Adidas Ag · XETR:ADS
Adidas — Q1 2009 Earnings Presentation
36 slides from Adidas's earnings presentation, May 5, 2009
Slide 1: First Quarter 2009 Results Roadshow
First Quarter 2009 Results Roadshow Robin J. Stalker May 5, 2009
Slide 2: Agenda
Agenda • Brand Review • Regional Review • Financial Highlights • Strategic Initiatives • Summary 2
Slide 3: adidas Group Revenues Decrease 6% In Q1 2009
adidas Group Revenues Decrease 6% In Q1 2009 (6%) (3%) (4%) 1% (6%) 2% (6%) (2%) (10%) (5%) 0% 5% In euros Currency-neutral 3
Slide 4: Underlying Brand Strength
Underlying Brand Strength 4
Slide 5: adidas Positioning Strengthened In Several Markets And Categories
adidas Positioning Strengthened In Several Markets And Categories Q1 2009 Change Net sales (€ in millions) € 1,917 (6%)1) Gross margin 47.0% (2.0pp) Operating margin 11.9% (5.2pp) 1) Currency-neutral change 5
Slide 6: Winning The Consumer Through Consistent Innovation
Winning The Consumer Through Consistent Innovation 6
Slide 7: adidas Sport Style Sales Advance 12%
adidas Sport Style Sales Advance 12% 7
Slide 8: Restructuring Costs Impact Reebok's Development
Restructuring Costs Impact Reebok’s Development Q1 2009 Change Net sales (€ in millions) € 458 (4%)1) Gross margin 29.4% (7.7pp) Operating margin (20.9%) (18.2pp) 1) Currency-neutral change 8
Slide 9: Successful Launch Of Women's Initiatives
Successful Launch Of Women’s Initiatives 9
Slide 10: TaylorMade-adidas Golf Grows Strongly in Europe
TaylorMade-adidas Golf Grows Strongly in Europe Q1 2009 Change Net sales (€ in millions) € 194 (6%)1) Gross margin 39.8% (6.8pp) Operating margin (10.7%) (23.0pp) 1) Currency-neutral change 10
Slide 11: New Product Launches Support Market Share Gains
New Product Launches Support Market Share Gains 11
Slide 12: Agenda
Agenda • Brand Review • Regional Review • Financial Highlights • Strategic Initiatives • Summary 12
Slide 13: Diverse Performance By Region And Market
Diverse Performance By Region And Market 13
Slide 14: Sales Decline In All Regions Except Latin America
Sales Decline In All Regions Except Latin America (5%) Europe (6%) (17%) North America (7%) Asia (6%) 6% Latin America 31% 23% (6%) (2%) (20%) (10%) 0% 10% 20% 30% In euros Currency-neutral 14
Slide 15: Emerging Markets Excluding China And Russia Up 16%
Emerging Markets Excluding China And Russia Up 16% • Group continues to benefit from strong presence in global emerging markets • Emerging market sales growth rate excluding China and Russia around prior year levels • Particular strength in Latin America 15
Slide 16: Underlying Russian Business Solid
Underlying Russian Business Solid • Underlying strength of Group brands intact • Higher volumes compared to prior year • Significant negative currency impact 16
Slide 17: Disciplined Approach Towards Inventory Management In China
Disciplined Approach Towards Inventory Management In China • Excess inventory in the marketplace hampers industry growth • adidas taking disciplined approach to nurture brand positioning • Store base rationalisation at Reebok 17
Slide 18: Measures Taken To Keep North American Positioning Clean
Measures Taken To Keep North American Positioning Clean • Group brands challenged by overall market weakness • adidas takes action to keep market positioning healthy • Reebok product offering improving 18
Slide 19: adidas Group Consistent With Long-Term Strategies
adidas Group Consistent With Long-Term Strategies • Macroeconomic development challenges persist • Disciplined execution of Group strategies • Decisive steps taken to shape organisation for the long-term future 19
Slide 20: Agenda
Agenda • Brand Review • Regional Review • Financial Highlights • Strategic Initiatives • Summary 20
Slide 21: Group Gross Margin Declines
Group Gross Margin Declines • Higher input costs 47.0% • Currency devaluation effect, (2.0pp) in particular related to the Russian rouble 29.4% (7.7pp) • Promotional retail environment 39.8% (6.8pp) 45.2%1) (4.0pp) Group gross profit declines 10% to € 1.164 billion 1) Includes HQ/Consolidation 21
Slide 22: Factors Driving Operating Expense Increase
Factors Driving Operating Expense Increase Own Retail • Continued investments into controlled space (adidas + Reebok) • Allowances for doubtful debts Allowances • Effect: € 34 million (across all segments) Reebok • Restructuring in Europe and US restructuring • Effect: € 26 million (Reebok + HQ/Cons
Slide 23: First Quarter Operating Margin Down 8.5pp
First Quarter Operating Margin Down 8.5pp Q1 2009 Royalty and commission income € 20 million (4%) Other operating income € 27 million +22% Other operating expenses +10% € 1.153 billion Other operating expenses as a percentage 44.7% of sales +4.7pp Operating profit € 58 million (79%) Operating margin
Slide 24: Exchange Rate Effects Impact Financial Expenses
Exchange Rate Effects Impact Financial Expenses Q1 2009 Net financial expenses € 49 million +56% Income tax rate 51.7% +19.7pp Minority interests (164%) negative € 1m Net income attributable to shareholders (97%) € 5 million Basic earnings per share € 0.02 (97%) Diluted earnings per share € 0.04 (95
Slide 25: 2009 Guidance
2009 Guidance adidas Group Sales (currency-neutral) Low- to mid-single-digit decline Gross margin Decline Operating margin Decline Earnings per share Decline 25
Slide 26: Operating Working Capital Increases
Operating Working Capital Increases • Inventories increase18% 26 on a currency-neutral 25.5 25.6 25.7 25.6 basis 26 25.2 • Demand slowdown 25 24.7 24.5 24.5 • New Reebok companies 25 24.2 • Ashworth acquisition 24 • Receivables up 11% on a 24 currency-neutral basis 23 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q
Slide 27: Net Debt Increases € 810 Million
Net Debt Increases € 810 Million • Net borrowings increase 39% to 3,250 € 2.883 billion 3,000 2,883 • Negative operating 2,750 2,519 2,593 2,395 working capital 2,500 2,201 2,260 2,189 development 2,250 2,073 2,000 • Share buyback 1,750 1,766 • Currency translation 1,500 effects 1,250 1,000 • Financ
Slide 28: Agenda
Agenda • Brand Review • Regional Review • Financial Highlights • Strategic Initiatives • Summary 28
Slide 29: adidas Group Evolved Significantly Since 2000
adidas Group Evolved Significantly Since 2000 Increased Build-up of regional own retail complexity Strong growth over long period of time 29
Slide 30: Cost-Saving Activities Related To Four Major Areas
Cost-Saving Activities Related To Four Major Areas Rightsizing and integration of business units Annual cost savings to exceed € 100 million Implementation of separate wholesale and retail structures All measures to be implemented by year-end Elimination of regional headquarters One-time costs of ar
Slide 31: Full Product And Event Pipeline
Full Product And Event Pipeline 31
Slide 32: Agenda
Agenda • Brand Review • Regional Review • Financial Highlights • Strategic Initiatives • Summary 32
Slide 33: adidas Group Ready For The Challenges Ahead
adidas Group Ready For The Challenges Ahead • Proactive approach to crisis • Building brand equity for long-term, sustainable growth • Important measures taken to leverage Group strength 33
Slide 34: Questions & Answers
QUESTIONS & ANSWERS 34
Slide 35: Appendix
APPENDIX adidas 95 GROUP
Slide 36: adidas Group Financial Calendar
adidas Group Financial Calendar August 5, 2009 First Half 2009 Results November 4, 2009 Nine Months 2009 Results 36