Adidas Ag · XETR:ADS
Adidas — Q2 2016 Earnings Presentation
41 slides from Adidas's earnings presentation, Nov 14, 2016
Slide 1: Q2 2016 Roadshow Presentation
HOW Q2 2016 WE ROADSHOW PRESENTATION CREATE THE NEW
Slide 2: Operational Highlights
OPERATIONAL HIGHLIGHTS 2
Slide 3: Major Developments in Q2
MAJOR DEVELOPMENTS IN Q2 ADIDAS GROUP DELIVERS RECORD SECOND QUARTER PERFORMANCE GROUP REVENUES GROW 21% CURRENCY-NEUTRAL OR 13% IN EURO TERMS TO € 4.4 BILLION ONGOING BRAND HEAT AT ADIDAS (+25%) FUELLED BY GROWTH IN KEY PERFORMANCE AND LIFESTYLE CATEGORIES ACCELERATING MOMENTUM AT REEBOK ( +7%) 13t
Slide 4: Strong Growth in Key Markets and Key Categories
STRONG GROWTH IN KEY MARKETS AND KEY CATEGORIES UNDERLINES BROAD-BASED TOP-LINE MOMENTUM WESTERN EUROPE (+29%) GREATER CHINA (+30%) KEY MARKETS NORTH AMERICA (+26%) LATIN AMERICA (+8%) FOOTBALL (+17%) ORIGINALS (+50%) KEY CATEGORIES RUNNING (+30%) NEO (+31%) TRAINING (+11%) 4
Slide 5: Football
STRONG MOMENTUM SUPPORTED BY THE UEFA EURO 2016 FOOTBALL CURRENCY-NEUTRAL REVENUES GROW 17% IN Q2, WITH DOUBLE-DIGIT SALES INCREASES IN MOST MARKETS REVENUES IN APPAREL UP AT A STRONG DOUBLE-DIGIT RATE, REFLECTING THE SUCCESS AROUND FEDERATION JERSEYS NEW RECORD SALES OF € 2.5 BILLION IN 2016 EXPECT
Slide 6: Running
KEY FRANCHISES DRIVE RECORD Q2 SALES RUNNING CURRENCY-NEUTRAL REVENUES SOAR 30% IN Q2, FUELLED BY STRONG DOUBLE-DIGIT SALES GROWTH IN ALL MAJOR MARKETS FOOTWEAR SALES GROW AT A STRONG DOUBLE-DIGIT RATE, DRIVEN BY THE STRONG DEMAND AROUND KEY FRANCHISES HIGHLY ANTICIPATED ULTRA BOOST UNCAGED’ SUCCESS
Slide 7: Training
FOCUS ON FEMALE CONSUMER PROPELS TOP-LINE GROWTH TRAINING CURRENCY-NEUTRAL REVENUES GROW 11% IN Q2, DRIVEN BY HIGH-SINGLE-DIGIT GROWTH IN FOOTWEAR AND DOUBLE-DIGIT INCREASES IN APPAREL DOUBLE-DIGIT SALES GROWTH IN ALL MAJOR REGIONS ONGOING STRONG MOMENTUM IN THE MEN’S BUSINESS FUELLED BY LATEST GENE
Slide 8: Originals
UNRIVALLED EXCITEMENT THROUGH KEY FRANCHISES AND PARTNERSHIPS ORIGINALS CURRENCY-NEUTRAL SALES SURGE 50% IN Q2 DOUBLE-DIGIT INCREASES IN ALL MARKETS EXCEPT RUSSIA/CIS STRONG DOUBLE-DIGIT SALES GROWTH IN BOTH FOOTWEAR AND APPAREL NMD AND YEEZY BOOST REMAIN THE MOST IN-DEMAND SNEAKERS WITH OUTSTANDING
Slide 9: NEO
NEW PRODUCT INTRODUCTIONS FOSTER TOP-LINE MOMENTUM NEO CURRENCY-NEUTRAL SALES UP 31% IN Q2, WITH STRONG DOUBLE-DIGIT GROWTH IN ALL MARKETS EXCEPT JAPAN DOUBLE-DIGIT INCREASES IN FOOTWEAR DRIVEN BY NEW PRODUCT INTRODUCTIONS SUCCESSFUL LAUNCH OF THE CLOUDFOAM FRANCHISE #CLOUDFOAM WITH ALMOST 10 MILLIO
Slide 10: Reebok
13TH CONSECUTIVE QUARTER OF TOP-LINE GROWTH REEBOK CURRENCY-NEUTRAL SALES INCREASE 7% IN Q2 DOUBLE-DIGIT SALES GROWTH IN KEY MARKETS SUCH AS WESTERN EUROPE, GREATER CHINA, RUSSIA/CIS AND JAPAN CLASSICS RECORDS ANOTHER QUARTER OF STRONG DOUBLE-DIGIT SALES GROWTH REEBOK RELEASES THE HIGHLY ANTICIPATED
Slide 11: TaylorMade-adidas Golf
STRATEGIC INITIATIVES SPUR GROWTH TAYLORMADE- ADIDAS GOLF REVENUES AT TMAG UP 7% IN Q2, DRIVEN BY STRONG DOUBLE-DIGIT SALES INCREASES AT TAYLORMADE (+24%) STRONG DOUBLE-DIGIT GROWTH IN METALWOODS, FUELLED BY THE M1 AND M2 PRODUCT FAMILIES TMAG UNDISPUTED NO1 IN METALWOODS TMAG TURNS PROFITABLE IN Q2
Slide 12: Financial Highlights
FINANCIAL HIGHLIGHTS 12
Slide 13: Broad-Based Top-Line Momentum Continues
BROAD-BASED TOP-LINE MOMENTUM CONTINUES WITH STRONG DOUBLE-DIGIT SALES INCREASES IN MOST REGIONS NORTH AMERICA +26% RUSSIA/CIS +7% JAPAN +21% WESTERN EUROPE +29% MEAA +14% GREATER CHINA +30% LATIN AMERICA +8% CURRENCY-NEUTRAL. FIGURES REFLECT COMBINED REVENUES OF THE ADIDAS AND REEBOK BUSINESSES. 13
Slide 14: Western Europe
ACCELERATING MOMENTUM AT ADIDAS AND REEBOK WESTERN CURRENCY-NEUTRAL SALES GROW 29% IN Q2, WITH DOUBLE-DIGIT SALES GROWTH IN ALL MAJOR COUNTRIES EUROPE ADIDAS REVENUES UP 30%, FUELLED BY DOUBLE-DIGIT SALES INCREASES IN KEY PERFORMANCE AND LIFESTYLE CATEGORIES REEBOK SALES INCREASE 23% , DUE TO DOUBLE
Slide 15: North America
MOMENTUM CONTINUES TO GAIN TRACTION NORTH CURRENCY-NEUTRAL SALES GROW 26% IN Q2 ACCELERATING MOMENTUM AT ADIDAS (+32%), DRIVEN BY AMERICA DOUBLE-DIGIT GROWTH IN KEY PERFORMANCE AND LIFESTYLE CATEGORIES REEBOK SALES DECLINE 3%, REFLECTING ONGOING EFFORTS TO STREAMLINE US DISTRIBUTION SIGNIFICANT GROS
Slide 16: Greater China
BRAND HEAT AT ADIDAS AND REEBOK CONTINUES GREATER CURRENCY-NEUTRAL SALES INCREASE 30% IN Q2 9TH CONSECUTIVE QUARTER OF DOUBLE-DIGIT GROWTH CHINA SALES AT ADIDAS GROW 30%, FUELLED BY STRONG DOUBLE- DIGIT GROWTH IN KEY PERFORMANCE CATEGORIES AS WELL AS AT ADIDAS ORIGINALS AND ADIDAS NEO REEBOK REVENUE
Slide 17: Russia/CIS
FURTHER TOP-LINE IMPROVEMENTS DESPITE ONGOING MACROECONOMIC CHALLENGES RUSSIA/CIS REVENUES GROW 7% CURRENCY-NEUTRAL IN Q2 ADIDAS SALES UP 5%, DRIVEN BY DOUBLE-DIGIT GROWTH IN THE RUNNING AND FOOTBALL CATEGORIES AS WELL AS AT ADIDAS NEO REVENUES AT REEBOK INCREASE 13%, SUPPORTED BY DOUBLE-DIGIT SALES
Slide 18: Latin America
RIO 2016 OLYMPIC GAMES TO PROVIDE FURTHER STIMULUS LATIN CURRENCY-NEUTRAL SALES INCREASE 8% IN Q2 TOP-LINE DEVELOPMENT SUPPORTED BY STRONG AMERICA SALES GROWTH IN MOST MAJOR MARKETS REVENUES AT ADIDAS GROW 10%, DRIVEN BY DOUBLE- DIGIT SALES GROWTH IN KEY PERFORMANCE AND LIFESTYLE CATEGORIES REVENUES
Slide 19: Japan
ONGOING STRONG MOMENTUM IN THE MARKETPLACE JAPAN CURRENCY-NEUTRAL SALES UP 21% IN Q2 REVENUES AT ADIDAS UP 17%, DRIVEN BY STRONG DOUBLE- DIGIT SALES GROWTH AT ADIDAS ORIGINALS REEBOK SALES GROW 66%, FUELLED BY STRONG DOUBLE- DIGIT SALES INCREASES IN TRAINING, RUNNING AND CLASSICS GROSS MARGIN IMPROV
Slide 20: MEAA
ROBUST TOP-LINE TRENDS ACROSS MAJOR MARKETS CONTINUE MEAA CURRENCY-NEUTRAL SALES INCREASE 14% IN Q2 TOP-LINE DEVELOPMENT SUPPORTED BY DOUBLE-DIGIT SALES GROWTH IN SOUTH KOREA, TURKEY AND AUSTRALIA ADIDAS UP 17%, FUELLED BY DOUBLE-DIGIT SALES GROWTH IN THE RUNNING AND FOOTBALL CATEGORIES AS WELL AS A
Slide 21: Other Businesses
STRONG IMPROVEMENTS IN PROFITABILITY OTHER CURRENCY-NEUTRAL SALES OF OTHER BUSINESSES UP 6% IN Q2, DUE TO STRONG GROWTH AT TMAG AND OTHER CENTRALLY MANAGED BUSINESSES BUSINESSES OTHER CENTRALLY MANAGED BUSINESSES UP 30%, DRIVEN BY DOUBLE-DIGIT GROWTH AT MOST SUB- BRANDS, IN PARTICULAR Y-3 CCM HOCKEY
Slide 22: Group Gross Margin Improves 0.5pp in Q2
GROUP GROSS MARGIN IMPROVES 0.5PP IN Q2 Q2 2016 H1 2016 GROSS MARGIN +0.5pp 48.8% +0.4pp 49.1% OTHER OPERATING EXPENSES +12% € 1,935 MILLION +13% € 3,858 MILLION OTHER OPERATING EXPENSES (0.3pp) 43.8% (0.8pp) 42.0% AS A PERCENTAGE OF SALES OPERATING PROFIT +77% € 414 MILLION +52% € 905 MILLION OPERA
Slide 23: Other Operating Income Grows € 126 Million
OTHER OPERATING INCOME GROWS € 126 MILLION REFLECTING TWO EXTRAORDINARY GAINS 159 Mitchell & Ness divestiture (ca. 1/3 of increase) Proceeds re-invested in ‘Creating the New’ No operating profit impact Chelsea F.C. contract termination (ca. 2/3 of increase) mid- to high-double-digit million euro
Slide 24: Group Operating Margin Up 3.4pp in Q2
GROUP OPERATING MARGIN UP 3.4PP IN Q2 Q2 2016 H1 2016 GROSS MARGIN +0.5pp 48.8% +0.4pp 49.1% OTHER OPERATING EXPENSES +12% € 1,935 MILLION +13% € 3,858 MILLION OTHER OPERATING EXPENSES (0.3pp) 43.8% (0.8pp) 42.0% AS A PERCENTAGE OF SALES OPERATING PROFIT +77% € 414 MILLION +52% € 905 MILLION OPERATI
Slide 25: Underlying Net Income Nearly Doubles to € 291 Million
UNDERLYING NET INCOME NEARLY DOUBLES TO € 291 MILLION Q2 2016 H1 2016 FINANCIAL INCOME +13% € 9 MILLION +21% € 29 MILLION FINANCIAL (17%) EXPENSES (19%) € 14 MILLION € 27 MILLION INCOME BEFORE TAXES +82% € 410 MILLION +54% € 907 MILLION NET INCOME FROM CONTINUING OPERATIONS +99% € 291 MILLION +60% €
Slide 26: Average OWC in % of Sales Down 1.2pp to 20.4%
AVERAGE OWC IN % OF SALES DOWN 1.2PP TO 20.4% 21.6% INVENTORIES GROW 24% (CN) TO SUPPORT TOP-LINE MOMENTUM 20.7% RECEIVABLES UP 8% (CN) 20.5% 20.4% PAYABLES GROW 10% (CN), 20.2% REFLECTING THE INCREASE IN INVENTORIES Q2/15* Q3/15* Q4/15* Q1/16* Q2/16* Average operating working capital in % of sales
Slide 27: Net Debt Position of € 1,028 Million
NET DEBT POSITION OF € 1,028 MILLION INCREASE IN NET DEBT DUE TO UTILISATION OF CASH FOR THE PURCHASE OF FIXED ASSETS AND (460) THE ACQUISITION OF RUNTASTIC RATIO OF NET DEBT/EBITDA AMOUNTS TO 0.6 (2015: 0.6) EQUITY RATIO REMAINS AT (809) STRONG LEVEL OF 41.3% (2015: 43.5%) (903) (957) (1,028) Q2/15
Slide 28: Outlook
OUTLOOK 28
Slide 29: Olympic Games 2016
OLYMPIC GAMES 2016 ILLUSTRATING THE BREADTH OF THE ADIDAS BRAND 29
Slide 30: Sport Burst
SPORT 16 BURST 2 ADIDAS LAUNCHES NEXT CHAPTER OF ITS BRAND CAMPAIGN 30
Slide 31: Speed of Light
SPEED OF LIGHT ADIDAS UNVEILS SPEED OF LIGHT PACK AHEAD OF THE START OF THE 2016/17 SEASON 31 31
Slide 32: First Never Follows
FIRST NEVER FOLLOWS ADIDAS INTRODUCES THE NEXT CHAPTER OF ITS FOOTBALL CAMPAIGN 32
Slide 33: ACE 16+ PureControl
ACE 16+ PURECONTROL ADIDAS FOOTBALL REINVENTS ON-PITCH SHOE FOR THE STREETS 33
Slide 34: Running
RUNNING COLORBOOST PROVIDES BOOST WITH A NEW LOOK 34
Slide 35: Training
TRAINING NEW PARTNERSHIP WITH SUPERMODEL KARLIE KLOSS 35
Slide 36: Basketball
BASKETBALL INTRODUCING CRAZY EXPLOSIVE 36
Slide 37: Originals
ORIGINALS ICONIC FOOTWEAR FRANCHISE MEETS REAL-LIFE SUPERSTAR 37
Slide 38: NEO
NEO STEPPING INTO COMFORT WITH CLOUDFOAM 38
Slide 39: Reebok
REEBOK PUTTING FURTHER EMPHASIS ON CROSSFIT AND COMBAT TRAINING 39
Slide 40: Improved Outlook
IMPROVED OUTLOOK ADIDAS GROUP INCREASES FY 2016 GUIDANCE GROUP SALES TO INCREASE AT A RATE IN THE HIGH TEENS GROSS MARGIN TO BE BETWEEN 48.0% AND 48.3% OPERATING MARGIN TO INCREASE TO A LEVEL UP TO 7.5% UNDERLYING NET INCOME TO INCREASE AT A RATE BETWEEN 35% AND 39% TO A LEVEL BETWEEN € 975 MILLION
Slide 41: Upcoming Events
UPCOMING EVENTS DATE EVENT NOVEMBER 03, 2016 NINE MONTHS 2016 RESULTS MARCH 08, 2017 FULL YEAR 2016 RESULTS MAY 04, 2017 FIRST QUARTER 2017 RESULTS MAY 11, 2017 ANNUAL GENERAL MEETING MAY 12, 2017 DIVIDEND PAYMENT AUGUST 03, 2017 FIRST HALF 2017 RESULTS 41