Adidas Ag · XETR:ADS
Adidas — 9M 2010 Earnings Presentation
35 slides from Adidas's earnings presentation, Nov 4, 2010
Slide 1: First Nine Months 2010 Results Analyst Presentation
First Nine Months 2010 Results Analyst Presentation Herzogenaurach November 4, 2010
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 Delivers On Key 2010 Priorities
adidas Group Delivers On Key 2010 Priorities Football / 2010 adidas Sport Reebok Growth in FIFA World Cup Style Transformation North America Growth in China in H2 4
Slide 5: adidas Group Achieves Record Q3 And YTD Sales
adidas Group Achieves Record Q3 And YTD Sales Q3 2010 Change YTD 2010 Change Net sales (€ in millions) 3,468 10%1) 9,059 8%1) Gross margin 47.3% 2.1pp 48.2% 3.1pp Operating margin 11.8% 0.2pp 9.6% 3.7pp Diluted earnings per share € 1.27 23% € 2.68 137% 1) Currency-neutral 5
Slide 6: Greater China Grows 9% Currency-Neutral In Q3
Greater China Grows 9% Currency-Neutral In Q3 • Inventory in Chinese market significantly improved • Greater China returns to growth in Q3 • Own retail comp store sales almost 20% in Q3 adidas Brand Centre in Beijing 6
Slide 7: Continuing Momentum In North America
Continuing Momentum In North America • Currency-neutral Group sales increase 14% in North America • Currency-neutral adidas sales increase 15% • Currency-neutral Reebok sales grow 25% 7
Slide 8: adidas and Reebok Brand Momentum Continues In Q3
adidas and Reebok Brand Momentum Continues In Q3 Q3 2010 Change 9M 2010 Change Net sales (€ in millions) 2,523 10%1) 6,624 9%1) Gross margin 47.4% 0.6pp 47.6% 1.0pp Net sales (€ in millions) 585 14%1) 1,396 11%1) Gross margin 36.8% 3.1pp 35.8% 4.1pp 1) Currency-neutral 8
Slide 9: Currency-Neutral adidas Sport Performance Sales Up 6% In Q3
Currency-Neutral adidas Sport Performance Sales Up 6% In Q3 • Football remains strongest growing category • Football and Outdoor sales increase at double-digit rates • Running, Training and Basketball sales increase in Q3 9
Slide 10: F50 adiZero Sets New Industry Benchmark
F50 adiZero™ Sets New Industry Benchmark • Positive energy from World Cup continues into new football season • F50 adiZero™ sets new industry benchmark • High-profile competitor athletes switching to adidas boot 10
Slide 11: Outdoor Category Growth Accelerates
Outdoor Category Growth Accelerates • Currency-neutral Outdoor sales increase at double- digit rates in Q3 • Gaining more credibility and TERREX Hybrid jacket recognition as product offering expands • Introduction of first tip to toe TERREX collection TERREX 35 backpack TERREX Solo shoe 11
Slide 12: Lightweight Technologies Drive Growth In Other Categories
Lightweight Technologies Drive Growth In Other Categories • Growth in running driven by adiZero™ footwear and apparel • Positive consumer reaction to the FLUID TRAINER • Lightweight technologies introduced to basketball footwear (adiZero™ Rose) and apparel (Revolution 30 Uniform) 12
Slide 13: adidas Sport Style Sales Advance 21% Currency-Neutral In Q3
adidas Sport Style Sales Advance 21% Currency-Neutral In Q3 • Strong sales momentum especially in Greater China, Western Europe and Japan • Sales mainly driven by Originals and adidas NEO1) • Originals by Originals and Originals Blue collection celebrated by consumers 1) formerly Style Essentials 13
Slide 14: Currency-Neutral Reebok Sales Up 14% in Q3
Currency-Neutral Reebok Sales Up 14% in Q3 • Sales increases of 25% or more in markets such as North America, Russia, Germany, Japan and Korea • EasyTone™ becomes fastest-selling shoe of all time at ABC Mart in Japan • ZigTech™ amongst top-selling shoes at key US retailers 14
Slide 15: Reebok Will Assume Toning Category Leadership
Reebok Will Assume Toning Category Leadership • New EasyTone™ silhouettes to meet all consumer tastes • Toning apparel to hit the US market in Q4 • Continued international roll-out of all toning concepts • Launch of new global EasyTone™ campaign in February 2011 15
Slide 16: adidas Group Fully Committed To American Football
adidas Group Fully Committed To American Football U-Form football cleat adiZero Scorch 16
Slide 17: Other Businesses Grow 3% In 9M Currency-Neutral
Other Businesses Grow 3% In 9M Currency-Neutral YTD 2010 Change Net sales (€ in millions) 1,086 3%1) Gross margin 44.8% 6.4pp Segmental operating 28.3% 7.4pp margin 1) Currency-neutral 17
Slide 18: TaylorMade-adidas Golf Extends Market Leadership
TaylorMade-adidas Golf Extends Market Leadership • New record for metalwood market share in North TRAXION LITE footwear America • Introduction of Burner® 2.0 irons, adiPURE Z and aidPURE Z footwear BURNER® 2.0 irons TRAXION LITE footwear • TaylorMade Tour Staff Pro Martin Kaymer wins PGA Championshi
Slide 19: Priorities For The Remainder Of 2010
Priorities For The Remainder Of 2010 • Aggressively support basketball category for adidas and Reebok • Position Reebok for sustainable success in toning • Continue to work on mitigation efforts to combat input cost rises 19
Slide 20: 2010 Guidance Adjusted
2010 Guidance Adjusted Group sales (currency-neutral) Increase around 8% Wholesale sales (currency-neutral) mid-single-digit increase Retail sales (currency-neutral) mid-teens increase Other Businesses sales (currency-neutral) low-single-digit increase Gross margin around 47.5% Operating margin arou
Slide 21: 2011 – Another Successful Year Ahead
2011 – Another Successful Year Ahead • Group currency-neutral sales up at mid-single-digit rate • Rising input and labour costs • Currency volatility • Diluted earnings per share to increase 10% to 15% 21
Slide 22: Financial Highlights
FINANCIAL HIGHLIGHTS Robin Stalker adidas Group CFO 22
Slide 23: Q3 Group Sales Increase 10% Currency-Neutral
Q3 Group Sales Increase 10% Currency-Neutral Q3 2010 9M 2010 10% 8% Wholesale 19% 13% 15% 16% Retail 27% 22% Other 4% 3% Businesses 17% 10% 10% 8% 20% 14% 0% 10% 20% 30% 0% 10% 20% 30% In euros Currency-neutral Total Group includes HQ/Consolidation 23
Slide 24: Wholesale Revenues Driven By Improvements In Nearly All Regions
Wholesale Revenues Driven By Improvements In Nearly All Regions Wholesale YTD 2010 Change Net sales (€ in millions) 6,247 8%1) Gross margin 42.0% 0.4pp Segmental operating 32.8% stable margin 1) Currency-neutral 24
Slide 25: Retail Segment Sales Increase 16% Currency-Neutral
Retail Segment Sales Increase 16% Currency-Neutral Retail YTD 2010 Change Net sales (€ in millions) 1,725 16%1) adidas comp store sales 8%1) Reebok comp store sales 12%1) Total comp store sales 9%1) Gross margin 61.7% 3.8pp Segmental operating 20.2 % 6.3pp margin 1) Currency-neutral 25
Slide 26: Strong Group Sales Growth In All Regions In Q3
Strong Group Sales Growth In All Regions In Q3 Q3 2010 9M 2010 8% 8% Western Europe 9% 9% Europ. Emerging 16% 14% Markets 29% 20% 14% 12% North America 27% 18% 9% (7%) Greater China 21% (3%) Other Asian 7% 5% Markets 26% 18% 7% 17% Latin America 22% 31% 10% 8% 20% 14% (10%) 0% 10% 20% 30% 40% (10%)
Slide 27: Gross Margin Up 210 Basis Points In Q3
Gross Margin Up 210 Basis Points In Q3 Q3 2010 9M 2010 Q3 gross margin increase driven by Wholesale 41.9% 42.0% (0.3pp) 0.4pp • lower input costs • higher share of Retail Retail 60.9% 61.7% sales at better margins 3.3pp 3.8pp • less clearance sales Other 45.3% 44.8% Businesses 7.5pp 6.4pp 47.3%1) 48
Slide 28: Year-To-Date Group Operating Profit Increases 86%
Year-To-Date Group Operating Profit Increases 86% Q3 2010 9M 2010 Royalty and commission income € 26 million € 72 million +41% +14% Other operating income € 19 million € 91 million (21%) +26% Other operating expenses € 1.275 billion € 3.666 billion +26% +13% Other operating expenses 36.8% 40.5% as a
Slide 29: Diluted EPS More Than Doubles Year-To-Date
Diluted EPS More Than Doubles Year-To-Date Q3 2010 9M 2010 Financial income € 6 million € 21 million (40%) +43% Financial expenses € 37 million € 87 million (8%) (36%) Income tax rate 30.0% 29.7% (0.3pp) (4.5pp) Net income attributable to € 266 million € 560 million shareholders +25% +148% Diluted e
Slide 30: Inventories Return To Normalised Levels
Inventories Return To Normalised Levels • Inventories increase 9% on a currency-neutral basis 21% 18% 20% • In euro terms up to 8% 9% € 1.9 billion 10% • Increase matches growth 0% Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 expectations for future (10%) quarters (8%) (11%) (20%) (20%) (27%) (30
Slide 31: Operating Working Capital As A Percentage Of Sales At Historic Lows
Operating Working Capital As A Percentage Of Sales At Historic Lows • Receivables up 8% on a 27 26.2 currency-neutral basis and 26 25.6 25.6 16% in euro terms to 25 24.5 € 2.2 billion 24.3 24 • Increase below Group’s 22.9 23 sales growth 22 21.7 20.9 • Payables increase 40% on a 21 currency-neutral
Slide 32: Other Key Balance Sheet Ratios Improve
Other Key Balance Sheet Ratios Improve • Net borrowings decrease 61% versus prior year to 3,000 2,883 2,732 € 903 million 2,593 2,500 2,294 2,189 • Ratio of net 2,000 borrowings/EBITDA 1,500 1,359 decreases to 0.7 from 2.8 1,090 917 903 in 2009 1,000 500 • Equity ratio increases 8.6 percentage point
Slide 33: adidas Group In Strong Financial Position To Drive Future Growth
adidas Group In Strong Financial Position To Drive Future Growth • 2010 strategic goals met • All balance sheet metrics improved versus prior year • adidas and Reebok momentum to continue in 2011 • Profitability in 2011 to outpace sales growth 33
Slide 34: Questions & Answers
QUESTIONS & ANSWERS 34
Slide 35: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates Nov 8, 2010 Investor Day Mar 2, 2011 Full Year 2010 Results May 4, 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