Adidas Ag · XETR:ADS
Adidas — Q1 2012 Earnings Presentation
59 slides from Adidas's earnings presentation, May 14, 2012
Slide 1: Roadshow Presentation – Q1 2012
Roadshow Presentation – Q1 2012 Zurich, May 14, 2012 Robin J. Stalker, CFO adidas Group
Slide 2: Operational Highlights
OPERATIONAL HIGHLIGHTS 2
Slide 3: adidas Group Delivers Record Q1 Sales And Earnings
adidas Group Delivers Record Q1 Sales And Earnings • Strong top-line growth in all segments and all geographies • Fifth consecutive quarter of double-digit growth • Group sales up 14% on a currency- neutral basis to over € 3.8 billion • Net borrowings decrease 30% to € 640 million 3
Slide 4: Sales Grow Across All Geographies In Q1
Sales Grow Across All Geographies In Q1 +7% Western Europe1) +15% European Emerging Markets1) +11% North America1) +26% Greater China1) +26% Other Asian Markets1) +14% Latin America1) 1) Sales development on a currency-neutral basis 4
Slide 5: Clearly Outperforming In Greater China
Clearly Outperforming In Greater China • Sales growth of 26% currency-neutral • Retail comp store sales up 10% currency-neutral • Focus on quality of distribution • Clear consumer focus 5
Slide 6: Further Market Share Gains In Western Europe
Further Market Share Gains In Western Europe • Sales increase 7% currency- neutral • Major sports events supporting market leadership ambitions in the UK and Poland • Strong performance driven by improved consumer interaction at point-of-sale 6
Slide 7: North America Sales Increase 11% Currency-Neutral
North America Sales Increase 11% Currency-Neutral • Currency-neutral sales at adidas and TMaG up 10% and 33% respectively • Market share gains in all of our brands as a result of improved retail presence • Continuation of sell-in momentum with adidas footwear sales up 22% 7
Slide 8: Brand adidas Drives Growth In Q1
Brand adidas Drives Growth In Q1 Q1 2012 Change Net sales (€ in millions) 2,888 16%1) Gross margin 46.4% (1.5pp) Net sales (€ in millions) 451 (7%)1) Gross margin 37.8% 0.6pp 1) Currency-neutral 8
Slide 9: adidas Sales Increase 16% Currency-Neutral
adidas Sales Increase 16% Currency-Neutral • adidas core categories increase 16% on a currency-neutral basis • Eighth consecutive quarter of double-digit growth • All regions up at a double-digit rate 9
Slide 10: Football Sales Increase 23% Currency-Neutral
Football Sales Increase 23% Currency-Neutral • Market share gains due to product introductions and brand activation events • adizero f50 remains best-selling boot in the market • New Predator Lethal Zones just unleashed 10
Slide 11: UEFA EURO 2012 Will See New Record Highs In Football
UEFA EURO 2012TM Will See New Record Highs In Football • adidas Official Sponsor and Partner of the UEFA EURO 2012TM • Outfitter of six high-calibre teams (Spain, Germany, Russia, Ukraine, Denmark and Greece) • Sales of more than € 1.5 billion targeted in 2012 • Sustain market share gains adidas has
Slide 12: Excitement Building Ahead Of Summer Olympic Games
Excitement Building Ahead Of Summer Olympic Games • Team kit designed by Stella McCartney exceeding all expectations 12
Slide 13: Focus On Running Paying Off With 16% Growth
Focus On Running Paying Off With 16% Growth • Lightweight THE success story • Clima franchise jumps over 80% • High visibility due to marketing instalments 13
Slide 14: adidas Basketball Sales Increase 12% Driven By Footwear
adidas Basketball Sales Increase 12% Driven By Footwear • Footwear at Basketball up 23% on a currency-neutral basis • adizero Crazy Light 2 setting new standards in lightness 14
Slide 15: Outdoor Sales Increase 45% Currency-Neutral
Outdoor Sales Increase 45% Currency-Neutral 15
Slide 16: adidas Sport Style Sales Grow 24% Currency-Neutral
adidas Sport Style Sales Grow 24% Currency-Neutral 16
Slide 17: Reebok Sales Up 10% Excluding Licences And Toning
Reebok Sales Up 10% Excluding Licences And Toning • Sales excluding NHL-, NFL-license and toning up 10% currency- neutral • Classics grows 7% currency- neutral • Gross margin continues to improve • Major product and technology launches planned for 2013 17
Slide 18: Reebok Begins Global Brand Positioning Campaign
Reebok Begins Global Brand Positioning Campaign 18
Slide 19: Commercial Irregularities Discovered At Reebok India
Commercial Irregularities Discovered At Reebok India Course of actions to be taken … … new local leadership team appointed … restructuring of business activities … changing commercial business practices … reduction of franchise store base 19
Slide 20: TMaG Grows 32% Currency-Neutral
TMaG Grows 32% Currency-Neutral • Highest growth rate in almost nine years • Sales up double-digit in all club categories, apparel and footwear • Significant market share expansion in metalwoods and irons • Planned acquisition of Adams Golf broadening consumer spectrum 20
Slide 21: adidas Group Well On Track For Successful 2012
adidas Group Well On Track For Successful 2012 21
Slide 22: Financial Highlights
FINANCIAL HIGHLIGHTS 22
Slide 23: Group Gross Margin Decline Limited To 70bp
Group Gross Margin Decline Limited To 70bp Gross Margin Q1 2012 • Higher input costs Wholesale (1.4pp) 41.8% Retail 61.5% +0.2pp • Higher Retail sales at higher margins Other Businesses 43.7% (1.9pp) • Overproportionate growth in emerging markets (0.7pp) 47.7%1) • More favourable sales mix 1) Total
Slide 24: Q1 Group Operating Profit Increases 30%
Q1 Group Operating Profit Increases 30% Q1 2012 Royalty and commission income +34% € 25 million Other operating income +44% € 25 million Other operating expenses +12% € 1.467 billion Other operating expenses 38.4% as a percentage of sales (1.6pp) Operating profit +30% € 409 million Operating margin
Slide 25: Net Income And Diluted EPS Increase 38%
Net Income And Diluted EPS Increase 38% Q1 2012 Financial income € 8 million +78% Financial expenses € 28 million (16%) Income tax rate 25.5% (1.0pp) Net income attributable to € 289 million shareholders +38% Diluted earnings per share +38% € 1.38 25
Slide 26: Q1 Wholesale Sales Up 10% Currency-Neutral
Q1 Wholesale Sales Up 10% Currency-Neutral Wholesale Q1 2012 Change Net sales (€ in millions) 2,614 +10%1) Gross margin 41.8% (1.4pp) Segmental operating 32.6% (2.0pp) margin 1) Currency-neutral 26
Slide 27: Retail Comparable Store Sales Increase 9%
Retail Comparable Store Sales Increase 9% Retail Q1 2012 Change Net sales (€ in millions) 693 +16%1) adidas comp store sales +9%1) Reebok comp store sales +6%1) Total comp store sales +9%1) Gross margin 61.5% +0.2pp Segmental operating margin 16.6% +1.1pp 1) Currency-neutral 27
Slide 28: Other Businesses Up 32% Currency-Neutral
Other Businesses Up 32% Currency-Neutral Other Businesses Q1 2012 Change Net sales (€ in millions) 517 +32%1) Gross margin 43.7% (1.9pp) Segmental operating margin 28.7% +0.6pp 1) Currency-neutral 28
Slide 29: Inventory Growth Moderates To 13% Currency-Neutral
Inventory Growth Moderates To 13% Currency-Neutral • Inventories increase 13% 24 on a currency-neutral basis 22.9 • Sequential decline in growth rate 23 (+16% in Q4) 22 21.7 • Reflects FOB impact and growth expectations 20.9 20.9 • Receivables up 8% on a 21 20.8 20.7 20.8 20.7 20.5 currency-neutral
Slide 30: Net Borrowings Decrease 30%
Net Borrowings Decrease 30% Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 • Net borrowings decrease 30% versus 200 90 prior year to € 640 million • Ratio of net borrowings/EBITDA (200) decreases to 0.5 from 0.8 in 2011 (221) • Equity ratio increases (600) (640) 2.9 percentage points to 48.1%
Slide 31: Full Year Outlook Increased
Full Year Outlook Increased Group sales (currency-neutral) increase at a rate approaching 10% Wholesale sales (currency-neutral) mid- to high-single-digit increase Retail sales (currency-neutral) low-teens increase Other Businesses sales (currency-neutral) low-teens increase Gross margin around 47.5
Slide 32: Questions & Answers
QUESTIONS & ANSWERS 32
Slide 33: Upcoming Financial Reporting Dates
Upcoming Financial Reporting Dates May 10, 2012 Annual General Meeting May 11, 2012 Dividend Payment1) Aug 2, 2012 First Half 2012 Results Sep 20-21, 2012 Investor Field Trip to Carlsbad, California Nov 8, 2012 Nine Months 2012 Results 1) Subject to Annual General Meeting approval 33
Slide 34: Appendix: 2015 Aspirations
APPENDIX: 2015 ASPIRATIONS 34
Slide 35: Global Brands Game Changing Growth Projects
Global Brands Game Changing Growth Projects REEBOK NEO ADIDAS FITNESS EMPIRE FAST FASHION RUNNING BASKETBALL CUSTOMIZATION INTERACTIVITY 35
Slide 36: Brand Architecture – Portfolio Strategy
Brand Architecture – Portfolio Strategy 8% 14 % 22 % 14 % 26 % 10 % 6% PURE ATHLETIC ATHLETIC BRAND SPORT STYLE STYLE PERFORMER STYLE CLASSIC DRIVEN INSPIRED ADOPTER SETTER COMPETITIVE SPORTS ACTIVE SPORTS CASUAL SPORTS SPORTS FASHION 12 % 78 % 10 % 36
Slide 37: Brand Architecture – Business Reality
Brand Architecture – Business Reality 8% 14 % 22 % 14 % 26 % 10 % 6% PURE ATHLETIC ATHLETIC BRAND SPORT STYLE STYLE PERFORMER STYLE CLASSIC DRIVEN INSPIRED ADOPTER SETTER COMPETITIVE SPORTS ACTIVE SPORTS CASUAL SPORTS SPORTS FASHION 12 % 78 % 10 % 37
Slide 38: Brand Differentiation
Brand Differentiation TINNED RAN adidas IIdWA10 D m 2 oO Zz > z= @ THE PERFORMANCE BRAND & MULTI e SPORTS SPECIALIST B BZ i Bu QS = m Zz Go eS Zz wn uU oS a a Ww @ ee) THvaLoo4 « >. ONINNAY = @ warisve Reebok u @ u @ 25 z x a & THE FITNESS ag z= a 4 < & 2 > TRAINING BRAND Q c 8 kK @ ) 4 }@ “FIT FOR
Slide 39: adidas Sport Performance – Making The Athlete Better
adidas Sport Performance – Making The Athlete Better 39
Slide 40: adidas Sport Style – Multi-Label Strategy
adidas Sport Style – Multi-Label Strategy 40
Slide 41: adidas Originals – Iconic And Authentic Street Style
adidas Originals – Iconic And Authentic Street Style 41
Slide 42: NEO Label Attributes And USP
NEO Label Attributes And USP 42
Slide 43: NEO Targets A Global Consumer With A Homogenous Fashion Style
NEO Targets A Global Consumer With A Homogenous Fashion Style 43
Slide 44: Reebok – Brand Positioning
Reebok – Brand Positioning 44
Slide 45: Three Elements Of Total Fitness
Three Elements Of Total Fitness 45
Slide 46: Reebok – The Fitness And Training Brand
Reebok – The Fitness And Training Brand 46
Slide 47: Reebok Classics Strategy
Reebok Classics Strategy • Fit for the Street - thru lens of music/dance • Building holistic product offering • Marketing communications • Introduce over time an American Sportswear line 47
Slide 48: Global Brands Growth
Global Brands Growth 2010 € 6.5 billion € 1.9 billion 2015 € 8.5 billion € 3.0 billion 48
Slide 49: Sustainable Growth In Key Attack Markets
Sustainable Growth In Key Attack Markets North America • Biggest growth potential • Focus on High School Kids and Team Sports Greater China • Market leadership by 2015 • Increase store base Russia/CIS • Increase market share of currently 60% to 70% • Become leading sports brands in Outdoor 49
Slide 50: Focus On The High School Consumer
Focus On The High School Consumer • 16.3m high school kids • $16.1bn spending • 20% industry spend • 80% higher spending than college kids • Influencers and purchasers of sport and fashion 50
Slide 51: Generation US Focus Sports
Generation US Focus Sports 51
Slide 52: Chinese Consumer Becoming More Sophisticated
Chinese Consumer Becoming More Sophisticated 52
Slide 53: Category Attack In Higher Tier Cities
Category Attack In Higher Tier Cities 53
Slide 54: Time To Unleash Originals
Time To Unleash Originals 54
Slide 55: Increasing Store Footprint To Capture Growth
Increasing Store Footprint To Capture Growth • City-by-city footprint plan to match local retail environment • Segmentation to match purchase patterns of high vs. low spenders • Accessible pricing options to complement range • POS increase of 2,500 by 2015 55
Slide 56: Russia/CIS Driven By adidas And Reebok Own Retail
Russia/CIS Driven By adidas And Reebok Own Retail ~800 own retail stores in 2011 ~1,200 own retail stores by 2015 >90% of sales through own retail in 2011 YTD December 2011 comp store sales +24% 56
Slide 57: Opportunities Outweigh Challenges In Russia/CIS
Opportunities Outweigh Challenges In Russia/CIS 57
Slide 58: adidas In Superior Competitive Position
adidas In Superior Competitive Position Significant coverage and Distribution market penetration Broad range covering Product Range multiple consumer targets Unmatched partnership portfolio Brand Marketing Strong POS activation 58
Slide 59: Reebok Has Strong Momentum
Reebok Has Strong Momentum • Inherited solid foundation • Brand strength second only to India • Powerful Brand representation in ~200 stores • Success with Toning, Zig and Flex • KPI’s approaching adidas levels 59