Adidas Ag · XETR:ADS
Adidas — Q3 2015 Earnings Presentation
94 slides from Adidas's earnings presentation, 2015
Slide 1: Q3 2015 Results Roadshow Presentation
Q3 2015 Results Roadshow Presentation MAKE A DIFFERENCE
Slide 2: Operational Performance
OPERATIONAL PERFORMANCE 2
Slide 3: adidas Group Delivers Stellar Performance
ADIDAS GROUP DELIVERS STELLAR PERFORMANCE 3
Slide 4: Major Developments
MAJOR DEVELOPMENTS • Top-line momentum accelerates in Q3 • Group revenues increase 13% currency- neutral or 18% in euro terms to € 4.8 billion • Gross margin up 1.0pp to 48.4% reflecting brand strength • Operating margin increases 70bps to 10.6% • Net income from continuing operations increases 20%
Slide 5: adidas and Reebok Enjoy Strong Momentum
ADIDAS AND REEBOK ENJOY STRONG MOMENTUM Q3 2015 CHANGE 9M 2015 CHANGE NET SALES (€ IN MILLIONS) 4,007 +14%1) 10,540 +11%1) GROSS MARGIN 47.9% +1.6pp 47.9% +1.0pp NET SALES (€ IN MILLIONS) 476 +3%1) 1,295 +6%1) GROSS MARGIN 38.9% +1.6pp 39.4% +0.9pp 1) Currency-neutral. 5
Slide 6: Football
FOOTBALL • Currency-neutral sales grow 19% in Q3, with double-digit sales increases in most markets • Strong momentum in Football footwear, driven by ongoing success around ‘ACE’ & ‘X’ • Revenues in Football apparel grow at double-digit rates, reflecting the successful launch of partnerships • Impac
Slide 7: Running
RUNNING • Currency-neutral Running sales up 9% in Q3, driven by increases in all markets except Russia/CIS • Double-digit growth in North America, Greater China and Japan • Footwear revenues increase at a double-digit rate • 8 million pairs of Boost running shoes sold so far in 2015 • 64 major marat
Slide 8: Originals
ORIGINALS • Sales increase 33% currency-neutral in Q3 • Revenues grow double-digits in all markets except Russia/CIS • Growth driven by strong double-digit revenue increases in footwear • Ongoing robust sales momentum in main franchises such as the Superstar, ZX Flux and Stan Smith • Continuous bran
Slide 9: Reebok
REEBOK • Currency-neutral Reebok revenues up 3% in Q3 • 10th consecutive quarter of growth • Double-digit increases in key markets such as Latin America, MEAA and Japan • Greater China revenues more than doubled • Double-digit growth in the Studio category as well as in Classics • Revenues in North
Slide 10: Brand Campaigns Drive Brand Heat
BRAND CAMPAIGNS DRIVE BRAND HEAT 10
Slide 11: Exciting New Partnerships
EXCITING NEW PARTNERSHIPS 11
Slide 12: Major Progress in the US
MAJOR PROGRESS IN THE US • Authenticating the brand through grassroots events and higher visibility in US sports • Impactful partnerships with Kanye West and Pharrell Williams • Significantly improved product presentation through intensified cooperation with major retail partners • Own-retail expans
Slide 13: TaylorMade-adidas Golf
TAYLORMADE-ADIDAS GOLF • Q3 revenues up 6% currency-neutral, reflecting easier comparisons and first operational progress • Turnaround plan focusing on improvements in manufacturing, assembly, margin and marketing investments • Focus on key strategic markets • 14% workforce reduction as a result of
Slide 14: Financial Highlights
FINANCIAL HIGHLIGHTS 14
Slide 15: Sales Increase in Nearly All Regions in Q3
SALES INCREASE IN NEARLY ALL REGIONS IN Q3 (7%) RUSSIA/CIS + 18% WESTERNEUROPE +6% JAPAN 6% NORTH AMERICA +15% GREATER CHINA + 14% MEAA + 20% LATINAMERICA Currency-neutral. Figures reflect combined revenues of the adidas and Reebok businesses. 15
Slide 16: Western Europe
WESTERN EUROPE • Sales up 18% currency-neutral in Q3 • Double-digit sales growth in most of the region‘s major markets • Strong sales growth at adidas (+19%) fuelled by double-digit sales increases in Football and at adidas Originals • Reebok sales up 6% currency-neutral • Retail sales grow 12% curr
Slide 17: North America
NORTH AMERICA • Currency-neutral sales increase 6% in Q3 • Revenues at adidas up 11%, driven by double-digit growth in the Running and Football categories as well as at adidas Originals • Reebok sales decrease 11%, with declines in most categories • Sales increases in both wholesale (+7%) and retail
Slide 18: Greater China
GREATER CHINA • Currency-neutral sales grow 15% in Q3 • Growth due to double-digit increases at adidas and strong improvements at Reebok • adidas sales grow 14%, driven by strong double-digit sales increases in key performance categories as well as at adidas Originals and adidas NEO • Sales increase
Slide 19: Russia/CIS
RUSSIA/CIS • Sales down 7% currency-neutral in Q3 • Currency-neutral sales declines at both adidas (-7%) and Reebok (-4%) • Operating expenses down 29%, primarily due to lower operating overhead costs • Further rationalisation of own-retail store network with 58 net store closures during Q3 19
Slide 20: Latin America
LATIN AMERICA • Currency-neutral sales up a strong 20% in Q3 fuelled by double-digit increases in most markets • Revenues at adidas up 21%, driven by double-digit growth in the Training and Football categories as well as at adidas Originals • Reebok grows 16%, supported by double- digit sales increa
Slide 21: Japan
JAPAN • Currency-neutral sales grow 6% in Q3, driven by strong sales increases at both adidas (+5%) and Reebok (+12%) • Sales growth at adidas mainly due to double-digit increases in Running as well as at adidas Originals • Reebok sales growth supported by strong growth in Classics • Retail revenues
Slide 22: MEAA
MEAA • Revenues in Q3 up 14% currency-neutral with sales growth in most of the region‘s major markets • adidas up 14%, driven by double-digit sales increases in Football as well as at adidas Originals and adidas NEO • Reebok sales grow 12%, mainly due to double-digit sales increases in the Training
Slide 23: Other Businesses
OTHER BUSINESSES • Currency-neutral sales grow 10% in Q3 • Sales at TMaG up 6%, driven by double-digit increases in North America • Reebok-CCM Hockey grows 9%, supported by increases in North America and Western Europe • Gross margin of Other Businesses improves 2.1pp to 34.4% (2014: 32.3%) 23
Slide 24: Group Operating Profit Up 26% in Q3
GROUP OPERATING PROFIT UP 26% IN Q3 Q3 2015 9M 2015 GROSS PROFIT € 2,304 million € 6,202 million +20% +17% GROSS MARGIN 48.4% 48.6% +1.0pp +0.1pp OTHER OPERATING EXPENSES € 1,845 million € 5,265 million +18% +15% OTHER OPERATING EXPENSES AS A PERCENTAGE OF SALES 38.8% 41.3% +0.1pp (0.4pp) OPERATING
Slide 25: Net Income Grows 20% in Q3
NET INCOME GROWS 20% IN Q3 Q3 2015 9M 2015 FINANCIAL INCOME € 8 million € 32 million +81% +125% FINANCIAL EXPENSES € 18 million € 51 million +54% +2% INCOME BEFORE TAXES € 495 million € 1,082 million +26% +22% INCOME TAX RATE 31.9% 31.9% +3.3pp +3.1pp NET INCOME FROM CONTINUING OPERATIONS € 337 mill
Slide 26: Retail Profitability Improves Strongly
RETAIL PROFITABILITY IMPROVES STRONGLY Q3 2015 CHANGE 9M 2015 CHANGE NET SALES € 1,104 million +9%1) € 3,056 million +10%1) ADIDAS COMP STORE SALES +4% 1) +3% 1) REEBOK COMP STORE SALES (4%)1) (5%)1) TOTAL COMP STORE SALES +3%1) +2%1) GROSS MARGIN 61.8% +3.7pp 61.8% +2.4pp OPERATING MARGIN 22.7% +2.
Slide 27: Store Development
STORE DEVELOPMENT • 2,679 stores operated at quarter-end • 80 net store closures compared to year-end 2014 • 192 new stores opened, 272 stores closed, 74 stores remodelled • 154 concession corners reclassified into the wholesale channel • 1,466 adidas and 363 Reebok branded; 850 factory outlets 27
Slide 28: Inventories Remain at Healthy Levels
INVENTORIES REMAIN AT HEALTHY LEVELS • Inventories from continuing operations increase 10% (c.n.) 20% 16% • Receivables from continuing operations 15% up 9% (c.n.) 10% 10% • Payables from continuing operations 7% grow 17% (c.n.) 5% 3% 2% • Average OWC in % of sales decreases 0% 1.6pp to 20.7% 0% Q2/
Slide 29: Net Debt Grows to €903 Million
NET DEBT GROWS TO € 903 MILLION 500 295 • Net borrowings increase to € 903 million (2014: € 543 million), due 100 to the utilisation of cash for the share buyback programme -300 (180) (185) • Ratio of net borrowings/EBITDA (254) amounts to 0.6 (2014: 0.5) (454) (543) (542) • Equity ratio decreases t
Slide 30: Strategic Initiatives & Outlook
STRATEGIC INITIATIVES & OUTLOOK 30
Slide 31: Sport Infinity: Closing the Sustainability Loop
SPORT INFINITY: CLOSING THE SUSTAINABILITY LOOP 31
Slide 32: Futurecraft: 3D-Printed Running Shoe Midsole
FUTURECRAFT: 3D-PRINTED RUNNING SHOE MIDSOLE 32
Slide 33: Futurecraft: Exploring Leather Manufacturing
FUTURECRAFT: EXPLORING LEATHER MANUFACTURING 33
Slide 34: adidas and Manz Sign Cooperation Agreement
ADIDAS AND MANZ SIGN COOPERATION AGREEMENT 34
Slide 35: Creating Hype with Messi's 10/10 Limited Edition
CREATING HYPE WITH MESSI’S 10/10 LIMITED EDITION 35
Slide 36: Attacking Key Cities in Football
ATTACKING KEY CITIES IN FOOTBALL 36
Slide 37: Continuing the Football Revolution with Laceless
CONTINUING THE FOOTBALL REVOLUTION WITH LACELESS 37
Slide 38: Gearing Up to Kick Off UEFA Euro 2016
GEARING UP TO KICK OFF UEFA EURO 2016 38
Slide 39: Continuing Focus on US Sports
CONTINUING FOCUS ON US SPORTS 39
Slide 40: Introducing D Rose 6 Signature Shoe
INTRODUCING D ROSE 6 SIGNATURE SHOE 40
Slide 41: James Harden Laces Up Crazylight Boost 2015
JAMES HARDEN LACES UP CRAZYLIGHT BOOST 2015 41
Slide 42: Yeezy Season 1 Hits Retail
YEEZY SEASON 1 HITS RETAIL adidas GROUP
Slide 43: Originals to Launch New Footwear Franchise NMD
ORIGINALS TO LAUNCH NEW FOOTWEAR FRANCHISE N M D 43
Slide 44: Reebok Continues to Pursue Fitness Path
REEBOK CONTINUES TO PURSUE FITNESS PATH 44
Slide 45: M1 Product Line Hits Retail
M1 PRODUCT LINE HITS RETAIL 45
Slide 46: adidas Group Increases FY 2015 Outlook
ADIDAS GROUP INCREASES FY 2015 OUTLOOK Group sales (currency-neutral) High-single-digit increase Gross margin 48.0% to 48.5% Other operating expenses (in % of sales) Moderate increase Operating margin1) Between 6.5% and 7.0% Net income from continuing operations1) To increase at a rate of around 10%
Slide 47: Outlook 2016
OUTLOOK 2016 • Strong brand momentum to continue in 2016 • Group sales to grow at a high-single-digit rate • Gross margin to be negatively impacted by currency effects • Operating profit to grow at a high-single-digit rate • Operating margin to remain at least stable versus the 2015 level 47
Slide 48: Upcoming Events
UPCOMING EVENTS December 9, 2015 2nd IR Tutorial Workshop March 3, 2016 Full Year 2015 Results May 4, 2016 First Quarter 2016 Results May 12, 2016 Annual General Meeting August 4, 2016 First Half 2016 Results 48
Slide 49: Appendix
APPENDIX 49
Slide 50: Creating the New
CREATING THE NEW 50
Slide 51: 3 Strategic Choices: Speed, Cities, Open Source
3 STRATEGIC CHOICES TAKEN SPEED CITIES OPEN SOURCE 51
Slide 52: Our Strategy for Creating the New
OUR STRATEGY FOR CREATING THE NEW OPEN SOURCE TOP LINE & MARKET SHARE GROWTH BRAND GROSS MARGIN DESIRE EXPANSION OPERATING LEVERAGE 52
Slide 53: Financial Ambition
FINANCIAL AMBITION HIGH-SINGLE-DIGIT HIGH-SINGLE-DIGIT HIGH-SINGLE-DIGIT MID-SINGLE-DIGIT NET SALES CAGR (2015-2020) – CURRENCY-NEUTRAL NET INCOME: ~15% CAGR (2015–2020) 53
Slide 54: Agility
AGILITY WIN ACCELERATE 2019 2020 IMPACT 2018 BUILD 2017 BRING THE NEW 2016 2015 54
Slide 55: Global Brands
GLOBAL BRANDS 55
Slide 56: Open Source
OPEN SOURCE BRAND DESIRE 56
Slide 57: Focus on Sport
FOCUS ON SPORT SPORT SPORTSWEAR STREETWEAR COLLABS BEST SPORTS BRAND ORIGINAL SPORTS BRAND SPORTSWEAR FOR ALL 57
Slide 58: Focused on Consumers and Organization
FOCUSED ON ORGANIZATION CONSUMERS CLEAR LINE OF SITE FOR EACH CATEGORY FOOTBALL RUNNING BASKETBALL TRAINING OUTDOOR HBS ORIGINALS STYLE DIGITAL SPORTS STRATEGY FUTURE CREATIVE DIRECTION BRAND MGT CTC 58
Slide 59: Everything Comes from Sport
EVERYTHING COMES FROM SPORT CREATE FOR THE CREATOR 6 CITIES FOOTWEAR FRANCHISES CATEGORY ROLES WOMEN MARKETING SPEND 59
Slide 60: Focus Categories
FOCUS CATEGORIES LEAD GROW AMPLIFY AUTHENTICATE #1 IN EVERY MARKET DRAMATIC MARKET LARGEST BUSINESS REGIONAL PLAYERS/ SHARE GAINS IN EVERY MARKET GROWTH ENGINES FOOTBALL RUNNING TRAINING BASKETBALL ORIGINALS NEO HEARTBEAT SPORTS DIGITAL OUTDOOR 60
Slide 61: Open Source
OPEN SOURCE BRAND DESIRE 61
Slide 62: Open Source: Creators, Partners, Community, Customers
OPEN SOURCE CREATORS PARTNERS COMMUNITY CUSTOMERS 62
Slide 63: Creator Farms
CREATOR FARMS LONDON BERLIN DESIGN STUDIO DESIGN STUDIO PARIS LOS ANGELES NYC BROOKLYN DESIGN STUDIO TOKYO EIM OFFICE DESIGN STUDIO DESIGN STUDIO SHANGHAI DESIGN STUDIO 63
Slide 64: Newsrooms
NEWSROOMS MOSCOW PORTLAND LONDON HERZO NEW YORK TOKYO SHANGHAI RIO 64
Slide 65: Partners
PARTNERS 65
Slide 66: Open Source
OPEN SOURCE BRAND DESIRE 66
Slide 67: Speed
SPEED FIRST FAST SPORTS COMPANY IN THE INDUSTRY 67
Slide 68: Challenging the Industry Standard
CHALLENGING THE INDUSTRY STANDARD WE ARE SPORTS INDUSTRY (FOOTWEAR) STANDARD 45 days 12-18 months 68
Slide 69: Goal
GOAL 50% 20% OF ALL RANGES FULL-PRICE SELL-THRU ON SPEED PROGRAMS ACROSS SPEED RANGES 69
Slide 70: First Fast Sports Company in the Industry
FIRST FAST SPORTS COMPANY IN THE INDUSTRY SHARE OF VOLUME SOLD AT FULL PRICE RISK OF OVERBUYING INVENTORY TURN AVERAGE MARKDOWN ON ARTICLES SOLD 70
Slide 71: 71
71 71
Slide 72: Transformation
TRANSFORMATION €1.5bn €1.7bn FITNESS TRADITIONAL SPORTS 72
Slide 73: Training Running
TRAINING RUNNING Pe CLASSICS
Slide 74: Training
TRAINING CROSSFI T DANCE YOGA SPIN 74 74
Slide 75: Running
RUNNING SPEED DISTANCE TERRAIN TRAIL 75
Slide 76: Classics
CLASSICS FOUNDATION RETRO RUNNI NG CONTEMPORARY 76
Slide 77: Global Sales
GLOBAL SALES 77
Slide 78: Open Source: Creating the New
CREATING THE NEW OPEN SOURCE 78
Slide 79: Consumer Journey
PURCHASE 7 FIND A 5 FEEL & TRY STORE PRODUCT 6 4 SEEK APPROVAL SHARE 3 CONSUMER JOURNEY 2 BROWSE ONLINE TODAY’S FEMALE ATHLETE GET 1 INSPIRED 79
Slide 80: Omni-Channel
OMNI-CHANNEL SOCIAL MEDIA SEAMLESS MOBILE ONLINE CONSUMER EXPERIENCE CONSUMER ACROSS ALL TOUCHPOINTS BIG DATA PHYSICAL STORE CRM 80
Slide 81: Capturing Full Sales Potential
CAPTURING FULL SALES POTENTIAL INVENTORY CLICK & SHIP FROM ENDLESS CHECK COLLECT STORE AISLE 81
Slide 82: Unrivaled Store Network
UNRIVALED STORE NETWORK 2,900 OWN RETAIL 11,000 FRANCHISE 30+ OWN ECOM …AND GROWING 82
Slide 83: Own Concept Stores Double-Digit CAGR
OWN CONCEPT DOUBLE-DIGIT STORES CAGR BY 2020 PREMIUM PRESENTATION WITH NEW STORE 500-600 FORMATS ADDITIONAL CONNECT-ENGAGE-INSPIRE SERVICE MODEL STORES LEVERAGE OMNI-CHANNEL CAPABILITIES 83
Slide 84: Franchise Double-Digit CAGR
FRANCHISE DOUBLE-DIGIT CAGR BY 2020 LEVERAGE OWN-RETAIL CAPABILITIES 3,000 IMPLEMENT HARD FRANCHISE BUSINESS MODEL ADDITIONAL STORES EXPAND TO NEW GEOGRAPHIES 84
Slide 85: Ecom x4 by 2020
ECOM EUR 500M X4BY 2020 2 BILLION PERSONALISED INTERACTION PRODUCT-LED EXPERIENCE PRODUCT AVAILABILITY AND EXCLUSIVITY LEVERAGE OMNI-CHANNEL CAPABILITIES 85
Slide 86: Concept Store Productivity
CONCEPT STORE PRODUCTIVITY NS/SQM – EXCL. CIS 2015 - 2020 NEW SERVICE PHILOSOPHY BETTER ASSORTMENT AND RANGE PLANNING +7% CAGR IMPROVED FOCUS ON STAFF TRAINING ACTIVE SHAPING OF THE CHAIN FOOTWEAR FOCUS OMNI-CHANNEL CAPABILITIES 2010 2015 86
Slide 87: Top 20 KA Strategy
STRATEGIC SELL-OUT FOCUSED END-2-END PLANNING INVESTMENT SUPPLY TOP 20 KA STRATEGY 1 PREMIUM KEY DESTINATION DIGITALIZATION PRESENTATION DOORS & INNOVATION 87
Slide 88: Retail to Wholesale
RETAIL TO WHOLESALE PREDEFINED SPACE SOLUTIONS MODULAR PRODUCT PACKAGES SIMPLIFIED PROCESS 88
Slide 89: Wholesale Managed Space
WHOLESALE MANAGED SPACE FOCUS ON KEY LOCATIONS IN KEY CITIES SEGMENTATION OF THE RSM SPACES X2 CLOSE COLLABORATION WITH TOP 20 KEY ACCOUNTS +300K SQM 89
Slide 90: Wholesale: +2 Billion
WHOLESALE MID-SINGLE- CUSTOMIZED STRATEGIC PARTNERSHIPS DIGIT CAGR WITH TOP KEY ACCOUNTS PARTNER WITH SPECIALISTS TO ADDRESS +2 BILLION EUR AUTHENTIC ATHLETES AND INFLUENCERS ACTIVE APPROACH TO WHS ECOM 90
Slide 91: Controlled Space
CONTROLLED 2020 60%+ SPACE ALLOW OUR BRANDS TO SHINE 2015 TURN BRAND HEAT INTO COMMERCIAL SUCCESS 50%+ 2010 37% 91
Slide 92: Roles of Markets
ROLES OF MARKETS WESTERN CIS EUROPE NORTH AMERICA JAPAN GREATER CHINA SOUTH KOREA EMERGING MARKETS SEA/PACIFIC LATIN AMERICA LEAD GROW EXTEND HIGH-SINGLE-DIGIT DOUBLE-DIGIT MID-SINGLE-DIGIT WESTERN EUROPE // NORTH AMERICA // CIS // GREATER CHINA // LATIN AMERICA // JAPAN // EMERGING MARKETS SEA/PACI
Slide 93: 80% of Absolute Growth from Focus Markets
WESTERN EUROPE NORTH AMERICA GREATER CHINA LATIN 80% AMERICA OF ABSOLUTE GROWTH FROM FOCUS MARKETS 93
Slide 94: Deliver the Promise
DELIVER THE PROMISE OMNI-CHANNEL LEADER IN SPORTING GOODS 1 LEVERAGE SCALE OF WINNING IN 6 GLOBAL KEY CITIES OUR POS NETWORK 80% OF GROWTH TO COME FROM 4 KEY MARKETS 2 DRIVE PRODUCTIVITY ACROSS OUR SALES PLATFORM 4X ECOM INCREASED NS / SQM PRODUCTIVITY +1 MILLION SQM OF 3 SHAPE OUR OWN DESTINY CONTR