Adidas Ag · XETR:ADS
Adidas — Q2 2015 Earnings Presentation
94 slides from Adidas's earnings presentation, 2015
Slide 1: Q2 2015 Results Roadshow Presentation
Q2 2015 Results Roadshow Presentation MAKE A DIFFERENCE
Slide 2: Operational Highlights
OPERATIONAL HIGHLIGHTS 2
Slide 3: Major Developments
MAJOR DEVELOPMENTS • adidas and Reebok brands enjoying strong momentum • Rockport divestiture completed • Digital activities strengthened by acquisition of Runtastic • Second tranche of share buyback programme finished • Disappointing performance of TaylorMade-adidas Golf 3
Slide 4: TMAG
TMAG • Currency-neutral sales down 26% in Q2, due to declines in most categories • Sell-through rates of new product launches below initial expectations • Slower-than-expected golf market recovery contributes to TMaG weakness • Engagement with investment bank to analyse future options for golf busin
Slide 5: TMAG Turnaround Plan
TMAG TURNAROUND PLAN • Enhanced pricing, promotion and trade patterns • Product cost and supply chain optimisation • Re-prioritisation of global marketing investments • Realisation of significant operating overhead savings 5
Slide 6: Robust Growth in Q2
ROBUST GROWTH IN Q2 • Sales increase 5% currency-neutral or 15% in euro terms to € 3.9 billion • adidas and Reebok grow 8% and 6% currency-neutral, respectively • Gross margin down 0.9pp to 48.3%, partly due to lower margins at TMaG • Operating margin down 0.4pp to 6.0% • Net income from continuing
Slide 7: adidas and Reebok with Strong Momentum
ADIDAS AND REEBOK WITH STRONG MOMENTUM Q2 2015 CHANGE H1 2015 CHANGE NET SALES (€ IN MILLIONS) 3,180 +8%1) 6,533 +10%1) GROSS MARGIN 48.0% +0.7pp 48.0% +0.5pp NET SALES (€ IN MILLIONS) 408 +6%1) 819 +8%1) GROSS MARGIN 40.4% +1.9pp 39.6% +0.5pp 1) Currency-neutral. 7
Slide 8: Sales Increase in Most Regions in Q2
SALES INCREASE IN MOST REGIONS IN Q2 (14%) RUSSIA/CIS + 12% WESTERNEUROPE (6%) JAPAN 0% NORTH AMERICA +19% GREATER CHINA + 16% MEAA + 9% LATINAMERICA Currency-neutral. Figures reflect combined revenues of the adidas and Reebok businesses. 8
Slide 9: Running
RUNNING • Currency-neutral Running sales up 2% in Q2, supported by growth in most markets • Double-digit sales increases in apparel • More than 5 million Boost running shoes sold in 2015 • Great success with Ultra Boost – All White version sold out in three days • 53 marathon wins with Boost and cou
Slide 10: Football
FOOTBALL • Football suffers revenue declines due to the anniversary of the 2014 FIFA World Cup • Currency-neutral sales for Football footwear grow 17% in Q2 • Successful launch of ‘ACE’ and ‘X’ • #BETHEDIFFERENCE Football Reset Campaign launched 10
Slide 11: Training
TRAINING • Currency-neutral Training sales increase 6% in Q2 • Growth driven by strong sales increases in apparel and hardware • Double-digit growth in Greater China, Latin America and MEAA • 50% sales increase for the ClimaChill product range 11
Slide 12: Originals
ORIGINALS • Sales at adidas Originals increase 37% currency-neutral in Q2, driven by strong double-digit revenue increases in footwear • Growth in footwear suported by strong franchises such as the Superstar, ZX Flux and Stan Smith • Yeezy 350 Boost creates further hype • Strong double-digit increas
Slide 13: NEO
NEO • adidas NEO sales increase 43% currency-neutral in Q2 • Strong double-digit growth in both footwear and apparel • Strong momentum across all markets except Russia/CIS • Successful launch of the SS15 Selena Gomez Collection 13
Slide 14: Reebok
REEBOK • Currency-neutral Reebok revenues up 6% in Q2 • 9th consecutive quarter of growth • Double-digit growth rates in the Training and Studio categories • Strong momentum across most markets • Revenues in North America negatively impacted by ongoing efforts to streamline the factory outlet busine
Slide 15: Financial Highlights
FINANCIAL HIGHLIGHTS 15
Slide 16: Western Europe
WESTERN EUROPE • Sales up 12% currency-neutral in Q2 • Double-digit sales growth in most of the region‘s major markets • Strong sales growth at both adidas (+12%) and Reebok (+9%) • Growth at adidas supported by double- digit sales increases at adidas Originals • Retail sales grow +25% currency- neu
Slide 17: North America
NORTH AMERICA • Sales remain stable in Q2 • Revenues at adidas up 2%, supported by double-digit growth at adidas Originals • Reebok sales decrease 9%, due to ongoing efforts to streamline the brand‘s factory outlet business • Investments in brand-building activities and point-of-sale activation cont
Slide 18: Greater China
GREATER CHINA • Currency-neutral sales grow 19% in Q2, with double-digit increases at both adidas (+19%) and Reebok (+57%) • Growth at adidas driven by strong double-digit sales increases in key categories such as Training and Running as well as at adidas Originals and adidas NEO • Sales increases a
Slide 19: Russia/CIS
RUSSIA/CIS • Sales down 14% currency-neutral in Q2 • Currency-neutral sales declines at both adidas (-16%) and Reebok (-8%) • Further rationalisation of own-retail store network with 64 net store closures during Q2 • Significant reduction of operating expenses, primarily due to lower sales expenditu
Slide 20: Latin America
LATIN AMERICA • Sales grow 9% currency-neutral in Q2 due to double-digit increases in Argentina, Chile and Peru • Sales up 7% at adidas, driven by double-digit growth in Training, Basketball and adidas Originals • Reebok grows 22%, supported by double-digit sales increases in Running, Training and C
Slide 21: Japan
JAPAN • Currency-neutral sales down 6% in Q2 • Growth at Reebok (+27%) more than offset by sales declines at adidas (-8%) • Sales decline at adidas mainly due to double-digit decreases in the Training and Football categories • Retail revenues up double-digits, supported by double-digit comp growth 2
Slide 22: MEAA
MEAA • Revenues in Q2 up 16% currency- neutral with double-digit increases in UAE, South Korea, Turkey and India • adidas up 14%, driven by double-digit sales increases in Training and Running as well as at adidas Originals and NEO • Reebok sales grow 23% mainly due to double-digit sales increases i
Slide 23: Profitability of Other Businesses Declines
PROFITABILITY OF OTHER BUSINESSES DECLINES Other Businesses Q2 2015 CHANGE H1 2015 CHANGE NET SALES € 365 million (14%)1) € 742 million (8%)1) GROSS MARGIN 30.8% (5.9pp) 34.2% (3.2pp) OPERATING MARGIN (10.9%) (11.5pp) (6.1%) (3.4pp) 1) Currency-neutral. Figures reflect continuing operations as a res
Slide 24: Group Operating Profit Up 14% in H1
GROUP OPERATING PROFIT UP 14% IN H1 Q2 2015 H1 2015 GROSS PROFIT € 1,889 million € 3,897 million +13% +15% GROSS MARGIN 48.3% 48.8% (0.9pp) (0.4pp) OTHER OPERATING EXPENSES € 1,720 million € 3,420 million +13% +14% OTHER OPERATING EXPENSES AS A PERCENTAGE OF SALES 44.0% 42.8% (0.6pp) (0.7pp) OPERATI
Slide 25: Net Income Grows 14% in H1 2015
NET INCOME GROWS 14% IN H1 2015 Q2 2015 H1 2015 FINANCIAL INCOME € 8 million € 24 million +64% +102% FINANCIAL EXPENSES € 17 million € 32 million (14%) (19%) INCOME BEFORE TAXES € 225 million € 588 million +11% +18% INCOME TAX RATE 35.1% 31.8% +6.0pp +2.9pp NET INCOME FROM CONTINUING OPERATIONS € 14
Slide 26: Retail Profitability Improves Strongly
RETAIL PROFITABILITY IMPROVES STRONGLY Q2 2015 CHANGE H1 2015 CHANGE NET SALES € 1,057 million +8%1) € 1,952 million +11%1) ADIDAS COMP STORE SALES (1%) 1) +2% 1) REEBOK COMP STORE SALES (9%)1) (6%)1) TOTAL COMP STORE SALES (2%)1) +1%1) GROSS MARGIN 63.4% +2.9pp 61.8% +1.5pp OPERATING MARGIN 23.3% +
Slide 27: Retail Store Development
RETAIL STORE DEVELOPMENT • 2,846 stores operated at quarter-end • Net decrease of 67 stores versus 2,913 at the end of 2014 • 112 new stores opened, 179 stores closed, 39 stores remodelled • 1,582 adidas and 422 Reebok branded; 842 factory outlets 27
Slide 28: Inventories Remain at Healthy Levels
INVENTORIES REMAIN AT HEALTHY LEVELS • Inventories from continuing 23% operations increase 3% (c.n.) 18% 18% 16% • Receivables from continuing operations up 3% (c.n.) 13% • Payables from continuing 7% operations decrease 3% (c.n.) 8% • Average OWC in % of sales 3% 3% 2% decreases 0.4pp to 21.6% 0% -
Slide 29: Share Buyback Programme
SHARE BUYBACK PROGRAMME 2nd tranche successfully completed: • 2nd tranche: 4,129,627 shares repurchased at average price of € 72.65 per share • 1st tranche & 2nd tranche: 9,018,769 shares repurchased, corresponding to 4.31% of nominal capital 29
Slide 30: Net Debt Grows to €957 Million
NET DEBT GROWS TO € 957 MILLION 500 295 • Net borrowings increase to € 957 million (2014: € 454 million), 100 due to the utilisation of cash for the share buyback programme (94) • Ratio of net borrowings/EBITDA -300 (180) (254) (185) amounts to 0.6 (2014: 0.4) (454) • Equity ratio decreases to 43.5%
Slide 31: adidas Group Confirms FY 2015 Outlook
ADIDAS GROUP CONFIRMS FY 2015 OUTLOOK GROUP SALES (CURRENCY-NEUTRAL) MID-SINGLE-DIGIT INCREASE GROSS MARGIN 47.5% TO 48.5% OTHER OPERATING EXPENSES (IN % OF SALES) AROUND PRIOR YEAR LEVEL OPERATING MARGIN1) BETWEEN 6.5% AND 7.0% NET INCOME FROM CONTINUING OPERATIONS1) TO INCREASE AT A RATE OF 7% TO
Slide 32: Strategic Initiatives and Outlook
STRATEGIC INITIATIVES AND OUTLOOK 32
Slide 33: ACE and X Hit Retail in Q3
_ACE AND XHIT RETAILIN Q3 adidas GROUP
Slide 34: adidas and Manchester United Reunite
ADIDAS AND MANCHESTER UNITED REUNITE 34
Slide 35: Sport 15 Campaign Continues
SPORT 15 CAMPAIGN CONTINUES 35
Slide 36: adidas Continues to Focus on US Sports
ADIDAS CONTINUES TO FOCUS ON US SPORTS 36
Slide 37: Increasing Focus on the MLB
INCREASING FOCUS ON THE MLB 37
Slide 38: adidas and Pac-12 Announce Partnership
ADIDAS AND PAC-12 ANNOUNCE PARTNERSHIP 38
Slide 39: Introducing Boost Experience by adidas
INTRODUCING BOOST EXPERIENCE BY ADIDAS 39
Slide 40: First 'Sportswear Collective' Store in China
FIRST ‘SPORTSWEAR COLLECTIVE’ STORE IN CHINA 40
Slide 41: Supershell Superstar by Pharrell Williams
SUPERSHELL SUPERSTAR BY PHARRELL WILLIAMS 41
Slide 42: Reebok Launches CrossFit Nano 5.0
REEBOK LAUNCHES CROSSFIT NANO 5.0 42
Slide 43: Reebok Unveils First-Ever UFC Fight Kit
REEBOK UNVEILS FIRST-EVER UFC FIGHT KIT 43
Slide 44: TMAG Ready for Upcoming Product Launches
TMAG READY FOR UPCOMING PRODUCT LAUNCHES 44
Slide 45: Runtastic Acquisition Completed
RUNTASTIC ACQUISITION COMPLETED 45
Slide 46: Tremendous Growth Story
TREMENDOUS GROWTH STORY 70M 140M REGISTERED USERS APP DOWNLOADS 46
Slide 47: Completing the Digital Ecosystem
COMPLETING THE DIGITAL ECOSYSTEM DATA APPS COMMERCE DIGITAL DIGITAL IP SPORT SENSORS COMMUNITY SUBSCRIPTION CONTENT BRAND CRM SCIENCE COMMERCE WEARABLES PARTICIPATION SOCIAL / NEWSROOMS DIGITAL EXPERIENCE 47
Slide 48: Upcoming Events
UPCOMING EVENTS NOVEMBER 05, 2015 NINE MONTHS 2015 RESULTS MARCH 03, 2016 FULL YEAR 2015 RESULTS MAY 04, 2016 FIRST QUARTER 2016 RESULTS MAY 12, 2016 ANNUAL GENERAL MEETING MAY 13, 2016 DIVIDEND PAYMENT1) 1) Subject to Annual General Meeting Approval. 48
Slide 49: Appendix
APPENDIX 49
Slide 50: Creating the New
CREATING THE NEW 50
Slide 51: 3 Strategic Choices Taken: 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 Organization and Consumers
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 Euro
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