Adidas Ag · XETR:ADS
Adidas — Kepler Cheuvreux 20th German Corporate Conference 2021
51 slides from Adidas's conference presentation, December 2020
Slide 1: adidas German Corporate Conference 2021
adidas GERMAN CORPORATE CONFERENCE 2021
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 INTRODUCTION 02 BUSINESS UPDATE 03 FINANCIAL UPDATE 04 OPERATIONAL UPDATE 05 OUTLOOK 3
Slide 4: Introduction
INTRODUCTION
Slide 5: 5
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Slide 6: For the Game: Bringing Teams Back to Football
FORTHE =. GAME We BRINGING TEAMS BACK TO FOOTBALL.
Slide 7: Amanda Rajkumar to join adidas as Board Member for Global Human Resources
AMANDA RAJKUMAR TO JOIN ADIDAS AS BOARD MEMBER RESPONSIBLE FOR GLOBAL HUMAN RESOURCES ▪ Joins adidas at the beginning of 2021 ▪ Held numerous executive leadership positions for different business divisions ▪ Over 24 years of human resources experience in global organizations ▪ Proven track record at
Slide 8: Create Lasting Change Now: Progress Against Our Commitments
CREATE LASTING CHANGE NOW PROGRESS AGAINST OUR COMMITMENTS JULY AUGUST SEPTEMBER Q4 Creation of global committee Relaunch of our company- Global event to reflect, learn 30-hour inclusion training to accelerate inclusion wide fair play code of conduct and celebrate inclusion mandatory for all employe
Slide 9: adidas as Best Place to Work
ADIDAS AS BEST PLACE TO WORK HIGHEST RANKED SPORTS COMPANY IN FORBES WORLD’S BEST EMPLOYERS 2020 LIST 9
Slide 10: Business Update
BUSINESS UPDATE
Slide 11: Consumer Highlights Q3 2020
CONSUMER HIGHLIGHTS Q3 2020 11
Slide 12: Positive Store Opening Trend Continued Throughout Q3
POSITIVE STORE OPENING TREND CONTINUED THROUGHOUT Q3 96% OF GLOBAL STORE FLEET OPEN AT THE END OF SEPTEMBER 100% 100% 90% 4% Jun: 80% Jan: Store fleet largely First stores in operational 70% China closed Mar: As stores in China re-opened, May: Sep: 60% Rest of World closed down Business in Greater >
Slide 13: Strengths & Weaknesses Q3 2020
STRENGTHS & WEAKNESSES Q3 2020 INVENTORY NORMALIZATION PROGRESSING AS PLANNED REVENUE RECOVERY NOT FOLLOWING A LINEAR TREND + Reduction of more than € 0.5 billion from peak in June − Fading impact from pent-up demand and one-time consumer subsidies TOP-LINE RECOVERY LED BY DTC BUSINESS RETAIL TRAFFI
Slide 14: P&L at a Glance Q3 2020
P&L AT A GLANCE Q3 2020 REVENUES DECREASE 3% CURRENCY-NEUTRAL And 7% in euro terms to € 5.964 billion GROSS MARGIN DOWN 2.1PP TO 50.0% Headwinds from industry-wide promotional activity and adverse FX OPERATING PROFIT OF € 794 MILLION Operating margin of 13.3% supported by strict cost control NET INC
Slide 15: Strategic Growth Areas Q3 2020
STRATEGIC GROWTH AREAS Q3 2020 ADIDAS NORTH AMERICA Growth over the first two months of the quarter GREATER CHINA Double-digit growth in DTC driven by both own retail and e-com E-COMMERCE Reflecting significantly higher full-price share Currency-neutral. 15
Slide 16: Another Quarter of Exceptional E-Commerce Growth
ANOTHER QUARTER OF EXCEPTIONAL E-COMMERCE GROWTH CONTINUING TO DRIVE PROFITABLE GROWTH % E-COMMERCE REVENUES UP 51% Exceptional growth despite store opening rate >90% REACHING NEARLY 150 MILLION MEMBERS Member sales account for two-thirds of e-com revenues across the US and Europe CONFIRMED APP LAUN
Slide 17: adidas and Reebok Brand Performance
ADIDAS AND REEBOK BRAND PERFORMANCE BRAND ADIDAS RECORDS GROWTH IN ORIGINALS AND RUNNING ADIDAS REVENUES REEBOK REVENUES % % Currency-neutral. 17
Slide 18: Financial Update
FINANCIAL UPDATE
Slide 19: Overview Market Segments
OVERVIEW MARKET SEGMENTS EUROPE AND RUSSIA/CIS BACK TO GROWTH +11% +4% Operating margin: 30.2% (+0.1pp) -1% Operating margin: 21.8% (-4.2pp) -7% Operating margin: 21.7% (+5.6pp) Operating margin: 29.7% (-5.3pp) -13% -10% Operating margin: 29.9% (-2.2pp) Operating margin: 11.3% (-5.8pp) Net sales dev
Slide 20: P&L Overview: Return to Double-Digit Operating Margin
P&L OVERVIEW RETURN TO DOUBLE-DIGIT OPERATING MARGIN (€ in millions) Q3 2020 Q3 2019 Y-O-Y NET SALES 5,964 6,410 -7% GROSS MARGIN 50.0% 52.1% -2.1pp OTHER OPERATING EXPENSES 2,223 2,486 -11% (in % of sales) 37.3% 38.8% -1.5pp MARKETING AND POINT-OF-SALE EXPENSES 579 753 -23% (in % of sales) 9.7% 11.
Slide 21: Gross Margin Development Decomposed
GROSS MARGIN DEVELOPMENT DECOMPOSED HEADWINDS FROM ADVERSE FX AND INDUSTRY-WIDE PROMOTIONAL ACTIVITY AS ANTICIPATED ▪ Significantly less pronounced than in Q2 due to the company’s focus on profitable sell-through and disciplined sell-in 52.1% 50.0% Gross margin Sourcing & Channel & Pricing FX Gross
Slide 22: Significant Operating Profit Recovery
SIGNIFICANT OPERATING PROFIT RECOVERY € 1.1 BILLION SEQUENTIAL IMPROVEMENT SUPPORTED BY STRICT COST CONTROL +1,126 € in millions 897 875 794 643 65 -333 2019 Operating Profit Q1 Q2 Q3 2020 Operating Profit 22
Slide 23: Net Debt and Equity Position
NET DEBT AND EQUITY POSITION INCREASE IN NET DEBT OF € 300 MILLION COMPARED TO THE END OF Q2 -1,434 535 342 Net debt At € 1,092 million -345 Equity position Decrease of € 583 million year-on-year -769 Equity ratio -1,092 At 30.4% Q3/16 Q3/17 Q3/18 Q3/19 Q3/20 (Net debt)/net cash at quarter-end, € in
Slide 24: Average Operating Working Capital
AVERAGE OPERATING WORKING CAPITAL SEQUENTIAL NORMALIZATION OF BOTH INVENTORIES AND PAYABLES +5.1PP 23.2% 21.3% 20.3% 19.7% 18.1% Inventories up 35% c.n. year-on-year Reduced by 10% c.n. since end of June Receivables down 14% c.n. year-on-year Continued emphasis on cash collection Payables down 26% c
Slide 25: Operational Update
OPERATIONAL UPDATE
Slide 26: Execute Through COVID-19
EXECUTE THROUGH COVID-19 STRIKING THE BALANCE BETWEEN SHORT AND LONG TERM 1 2 3 4 26
Slide 27: Inventory Normalization Progressing as Planned
1 INVENTORY NORMALIZATION PROGRESSING AS PLANNED OPERATIONAL FLEXIBILITY Peak ▪ € 1.1 billion inventory build-up since year-end 2019 level ▪ € 0.5 billion inventory reduction during Q3 ▪ Reasonable level of discounting with gross margin being down just 2.1pp year-on-year amid promotional environment
Slide 28: Executing Inventory Normalization Plan
1 EXECUTING INVENTORY NORMALIZATION PLAN OPERATIONAL FLEXIBILITY 28
Slide 29: Cash Position Increases to € 3.2 Billion
2 CASH POSITION INCREASES TO € 3.2 BILLION AT THE END OF Q3 FINANCIAL FLEXIBILITY € in billions 1.3 0 -0.1 3.2 2.0 Total cash Total cash Operating cashflow Investing cashflow Financing cashflow June 30, 2020 September 30, 2020 29
Slide 30: Optimized Capital Structure and Financing Costs
2 OPTIMIZED CAPITAL STRUCTURE AND FINANCING COSTS FINANCIAL FLEXIBILITY € in billions 1.5 3.0 0.5 0.5 0.5 Total Eurobonds Sustainability bond New syndicated loan financing issued issued with partner banks activities 30
Slide 31: KfW Syndicated Loan Facility Replaced
2 KFW SYNDICATED LOAN FACILITY REPLACED FINANCIAL FLEXIBILITY BN € 0.5 BN € 0.5 BN € 1.5 BN 4 YEARS 15 YEARS SYNDICATED LOAN € COUPON: 0.00% COUPON: 0.625% FACILITY April 14 September 1 November 10 KfW bridge € 1 billion financing bonds New € 1.5 billion approved placed syndicated loan Through March
Slide 32: Membership: Only Sports Brand to Reward Physical and Purchasing Activity
3 ONLY SPORTS BRAND TO REWARD BOTH PHYSICAL AND PURCHASING ACTIVITY DIGITAL OPPORTUNITIES +20% +60% AVERAGE AVERAGE ORDER ORDER VALUE FREQUENCY Introducing products and Providing premium DTC connecting brand moments while athletes train and run to acquire membership points MEMBERSHIP excellence at s
Slide 33: Creators Club Week with Exclusive Offers for Members
3 CREATORS CLUB WEEK WITH EXCLUSIVE OFFERS FOR MEMBERS DIGITAL OPPORTUNITIES 33
Slide 34: More Impactful Storytelling in Our Stores
4 MORE IMPACTFUL STORYTELLING IN OUR STORES DIRECT-TO-CONSUMER 34
Slide 35: London Originals Flagship Opening
4 LONDON ORIGINALS FLAGSHIP OPENING DIRECT-TO-CONSUMER 35
Slide 36: Own Retail Traffic and Conversion Trend
4 OWN RETAIL TRAFFIC AND CONVERSION TREND DIRECT-TO-CONSUMER GLOBAL – YTD NOVEMBER 2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Conversion rate vs. PY (%) Traffic vs. PY (%) Illustrative. 36
Slide 37: Actively Driving Channel Shift Toward DTC
4 ACTIVELY DRIVING CHANNEL SHIFT TOWARD DTC DIRECT-TO-CONSUMER YTD SEPTEMBER 2019 YTD SEPTEMBER 2020 - ▪ Exceptional e-com growth paired with successful store activations ▪ Direct relationship to consumers with digital and physical touchpoints ▪ Exiting non-strategic wholesale accounts to win with t
Slide 38: Outlook
OUTLOOK
Slide 39: Futurecraft.Strung
FUTURECRAFT.STRUNG 39
Slide 40: Reebok Forever Floatride Grow
REEBOK FOREVER FLOATRIDE GROW 40
Slide 41: ZX 2K Boost
ZX 2K BOOST 41
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Slide 43: Ninja: Chase the Spark
NINJA CHASE THE SPARK 43
Slide 44: Ivy Park
IVY PARK 44
Slide 45: Stores in Parts of Europe Closing Again
STORES IN PARTS OF EUROPE CLOSING AGAIN AS INCREASING NUMBER OF CORONAVIRUS CASES LEADS TO PARTIAL LOCKDOWNS 100% 100% 7% 90% 80% Jan: First stores in Sep: 70% >95% of global China closed Mar: May: store fleet open As stores in China re-opened, Business in Greater Oct & Nov: 60% Rest of World closed
Slide 46: Outlook for Q4 2020
OUTLOOK FOR Q4 2020 SIMILAR TOP-LINE DEVELOPMENT AS EXPERIENCED IN Q3 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Outlook Net sales -34% -3% Low- to mid-single-digit -19% decline Around prior Gross margin -4.2pp -2.4pp -2.1pp year level Operating result € 65m -€ 333m € 794m € 100-200 million ▪ No additional maj
Slide 47: Better Positioned to Cope with Short-Term Uncertainties
BETTER POSITIONED TO COPE WITH SHORT-TERM UNCERTAINTIES AND BENEFIT FROM LONG-TERM GROWTH DRIVERS CULTURAL ▪ Putting health and safety first FOUNDATION ▪ Becoming even more diverse and inclusive OPERATIONAL ▪ Agile approach to sourcing and sell-in FLEXIBILITY ▪ Recipe for impactful campaigns and lau
Slide 48: Investor & Media Day: Save the Date
SAVE THE DATE INVESTOR & MEDIA DAY MARCH 10, 2021 48
Slide 49: Summary
SUMMARY 1 Top- and bottom-line results close to prior-year level 2 Focus on healthy inventories, profitable sell-through and disciplined sell-in 3 On track toward normalized inventory level by year-end 4 Financial flexibility increased at favorable conditions 5 Better positioned for short-term uncer
Slide 50: Wnt
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Slide 51: adidas Investor Relations Team
ADIDAS INVESTOR RELATIONS TEAM COMMUNICATIONS ADRIAN ROTT SEBASTIAN STEFFEN Senior Director Investor Head of Investor Relations Relations CHRISTOPH RUMP ANJA KLIEBER PHILIPP ULRICH MORITZ VERLEGER LAURA SÄNGER Director Investor Senior Manager Investor Senior Manager Investor Manager Investor Assista
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