 14%1) 13%1) Total comp store sales 14%1) 15%1) Gross margin 62.3% +1.4pp 63.2% +1.5pp Segmental operating
Slide 10: Other Businesses Grow 13% Currency-Neutral In Q3
Other Businesses Grow 13% Currency-Neutral In Q3 Other Businesses Q3 2011 Change 9M 2011 Change Net sales (€ in 411 13%1) 1,197 13%1) millions) Gross margin 42.9% (2.4pp) 44.4% (0.4pp) Segmental operating 28.4% (0.4pp) 28.1% (0.1pp) margin 1) Currency-neutral 10
Slide 11: Strong Momentum At adidas And Reebok
Strong Momentum At adidas And Reebok Q3 2011 Change 9M 2011 Change Net sales (€ in millions) 2,794 15%1) 7,467 14%1) Gross margin 46.0% (1.4pp) 46.9% (0.7pp) Net sales (€ in millions) 564 2%1) 1,467 9%1) Gross margin 37.5% 0.7pp 37.0% 1.2pp 1) Currency-neutral 11
Slide 12: adidas Sales Increase 15% Currency-Neutral In Q3
adidas Sales Increase 15% Currency-Neutral In Q3 adidas Sport Performance adidas Sport Style Up 13% Up 20% 12
Slide 13: adidas Running Sales Increase 20% In Q3
adidas Running Sales Increase 20% In Q3 • Yohan Blake becomes 100m world champion in adizero Prime • Patrick Makau sets new marathon world record in adizero adios 2 • Runner’s World Global “Best Update Award” for Response Trail 18 13
Slide 14: adidas Basketball North America Sales Up 21% In Q3
adidas Basketball North America Sales Up 21% In Q3 • Global sales up 11% YTD • Strong ASP increases in 2011 compared to 2010 • Sell through of 75% for adizero Crazy Light after 45 days • adizero Rose 2 off to fast start • adiPower Howard launches this week 14
Slide 15: adidas Sport Style Sales Increase 20% In Q3
adidas Sport Style Sales Increase 20% In Q3 • Mega Vario is the best selling adidas shoe during back to school • Originals now offering key Collegiate silhouettes • Most successful Star Wars range ever in Q3 • NEO Label sales grow 40% 15
Slide 16: Reebok Sales Increase 9% Currency-Neutral YTD
Reebok Sales Increase 9% Currency-Neutral YTD • Reebok sales grow 4% in North America, or 24% excluding toning in Q3 after 15% decline in Q2 • European Emerging Markets grow 22% and Other Asian Markets increase 7% • John Wall basketball shoe ZigEncore ($115) and Zig ProFuture ($100) launched in bask
Slide 17: Reebok Classics Turnaround Begins
Reebok Classics Turnaround Begins • Reethym of Lite campaign viewed 3.8 million times on YouTube • Campaign rolled out internationally in UK, Japan, South Korea and Russia in Q3 • Classics footwear average selling prices up 25% 17
Slide 18: TaylorMade-adidas Golf Extends Market Leadership
TaylorMade-adidas Golf Extends Market Leadership • Sales increase 17% YTD and 16% in Q3 • Double-digit growth in Metalwoods and Irons • Footwear up almost 40% driven by TOUR360 ATV launch • Market share lead extended in irons • Darren Clarke wins British Open • Sergio Garcia wins two in two weeks 18
Slide 19: 9M Group Gross Margin Virtually Flat At 48.2%
9M Group Gross Margin Virtually Flat At 48.2% Q3 2011 9M 2011 Wholesale 40.4% 41.1% • Higher input costs (1.5pp) (0.9pp) Retail 62.3% 63.2% +1.4pp +1.5pp • Higher Retail sales at higher margins Other 42.9% 44.4% • Overproportionate growth in Businesses (2.4pp) (0.4pp) emerging markets • More favoura
Slide 20: 9M Group Operating Profit Increases 12%
9M Group Operating Profit Increases 12% Q3 2011 9M 2011 Royalty and commission income € 23 million € 64 million (12%) (11%) Other operating income € 14 million € 50 million (23%) (45%) Other operating expenses € 1.358 billion € 3.996 billion +7% +9% Other operating expenses 36.3% 39.6 % as a percent
Slide 21: Record Diluted EPS
Record Diluted EPS Q3 2011 9M 2011 Financial income € 10 million € 24 million +81% +13% Financial expenses € 33 million € 97 million (9%) +11% Income tax rate 27.3% 27.4% (2.7pp) (2.3pp) Net income attributable to € 303 million € 652 million shareholders +14% +16% Diluted earnings per share € 1.45 €
Slide 22: Operating Working Capital As A Percentage Of Sales Remains At Low Levels
Operating Working Capital As A Percentage Of Sales Remains At Low Levels • Inventories increase 20% on a 27 currency-neutral basis 26 25.6 • Sequential decline in growth 25 rate (+26% in Q2) 24.3 24 • Reflects FOB impact and 22.9 23 growth expectations 22 21.7 • Receivables up 5% on a 20.9 20.8 20.7
Slide 23: Net Debt Declines Year-Over-Year
Net Debt Declines Year-Over-Year • Net borrowings decrease 17% versus prior year to 3,000 € 750 million 2,500 2,294 • Ratio of net borrowings/EBITDA 2,000 decreases to 0.6 from 0.7 1,500 1,359 in 2010 917 1,090 903 914 1,000 863 750 • Equity ratio increases 500 2.4 percentage points to 221 46.9% 0 Q
Slide 24: Agenda
Agenda • 9M 2011 Highlights • Outlook • Appendix: 2015 Aspirations 24
Slide 25: adidas Group Will Deliver Record 2011 Results
adidas Group Will Deliver Record 2011 Results increase at a rate Group sales (currency-neutral) approaching 12% Wholesale sales (currency-neutral) high-single-digit increase Retail sales (currency-neutral) high-teens increase Other Businesses sales (currency-neutral) high-single-digit increase Gross
Slide 26: adidas Outdoor Well On Track For Route 2015 Goals
adidas Outdoor Well On Track For Route 2015 Goals • Sales increase almost 40% YTD • Strong growth in Outdoor driven by Terrex • Good start to US roll-out • € 500 million organic sales target for 2015 26
Slide 27: adidas Group To Acquire Outdoor Specialist Five Ten
adidas Group To Acquire Outdoor Specialist Five Ten • “The Brand Of The Brave” • Leading performance brand in Outdoor action sports with clear focus on Climbing and Mountain Biking • Complementary to adidas product offering • Efficiency opportunities in sourcing, sales and logistics • 2011 sales of
Slide 28: adidas Football Sales Already Up In Q3
adidas Football Sales Already Up In Q3 • Global football sales up 11% in Q3; footwear sales up 22% • Six adidas teams qualified for EURO 2012 • Major product launches every month between now and next summer’s event • New record sales of above € 1.5 billion expected in 2012 28
Slide 29: adizero f50 Powered By miCoach
adizero f50 Powered By miCoach compare share compete 29
Slide 30: Well Positioned To Weather Economic Challenges
Well Positioned To Weather Economic Challenges • Resilience of sporting goods industry • Reebok brand revived • Regained momentum in China • Less currency risk • All brands much stronger in North America • Excellent balance sheet • Event year ahead 30
Slide 31: 2012 Set To Be Another Record Year
2012 Set To Be Another Record Year • adidas Group sales projected to increase at a mid-to high-single-digit rate on a currency-neutral basis • UEFA EURO 2012 and London 2012 Olympic Games to support sales growth • Earnings to grow faster than sales at a rate between 10% and 15% • Fully on track to a
Slide 32: Agenda
Agenda • 9M 2011 Highlights • Outlook • Appendix: 2015 Aspirations 32
Slide 33: Global Brands Game Changing Growth Projects
Global Brands Game Changing Growth Projects REEBOK NEO ADIDAS FITNESS EMPIRE FAST FASHION RUNNING BASKETBALL CUSTOMIZATION INTERACTIVITY 33
Slide 34: 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 % 34
Slide 35: 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 % 35
Slide 36: 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 37: adidas Sport Performance – Making The Athlete Better
adidas Sport Performance – Making The Athlete Better COOLER STRONGER FASTER NATURAL SMARTER 37
Slide 38: 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 39: 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 39
Slide 40: 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 41: 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 42: Reebok – Brand Positioning
Reebok – Brand Positioning FUN + FITNESS WOMEN MEN GIRLS BOYS TRAINING TRAINING RUNNING RUNNING WALKING CLASSICS SPORTS 42
Slide 43: Three Elements Of Total Fitness
Three Elements Of Total Fitness Strength Conditioning Flexibility 43
Slide 44: Key Concepts Fitness/Training
Key Concepts Fitness/Training Strength Conditioning Flexibility 44
Slide 45: 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 45
Slide 46: 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 46
Slide 47: 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 47
Slide 48: Global Sales Strategic Priorities
Global Sales Strategic Priorities North America • Achieve controlled space of >45% Greater China • Integrated distribution Roadmap • Three “Attack” markets Russia/CIS to generate 50% of sales growth 48
Slide 49: 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 49
Slide 50: Generation US Focus Sports
Generation US Focus Sports 7 Million High School Athletes Basketball Football Soccer Baseball Running Training 50
Slide 51: Chinese Consumer Becoming More Sophisticated
Chinese Consumer Becoming More Sophisticated 51
Slide 52: 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 53: Time To Unleash Originals
Time To Unleash Originals —SLV adidas ORIGINALS
Slide 54: 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 54
Slide 55: Russia/CIS Driven By adidas And Reebok Own Retail
Russia/CIS Driven By adidas And Reebok Own Retail ~800 own retail stores in 2011 ~1,200 own retail stores by 2015 >90% of sales through own retail in 2011 YTD September 2011 comp store sales +31% 55
Slide 56: Opportunities Outweigh Challenges In Russia/CIS
Opportunities Outweigh Challenges In Russia/CIS Volatility of economy and currency Large population (Russia 143m) High levels of bureaucracy Russians spend 74% of income on Infrastructure challenges consumer goods vs. 40% for Europe War for talent Above average GDP growth Rising disposable incomes E
Slide 57: adidas In Superior Competitive Position
adidas In Superior Competitive Position Significant coverage and Distribution market penetration Broad range covering Product Range multiple consumer targets Unmatched partnership portfolio Brand Marketing Strong POS activation 57
Slide 58: Reebok Has Strong Momentum
Reebok Has Strong Momentum • Inherited solid foundation • Brand strength second only to India • Powerful Brand representation in 191 stores • Success with Toning, Zig and Flex • KPI’s approaching adidas levels 58
Slide 59: Questions & Answers
adidas GROUP QUESTIONS & ANSWERS
Slide 60: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates 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, 2012 Nine Months 2012 Results 1) Subject to Annual General Meeting approval 60