Adidas Ag · XETR:ADS
Adidas — FY2016 Earnings Presentation
39 slides from Adidas's earnings presentation, 2017
Slide 1: Full Year 2016 Roadshow Presentation
FULL YEAR 2016 ROADSHOW PRESENTATION
Slide 2: Operational Highlights 2016
OPERATIONAL HIGHLIGHTS 2016 2
Slide 3: Creating the New: Open Source, Culture, Brand Desire
CREATING THE NEW FOCUS ON DRIVING BRAND DESIRABILITY OPEN SOURCE CULTURE BRAND DESIRE 3
Slide 4: Strategic Choices Gain Traction
STRATEGIC CHOICES GAIN TRACTION SIGNIFICANT PROGRESS ACROSS ALL THREE INITIATIVES FULL-PRICE SHARE MARKET SHARE GAINS PARTNERSHIP WITH KANYE OF SALES AS REVENUES GROW WEST DRIVES COMMERCIAL 10% HIGHER MORE THAN 30% SUCCESS AND BRAND HEAT SPEED RANGE ABSOLUTE AND ADIDAS X PARLEY GENERATING 25% OF REL
Slide 5: Strengths and Weaknesses in 2016
STRENGTHS AND WEAKNESSES IN 2016 BROAD-BASED NOT ALL PERFORMANCE CATEGORIES TOP-LINE MOMENTUM EXPERIENCING SAME LEVEL OF GROWTH MARKET SHARE AND NPS GAINS REEBOK IN KEY CATEGORIES AND MARKETS STILL PERFORMING BELOW EXPECTATIONS MAJOR PROGRESS IN THE US, MARKET POSITION IN THE US THE LARGEST SPORTING
Slide 6: Major P&L Developments in 2016
MAJOR P&L DEVELOPMENTS IN 2016 REVENUES INCREASE 18% CURRENCY-NEUTRAL AND 14% IN EURO TERMS TO € 19.3 BILLION GROSS MARGIN GROWS 30 BASIS POINTS TO 48.6% REFLECTING IMPROVEMENTS IN THE PRICING, PRODUCT AND CHANNEL MIX DESPITE SEVERE NEGATIVE FX EFFECTS OPERATING MARGIN IMPROVES 1.3PP TO 7.7% MAINLY
Slide 7: adidas Brand Keeps Up Momentum
ADIDAS BRAND KEEPS UP MOMENTUM PERFORMANCE AND LIFESTYLE BUSINESSES GROW AT DOUBLE-DIGIT RATES +22% 7
Slide 8: Strong Growth in Performance
STRONG GROWTH IN PERFORMANCE DOUBLE-DIGIT INCREASES IN NEARLY ALL KEY SPORT PERFORMANCE CATEGORIES +13% 8
Slide 9: Winning in Lifestyle
WINNING IN LIFESTYLE LIFESTYLE WITH 7 CONSECUTIVE QUARTERS OF +30% GROWTH +45% 9
Slide 10: Reebok Sharpens Brand Image
REEBOK SHARPENS BRAND IMAGE REVENUE GROWTH IN NEARLY ALL MARKET SEGMENTS +6% 10
Slide 11: Outstanding Ecom Growth
OUTSTANDING ECOM GROWTH ECOMMERCE REVENUES REACH € 1 BILLION IN 2016 +59% 11
Slide 12: Financial Highlights 2016
FINANCIAL HIGHLIGHTS 2016 12
Slide 13: Broad-Based Top-Line Growth
BROAD-BASED TOP-LINE GROWTH DOUBLE-DIGIT SALES INCREASES ACROSS MOST REGIONS RUSSIA/CIS +3% NORTH AMERICA WESTERN EUROPE +24% +20% JAPAN GREATER CHINA +16% +28% MEAA +16% LATIN AMERICA +16% CURRENCY-NEUTRAL. FIGURES REFLECT COMBINED REVENUES OF THE ADIDAS AND REEBOK BRANDS. 13
Slide 14: Western Europe
ONGOING STRONG DEMAND FOR THE ADIDAS AND REEBOK BRANDS WESTERN CURRENCY-NEUTRAL SALES INCREASE 20% IN 2016 DOUBLE-DIGIT GROWTH ACROSS ALL KEY MARKETS EUROPE ADIDAS BRAND REVENUES UP 20% ON TOP OF AN 18% INCREASE IN THE PRIOR YEAR REEBOK SALES INCREASE 18% DOUBLE-DIGIT GROWTH IN TRAINING AND CLASSICS
Slide 15: North America
ACCELERATING MOMENTUM FOR THE ADIDAS BRAND NORTH CURRENCY-NEUTRAL SALES INCREASE 24% IN 2016 STRONG DOUBLE-DIGIT GROWTH IN EVERY QUARTER AMERICA ACCELERATING MOMENTUM AT BRAND ADIDAS (+30%) DOUBLE-DIGIT GROWTH IN PERFORMANCE AND STYLE REEBOK SALES DOWN 1% REFLECTING CHALLENGES IN US MARKET GROSS MAR
Slide 16: Greater China
BRAND PRESENCE FUELS TOP- AND BOTTOM-LINE GROWTH GREATER CURRENCY-NEUTRAL SALES GROW 28% IN 2016 CHINA SALES AT BRAND ADIDAS UP 28% DOUBLE-DIGIT GROWTH IN KEY PERFORMANCE AND LIFESTYLE CATEGORIES REEBOK REVENUES UP 17% DRIVEN BY TRAINING, RUNNING AND CLASSICS GROSS MARGIN IMPROVES FURTHER (+0.4PP) R
Slide 17: Latin America
DOUBLE-DIGIT GROWTH DESPITE MACROECONOMIC CHALLENGES LATIN CURRENCY-NEUTRAL SALES INCREASE 16% IN 2016 DOUBLE-DIGIT GROWTH IN NEARLY ALL MARKETS AMERICA REVENUES AT BRAND ADIDAS UP 19% DOUBLE-DIGIT GROWTH IN KEY PERFORMANCE AND LIFESTYLE CATEGORIES REEBOK REVENUES UP 1% REFLECTING THE CHANGE IN BUSI
Slide 18: Other Businesses
PROFITABILITY REMAINS UNDER PRESSURE OTHER CURRENCY-NEUTRAL SALES INCREASE 1% IN 2016 SALES AT TMAG DECLINE 1% BUSINESSES GROWTH AT TAYLORMADE AND ADIDAS GOLF OFFSET BY DECLINES AT ASHWORTH AND ADAMS GOLF CCM HOCKEY SALES DOWN 13% REFLECTING THE CHALLENGING US HOCKEY MARKET GROSS MARGIN UP 3.6PP DRI
Slide 19: Gross Margin Increases
GROSS MARGIN INCREASES DESPITE SEVERE FX HEADWINDS INCREASE OF 30 BPS -390 BPS +420 BPS GROSS FX UNDERLYING GROSS MARGIN HEADWINDS IMPROVEMENT MARGIN FY2015 FY2016 19
Slide 20: Operating Margin Improves
OPERATING MARGIN IMPROVES REFLECTING IMPROVEMENTS IN GROSS MARGIN AND LOWER OPEX IN % OF SALES Q4 2016 FY 2016 GROSS MARGIN +1.6PP 48.8% +0.3PP 48.6% OTHER OPERATING EXPENSES +16% € 2,346 MILLION +13% € 8,263 MILLION OTHER OPERATING EXPENSES (0.3PP) AS A PERCENTAGE OF SALES +1.5PP 50.1% 42.8% OPERAT
Slide 21: Non-Recurring Items
NON-RECURRING ITEMS LARGELY OFFSET ONE ANOTHER IN 2016 REEBOK RESTRUCTURING AROUND € 30 MILLION CHELSEA F.C. MID- TO HIGH-DOUBLE- DIGIT MILLION EUROS TMAG ONE-OFFS LOW- TO MID-DOUBLE- DIGIT MILLION EUROS MITCHELL & NESS LOW- TO MID-DOUBLE- DIGIT MILLION EUROS ‘CTN’ INVESTMENTS LOW- TO MID-DOUBLE- DI
Slide 22: Underlying Net Income Up 41%
UNDERLYING NET INCOME UP 41% TO € 1,019 MILLION IN 2016 Q4 2016 FY 2016 FINANCIAL (42%) (40%) INCOME € 8 MILLION € 28 MILLION FINANCIAL EXPENSES +145% € 39 MILLION +11% € 74 MILLION INCOME BEFORE TAXES +18% (€ 8 MILLION) +35% € 1,444 MILLION NET INCOME FROM CONTINUING OPERATIONS +48% (€ 9 MILLION) +
Slide 23: Average OWC in % of Sales
AVERAGE OWC IN % OF SALES DOWN 0.3PP TO 20.2% 22,4% INVENTORIES GROW 19% (CURRENCY-NEUTRAL) TO SUPPORT TOP-LINE MOMENTUM 21,3% RECEIVABLES UP 7% (CURRENCY-NEUTRAL) 20,5% 20,2% 20,0% PAYABLES GROW 23% (CURRENCY-NEUTRAL), REFLECTING THE INCREASE IN INVENTORIES 2012 2013* 2014* 2015* 2016* Average oper
Slide 24: Net Debt Position
NET DEBT POSITION IMPROVES SIGNIFICANTLY TO € 103 MILLION 448 DECREASE MAINLY DUE TO FIRST CONVERSIONS 295 OF CONVERTIBLE BONDS INTO SHARES AS WELL AS AN INCREASE IN CASH GENERATED FROM OPERATING ACTIVITIES RATIO OF NET DEBT/EBITDA AMOUNTS TO 0.1 (2015: 0.3) -103 -185 EQUITY RATIO REMAINS AT A STRON
Slide 25: Dividend Proposal of €2.00 per Share
DIVIDEND PROPOSAL OF € 2.00 PER SHARE 2,00 PROPOSED DIVIDEND OF € 2.00 PER SHARE, 1,60 UP 25% VERSUS THE PRIOR YEAR 1,50 1,50 1,35 PAYOUT RATIO OF 39.6% (2015: 47.9 %) PAYOUT RATIO WITHIN TARGET RANGE OF BETWEEN 30% AND 50% 2012 2013 2014 2015 2016 Dividend per share (in €), 2016 subject to Annual G
Slide 26: Outlook 2017
OUTLOOK 2017 26
Slide 27: Brand Momentum to Continue in 2017
BRAND MOMENTUM TO CONTINUE IN 2017 STRATEGIC GROWTH AREAS EXPECTED TO SPUR STRONG REVENUE IMPROVEMENT KEY PERFORMANCE AND LIFESTYLE CATEGORIES TO DRIVE TOP-LINE EXPANSION DOUBLE-DIGIT SALES INCREASES IN KEY MARKETS 27
Slide 28: Broad-Based Category Strength
BROAD-BASED CATEGORY STRENGTH PRODUCT LINE-UP, MARKETING INITIATIVES AND SPORTING EVENTS TO DRIVE GROWTH FOOTBALL RUNNING TRAINING ORIGINALS CEMENTING MARKET FURTHER MARKET FOCUS ON APPAREL BRAND HEAT TO LEADERSHIP SHARE GAINS FRANCHISES CONTINUE GAINING FURTHER FURTHER ROLL-OUT BENEFIT FROM BUILD-
Slide 29: Momentum Across the Globe
MOMENTUM ACROSS THE GLOBE DOUBLE-DIGIT GROWTH EXPECTED FOR THREE LARGEST MARKETS WESTERN NORTH GREATER LATIN EUROPE AMERICA CHINA AMERICA STRENGTHEN MARKET- ENSURE CONTINUED FOCUS ON ONGOING LEADING POSITION MOMENTUM FOOTWEAR TO MACROECONOMIC COMPLEMENT UNCERTAINTIES FURTHER PROCESS LEADERSHIP IN FO
Slide 30: Outlook
OUTLOOK STRONG TOP- AND BOTTOM-LINE IMPROVEMENTS EXPECTED SALES TO INCREASE AT A RATE BETWEEN 11% AND 13% GROSS MARGIN TO IMPROVE UP TO 0.5PP TO A LEVEL OF UP TO 49.1% OPERATING MARGIN TO GROW BY BETWEEN 0.6PP AND 0.8PP TO A LEVEL BETWEEN 8.3% AND 8.5% NET INCOME FROM CONTINUING OPERATIONS TO INCREA
Slide 31: Strategy Acceleration
STRATEGY ACCELERATION 31
Slide 32: Creating the New Is Our Strategy
CREATING THE NEW IS OUR STRATEGY OPEN SOURCE CULTURE BRAND DESIRE 32
Slide 33: The Power to Change Lives
OUR CORE BELIEF T H R O U G H S P O R T, W E H AV E THE POWER TO CHANGE LIVES 33
Slide 34: Culture
CULTURE BUILDING ON OUR PEOPLE’S UNIQUE PASSION FOR SPORTS AND FOR OUR BRANDS DRIVE DIVERSITY WITHIN THE COMPANY IMPROVE TALENT MANAGEMENT FOSTER PERFORMANCE CULTURE IMPLEMENT EQUITY-BASED COMPENSATION REFINE LEADERSHIP STRUCTURE 34
Slide 35: Acceleration Plan
ACCELERATION PLAN FOUR PILLARS TO DRIVE FASTER GROWTH ADIDAS PORTFOLIO ONE ADIDAS DIGITAL NORTH AMERICA STREAMLINE THE STRONGLY DEVELOP IMPROVE DRIVE DIGITAL PORTFOLIO BUSINESS IN NORTH EFFECTIVENESS AND TRANSFORMATION AMERICA INCREASE ALONG ENTIRE VALUE ACTIVELY MANAGE EFFICIENCY CHAIN BRANDS, COUN
Slide 36: Streamlining the Portfolio
STREAMLINING THE PORTFOLIO FOCUS ON CORE COMPETENCIES IN FOOTWEAR AND APPAREL Golf DIVESTITURE DUE TO DIVESTITURE DUE TO INTEGRATION INTO REINTEGRATION INTO TURNAROUND PLAN ADIDAS OUTDOOR TO ADIDAS TO TO • LIMITED GROWTH • LIMITED GROWTH • USE BRAND TO • INCREASE OVERALL • ACCELERATE OF GOLF MARKET
Slide 37: Updated Financial Ambition 2020
UPDATED FINANCIAL AMBITION 2020 REFLECTING ACCELERATION PLAN INITIAL UPDATED TARGET KPIS AMBITION 2020 AMBITION 2020 SALES GROWTH CAGR 2015-2020; currency-neutral HIGH-SINGLE-DIGIT 10%-12% NET INCOME ~15% 20%-22% CAGR 2015-2020 NET SALES € in billions ~22 25-27 ECOMMERCE € in billions 2 4 OPERATING
Slide 38: 'CTN' Off to a Strong Start
‘CTN’ OFF TO A STRONG START AT THE SAME TIME THERE IS STILL A LONG WAY TO GO AMBITION REMAINING TARGET 2015 2016 2020 2017-2020 ACHIEVEMENT NET SALES 16.9 19.3 25.0-27.0 5.7-7.7 EUR BN OPERATING MARGIN 6.5 7.7 11.0 3.3PP % OF NET SALES ECOMMERCE 0.6 1.0 4.0 3.0 EUR BN 38
Slide 39: Summary
SUMMARY WE ARE IN A HIGHLY ATTRACTIVE INDUSTRY CREATING THE NEW IS THE RIGHT STRATEGY EXCEPTIONAL RESULTS ACHIEVED IN 2016 STRONG TOP- AND BOTTOM-LINE GROWTH EXPECTED IN 2017 ACCELERATION PLAN TO GROW REVENUES AND PROFITS EVEN FASTER THAN INITIALLY PROJECTED 39