Adidas Ag · XETR:ADS
Adidas — Q2 2019 Earnings Presentation
31 slides from Adidas's earnings presentation, 2019
Slide 1: Q2 2019 Roadshow Presentation
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: Agenda
AGENDA 01 BUSINESS UPDATE 02 FINANCIAL UPDATE 03 OUTLOOK
Slide 4: Supervisory Board extends contracts of Karen Parkin and Harm Ohlmeyer
SUPERVISORY BOARD EXTENDS CONTRACTS OF KAREN PARKIN AND HARM OHLMEYER EXECUTIVE BOARD TEAM IN PLACE TO ENSURE LONG-TERM SUSTAINABLE SUCCESS 4
Slide 5: Business Update
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Slide 6: Consumer Highlights: Leveraging Multiple Dimensions of Innovation
CONSUMER HIGHLIGHTS LEVERAGING MULTIPLE DIMENSIONS OF INNOVATION 6
Slide 7: Strengths & Weaknesses in Q2 2019
STRENGTHS & WEAKNESSES IN Q2 2019 CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS SUPPLY CHAIN SHORTAGES WITH EXPECTED IMPACT + Double-digit growth in Greater China and e-commerce − Weighing on growth and profitability in North America NEW PRODUCTS GAIN COMMERCIAL TRACTION IN DTC NO GROWTH IN WHOLESALE
Slide 8: P&L Highlights in Q2 2019
P&L HIGHLIGHTS IN Q2 2019 REVENUES INCREASE 4% CURRENCY-NEUTRAL And 5% in euro terms to € 5.509 billion GROSS MARGIN UP 1.2PP TO 53.5% Driven by favorable FX development OPERATING MARGIN UP 0.4PP TO 11.7% Despite increased brand investments and DTC-related costs NET INCOME FROM CONTINUING OPERATIONS
Slide 9: Continued Progress in Strategic Growth Areas in Q2 2019
CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS IN Q2 2019 ADIDAS NORTH AMERICA On top of a 17% increase in Q2 2018 GREATER CHINA On top of a 27% increase in Q2 2018 E-COMMERCE On top of a 26% increase in Q2 2018 Currency-neutral. 9
Slide 10: adidas Brand Grows in Most Markets
ADIDAS BRAND GROWS IN MOST MARKETS FOOTWEAR REVENUES ACCELERATE % SPORT PERFORMANCE DECLINES 2% Despite double-digit growth in Training and Basketball SPORT INSPIRED GROWS 9% Reflecting growth in Originals and Yeezy FOOTWEAR REVENUES INCREASE 5% Supply chain shortages weighing on growth in apparel C
Slide 11: Top-Line Stabilization at Reebok
TOP-LINE STABILIZATION AT REEBOK BRAND KEEPS EXECUTING ‘MUSCLE-UP’ AFTER RETURN TO PROFITABILITY % REEBOK REVENUES INCREASE 3% Driven by double-digit growth in North America and Latin America GROWTH IN CLASSICS Driven by robust increase in footwear GROSS MARGIN DOWN 1.6PP TO 43.2% Following exceptio
Slide 12: Exceptional Growth in E-Commerce
EXCEPTIONAL GROWTH IN E-COMMERCE DRIVING DIGITAL CONSUMER ENGAGEMENT % E-COMMERCE REVENUES GROW 37% Driven by double-digit growth across all regions LAUNCH OF CREATORS CLUB IN UK AND GERMANY Driving traffic and engagement rates ADIDAS APP LIVE IN ALMOST 30 COUNTRIES Building direct relationships to
Slide 13: Financial Update
FINANCIAL UPDATE
Slide 14: Growth by Market Segment
GROWTH BY MARKET SEGMENT SIGNIFICANT INCREASE IN ASIA-PACIFIC AND ROBUST GROWTH IN NORTH AMERICA -4% RUSSIA/CIS EUROPE 0% NORTH AMERICA +6% +8% ASIA-PACIFIC LATIN AMERICA +5% +12% EMERGING MARKETS 14 Currency-neutral.
Slide 15: North America
NORTH AMERICA TOP-LINE AND MARGIN IMPACTED BY SUPPLY CHAIN SHORTAGES % Currency-neutral sales increase 6% adidas brand revenues up 5% Driven by growth in both Sport Performance and Sport Inspired Reebok brand revenues increase 10% Driven by double-digit growth in Classics Gross margin decreases 1.5p
Slide 16: Asia-Pacific
ASIA-PACIFIC SIGNIFICANT GROWTH DRIVEN BY GREATER CHINA % Currency-neutral sales increase 8% adidas brand sales up 9% Driven by double-digit growth in Sport Inspired Reebok brand revenues down 11% Due to declines in both Sport and Classics Gross margin up 2.3pp to 59.7% Driven by positive FX impact,
Slide 17: Europe
EUROPE STRONG BOTTOM-LINE IMPROVEMENTS % Currency-neutral sales remain stable adidas brand revenues remain stable Growth in Sport Inspired offset by decline in Sport Performance Reebok brand sales increase 4% Driven by growth in Classics Gross margin improves 3.9pp to 52.2% Due to significant positi
Slide 18: P&L Overview: Q2 2019 Results
P&L OVERVIEW Q2 2019 RESULTS (€ in millions) Q2 2019 Q2 2018 Y-O-Y NET SALES 5,509 5,261 +5% GROSS MARGIN 53.5% 52.3% +1.2pp OTHER OPERATING INCOME 5 19 -74% OTHER OPERATING EXPENSES 2,346 2,210 +6% (in % of sales) 42.6% 42.0% +0.6pp MARKETING AND POINT-OF-SALE EXPENSES 744 707 +5% (in % of sales) 1
Slide 19: Gross Margin to Decline in H2
GROSS MARGIN TO DECLINE IN H2 SEVERAL FACTORS TO BE CONSIDERED Less favorable sourcing costs and increased use of air freight According to mitigation plan for supply chain shortages More balanced growth across channels New products to be scaled with partners Selective price reinvestments in Europe S
Slide 20: Average Operating Working Capital
AVERAGE OPERATING WORKING CAPITAL IN % OF SALES DOWN 1.9PP TO 18.3% -1.9PP 20.1% 19.7% 19.0% Inventories up 5% c.n. 18.6% Reflecting planned top-line acceleration in H2 18.3% Receivables up 1% c.n. Reflecting top-line development in wholesale Payables up 14% c.n. Due to improved terms with vendors Q
Slide 21: Net Cash and Equity Position
NET CASH AND EQUITY POSITION EQUITY RATIO AT 34.3% +273 959 908 Net cash position At € 362 million 535 Equity position 362 Increases € 580 million year-on-year Equity ratio Down 7.9pp year-on-year due to IFRS 16 89 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Net cash at quarter-end, € in millions. 21
Slide 22: Shareholder Return: Share Buyback Update
SHAREHOLDER RETURN SHARE BUYBACK UPDATE 2018 2019 TOTAL Volume Up to Around Up to Targeted € 1.0 billion € 800 million € 3.0 billion Volume € 1.0 billion € 301 million € 1.3 billion Completed* Shares 5.1 million 1.3 million 6.4 million Purchased* 22 * For 2019 and Total: As at June 30, 2019. Buyback
Slide 23: Outlook
OS r OUTLOOK |
Slide 24: 2019 Focus Areas
2019 FOCUS AREAS ANOTHER IMPORTANT MILESTONE TOWARD 2020 TARGETS Leveraging multiple dimensions of innovation To drive quality top-line growth Continuing to invest with impact Into brand desire and scalable business model Delivering overproportionate net income growth On the back of sustainable oper
Slide 25: Evolving Icons from the Past and Building Icons of the Future
EVOLVING ICONS FROM THE PAST AND BUILDING ICONS OF THE FUTURE MULTIPLE DIMENSIONS OF INNOVATION 25
Slide 26: Scaling Groundbreaking Technology
SCALING GROUNDBREAKING TECHNOLOGY MULTIPLE DIMENSIONS OF INNOVATION 26
Slide 27: Bringing Collaboration to the Next Level
BRINGING COLLABORATION TO THE NEXT LEVEL MULTIPLE DIMENSIONS OF INNOVATION 27
Slide 28: Top-Line Acceleration in H2 2019
TOP-LINE ACCELERATION IN H2 2019 BUILDING BLOCKS IN PLACE Product engine to contribute Scaling recent launches as well as introducing new products Europe to return to growth Foundation laid for recovery in H2 Upcoming UEFA EURO 2020 First positive impact from related product launches in Q4 Earlier C
Slide 29: Outlook 2019 Confirmed: Tough Yeezy Comps and Supply Shortage
OUTLOOK 2019 CONFIRMED TOUGH YEEZY COMPS AND SUPPLY SHORTAGE TO IMPACT H2 PHASING Sequential top-line acceleration towards year-end Modest improvement in Q3 followed by step-up in Q4 Gross margin to decline in H2 Air freight costs, fading tailwinds, price reinvestments and tough comps Opex spend mor
Slide 30: Outlook 2019 Confirmed: Driving Double-Digit Bottom-Line Growth
OUTLOOK 2019 CONFIRMED DRIVING DOUBLE-DIGIT BOTTOM-LINE GROWTH GUIDANCE GUIDANCE EXCL. IFRS 16 INCL. IFRS 16** Net sales* Increase of 5% – 8% Gross margin Increase to around 52.0% Operating margin Increase of 0.5pp – 0.7pp to around 11.3% – 11.5% Net income from Increase of 10% – 14% to Increase of
Slide 31: Summary
SUMMARY 1 First half of 2019 according to plan 2 Continuation of double-digit bottom-line growth 3 Building blocks in place to accelerate top line in H2 4 2019 another year of quality top- and bottom-line growth 5 Focus on relentless execution of ‘Creating the New’ 31