Adidas Ag · XETR:ADS
Adidas — Q1 2019 Earnings Presentation
26 slides from Adidas's earnings presentation, 2019
Slide 1: adidas Q1 2019 Roadshow Presentation
adidas Qi 2019 ROADSHOW PRESENTATION
Slide 2: Business Update
BUSINESS UPDATE
Slide 3: adidas x Beyoncé: Multi-layered partnership in the spirit of open source
ADIDAS X BEYONCÉ MULTI-LAYERED PARTNERSHIP IN THE SPIRIT OF OPEN SOURCE BEYONCÉ AS A CREATIVE PARTNER Taking our successful approach to collaboration to the next level CO-CREATION OF EXCITING PERFORMANCE AND LIFESTYLE PRODUCTS Developing signature footwear and apparel as well as re-launching Ivy Par
Slide 4: Consumer Highlights: Leveraging multiple dimensions of innovation
CONSUMER HIGHLIGHTS LEVERAGING MULTIPLE DIMENSIONS OF INNOVATION 4
Slide 5: Strengths & Weaknesses in Q1 2019
STRENGTHS & WEAKNESSES IN Q1 2019 CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS SUPPLY CHAIN SHORTAGES + Double-digit growth in Greater China and e-commerce − Weighing on growth in North America SUCCESSFUL ACTIVATION OF NEW LAUNCHES EUROPE GROWTH RECOVERY TO UNFOLD IN H2 + UB19 and Nite Jogger perfor
Slide 6: P&L Highlights in Q1 2019
P&L HIGHLIGHTS IN Q1 2019 REVENUES INCREASE 4% CURRENCY-NEUTRAL And 6% in euro terms to € 5.883 billion GROSS MARGIN UP 2.5PP TO 53.6% Supported by favorable FX development OPERATING MARGIN UP 1.4PP TO 14.9% Despite higher investments NET INCOME FROM CONTINUING OPERATIONS INCREASES 16% To € 631 mill
Slide 7: Strong Progress in Strategic Growth Areas in Q1 2019
STRONG PROGRESS IN STRATEGIC GROWTH AREAS IN Q1 2019 ADIDAS NORTH AMERICA On top of a 23% increase in Q1 2018 GREATER CHINA On top of a 26% increase in Q1 2018 E-COMMERCE On top of a 27% increase in Q1 2018 Currency-neutral. 7
Slide 8: adidas Brand Grows in Most Markets
ADIDAS BRAND GROWS IN MOST MARKETS STRONG INCREASE IN ASIA-PACIFIC AND ROBUST GROWTH IN NORTH AMERICA % SPORT PERFORMANCE GROWS 3% High-single-digit growth in Training and Running partially offset by tough comparisons in Football SPORT INSPIRED GROWS 6% Reflecting exceptional Yeezy growth BALANCED G
Slide 9: Further Margin Improvement at Reebok
FURTHER MARGIN IMPROVEMENT AT REEBOK BRAND KEEPS EXECUTING ‘MUSCLE-UP’ AFTER RETURN TO PROFITABILITY REEBOK REVENUES DECREASE 6% Due to declines in most markets GROWTH IN CLASSICS Driven by double-digit increase in apparel GROSS MARGIN UP 2.9PP TO 44.7% Driven by further execution of ‘Muscle-Up’ Cur
Slide 10: Exceptional Growth in E-Commerce
EXCEPTIONAL GROWTH IN E-COMMERCE DRIVING DIGITAL CONSUMER ENGAGEMENT % E-COMMERCE REVENUES GROW 40% Driven by double-digit growth across all regions DRIVING TRAFFIC AND ENGAGEMENT RATES Through exclusive releases such as AlphaEdge 4D ADIDAS APP NOW LIVE IN 27 COUNTRIES More than 9 million downloads
Slide 11: Financial Update
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Slide 12: Growth by Market Segment
GROWTH BY MARKET SEGMENT MODERATE GROWTH IN NORTH AMERICA AND STRONG INCREASES IN ASIA-PACIFIC +22% RUSSIA/CIS EUROPE -3% NORTH AMERICA +3% +12% ASIA-PACIFIC LATIN AMERICA -3% +10% EMERGING MARKETS 12 Currency-neutral.
Slide 13: North America
NORTH AMERICA TOP-LINE GROWTH IMPACTED BY SUPPLY CHAIN SHORTAGES % Currency-neutral sales increase 3% adidas brand revenues up 5% Driven by growth in Sport Performance Reebok brand revenues decrease 12% Despite growth in Classics Gross margin increases 0.5pp to 38.3% Driven by lower sourcing costs a
Slide 14: Asia-Pacific
ASIA-PACIFIC STRONG DOUBLE-DIGIT GROWTH DRIVEN BY GREATER CHINA % Currency-neutral sales increase 12% adidas brand sales increase 13% Driven by double-digit growth in both Sport Performance and Sport Inspired Reebok brand revenues down 7% Despite growth in Classics Gross margin up 2.7pp to 58.7% Due
Slide 15: Europe
EUROPE STRONG BOTTOM-LINE IMPROVEMENTS % Currency-neutral sales decrease 3% adidas brand revenues down 3% Despite growth in Training and Running Reebok brand sales decrease 7% Despite growth in Running Gross margin improves 6.1pp to 51.7% Due to a significant positive FX impact, lower sourcing costs
Slide 16: P&L Overview
P&L OVERVIEW Q1 2019 RESULTS IN NEW P&L STRUCTURE (€ in millions) Q1 2019 Q1 2018 Y-O-Y NET SALES 5,883 5,548 +6% GROSS MARGIN 53.6% 51.1% +2.5pp OTHER OPERATING INCOME 6 12 -48% OTHER OPERATING EXPENSES 2,317 2,127 +9% (in % of sales) 39.4% 38.3% +1.0pp MARKETING AND POINT-OF-SALE EXPENSES 703 706
Slide 17: Quarterly Gross Margin
QUARTERLY GROSS MARGIN Q1 2019 IMPROVEMENT REFLECTING LOWER BASE AND FAVORABLE FX 53.6% +2.5PP ~52.0% 52.3% 52.2% 51.8% 51.8% 51.1% 2019 guidance: to increase to around 52.0% Q1 Q2 Q3 Q4 FY 2018 2019 17
Slide 18: Average Operating Working Capital
AVERAGE OPERATING WORKING CAPITAL IN % OF SALES DOWN 1.7PP TO 18.6% -1.7PP 20,3% 20,1% 19,7% Inventories up 2% c.n. 19,0% As a result of tight inventory management 18,6% Receivables up 6% c.n. Reflecting top-line development Payables up 28% c.n. Due to improved terms with vendors Q1/18 Q2/18 Q3/18 Q
Slide 19: Net Cash and Equity Position
NET CASH AND EQUITY POSITION EQUITY RATIO AT 36.0% +537 959 908 Net cash position 535 At € 908 million Equity position 371 Increases € 524 million year-on-year Equity ratio Down 8.8pp year-on-year due to IFRS 16 89 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Net cash at quarter-end, € in millions. 19
Slide 20: Shareholder Return: Share Buyback Update
SHAREHOLDER RETURN SHARE BUYBACK UPDATE TOTAL SIZE Up to € 3.0 billion (around € 800 million in 2019) TIMEFRAME Started March 22, 2018 and ending latest on May 11, 2021 NUMBER OF SHARES PURCHASED* 5.8 million adidas AG shares (0.7 million in Q1 2019) AMOUNT PURCHASED* € 1.2 billion (€ 152 million in
Slide 21: Outlook
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Slide 22: 2019 Focus Areas
2019 FOCUS AREAS ANOTHER IMPORTANT MILESTONE TOWARD 2020 TARGETS Leveraging multiple dimensions of innovation To drive high-quality top-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 23: Supply Chain Shortages: Mitigation Measures in Place
SUPPLY CHAIN SHORTAGES MITIGATION MEASURES IN PLACE TACTICAL DECISIONS Prioritizing product Leveraging airfreight Accelerating existing capacities MID-TERM DECISIONS Acquiring additional capacities 23
Slide 24: Top-line Acceleration in H2 2019
TOP-LINE ACCELERATION IN H2 2019 BUILDING BLOCKS IN PLACE Product engine to contribute Scaling recent launches as well as introducing new products Europe to return to growth Foundation laid for recovery in H2 UEFA EURO 2020 to come First positive impact from related product launches in Q4 Impact of
Slide 25: 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 26: Summary
SUMMARY 1 Successful start into 2019 according to plan 2 Continuation of double-digit bottom-line growth in Q1 3 Building blocks in place to accelerate top line in H2 4 2019 another year of high-quality top- and bottom-line growth 5 Focus on relentless execution of ‘Creating the New’ 26