August 6, 2020

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 beyond the control of the company, including, but not limited to the risks described in the Risk and Opportunity Report of the adidas Annual Report. In case the underlying assumptions turn out to be incorrect or (described or other) risks or opportunities materialize, actual results and developments may materially deviate (negatively or positively) from those expressed by such statements and Management's plans may change. adidas does not assume any obligation to update any forward-looking statements made in this presentation or in connection herewith beyond statutory disclosure obligations.

In light of the current very dynamic developments, adidas points out that the factual basis for any conversation is limited to the information publicly disclosed at the occasion of its second quarter 2020 results release and earnings call on August 6, 2020. The company will not provide any information with regard to decisions of adidas or its current trading that has not been published through an official release or made otherwise publicly available by adidas.

AGENDA

  1. INTRODUCTION
  2. BUSINESS UPDATE
  3. FINANCIAL UPDATE
  4. OPERATIONAL UPDATE
  5. OUTLOOK

3

INTRODUCTION

MANAGEMENT FOCUS

NAVIGATING TOWARD LONG-TERM SUCCESS

5

EXECUTE THROUGH COVID-19

STORE FLEET LARGELY OPERATIONAL AT THE END OF Q2

100%

June:

17%

Store fleet largely

January:

operational

First stores in

March:

China closed

As stores in China re-opened,

May:

Rest of World closed down

Business in Greater China

50%

returned to growth

83%

April:

>70% of global store fleet

closed

0%

January

February

March

April

May

June

Open

Closed

Illustrative.

6

EXECUTE THROUGH COVID-19

PROTECTING OUR PEOPLE, COMMUNITIES AND PARTNERS REMAINS TOP PRIORITY

HEALTH AND SAFETY IN OUR STORES

Executing store re-opening in accordance with social distancing measures and local regulations

HEALTH AND SAFETY IN OUR OFFICES

Providing workplace flexibility and safe in-office environment

SUPPLY CHAIN RESPONSIBILITY

Supporting our supply chain partners and their workers through best-practice sharing

7

SHAPE STRUCTURAL TRENDS

LONG-TERM INDUSTRY TRENDS SUPPORTING FUTURE GROWTH

HEALTH AND SPORTS EVEN MORE IMPORTANT TO CONSUMERS

Around 50% of age group 18-34 plan to exercise more as a result of the coronavirus pandemic

FASHION SHIFT TOWARD ATHLEISURE SET TO ACCELERATE

Around 75% of surveyed companies plan to shift employees to permanently remote positions post-coronavirus

FAST-FORWARD OF DIGITAL TRANSFORMATION

adidas digital sales penetration more than 1/3 in H1 when combining own e-com and partners' online revenues

~


  • >

8

CREATE LASTING CHANGE NOW

WE ARE A DIVERSE COMPANY WITH ZERO TOLERANCE FOR DISCRIMINATION AND RACISM

>

~

Around 90% of our employees

Employees from more than 100 nations

Women represent 34% of

hold international passports

work at the company's global HQ

management positions globally

9

CREATE LASTING CHANGE NOW

COMMITMENTS TO DRIVE FURTHER CHANGE

COMMITMENTS GLOBALLY

COMMITMENTS IN THE UNITED STATES

WE ESTABLISH A COMMITTEE TO ACCELERATE INCLUSION & EQUALITY

Committee to focus on advancement of underrepresented groups; sponsored by the CEO and consisting of diverse representatives

WE STRENGTHEN OUR GLOBAL ANTI-DISCRIMINATION POLICY

Independent third-party firm to govern the investigation of cases; strict non-retaliation policy to protect employees that report violations

WE REFORM OUR HIRING AND CAREER DEVELOPMENT PROCESSES

Removing hiring bias, increasing representation and oversight; new mentoring and talent programs for Black and Latinx employees

WE CELEBRATE DIVERSITY

Celebrating Black History Month, Lunar New Year, International Women's Day, Pride, Hispanic Heritage Month and Diwali, among others

WE INVEST $ 120 MILLION IN OUR BLACK COMMUNITIES OVER 5 YEARS

We increase funding for our programs that support, empower and elevate the Black community

WE INVEST IN UNIVERSITY SCHOLARSHIPS

We finance 50 scholarships each year for Black students at partner schools

WE INCREASE THE DIVERSITY OF OUR EMPLOYEES

We fill a minimum of 30% of all new positions in the US with Black and Latinx people and target 12% leadership representation by 2025

WE MAKE JUNETEENTH A PAID HOLIDAY

Our offices, distribution centers and retail stores will be closed on June 19 to commemorate the end of slavery in the United States

10

BUSINESS UPDATE

CONSUMER HIGHLIGHTS

Q2 2020

12

STRENGTHS & WEAKNESSES

Q2 2020

+

+

+

+

GREATER CHINA RECOVERY AHEAD OF INITIAL PLAN

Return to growth in May paving the way for flat quarter

DTC BUSINESS UP SLIGHTLY DUE TO DIGITAL ACCELERATION

Exceptional growth in e-com compensates for store closures

IMPACTFUL CONSUMER MARKETING AND PRODUCT LAUNCHES

Despite lockdowns and store closures in most parts of the world

FINANCIAL FLEXIBILITY SAFEGUARDED

Through disciplined cash and cost management

  • NORTH AMERICA LAGGING BEHIND OTHER MAJOR MARKETS Store fleet not yet fully operational due to external developments
  • INVENTORIES REACHING EXPECTED PEAK LEVEL DURING Q2 Plans to manage down inventories toward year-endin place
  • GROSS MARGIN FACING HEADWINDS
    From promotional activity, adverse FX and inventory allowances
  • PROFITABILITY IN NEGATIVE TERRITORY
    Due to revenue shortfall and coronavirus-related charges

13

P&L AT A GLANCE

Q2 2020

REVENUES DECREASE 34% CURRENCY-NEUTRAL

And 35% in euro terms to € 3.579 billion

GROSS MARGIN DOWN 2.4PP TO 51.0%

Headwinds from promotional activity, adverse FX and inventory allowances

OPERATING LOSS OF € 333 MILLION

Due to revenue shortfall and coronavirus-related charges

NET LOSS FROM CONTINUING OPERATIONS

Of € 306 million

BASIC EPS FROM CONTINUING OPERATIONS

Of negative € 1.45

14

STRATEGIC GROWTH AREAS

Q2 2020

ADIDAS NORTH AMERICA

Despite triple-digite-com growth

GREATER CHINA

Double-digit growth in May and June

E-COMMERCE

Triple-digit growth in April and May

Currency-neutral.

15

ADIDAS AND REEBOK BRAND PERFORMANCE

MORE PRONOUNCED DECLINE FOR REEBOK DUE TO HIGHER NORTH AMERICA EXPOSURE

ADIDAS REVENUES

REEBOK REVENUES

% %

Currency-neutral.

16

FINANCIAL UPDATE

REVENUE GROWTH BY MARKET SEGMENT

CORONAVIRUS HAD A GLOBAL IMPACT IN Q2

-40%

-34%

-38%

Operating margin: 24.0% (-2.3pp)

Operating margin: 2.7% (-22.5pp)

Operating margin: -1.8%(-13.2pp)

-16%

Operating margin: 31.0% (-3.9pp)

-64%

-60%

Operating margin: -21.2%(-49.7pp)

Operating margin: -10.5%(-25.1pp)

Net sales development currency-neutral.

18

P&L OVERVIEW

Q2 RESULTS REFLECT MATERIAL NEGATIVE CORONAVIRUS IMPACT

(€ in millions)

Q2 2020

Q2 2019

Y-O-Y

3,579

5,509

-35%

NET SALES

51.0%

53.5%

-2.4pp

GROSS MARGIN

OTHER OPERATING EXPENSES

2,189

2,346

-7%

61.1%

42.6%

+18.6pp

(in % of sales)

560

744

-25%

MARKETING AND POINT-OF-SALE EXPENSES

(in % of sales)

15.6%

13.5%

+2.1pp

1,628

1,602

+2%

OPERATING OVERHEAD EXPENSES

45.5%

29.1%

+16.4pp

(in % of sales)

OPERATING LOSS/PROFIT

-333

643

n.a.

OPERATING MARGIN

-9.3%

11.7%

-21.0pp

-306

462

n.a.

NET LOSS/INCOME from continuing operations

BASIC EPS from continuing operations (€)

-1.45

2.33

n.a.

Slight increase when excluding

inventory allowances

  • details on separate slide

Underlying decline more than offset by business-driven and coronavirus-related increases

  • details on separate slide

Including negative impact of around € 250 million* due to coronavirus-relatedcosts

*Reflecting the combined impact from the increase in inventory and bad debt allowances as well as the impairment of retail stores and the Reebok trademark.

19

GROSS MARGIN DEVELOPMENT DECOMPOSED

SLIGHT INCREASE WHEN EXCLUDING INVENTORY ALLOWANCES

53.5%

51.0%

Gross margin

Sourcing &

Channel &

Pricing

FX

Inventory

Gross margin

Q2 2019

Other

market mix

mix

impact

allowances

Q2 2020

Illustrative.

20

OVERHEAD COST DEVELOPMENT DECOMPOSED

DOUBLE-DIGIT UNDERLYING DECLINE MASKED BY E-COM GROWTH AND CORONAVIRUS-RELATED COSTS

Q2 OOH DEVELOPMENT

DECOMPOSITION

€ in billions

1 Underlying decline resulting from tactical measures

3

▪ T&E as well as other discretionary spend reduced materially

1

▪ Personnel expenses down despite largely stable headcount

▪ Reduction and delay of retail expansion as well as IT projects

2

1.6

1.6

2 Business-driven increase

Support of exceptional e-com growth

▪ Volume-driven increase of logistics and freight costs

3 Coronavirus-related increase

▪ Impairment of retail stores and Reebok trademark

▪ Higher bad debt allowances

OOH

Underlying

Business

Coronavirus

OOH

Q2 2019

decline

-driven

-related

Q2 2020

Illustrative.

21

NET DEBT AND EQUITY POSITION

NET DEBT INCREASES BY € 1,154 MILLION YEAR-ON-YEAR

-1,154

362

89

Net debt

At € 792 million

Equity position

-735

-792

At € 6,230 million

-1,028

Equity ratio

At 30.7%

Q2/16

Q2/17

Q2/18

Q2/19

Q2/20

(Net debt)/net cash at quarter-end, € in millions.

22

AVERAGE OPERATING WORKING CAPITAL

EFFECTIVE CASH MEASURES PARTLY OFFSET INVENTORY INCREASE

+3.3PP

21.4%

21.5%

20.4%

20.1%

Inventories up 49% c.n. year-on-year

18.3%

Plans to manage down toward year-end in place

Receivables down 31% c.n. year-on-year

Execution of cash measures and fewer shipments

Payables up 23% c.n. year-on-year

Reflecting measures to manage cash outflows

Q2/16

Q2/17

Q2/18

Q2/19

Q2/20

Average operating working capital = sum of operating working capital at quarter-end / 4.

23

OPERATIONAL UPDATE

EXECUTE THROUGH COVID-19

STRIKING THE BALANCE BETWEEN SHORT AND LONG TERM

1

2

3

4

25

1 INVENTORY NORMALIZATION TOWARD YEAR-END FROM PEAK IN JUNE OPERATIONAL FLEXIBILITY

Peak level

Plan for effective inventory normalization:

  • Event-relatedand 'evergreen' product stored and repurposed into 2021 product
  • > 1,000 own factory outlets being used as store fleet now largely operational
  • Commercial moments and online sales events leveraged in e-comthroughout the year
  • Smaller portion of inventory also moved through select retail partners as partner stores reopen

Normalized

level

Dec 2019

Q2 2020

Dec 2020

Illustrative.

26

1 FLEXIBLY DRIVING OUR PRODUCT PIPELINE OPERATIONAL FLEXIBILITY

27

2 SHORT-TERM CASH MEASURES FINANCIAL FLEXIBILITY

Increase

inflows

Reduce

outflows

Additional financing

  • Push e-com
  • Prioritize China and other open markets
  • Intensify credit collection efforts
  • Trade payables: proactive adjustment of order book
  • OPEX: cut discretionary spend, reduce management compensation, make use of short-time working, cancel marketing activities
  • CAPEX: stop retail expansion/remodeling, IT projects
  • Draw committed and uncommitted credit lines
  • Repatriate cash from foreign entities
  • Bridge financing through KfW syndicated loan

28

  • 2 NO OPERATING CASH OUTFLOW IN Q2 DESPITE MATERIAL NET SALES DECLINE FINANCIAL FLEXIBILITY

  • in billions

Q1

Q2

0

-1.1

-0.8

No operating cash outflow

in Q2 thanks to execution of cost

and cash measures

-1.9

Net sales change year-on-year

Net cash (used in) / generated from operating activities

Illustrative.

29

  • 2 CASH POSITION STABLE AT € 2.0 BILLION

    FINANCIAL FLEXIBILITY

  • in billions

0.1-0.1

0

2.0

2.0

Total cash

Operating cashflow

Financing cashflow

Investing cashflow

Total cash

March 31, 2020

June 30, 2020

30

2 CREDIT RATING

ADIDAS AWARDED INVESTMENT-GRADE RATINGS

A+

Outlook stable

A2

Outlook stable

  • Global scale and reach within an attractive industry
  • High brand awareness and sports credibility
  • Strong focus on innovation
  • Track record of sales growth and margin improvement
  • Strong credit metrics, robust liquidity profile and conservative financial policies

31

3 DIGITAL BRAND BUILDING DRIVES COMMERCIAL SUCCESS DIGITAL OPPORTUNITIES

BRAND-BUILDING PLATFORMS

SOCIAL MEDIA

RUNNING & TRAINING APP

~400m

video views

>3x

Training app usage more

#hometeam

than

tripled in March-May with

for the

campaign

>90% organic traffic

COMMERCIAL PLATFORMS

ADIDAS APP

CREATORS CLUB

>4x

sales growth

>60%

of online sales

in the adidas app

through

Creators Club

in 2020 so far

members

32

3 INTEGRATED ECOSYSTEM ESTABLISHED AND FURTHER BUILDING BLOCKS DEFINED DIGITAL OPPORTUNITIES

ADIDAS APP

E-COM

WAREHOUSESRUNTASTIC INTEGRATION

CREATORS

SOCIALCLUB

MEDIA

>6X

>€ 4bn

Building blocks and investments for future growth

  • Members first: Creators Club as anchor of the digital adidas experience
  • Targeted marketing: Consistent storytelling across all channels
  • Data-drivencreation: Leverage consumer insights along the value chain
  • Operational backbone: More logistics capacity needed to fulfill rising demand

2015

2016

2017

2018

2019

2020

2021+

Strong foundation as part of 'Creating The New'…

...but further investments defined

E-commerce sales.

33

3 COMMERCIALIZING DIGITAL CAPABILITIES THROUGH RAPID CREATION DIGITAL OPPORTUNITIES

34

3 WINNING WITH THE WINNERS THROUGH DIGITAL SELL-IN PROCESS DIGITAL OPPORTUNITIES

35

4 STORE OPENING TREND POSITIVE THROUGHOUT JULY RETAIL RECOVERY

July:

Positive store

opening trend

100%

throughout July

June:

January:

Store fleet largely

March:

operational

First stores in

China closed

As stores in China re-opened,

Rest of World closed down

May:

50%

Business in Greater China

returned to growth

April:

>70% of global store fleet

closed

0%

January

February

March

April

May

June

July

Open

Closed

8%

92%

Illustrative.

36

4 OWN RETAIL TRAFFIC AND CONVERSION TREND RETAIL RECOVERY

ASIA-PACIFIC

EUROPE

NORTH AMERICA

Jan

Feb

Mar

Apr

May

Jun

Jan

Feb

Mar

Apr

May

Jun

Jan

Feb

Mar

Apr

May

Jun

Conversion rate vs. PY (%)

Traffic vs. PY (%)

Illustrative.

37

OUTLOOK

RDY

39

RUNNING40

OUTDOOR41

CLUBS

42

ZX 2K

BOOST

43

HYPE

44

SUPERSTAR

45

CLEAN CLASSICS

46

REEBOK

47

OUTLOOK FOR Q3 2020

SIGNIFICANT SEQUENTIAL IMPROVEMENT EXPECTED

Net sales

North America

Asia-Pacific

Europe

E-commerce

Operating result

Q1 2020

Q2 2020

Q3 2020 Trend

(vs. Q2)

Q3 2020 outlook:

-19%

-34%

Net sales:mid- to high-single-digit decline

+1%

-38%

Operating profit:of € 600-700 million

-45%

-16%

Key assumptions:

-8%

-40%

No major lockdowns

+35%

+93%

>90% of store fleet remaining operational

Own-retail traffic gradually improving

€ 65m

-€ 333m

Net sales development currency-neutral.

48

OUTLOOK FOR Q3 2020

RETURN TO DOUBLE-DIGIT OPERATING MARGIN IN Q3 IMPLIED

Improvement of

around € 1.0 billion

€ in billions

€ 600-700 million

Q1

Q2

Q3

0.1

-0.3

-19%

Mid- to high-single-

digit decline

-34%

Net sales change year-on-yearcurrency-neutral

Operating profit

49

SUMMARY

  1. Creating lasting change for diversity and inclusion now
  2. Sufficient short-term flexibility to keep navigating to long-term success
  3. Exceptional growth in e-com enabled by integrated digital ecosystem
  4. Business normalization on track with store fleet now largely operational
  5. Shaping structural sport and lifestyle trends amplified by the pandemic

50

Q&A

ADIDAS INVESTOR RELATIONS

TEAM COMMUNICATIONS

SEBASTIAN STEFFEN

Head of Investor Relations

ADRIAN ROTT

Senior Director Investor Relations

MORITZ VERLEGER

CHRISTOPH RUMP

ANJA KLIEBER

PHILIPP ULRICH

LAURA SÄNGER

Director Investor

Senior Manager Investor

Manager Investor

Manager Investor

Assistant Manager

Relations

Relations

Relations

Relations

Investor Relations

+49 9132 84 2920

investor.relations@adidas.com

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adidas AG published this content on 06 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 August 2020 09:02:04 UTC