Adidas Ag · XETR:ADS
Adidas — Q3 2019 Earnings Presentation
32 slides from Adidas's earnings presentation, 2019
Slide 1: Q3 2019 Roadshow Presentation
Q3 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: Brian Grevy succeeds Eric Liedtke as board member responsible for Global Brands
BRIAN GREVY SUCCEEDS ERIC LIEDTKE AS BOARD MEMBER RESPONSIBLE FOR GLOBAL BRANDS 4
Slide 5: Business Update
BUSINESS UPDATE KASPER RORSTED CEO
Slide 6: Consumer Highlights
CONSUMER HIGHLIGHTS LEVERAGE CONSUMER ENGAGEMENT THROUGH PRODUCTS AND STORIES 6
Slide 7: Strengths & Weaknesses in Q3 2019
STRENGTHS & WEAKNESSES IN Q3 2019 CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS SUPPLY CHAIN SHORTAGES WITH EXPECTED IMPACT + adidas North America, Greater China and e-com up double-digits − Weighing primarily on profitability RETURN TO GROWTH IN EUROPE DECELERATION OF GROWTH IN FOOTWEAR + Strategic
Slide 8: P&L Highlights in Q3 2019
P&L HIGHLIGHTS IN Q3 2019 REVENUES INCREASE 6% CURRENCY-NEUTRAL And 9% in euro terms to € 6.410 billion GROSS MARGIN UP 0.3PP TO 52.1% Driven by favorable FX development OPERATING MARGIN DOWN 1.3PP TO 14.0% Due to planned increase in operating expenses NET INCOME FROM CONTINUING OPERATIONS DECREASES
Slide 9: Continued Progress in Strategic Growth Areas
CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS IN Q3 2019 ADIDAS NORTH AMERICA On top of 18% increase in Q3 2018 GREATER CHINA On top of 26% increase in Q3 2018 E-COMMERCE On top of 76% increase in Q3 2018 Currency-neutral. 9
Slide 10: adidas Brand Grows in All Markets
ADIDAS BRAND GROWS IN ALL MARKETS DOUBLE-DIGIT IMPROVEMENTS IN NORTH AMERICA, EMERGING MARKETS AND RUSSIA/CIS % SPORT PERFORMANCE INCREASES 8% Training continues to grow at double-digit rate SPORT INSPIRED GROWS 4% Driven by mid-single-digit growth in Originals APPAREL REVENUES INCREASE 13% Supporte
Slide 11: Continued Top-Line Stabilization at Reebok
CONTINUED TOP-LINE STABILIZATION AT REEBOK BRAND KEEPS GROWING AT A MODERATE RATE % REEBOK REVENUES INCREASE 2% Driven by double-digit growth in North America and Russia/CIS GROWTH IN SPORT Driven by significant increase in Training GROSS MARGIN DOWN 3.1PP TO 42.1% Following exceptional expansion in
Slide 12: Strong Growth in E-Commerce
STRONG GROWTH IN E-COMMERCE DRIVING DIGITAL CONSUMER ENGAGEMENT % E-COMMERCE REVENUES GROW 14% Driven by double-digit growth across most regions EXTENDED PARTNERSHIPS WITH DIGITAL PLATFORMS Leverage various channels to drive e-commerce sales INTEGRATION OF RUNTASTIC INTO DIGITAL ECOSYSTEM COMPLETED
Slide 13: Financial Update
FINANCIAL UPDATE HARM OHLMEYER CFO
Slide 14: Growth by Market Segment
GROWTH BY MARKET SEGMENT BROAD-BASED GROWTH ACROSS ALL REGIONS +13% RUSSIA/CIS EUROPE +3% NORTH AMERICA +10% +8% ASIA-PACIFIC LATIN AMERICA +5% +14% EMERGING MARKETS Currency-neutral. 14
Slide 15: North America
NORTH AMERICA STRONG GROWTH FOR BOTH BRANDS % Currency-neutral sales increase 10% adidas brand revenues up 10% Driven by growth in both Sport Performance and Sport Inspired Reebok brand revenues increase 17% Driven by double-digit growth in Sport Gross margin decreases 0.8pp to 41.2% Better product/
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 Performance Reebok brand revenues down 11% Due to declines in both Sport and Classics Gross margin down 0.7pp to 56.5% Better channel mix more
Slide 17: Europe
EUROPE EUROPE BACK TO MODERATE GROWTH % Currency-neutral sales grow 3% adidas brand revenues increase 5% Driven by growth in both Sport Performance and Sport Inspired Reebok brand sales decrease 8% Due to declines in both Sport and Classics Gross margin improves 2.2pp to 51.0% Despite significant pr
Slide 18: P&L Overview Q3 2019 Results
P&L OVERVIEW Q3 2019 RESULTS (€ in millions) Q3 2019 Q3 2018 Y-O-Y NET SALES 6,410 5,873 +9% GROSS MARGIN 52.1% 51.8% +0.3pp OTHER OPERATING INCOME 7 9 -22% OTHER OPERATING EXPENSES 2,486 2,191 +13% (in % of sales) 38.8% 37.3% +1.5pp MARKETING AND POINT-OF-SALE EXPENSES 753 713 +6% (in % of sales) 1
Slide 19: Gross Margin Expansion Decomposed
GROSS MARGIN EXPANSION DECOMPOSED POSITIVE FX EFFECTS MORE THAN OFFSET UNDERLYING GROSS MARGIN DECLINE +0.3PP +0.8PP -0.5PP Underlying decline Less pronounced than expected Currency benefits Higher than anticipated Gross margin to decline in Q4 Several factors to be considered 51.8% 52.1% Gross Gros
Slide 20: OPEX Phasing in H2
OPEX PHASING IN H2 MORE BALANCED DISTRIBUTION BETWEEN Q3 AND Q4 50.5% 43.5% 38.8% OPEX ratio up 1.5pp in Q3 37.3% Due to expense shift from Q4 into Q3 OPEX ratio to decline in Q4 As planned Absolute OPEX spend to increase moderately in Q4 Driven by IT-related business initiatives Q3 Q4 H2 2018 2019
Slide 21: Average Operating Working Capital
AVERAGE OPERATING WORKING CAPITAL IN % OF SALES DOWN 1.6PP TO 18.1% -1.6PP 19.7% 19.0% 18.6% Inventories up 12% c.n. Reflecting planned top-line acceleration in Q4 18.3% 18.1% Receivables up 4% c.n. Reflecting top-line development in wholesale Payables up 21% c.n. Due to improved terms with vendors
Slide 22: Net Cash and Equity Position
NET CASH AND EQUITY POSITION EQUITY RATIO AT 35.4% -194 959 908 Net cash position At € 342 million 535 Equity position 362 342 Increases € 612 million year-on-year Equity ratio Down 6.5pp year-on-year due to IFRS 16 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Net cash at quarter-end, € in millions. 22
Slide 23: 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 € 629 million € 1.6 billion Completed* Shares 5.1 million 2.5 million 7.6 million Purchased* * For 2019 and Total: As at September 30, 2019. Buyba
Slide 24: Outlook
OUTLOOK KASPER RORSTED CEO
Slide 25: 2019 Focus Areas
2019 FOCUS AREAS ANOTHER IMPORTANT MILESTONE TOWARD 2020 TARGETS Leveraging multiple dimensions of innovation To drive top- and bottom-line growth Continuing to invest with impact Into brand desire and scalable business model Delivering overproportionate net income growth On the back of sustainable
Slide 26: Leveraging Multiple Dimensions of Innovation
LEVERAGING MULTIPLE DIMENSIONS OF INNOVATION TO DRIVE TOP- AND BOTTOM-LINE GROWTH 26
Slide 27: London Flagship Opening
LONDON FLAGSHIP OPENING OUR MOST DIGITAL STORE 27
Slide 28: Significant Top-Line Acceleration in Q4 2019
SIGNIFICANT TOP-LINE ACCELERATION IN Q4 2019 BUILDING BLOCKS IN PLACE Product engine to contribute Scaling recent launches as well as introducing new products Europe turnaround unfolding Recovery accelerating Upcoming UEFA EURO 2020 First positive impact from related product launches Earlier Chinese
Slide 29: Outlook 2019 Confirmed
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 30: Outlook 2019 Confirmed
OUTLOOK 2019 CONFIRMED DRIVING DOUBLE-DIGIT BOTTOM-LINE GROWTH 1 First nine months of 2019 according to plan 2 On track to achieve full-year outlook 3 Building blocks in place for significant top-line acceleration in Q4 4 2019 will be another record year 5 Focus on relentless execution of ‘Creating
Slide 31: Relentless Execution of 'Creating the New'
RELENTLESS EXECUTION OF ‘CREATING THE NEW’ TO DELIVER ON OUR FINANCIAL AMBITION 2020 % NET SALES CAGR 2015-2020 c.n. - % OPERATING MARGIN Up to % NET INCOME* CAGR 2015-2020 - * Figures reflect continuing operations as a result of the divestiture of the Rockport, TaylorMade, Adams Golf, Ashworth and
Slide 32: Q&A
Q&A 32