Adidas Ag · XETR:ADS
Adidas — Q3 2021 Earnings Presentation
41 slides from Adidas's earnings presentation, Nov 10, 2021
Slide 1: Q3 2021 Results
03 2021 RESULTS NOVEMBER 10, 2021
Slide 2: Forward-looking statements 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 beyond the control of
Slide 3: Agenda
AGENDA INTRODUCTION BUSINESS UPDATE FINANCIAL UPDATE OPERATIONAL UPDATE OUTLOOK of WHR = adidas
Slide 4: Introduction
Slide 5: Growth
GROWTH
Slide 6: Own the Game: women in leadership positions by 2025
OWN THE GAME WOMEN SHARE IN LEADERSHIP POSITIONS BY 2025 adidas
Slide 7: Outstanding ESG rating awarded
QUTSTANDING ESG (A716 AWARDED S&P Global > 85 Ratings noo CROSS-SECTOR ANALYSIS OF GLOBAL COMPANIES ONE OF THEHIGHEST EVER AWARDED ESG PROFILE EVALUATION AFTER EXTENSIVE DUE > DILIGENCE AND DIALOGUE OVERALL PREPAREDNESS CONSIDERED STRONG RANKED IN GLOBAL TOP TEN adidas
Slide 8: Business Update
Slide 9: Highlights
HIGHLIGHTS CONFIRMED \ IS HERE. CREDIBILITY —_ EXPERIENCE. SUSTAINABILITY adidas 9
Slide 10: Confirmed credibility: world records and podiums
BERLIN : STON =< 1 rect — = = ~— ©°® MORE WORLD RECORDS, MORE WINS, MORE PODIUMS IN TOP 50 ROAD RACES THAN ALL OTHERS COMBINED
Slide 11: Experience: members and app
14M SaasWaN >SSM Saas 3 ee r MEMBERS WEEK MEMBERS WEEK EXPERIENCE FOOTWEAR FIND YOUR GET STARTED
Slide 12: Sustainability: innovating with new materials and business models
SUSTAINABILITY INNOVATING WITH NEW MATERIALS AND BUSINESS MODELS
Slide 13: Q3 highlights by region
Double-digit increase across these regions Challenging market environment delaying recovery Double-digit growth in EMEA, North America and Latin America Covid-related lockdowns weighing on sales in the region New products resonating well with consumers Shipping & handling delays impacting sales in E
Slide 14: Q3 net sales and operating profit
Challenging market environment in China, Covid-related lockdowns and supply-chain constraints reducing top-line by around € 600 million Due to unfavorable FX development and higher supply chain costs Reflecting operating margin of 11.7% Of € 479 million Of € 2.34
Slide 15: Sales vs. 2019 level
Challenging market environment delaying recovery +7% increase vs. 2019 level +11% increase vs. 2019 level
Slide 16: Full price share and membership growth
Double-digit increases in EMEA, North America and Latin America Global full price share up by 15pp More than 220 million members globally
Slide 17: Product launches drive excitement
Key footwear franchises and major club jerseys spark excitement Sustainable and technical product launches drive credibility Successful DTC-exclusive launches
Slide 18: Financial Update
Ss “FINANCIAL UPDA
Slide 19: Operating margin by segment
Operating margin: 23.7% (+2.0pp vs. 2020) Operating margin: 20.3% (+0.5pp vs. 2020) Operating margin: 26.6% (-4.9pp vs. 2020) Operating margin: 17.5% (-5.5pp vs. 2020) Operating margin: 20.2% (+13.6pp vs. 2020)
Slide 20: Q3 income statement
+3% currency-neutral Net Sales 5,752 5,561 +3% Challenging market environment in China, Covid-related lockdowns and supply chain Gross Margin 50.1% 50.3% -0.2pp constraints reducing top-line by around € 600 million Other Operating Expenses 2,237 2,092 +7% (in % of sales) 38.9% 37.6% +1.3pp Marketing
Slide 21: Gross margin development
2020 vs. 19 2021 vs. 20 ▪ Channel mix: Higher DTC sales within the channel mix 2019 level ▪ Pricing impact: Drag from higher discounting in 2020 almost fully recovered in 2021 ▪ Market mix: Lower contribution 50.1% from China ▪ Sourcing: Significant increase in supply chain costs in 2021 Gross Gross
Slide 22: Inventories and working capital
Due to supply chain constraints Mainly driven by higher net sales in EMEA and Latin America Reflecting normalization of payment terms in prior year period Q3/20 Q4/20 Q1/21 Q2/21 Q3/21
Slide 23: Reebok divestiture to Authentic Brands Group
To Authentic Brands Group for a total consideration of up to € 2.1 billion While subject to customary closing conditions Upon closing of the transaction In an amount of € 402 million net of tax within discontinued operations in Q3
Slide 24: Operational Update
OPERATIONAL UPDATE
Slide 25: Q3 net sales growth by region
1 2 3 Supply chain constraints Covid-related lockdowns Challenging market environment Q3 Net Sales Q3 Net Sales Greater Asia- EMEA/ Growth c.n. Growth c.n. China Pacific North America - implied -
Slide 26: Greater China retail sales trend
1 Own retail sales up y-o-y in June and into July 0% Recovery from geo-political situation Negative impact from Covid-related lockdowns and natural disasters May Jun Jul Aug Sep
Slide 27: Greater China action plan
1 Dedicated studio enabling fast content creation and local Strengthen brand heat storytelling with more than 1,000 short stories created so far Significant ramp-up of China-for-China product creation with Create more commercial impact about 1/3 of new products coming from local creation center Scal
Slide 28: Showing commitment and creating excitement
1) SHOWING COMMITMENT AND CREATING EXCITEMENT iy, i a SHOWCASING THE BEST OF ADIDAS AT THE CHINA INTERNATIONAL IMPORT EXPO IN SHANGHAI WITHA FOCUS ON SUSTAINABILITY AND INNOVATION adidas ae
Slide 29: Government restrictions in Asia-Pacific
2 Government restrictions January September Progressive introduction of government restrictions throughout 2021 2021 2021
Slide 30: Asia-Pacific traffic and lockdown impact
2 Traffic up double- digits at the beginning of Q2 0% vs. 2020 ▪ Unique consumer behavior in APAC reflecting disciplines to comply with government regulations Traffic down more ▪ Continued lockdowns and other than 30% in Q3 covid-related restrictions impacting traffic in wholesale and retail ▪ Limit
Slide 31: Global supply-chain constraints weighing on top- and bottom-line
3) GLOBAL SUPPLY-CHAIN CONSTRAINTS WEIGHING ON TOP- AND BOTTOM-LINE adidas ILLUSTRATIVE. a
Slide 32: Vietnam production capacity
3 100% 100% 50% 50% Jul Aug Sep Oct Nov Dec Jul Aug Sep Oct Nov Dec Production capacity at month-end Average monthly production capacity Production capacity at month-end Average monthly production capacity ▪ Temporary disruptions in Vietnam throughout Q3 only ▪ Ongoing disruptions in Vietnam through
Slide 33: Supply chain mitigation measures
3 Optimize existing capacity and secure additional capacity Phase and cut supply for reduced rolling impact Ensure on-time delivery of high-margin product Manage customer relations and re- deployment of existing inventory Review discount strategy for commercial No significant impact beyond Q1 2022 e
Slide 34: Net sales bridge FY 2021 to FY 2022
Growth at least in line with long- term ambition of 8-10% Successful execution of Larger impact Fewer action plan and from factory Covid-related Global market more favorable lockdowns lockdowns share gains market globally environment Net Sales Greater Supply-chain Covid-related Underlying Net Sales
Slide 35: Outlook
Slide 36: Events & campaigns
EVENTS & CAMPAIGNS PRODUCTS
Slide 37: Upcoming investor event at headquarters
▪ Two-day event at our headquarters in Herzogenaurach, physical participation only ▪ Focus on across strategic growth categories Running, Football, Outdoor, Training, Originals and Sportswear ▪ Presenters include: ▪ Executive Board members ▪ General Managers of strategic growth categories ▪ Designer
Slide 38: FY 2021 outlook
Increase of Increase of Net sales1 CONFIRMED up to 20% up to 20% Increase to Increase to Lower end Gross margin LOWERED around 52% 50.5% - 51.0% due to longer-than-expected sourcing disruptions and Operating margin Increase to Increase to challenging market CONFIRMED 9.5% - 10% 9.5% - 10% environmen
Slide 39: Own the Game progress
Added more than € 3 billion Returned to strong double-digit operating margin Added more than € 1 billion
Slide 40: Capital allocation and cash return
Reebok proceeds Maintain current rating levels 3-4% of net sales ▪ 1st Tranche completed: €550m (Jul-Sep) ▪ 2nd Tranche launched: 30-50% of net income1 €450m (Oct-Dec) Use of surplus cash flow Total Cash Return Cash Return 2021-25 2021
Slide 41: Summary
SUMMARY NEW PRODUCT LAUNCHES DRIVING STRONG DEMAND IN EMEA, NORTH AMERICA AND LATIN AMERICA 2 THOROUGHLY MANAGING SUPPLY CHAIN CONSTRAINTS OPERATING MARGIN RECOVERY CONTINUING AS OWN THE GAME IN FULL EXECUTION ACROSS THE ENTIRE COMPANY 202170 BE SUCCESSFUL FIRST YEAR OF THE NEW STRATEGIC CYCLE DESPI