Adidas Ag · XETR:ADS
Adidas — H1 2010 Earnings Presentation
38 slides from Adidas's earnings presentation, Sep 22, 2010
Slide 1: Roadshow Presentation
Roadshow Presentation UniCredit GIC, Sept 22, 2010 Robin Stalker CFO, adidas Group
Slide 2: Agenda
Agenda • H1 2010 Operational Highlights • H1 2010 Financial Highlights • Outlook and Summary 2
Slide 3: adidas Group Delivers Record First Half Results
adidas Group Delivers Record First Half Results YTD 2010 Change Net sales (€ in millions) 5,590 7%1) Gross margin 48.8% +3.7pp Operating margin 8.1% +5.6pp Diluted earnings per share € 1.41 n/a 1) Currency-neutral 3
Slide 4: Wholesale Revenues Driven By Improvements In North America And Western Europe
Wholesale Revenues Driven By Improvements In North America And Western Europe Wholesale YTD 2010 Change Net sales (€ in millions) 3,826 6%1) Gross margin 42.0% +0.8pp Segmental operating 32.2% +0.5pp margin 1) Currency-neutral 4
Slide 5: Retail Segment Sales Increase 16% Currency-Neutral
Retail Segment Sales Increase 16% Currency-Neutral Retail YTD 2010 Change Net sales (€ in millions) 1,061 16%1) adidas comp store sales 7%1) Reebok comp store sales 15%1) Total comp store sales 8%1) Gross margin 62.1% +4.2pp Segmental operating 18.7 % +7.8pp margin 1) Currency-neutral 5
Slide 6: adidas Generates Record Football Revenues
adidas Generates Record Football Revenues 6
Slide 7: adidas Sport Style Sales Advance 19% Currency-Neutral
adidas Sport Style Sales Advance 19% Currency-Neutral 7
Slide 8: Reebok Q2 Sales Increase By 30% In North America
Reebok Q2 Sales Increase By 30% In North America 8
Slide 9: Consumer Reaction To ZigTech Extremely Positive
Consumer Reaction To ZigTech™ Extremely Positive 9
Slide 10: Other Businesses Grow 3% In H1 Currency-Neutral
Other Businesses Grow 3% In H1 Currency-Neutral YTD 2010 Change Net sales (€ in millions) 703 3%1) Gross margin 44.6% +5.8pp Segmental operating 28.0% +8.4pp margin 1) Currency-neutral 10
Slide 11: Strong Product Pipeline And Marketing Initiatives Support Growth In Weak Market Environment
Strong Product Pipeline And Marketing Initiatives Support Growth In Weak Market Environment 11
Slide 12: Agenda
Agenda • H1 2010 Operational Highlights • H1 2010 Financial Highlights • Outlook and Summary 12
Slide 13: Double-Digit Growth Rates In All Regions Except Greater China In Q2
Double-Digit Growth Rates In All Regions Except Greater China In Q2 Q2 2010 H1 2010 13% Western Europe 15% 8% 10% Europ. Emerging 25% 13% 34% Markets 15% 8% 10% North America 14% 12% (18%) (16%) Greater China (12%) (16%) Other Asian 11% 4% 27% 14% Markets 27% 23% Latin America 46% 36% 11% 7% 19% 11%
Slide 14: Q2 Gross Margin Increases 400 Basis Points
Q2 Gross Margin Increases 400 Basis Points Q2 2010 H1 2010 Q2 gross margin increase driven by Wholesale 41.0% 42.0% 1.4pp 0.8pp • lower input costs • higher share of Retail Retail 65.1% 62.1% sales at better margins 4.4pp 4.2pp • less clearance sales Other 44.2% 44.6% Businesses 5.9pp 5.8pp • curren
Slide 15: adidas and Reebok Brand Momentum Accelerates In Q2
adidas and Reebok Brand Momentum Accelerates In Q2 Q2 2010 Change H1 2010 Change Net sales (€ in millions) 2,103 13%1) 4,101 8%1) Gross margin 48.2% 2.1pp 47.7% 1.2pp Net sales (€ in millions) 435 16%1) 811 9%1) Gross margin 34.2% 2.6pp 35.1% 4.7pp 1) Currency-neutral 15
Slide 16: Significant Improvement In Group Operating Profit
Significant Improvement In Group Operating Profit Q2 2010 H1 2010 Royalty and commission income € 24 million € 45 million (0%) +3% Other operating income € 25 million € 72 million +16% +49% Other operating expenses € 1,281 million € 2,390 million +19% +7% Other operating expenses 43.9% 42.8% as a pe
Slide 17: Financial Expenses Decline 41% In H1 2010
Financial Expenses Decline 41% In H1 2010 Q2 2010 H1 2010 Financial income € 11 million € 23 million +314% +217% Financial expenses € 30 million € 58 million (35%) (41%) Income tax rate 28.1% 29.5% (43.2pp) (37.2pp) Net income attributable to € 126 million € 295 million shareholders n/a n/a Basic an
Slide 18: Inventories Decline 11% Currency-Neutral
Inventories Decline 11% Currency-Neutral • Inventories decrease 11% on a currency-neutral basis 21% 18% 20% 15% • In euro terms stable at 8% 10% € 2 billion 0% • Reduction of production Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 volumes in 2009 and effective (10%) (8%) clearance initiatives dri
Slide 19: Operating Working Capital Declines To 21.7% As A Percentage Of Sales
Operating Working Capital Declines To 21.7% As A Percentage Of Sales • Receivables up 3% on a currency-neutral basis and 27 26.2 16% in euro terms to 26 25.6 25.6 € 1.999 billion 25 24.5 24.3 • Reflects strict discipline in 24 implementing the Group’s 22.9 trade terms 23 • Payables increase 29% on a
Slide 20: Other Key Balance Sheet Ratios Improve
Other Key Balance Sheet Ratios Improve • Net borrowings decrease 60% versus prior year to 3,000 2,883 2,732 € 1.090 billion 2,500 2,593 2,294 2,189 • Ratio of net 2,000 borrowings/EBITDA 1,359 decreases to 1.0 from 2.9 1,500 1,090 in 2009 1,000 917 • Equity ratio increases 500 10.7 percentage points
Slide 21: Agenda
Agenda • H1 2010 Operational Highlights • H1 2010 Financial Highlights • Outlook and Summary 21
Slide 22: 2010 Guidance Increased
2010 Guidance Increased Group sales (currency-neutral) mid-single-digit increase Wholesale sales (currency-neutral) mid-single-digit increase Retail sales (currency-neutral) low-double-digit increase Other Businesses sales (currency-neutral) low-single-digit increase Gross margin approaching 47.5% O
Slide 23: Three Key Priorities For The Remainder Of 2010
Three Key Priorities For The Remainder Of 2010 • Take measures to mitigate gross margin headwinds • Return China to growth • Exploit strong product and concept pipeline 23
Slide 24: Industry Will Face Gross Margin Headwinds In 2011
Industry Will Face Gross Margin Headwinds In 2011 • Increasing raw material, • Global Operations efficiency labour and transportation initiatives costs • Hedging for 2011 largely • Industry capacity constraints completed • US dollar appreciation • More flexibility in pricing strategy compared to 200
Slide 25: Initiatives Underway To Return China To Growth
Initiatives Underway To Return China To Growth • Strength of adidas brand clear with own retail comp store sales up double-digit in H1 • Significant clean up of retail inventory completed • Franchisee comp store sales now positive in July • Strategy devised for push into lower tier cities • Biggest
Slide 26: Sustaining Investment To Maintain Strong Momentum
Sustaining Investment To Maintain Strong Momentum • Support industry leading product pipeline • Accelerate consumer demand in slow paced economic recovery • Increase efficiency of own-retail • Invest in holostic eCommerce strategy 26
Slide 27: Football Offensive To Continue In The Second Half
Football Offensive To Continue In The Second Half 27
Slide 28: Launch Of miCoach Mobile Application, Turning Smart Phones Into Mobile Coaches
Launch Of miCoach Mobile Application, Turning Smart Phones Into Mobile Coaches THE PACER THE ZONE MOBILE APP 28
Slide 29: Key Innovations In Training And Outdoor
Key Innovations In Training And Outdoor Training Outdoor TERREX Solo TechFit PowerWEB Boat Lace CC Fluid Trainer TERREX Fast X FM Mid 29
Slide 30: adidas Sport Style Initiatives To Continue Momentum
adidas Sport Style Initiatives To Continue Momentum adidas Originals MEGA collection adidas Originals by Jeremy Scott 30
Slide 31: Reebok Expands ZigTech To New Categories And Markets
Reebok Expands ZigTech™ To New Categories And Markets • Launch of ZigTech™ in basketball, with No. 1 NBA Draft Pick John Wall • ZigTech™ concept to be rolled out across Europe in second half of 2010 • Focus on new ZigTech™ silhouettes for women 31
Slide 32: Investments In Retail and eCommerce
Investments In Retail and eCommerce • Invest in people and processes • Remodel existing stores • Create centrally driven eCommerce structure 32
Slide 33: Questions & Answers
QUESTIONS & ANSWERS 33
Slide 34: Appendix
APPENDIX adidas GROUP
Slide 35: Q2 Group Sales Increase 11% Currency-Neutral
Q2 Group Sales Increase 11% Currency-Neutral Q2 2010 H1 2010 Wholesale 12% 6% 20% 10% Retail 17% 16% 24% 20% Other (1%) 3% Businesses 7% 7% 11% 7% 19% 11% (5%) 5% 15% 25% (5%) 5% 15% 25% In euros Currency-neutral Total Group includes HQ/Consolidation 35
Slide 36: Marketing Working Budget Expenditures Decline
Marketing Working Budget Expenditures Decline 1,500 1,429 14.5% 14.2% 1,378 1,301 1,269 14.0% 13.4% 13.5% 1,000 942 13.2% 13.0% 12.9% 12.5% 500 12.2% 12.0% 11.5% 0 11.0% 2005 2006 2007 2008 2009 Marketing working budget (€ in millions and in % of Group sales), Reebok included since 2006 for 2009 sum
Slide 37: Reebok Brand Positioning
Reebok Brand Positioning YOUR MOVE Men Women — Fitness — Training — Running \ — Running — Walking x — Sports Classics — x —Women —Men adidas GROUP
Slide 38: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates Nov 4, 2010 Nine Months 2010 Results 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