Adidas Ag · XETR:ADS
Adidas — FY2019 Earnings Presentation
58 slides from Adidas's earnings presentation, Mar 11, 2020
Slide 1: Herzogenaurach, March 11, 2020
Herzogenaurach, March 11, 2020
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER This presentation and other statements made in connection herewith may contain forward- looking statements with respect to Management’s plans and expectations for the future development of adidas. Such forward-looking statements are subject to risks and uncertainties, which are beyo
Slide 3: 70 Years of adidas
70 YEARS OF ADIDAS
Slide 4: adidas x Prada, recyclable hoodie, Stella McCartney
ADIDAS X PRADA 100% RECYCLABLE HOODIE a jas STE LéMcC\RTNEY REEBOK ; LONDON NANO 9 AGSHIP
Slide 5: Agenda
AGENDA 01 STRATEGIC UPDATE 02 BUSINESS UPDATE 03 FINANCIAL UPDATE 04 OUTLOOK 5
Slide 6: Strategic Update
STRATEGIC UPDATE KASPER RORSTED CEO
Slide 7: Creating the New: last year of current strategic cycle
‘CREATING THE NEW’ WE ARE IN THE LAST YEAR OF OUR CURRENT STRATEGIC CYCLE OPEN SOURCE TOP LINE & MARKET SHARE GROWTH CULTURE BRAND GROSS MARGIN DESIRE EXPANSION OPERATING LEVERAGE 7
Slide 8: Culture: our foundation to drive value creation
CULTURE OUR FOUNDATION TO DRIVE VALUE CREATION LIVING A PERFORMANCE CULTURE New company-wide performance management system well established ACTIVATING LEADERSHIP GROUPS Further improved cross-functional collaboration, decision making and succession planning ALIGNING WITH SHAREHOLDER INTERESTS Throug
Slide 9: Strategic choices: execution drives further progress in 2019
STRATEGIC CHOICES EXECUTION DRIVES FURTHER PROGRESS IN 2019 BN M > Net sales share of speed-enabled products Revenues across the six global key cities Made more than eleven million pairs of at 47% across all categories and markets reached a level of € 1.7 billion shoes containing Parley Ocean Plasti
Slide 10: Acceleration Plan: execution drives further progress in 2019
‘ACCELERATION PLAN’ EXECUTION DRIVES FURTHER PROGRESS IN 2019 + BN ~ K + Reebok with 12% revenue growth adidas North America revenues Global business services organization adidas app live in more in its home market North America reached a level of € 4.8 billion grew to almost 1,000 employees than 30
Slide 11: Business Update
BUSINESS UPDATE KASPER RORSTED CEO
Slide 12: Strengths & Weaknesses: 2019 another record year
STRENGTHS & WEAKNESSES 2019 ANOTHER RECORD YEAR DESPITE SOME CHALLENGES CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS SUPPLY CHAIN SHORTAGES WITH EXPECTED IMPACT + − Greater China and e-com up double-digits Weighing on both growth and profitability TOP LINE DRIVEN BY ALL MARKET SEGMENTS MUTED GROWTH
Slide 13: P&L Highlights: delivered on 2019 guidance
P&L HIGHLIGHTS DELIVERED ON 2019 GUIDANCE Outlook 2019 Results 2019 Net sales* Increase of 5% – 8% Increase of 6% Gross margin Increase to around 52.0% Increase to 52.0% Operating margin Increase of 0.5pp – 0.7pp to 11.3% – 11.5% Increase to 11.3% Net income from continuing operations Increase of 8%
Slide 14: Continued progress in strategic growth areas
CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS GREATER CHINA AND E-COM UP DOUBLE-DIGITS IN 2019 ADIDAS NORTH AMERICA Added more than € 2.5 billion since 2015 GREATER CHINA Added more than € 2.7 billion since 2015 E-COMMERCE Added more than € 2.1 billion since 2015 Currency-neutral. 14
Slide 15: adidas brand grows in all markets
ADIDAS BRAND GROWS IN ALL MARKETS DOUBLE-DIGIT INCREASES IN ASIA-PACIFIC AND EMERGING MARKETS % SPORT PERFORMANCE INCREASES 5% Training, outdoor and basketball grow at double-digit rates SPORT INSPIRED GROWS 8% Originals the biggest growth contributor BALANCED GROWTH Footwear growing mid-single-digi
Slide 16: Profitable top-line growth at Reebok
PROFITABLE TOP-LINE GROWTH AT REEBOK DRIVEN BY ITS HOME MARKET NORTH AMERICA % REEBOK REVENUES INCREASE 2% Double-digit growth in North America, Emerging Markets and Russia/CIS CLASSICS GROWS LOW-SINGLE-DIGITS Driven by increases in both footwear and apparel SPORT RECORDS MODERATE DECLINE Strong gro
Slide 17: Another year of exceptional e-commerce growth
ANOTHER YEAR OF EXCEPTIONAL E-COMMERCE GROWTH E-COM NOW REPRESENTS ALMOST € 3 BILLION OF OUR BUSINESS % E-COMMERCE REVENUES GROW 34% Greater China the biggest growth contributor CREATORS CLUB GAINING TRACTION WITH CONSUMERS Member sales account for more than half of e-com revenues across US and Euro
Slide 18: 2019 in review
2019 IN REVIEW SUCCESSFULLY TACKLED OUR 2019 FOCUS AREAS Leveraging multiple dimensions of innovation To drive top- and bottom-line growth Continuing to invest with impact Into brand desire and scalable business model Delivering overproportionate net income growth On the back of sustainable operatin
Slide 19: Financial Update
FINANCIAL UPDATE HARM OHLMEYER CFO
Slide 20: Revenue growth by market segment
REVENUE GROWTH BY MARKET SEGMENT ALL REGIONS RECORDING SALES INCREASES IN 2019 +8% Operating margin: 25.4% (+0.8pp) +3% +8% Operating margin: 23.2% (+3.2pp) Operating margin: 13.5% (-1.4pp) +10% Operating margin: 33.7% (+0.9pp) +7% +13% Operating margin: 28.2% (+0.4pp) Operating margin: 17.8% (+0.7p
Slide 21: Growth by market segment: North America, Asia-Pacific, Europe
GROWTH BY MARKET SEGMENT NORTH AMERICA, ASIA-PACIFIC AND EUROPE Supply chain shortages weighing on Asia-Pacific up double-digits driven by Europe returns to growth as initiatives growth and profitability in North America 15% growth in Greater China and reinvestments show planned effects adidas brand
Slide 22: Growth by market segment: Emerging Markets, Latin America, Russia/CIS
GROWTH BY MARKET SEGMENT EMERGING MARKETS, LATIN AMERICA AND RUSSIA/CIS Double-digit sales growth despite Profitable growth despite challenging Significant sales growth despite tough geopolitical tensions in several countries macroeconomic environment prior year World Cup comparison base adidas bran
Slide 23: P&L Overview 2019 Results
P&L OVERVIEW 2019 RESULTS (€ in millions) FY 2019 FY 2018 Y-O-Y NET SALES 23,640 21,915 +8% GROSS MARGIN 52.0% 51.8% +0.2pp OTHER OPERATING EXPENSES 9,843 9,172 +7% OTHER OPERATING EXPENSES in % of sales 41.6% 41.9% -0.2pp OPERATING PROFIT 2,660 2,368 +12% OPERATING MARGIN 11.3% 10.8% +0.4pp +15% to
Slide 24: Gross margin development since 2015
GROSS MARGIN DEVELOPMENT SINCE 2015 ACHIEVED INDUSTRY-LEADING GROSS MARGIN LEVEL “slight decrease" 52.0% 51.8% 50.4% Gross margin up 0.2pp to 52.0% in 2019 Supported by favorable FX development 49.2% Increase of 3.7pp compared to 2015 level 48.3% Due to execution of ‘Creating the New’ Only slight de
Slide 25: Other operating expenses
OTHER OPERATING EXPENSES DTC-DRIVEN OPERATING OVERHEAD GROWTH IN 2019 (€ in millions) FY 2019 FY 2018 Y-O-Y OTHER OPERATING EXPENSES 9,843 9,172 +7% (in % of sales) 41.6% 41.9% -0.2pp MARKETING AND POINT-OF-SALE EXPENSES 3,042 3,001 +1% DISTRIBUTION AND SELLING (in % of sales) 12.9% 13.7% -0.8pp EXP
Slide 26: Average operating working capital
AVERAGE OPERATING WORKING CAPITAL FURTHER DECLINE TO 18.1% 21.1% 20.5% 20.4% -0.9PP Inventories up 18% c.n. Due to low comparison base and Chinese New Year 19.0% Receivables up 8% c.n. 18.1% Representing healthy development Payables up 17% c.n. Due to improved terms with vendors 2015 2016 2017 2018
Slide 27: Net cash and equity position
NET CASH AND EQUITY POSITION EQUITY RATIO DECREASES DUE TO IFRS 16 -86 959 873 484 Net cash position At € 873 million Equity position -103 Increases € 420 million year-on-year Equity ratio -460 Down 8.0pp year-on-year due to IFRS 16 2015 2016 2017 2018 2019 Net cash/(net borrowings) at year-end, € i
Slide 28: Attractive cash returns to shareholders
ATTRACTIVE CASH RETURNS TO SHAREHOLDERS DIVIDEND INCREASE OF 15% TO € 3.85 PROPOSED FOR 2019 2018 2019 2020 TOTAL Dividend paid € 0.5 billion € 0.7 billion € 0.8 billion* € 2.0 billion Share up to up to buyback € 1.0 billion € 0.8 billion € 1.0 billion € 2.8 billion volume Total cash up to up to ret
Slide 29: Outlook
OUTLOOK KASPER RORSTED CEO
Slide 30: 2020 Focus Areas
2020 FOCUS AREAS COMMITTED TO BRINGING ‘CREATING THE NEW’ HOME Leverage major launches and sports events in 2020 Driving product activation and consumer engagement Deliver double-digit bottom-line growth Continuing to sustainably balance sales growth and margins Bring ‘Creating the New’ home Remaini
Slide 31: Products using recycled and natural materials
Products created Products designed using recycled materials to have multiple lifecycles Products created using natural materials 31
Slide 32: Parley
PARLEY 32
Slide 33: Futurecraft Loop
FUTURECRAFT LOOP 33
Slide 34: Biofabric Tennis Dress
BIOFABRIC TENNIS DRESS 34
Slide 35: Euro 2020
EURO 2020 35
Slide 36: Tokyo Olympics 2020
TOKYO OLYMPICS 2020 36
Slide 37: GMR
OM + PLAY CONNECTED GMR JncauARO reece 37
Slide 38: 4D
4D 38
Slide 39: Adizero Pro
al eae, ADIZERO PRO
Slide 40: SL20 UB20
SL20 UB20 40
Slide 41: RDY
RDY 41
Slide 42: Superstar
SUPERSTAR 42
Slide 43: Beyoncé
BEYONCÉ 43
Slide 44: Yeezy
YEEZY 44
Slide 45: Reebok
REEBOK 45
Slide 46: Outlook 2020 without impact of coronavirus outbreak
OUTLOOK 2020 WITHOUT IMPACT OF CORONAVIRUS OUTBREAK Outlook 2020 Net sales* Increase of 6% – 8% Gross margin Slight decrease compared to prior year level of 52.0% Operating margin Increase of 0.2pp – 0.5pp to 11.5% – 11.8% Net income from Increase of 10% – 13% continuing operations to € 2.100 – € 2.
Slide 47: On track to achieve Creating the New targets
ON TRACK TO ACHIEVE ‘CREATING THE NEW’ TARGETS AS IMPLIED BY OUTLOOK 2020 ‘CTN’ Targets 2020 Implied by March 2015 March 2017 March 2018 Outlook 2020 Net sales growth CAGR 2015-2020 c.n. high-single-digit 10% – 12% 10% – 12% ~11% Net income CAGR 2015-2020 ~15% 20% – 22% 22% – 24% 24% – 25% Net sales
Slide 48: Measures implemented in response to coronavirus
MEASURES IMPLEMENTED IN RESPONSE TO CORONAVIRUS HEALTH AND SAFETY OF OUR PEOPLE REMAINS TOP PRIORITY Dedicated task force team in place Temporary closure of office locations and stores Restricting international business travel Ongoing guidance and support for employees 48
Slide 49: Continuing to execute in rest of world despite coronavirus
CONTINUING TO EXECUTE IN THE REST OF THE WORLD DESPITE CORONAVIRUS WHILE MANAGING THE IMPACT IN GREATER CHINA Greater China Asia-Pacific (excl. Greater China) North America 6%-8% Europe Russia/CIS Latin America Emerging Markets 6%-8% GLOBAL GREATER CHINA REST OF WORLD Outlook 2020 without impact of
Slide 50: Assessment of coronavirus developments and impact on business
ASSESSMENT OF CORONAVIRUS DEVELOPMENTS AND THE IMPACT ON OUR BUSINESS WHAT WE KNOW WHAT WE DON’T KNOW Jan 25 WHAT WE DON’T KNOW Jan 1 Feb 29 End of Q1 Remainder of 2020 Chinese New Year ▪ Strong development in ▪ Greater China revenues ▪ Slight improvement in ▪ Recovery in Greater China and extent of
Slide 51: Assessment of coronavirus impact in the first quarter
ASSESSMENT OF CORONAVIRUS IMPACT IN THE FIRST QUARTER COMPANY’S NET SALES EXPECTED TO BE MORE THAN 10% BELOW PRIOR YEAR LEVEL IN Q1 Q1 company net sales >10% below prior year Asia-Pacific Rest of World € 5.9 billion Rest of World Greater China Net sales to grow 6% - 8% € 0.8 - 1.0 billion currency-n
Slide 52: Greater China growth trajectory
GREATER CHINA GROWTH TRAJECTORY CORONAVIRUS EXPECTED TO ONLY CAUSE A TEMPORARY DIP IN 2020 Double-digit top-line growth Return to growth path Dip due to coronavirus 2015-2019 2020 2021+ 52
Slide 53: Creating the New has made us stronger
‘CREATING THE NEW’ HAS MADE US STRONGER HEALTHY FUNDAMENTALS ENSURE THAT FUTURE PROSPECTS REMAIN INTACT Record profit and cash generation Stronger-than-ever balance sheet Resilient business model Proven ability to take the right decisions for long-term success A leading player in an attractive indus
Slide 54: Creating the New has made us stronger
‘CREATING THE NEW’ HAS MADE US STRONGER HEALTHY FUNDAMENTALS ENSURE THAT FUTURE PROSPECTS REMAIN INTACT ATHLEISURE IS HERE TO STAY Sportswear a permanent component of fashion landscape Record profit and cash generation STRUCTURAL SHIFT IN CONSUMER MINDSET Rising sports participation rates as well as
Slide 55: Summary
SUMMARY 1 Proved resilience in 2019 and again delivered double-digit earnings growth 2 Shareholders participating in the company’s ongoing success 3 Investing back into brands and business for future profitable growth 4 Leverage company’s strength to manage impact from coronavirus outbreak 5 Focused
Slide 56: Four years into Creating the New: delivering on promises
FOUR YEARS INTO ‘CREATING THE NEW’ WE KEEP DELIVERING ON OUR PROMISES Annual Outlook 2016 2017 2018 2019 SINCE START OF ‘CTN’ Net sales Operating margin Net income 2019 compared to 2015; figures reflect continuing operations as a result of the divestiture of the Rockport, TaylorMade, Adams Golf, Ash
Slide 57: Q&A
Q&A
Slide 58: adidas Investor Relations team
ADIDAS INVESTOR RELATIONS TEAM COMMUNICATIONS ADRIAN ROTT SEBASTIAN STEFFEN Senior Director Investor Head of Investor Relations Relations ANJA KLIEBER LAURA SÄNGER CHRISTOPH RUMP PHILIPP ULRICH MORITZ VERLEGER Senior Manager Investor Assistant Manager Investor Director Investor Relations Manager Inv