Adidas Ag · XETR:ADS
Adidas — Q1 2006 Earnings Presentation
40 slides from Adidas's earnings presentation, May 9, 2006
Slide 1: First Quarter 2006 Financial Results Presentation
First Quarter 2006 Financial Results Presentation May 9, 2006 15:00 CET
Slide 2: Operational Highlights
Operational Highlights Herbert Hainer, CEO
Slide 3: An Exciting Start To 2006
An Exciting Start To 2006 • Strong development in adidas and TaylorMade-adidas Golf segments • Reebok becomes new Group segment • World Cup momentum growing 3
Slide 4: Three Core Brands Drive Group Performance
Three Core Brands Drive Group Performance 4
Slide 5: A Strong Start For Brand adidas
A Strong Start For Brand adidas • Currency-neutral sales increase 12% (+17% in euros) • Across-the-board category growth • Own-retail sales up 30% 5
Slide 6: Major Progress In All Regions For Brand adidas
Major Progress In All Regions For Brand adidas Q1 2006 Net Sales Growth of Brand adidas in % of total brand sales +5% Europe 51 (+7%) North +19% 21 America (+30%) +18% Asia 22 (+23%) Latin 6 America +42% Total +12% (+67%) 100 adidas (+17%) 0% 20% 40% (Growth rates in euros) 6
Slide 7: adidas Brand Makes Strong Showing In Torino
adidas Brand Makes Strong Showing In Torino 7
Slide 8: adidas_1 Debuts At NBA All-Star Game
adidas_1 Debuts At NBA All-Star Game 8
Slide 9: adidas Becomes Official NBA Partner
adidas Becomes Official NBA Partner 9
Slide 10: Stella McCartney Contract Extended To 2010
Stella McCartney Contract Extended To 2010 10
Slide 11: adidas Signs NFL Superstar Reggie Bush
adidas Signs NFL Superstar Reggie Bush 11
Slide 12: adidas Buys Out Joint Venture Partner In India
adidas Buys Out Joint Venture Partner In India 12
Slide 13: adidas Backlogs Highlight Positive Outlook
adidas Backlogs Highlight Positive Outlook 15% Change Currency- neutral 12% change Total +15% +12% 9% Footwear +11% +8% 6% Total 3% Footwear Apparel +16% +13% Apparel 0% Q1 '05 Q1 '06 13
Slide 14: Reebok Q1 Performance In Line With Expectations
Reebok Q1 Performance In Line With Expectations • Currency-neutral sales down 16% (-10% in euros) • Weak sales to key accounts in the US and UK • Declines in lifestyle-oriented categories 14
Slide 15: Reebok Backlog Situation Remains Challenging
Reebok Backlog Situation Remains Challenging Change Currency- • Sequential neutral improvement change versus Q4 Total -10% -14% backlogs • North Footwear -11% -15% America the biggest Apparel -9% -13% challenge 15
Slide 16: Immediately Improving Reebok's Traction In The Market
Immediately Improving Reebok’s Traction In The Market • Partnership with Carat announced • Major initiatives: • New, motivated management team • Tightened distribution strategy • Better brand communication • Focus on executional excellence 16
Slide 17: Increasing Reebok Distribution Discipline
Increasing Reebok Distribution Discipline • Move from push to pull model • More selective distribution with key retailers • Tighter allocation strategy • Focus on quality market share growth 17
Slide 18: Strengthening Reebok Brand Communication
Strengthening Reebok Brand Communication • Streamlined logo usage • Individual achievement takes center stage • New NFL, running and basketball campaigns to come in FW 2006 18
Slide 19: Executional Excellence At Reebok
Executional Excellence At Reebok • Promising Reebok product initiatives • Executional excellence an important differentiator • More competitive attitude going forward 19
Slide 20: Stronger Q1 Than Originally Expected For TaylorMade-adidas Golf
Stronger Q1 Than Originally Expected For TaylorMade-adidas Golf • Currency-neutral sales increase strongly by 26% (+34% in euros) • Double-digit increases in all categories • North America and Asia show particular strength High-single-digit growth expected in 2006 20
Slide 21: Full Year Targets Reconfirmed
Full Year Targets Reconfirmed 2006 Targets Net sales growth Double-digit Gross margin 44 - 46% Operating margin ca. 9% Net income growth Double-digit 21
Slide 22: World-Class Players Wear adidas
World-Class Players Wear adidas 22
Slide 23: Exciting Product Launches
Exciting Product Launches 23
Slide 24: World Cup Fever in High Gear
World Cup Fever in High Gear • New Football partnerships category announced to generate sales of more than 1.2 billion euro • Exciting in 2006 product launches •• Football ambitions All pieces in place greater for a fantastic than eventever • Football category expected to generate sales of around 1.
Slide 25: Financial Highlights
Financial Highlights Robin J. Stalker, CFO
Slide 26: Regional Sales Growth Of Combined Group
Regional Sales Growth Of Combined Group Currency-neutral adidas Group Net Sales Growth in % of total Group sales +20% Europe (+21%) 44 North America +94% 31 +28% (+113%) Asia (+34%) 20 Latin +58% America (+85%) 5 Total +40% Group (+47%) 100 0% 50% 100% (Growth rates in euros) 26
Slide 27: Strong Sales Development For The Group Excluding Reebok
Strong Sales Development For The Group Excluding Reebok adidas Group excl. Reebok Net Sales Growth currency-neutral (in euros) +12% (+17%) +26% (+34%) +13% (+19%) (excl. Reebok) 0% 10% 20% 30% 27
Slide 28: Numerous Factors Impact First Quarter Gross Margin
Numerous Factors Impact First Quarter Gross Margin adidas Group gross margin 45.0% First-time Purchase Higher Negative inclusion price input currency Salomon of account- prices effects Reebok ing 28
Slide 29: Mixed Brand Gross Margin Development
Mixed Brand Gross Margin Development Q1/2006 46.6% Ð (0.5pp) 35.7% - - 42.9% Ï +0.1pp * 45.0% Ð (3.0pp) *Includes HQ/consolidation 29
Slide 30: Sales Growth and Operating Expense Leverage Support Operating Margin
Sales Growth and Operating Expense Leverage Support Operating Margin Group operating margin 10.1% Strong Lower € 5 million Operating sales gross increase in expense growth margin royalties leverage 30
Slide 31: Strong IBT And Earnings Performance
Strong IBT And Earnings Performance • Net financial expenses increase to € 28 million • Income before taxes grows 14% to € 220 million • Group tax rate reduced to 31.8% • Net income from continuing operations increases to € 150 million (+16%) Net income attributable to shareholders reaches € 144 mil
Slide 32: Operating Working Capital Progress Continues
Operating Working Capital Progress Continues adidas Group adidas Group excl. Reebok Inventories +66% +25% Receivables +54% +8% 9 Days of Sales Outstanding (DSO) improve Operating working capital as a percentage of net sales at record Q1 level of 25% 32
Slide 33: Reebok Acquisition Drives Net Debt Increase
Reebok Acquisition Drives Net Debt Increase Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 3,500 2,952 Net borrowings/(net cash) at end of period 3,000 2,500 2,000 1,500 1,000 700 542 586 500 00 (500) (551) (1,000) (€ in millions) 33
Slide 34: Share Split To Be Proposed At AGM
Share Split To Be Proposed At AGM • Second highest nominal share price in the DAX-30 • Share split to be proposed at Thursday’s Annual General Meeting • Ratio 1:4 No dilutive effect as no additional capital is being raised 34
Slide 35: Positive 2006 Outlook
Positive 2006 Outlook • Strong Q1 results • Increased strategic orientation • Brand-driven approach • 2006 guidance reconfirmed 35
Slide 36: Questions & Answers
adidas GROUP QUESTIONS & ANSWERS
Slide 37: Next Reporting Dates
Next Reporting Dates • May 11, 2006 Annual General Meeting, Fürth, Germany Live webcast at 10:30 CET • August 9, 2006 First Half Year 2006 Results Conference Call at 15:00 CET 37
Slide 38: Appendix
Appendix
Slide 39: adidas Backlogs By Product Category And Region
adidas Backlogs By Product Category And Region • Development of adidas order backlogs (in %) North Europe Asia Total America Footwear 4 20 20 11 Apparel 8 18 30 16 Total 8 19 28 15 • Currency-neutral development of adidas order backlogs (in %) North Europe Asia Total America Footwear 3 11 17 8 Appar
Slide 40: Reebok Backlogs By Product Category And Region
Reebok Backlogs By Product Category And Region • Development of Reebok order backlogs (in %) North Europe Total America Footwear 1 (23) (11) Apparel (21) 1 (9) Total (8) (14) (10) • Currency-neutral development of Reebok order backlogs (in %) North Europe Total America Footwear 0 (28) (15) Apparel (