Adidas Ag · XETR:ADS
Adidas — Q1 2011 Earnings Presentation
55 slides from Adidas's earnings presentation, May 24, 2011
Slide 1: Roadshow Presentation – Q1/11
Roadshow Presentation – Q1/11 London, May 24-25, 2011 Robin Stalker CFO, adidas Group
Slide 2: Agenda
Agenda • Q1 2011 Highlights • Outlook and summary • Appendix: 2015 Aspirations 2
Slide 3: adidas Group Has Fastest Q1 In History
adidas Group Has Fastest Q1 In History • Record sales of € 3.3 billion • Gross margin virtually unchanged • Net income and EPS increase 25% 3
Slide 4: Group Sales Growth Accelerates To 18%
Group Sales Growth Accelerates To 18%1) +14% Western European Markets1) +26% European Emerging Markets1) +26% North America1) +36% Greater China1) +7% Other Asian Markets1) +15% Latin America1) 1) Sales development on a currency-neutral basis 4
Slide 5: Wholesale Revenues Driven By Improvements In All Regions
Wholesale Revenues Driven By Improvements In All Regions Wholesale Q1 2011 Change Net sales (€ in millions) 2,320 18%1) Gross margin 43.1% 0.0pp Segmental operating margin 34.6% +1.5pp 1) Currency-neutral 5
Slide 6: Retail Comparable Store Sales Increase 17%
Retail Comparable Store Sales Increase 17% Retail Q1 2011 Change Net sales (€ in millions) 577 22%1) adidas comp store sales 17%1) Reebok comp store sales 15%1) Total comp store sales 17%1) Gross margin 61.2% +3.0pp Segmental operating margin 15.4% 4.2pp 1) Currency-neutral 6
Slide 7: Other Businesses Grow 14%
Other Businesses Grow 14% Other Businesses Q1 2011 Change Net sales (€ in millions) 376 14%1) Gross margin 45.6% +0.6pp Segmental operating margin 28.1% (0.9pp) 1) Currency-neutral 7
Slide 8: Strong adidas And Reebok Brand Momentum
Strong adidas And Reebok Brand Momentum Q1 2011 Change Net sales (€ in millions) 2,439 18%1) Gross margin 47.8% 0.1pp Net sales (€ in millions) 477 24%1) Gross margin 37.2% 0.9pp 1) Currency-neutral 8
Slide 9: adidas Sales Increase 18% Currency-Neutral
adidas Sales Increase 18% Currency-Neutral adidas Sport Performance adidas Sport Style Up 15% Up 27% 9
Slide 10: Innovation Drives Growth In Running
Innovation Drives Growth In Running • adiZero F50 Runner and ClimaCool Ride drive category sales up over 30% 10
Slide 11: Basketball Momentum Set To Continue
Basketball Momentum Set To Continue • Q1 sales increase 14% c.n. • adiZero Crazylight, the lightest ever basketball shoe, to hit retail in June 2011 11
Slide 12: adidas Outdoor Sales Advance 25%
adidas Outdoor Sales Advance 25% 12
Slide 13: adidas To Introduce Interactive Football Boot
adidas To Introduce Interactive Football Boot ? 13
Slide 14: adidas Launches “all adidas” Campaign
adidas Launches “all adidas” Campaign • Largest ever global brand campaign • “all adidas” launched in March 2011 • Fusion of sport, music and fashion • Celebration of every aspect of the adidas brand • Commercial success story already 14
Slide 15: Reebok Delivers Strong Sales And Margin Improvements
Reebok Delivers Strong Sales And Margin Improvements • Sales increase of 24% currency-neutral • Reebok gross margin up 0.9pp to 37.2% • More than 20% growth in most regions 15
Slide 16: ZigTech Continues To Go From Strength To Strength
ZigTech Continues To Go From Strength To Strength 16
Slide 17: Reebok Third Product Pillar RealFlex Starts Strongly
Reebok Third Product Pillar RealFlex Starts Strongly • 76 independent “sensors” help promote natural movement • Support of natural movement and flexibility • Very encouraging initial sell-through from retail 17
Slide 18: TMaG Grows 20% Currency-Neutral In Q1
TMaG Grows 20% Currency-Neutral In Q1 • White R11 driver well received by tour players and consumers • Martin Kaymer crowned world no. 1 golfer for first time 18
Slide 19: Group Gross Margin Virtually Unchanged
Group Gross Margin Virtually Unchanged Wholesale 43.1% 0.0pp • Higher input costs • Currency/Hedging Retail 61.2% 3.0pp • Higher Retail sales at higher margins Other 45.6% Businesses 0.6pp • Less clearance sales • Overproportionate growth in emerging 48.5%1) markets (0.1pp) Q1 Group gross profit up
Slide 20: Group Operating Margin Increases On A Comparable Basis
Group Operating Margin Increases On A Comparable Basis Q1 2011 Royalty and commission income € 18 million (16%) Other operating income € 17 million (63%) Other operating expenses € 1.309 billion 18% Other operating expenses 40.0% as a percentage of sales (1.5pp) Operating profit € 313 million 21% Op
Slide 21: Diluted EPS Increase 25%
Diluted EPS Increase 25% Q1 2011 Financial income € 5 million (61%) Financial expenses € 33 million 14% Income tax rate (4.0pp) 26.5% Net income attributable to shareholders € 209 million 25% Diluted earnings per share € 1.00 25% 21
Slide 22: Operating Working Capital As A Percentage Of Sales
Operating Working Capital As A Percentage Of Sales Continues to Improve • Inventories increase 23% on a 27 26.2 currency-neutral basis 26 25.6 25.6 • Mirrors growth expectations 25 24.3 for next quarters 24 22.9 • Receivables up 10% on a 23 currency-neutral basis 22 21.7 20.9 20.8 • Increase below G
Slide 23: Net Debt Declines Considerably
Net Debt Declines Considerably • Net borrowings decrease 33% versus 3,000 2,883 2,732 prior year to 2,500 € 914 million 2,294 2,000 • Ratio of net borrowings/EBITDA 1,500 1,359 1,090 decreases to 0.8 from 1,000 917 903 914 1.4 in 2010 500 221 • Equity ratio increases 0 0.6 percentage points to Q1/09
Slide 24: Agenda
Agenda • Q1 2011 Highlights • Outlook and summary • Appendix: 2015 Aspirations 24
Slide 25: 2011 Revenue Guidance Increased
2011 Revenue Guidance Increased Group sales (currency-neutral) high-single-digit increase Wholesale sales (currency-neutral) mid- to high-single-digit increase Retail sales (currency-neutral) low-double-digit increase Other Businesses sales (currency-neutral) mid-single-digit increase Gross margin 4
Slide 26: Impact Of Japan On Group Performance
Impact Of Japan On Group Performance • adidas Group market leader in Japan • Japan represents a high-single-digit percentage of Group sales and is highly profitable • Scenarios imply sales decline of 15% to 25% in Japan from April to December • Strength in other markets to compensate for shortfalls
Slide 27: Strong Start To Route 2015
Strong Start To Route 2015 • Group sales to increase at a high-single-digit rate • Position in key growth markets continues to improve • Despite negative headwinds profitability targets all confirmed • 2011 a fitting start to our Route 2015 journey 27
Slide 28: Agenda
Agenda • Q1 2011 Highlights • Outlook and summary • Appendix: 2015 Aspirations 28
Slide 29: Global Brands Game Changing Growth Projects
Global Brands Game Changing Growth Projects REEBOK NEO ADIDAS FITNESS EMPIRE FAST FASHION RUNNING BASKETBALL CUSTOMIZATION INTERACTIVITY 29
Slide 30: 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 % 30
Slide 31: 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 % 31
Slide 32: Brand Differentiation
Brand Differentiation OLYMPIC RUNNING FOOTBALL TENNIS AMERICAN SPORTS REGIONAL & 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 33: adidas Sport Performance – Making The Athlete Better
adidas Sport Performance – Making The Athlete Better COOLER STRONGER FASTER NATURAL SMARTER 33
Slide 34: 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 35: 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 35
Slide 36: 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 37: 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 38: Reebok – Brand Positioning
Reebok – Brand Positioning FUN + FITNESS WOMEN MEN GIRLS BOYS TRAINING TRAINING RUNNING RUNNING WALKING CLASSICS SPORTS 38
Slide 39: Three Elements Of Total Fitness
Three Elements Of Total Fitness Strength Conditioning Flexibility 39
Slide 40: Key Concepts Fitness/Training
Key Concepts Fitness/Training Strength Conditioning Flexibility 40
Slide 41: 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 41
Slide 42: 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 42
Slide 43: 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 43
Slide 44: 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 44
Slide 45: 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 45
Slide 46: Generation US Focus Sports
Generation US Focus Sports 7 Million High School Athletes Basketball Football Soccer Baseball Running Training 46
Slide 47: Chinese Consumer Becoming More Sophisticated
Chinese Consumer Becoming More Sophisticated 47
Slide 48: 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 49: Time To Unleash Originals
Time To Unleash Originals Pie adidas f ORIGINALS
Slide 50: 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 50
Slide 51: 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 51
Slide 52: 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 52
Slide 53: 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 53
Slide 54: Questions & Answers
adidas QUESTIONS & ANSWERS
Slide 55: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates Aug 4, 2011 First Half 2011 Results Nov 3, 2011 Nine Months 2011 Results 55