Adidas Group's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Adidas Ag Or ( ADDDF.PK)

Q4 2011 Earnings Conference Call

March 07, 2012, 08:30 AM ET


John-Paul O’Meara - Vice President Investor Relations

Herbert Hainer - Chief Executive Officer

Robin Stalker – Chief Financial Officer


Sujith [ph] – Maintrust [ph]

Michael Kuhn - Deutsche Bank

Antoine Belge - HSBC

Andreas Enthest - Exane BNP Paribas

Julian Easthope - Barclays Capital


Good afternoon ladies and gentlemen and welcome to Herzogenaurach for our full-year 2011 financial results presentation. As you would have seen this morning’s release the adidas Group has completed 2011 on a high-end with strong momentum. So in today's presentation Herbert Hainer, adidas Group CEO and Robin Stalker, Group CFO will reflect on a perfect start to our Route 2015 strategic business plan and discuss our initiatives to keep the momentum going in 2012. But as always let’s start with a refresher of the widespread presence and success of our brand and athletes in 2011.

Herbert Hainer

Good afternoon gentlemen – ladies and gentlemen, sorry, still a male dominated group. Let me start with our presentation and thanks for joining us this afternoon. It's a sort of any strategic plan I think it is important to gain momentum quickly and a President by the hitting targets. In this respect, we couldn’t have asked for a better start to Route 2015 as we met and in most cases exceeded our initial expectation for the year.

With sales increasing 13% currency neutral or 11% in euros to over €13.3 billion, we enjoyed the group’s strongest organic rates since 2006. We succeeded in offsetting almost all of the negative pressures from higher input costs. And by leveraging our operating overhead costs we drove net income up by 18% to new record level of €671 million, representing earnings-per-share of €3.20.

We also finished the year with our balance sheet in top shape with fresh inventories and net cash position of €90 million. Most striking in our performance was the broad-based growth achieved across all markets, brands and channels. And this was true through the whole year as we grew at double-digit rates in every quarter, including 11% in a strong fourth quarter. In particular, we were big winners in our three key 2015 tech markets which as we laid out in our strategic plan accounted for more than 50% of our growth.

Currency neutral sales in North America grew 15% with adidas increasing 21% in TaylorMade-adidas Golf increasing 25%. Reebok sales in the region also grew for the year rising 4% and that despite the significant decline in toning revenues. In Russia/CIS, revenues were up 26% driven by outstanding comparable store sales growth of 24%. In Greater China, sales increased 23% currency-neutral, as we won back market share and picked up the pace in rolling out franchise stores.

Equally as encouraging was our strong growth in Western Europe and resilient performance in Japan. Revenues in our home territory were up 10% driven by double-digit growth in Germany, France, and Spain. In Japan, we ended the year with only a slight decline of 3% currency neutral against the market which declined at the high single-digit rate following the unfortunate event last March.

These examples clearly highlight that in tough times consumers and customers gravitate towards those brands that being real and tangible value through innovation and cutting-edge design as well as best in class customer service.

In all categories we resonated with our consumers around the world in 2011. Footwear sales were up 18% currency neutral was double-digit growth in nearly all categories. In apparel, sales were up 8% currency neutral was grossing training and running more than compensating for the double-digit declines in footwear apparel due to the high volumes related to the FIFA World Cup in 2010. In hardware sales were up 10% (inaudible) outstanding performance in golf.

All of this would not have been possible without great innovation, great marketing, and great sporting moments, which we created and shared together with the athletes and their consumers around the world. So let me quickly recap some of these starting with the engine of our group, the brand Adidas.

In 2011, Adidas went all in with its largest brand campaign ever. Sales increased 14% currency neutral was 13% in euros to €9.9 billion, the brands highest growth rate in 13 years. Backed by our largest ever media spent the adidas all in campaign. This campaign was a runaway success. Throughout the year we seeded the notion adidas is all in reaching an estimated 370 million people are 80% of our next generation consumer. At the time of launch we immediately surpassed all competitors in social bus we ranked as the number one sponsored site on YouTube. Since then adidas has gathered millions of new fans on Facebook with the total across all of our pages now dwell over 32 million and counting compared to just less than 30 million a year ago.

Sport Performance sales were up 11% currency neutral as adidas continues to dominate the lightweight segment. And you only have to look at the mesmerizing performance of three-time FIFA player of the year Lionel Messi in his adizero f50. The unstoppable plays of youngest MVP winner Derrick Rose in the adizero Rose. The dazzling speed of 100 meter IAAF World Champion Yohan Blake in his 99 gram adizero Prime. And the sensational marathon times and course records set in London by Emmanuel Mutai, in Berlin by Patrick Makau, and in Boston and New York by Geoffrey Mutai in the adizero adios. And then you will understand why adidas is clearly the fastest brand on earth.

Looking at the categories in more detail. In football the adiPower Predator Japan’s victory at the FIFA Women's World Cup and the fusing of fast and smarter with the launch of the adizero f50 miCoach in Q4 let to a strong football year for the brand in the absence of a major tournament. Footwear sales were up over 20% extending our global market leadership in this important category.

In running, we more than achieved our goal to grow at the double-digit rates with sales increasing 19% as our success at retail net on the track with robust sales growth in the adizero Supernova and Clima product franchises.

On the court, our come back in basketball gathered pace with sales increasing 11% for the year. The launch of the Crazy Light in (inaudible) the success was the Derrick Rose signature franchise were the key highlights. The Crazy Light in particular at the $130 price point showcases the power of our innovation allowing us to move up the price ladder. And this is the brand that you will see continuing in 2012.

In outdoor, we also saw same strong momentum with sales growing 40% for the year. This standout performance was again driven by the award winning Derrick’s collections of footwear apparel and backpacks which combined lightweight materials modern design and innovative technologies.

We also made as you know a very exciting acquisition by adding Five Ten to the adidas Group family. So let’s take a short look at the Brand of the Brave.

Finally, once again adidas Sport Style was a major highlight adding almost half-a-billion in sales as it grew 24% to over €2.6 billion. This was driven by the men's global popularity of adidas Originals as well as the expansion of the adidas NEO label in the emerging markets. For today’s use, adidas is clearly both an innovative performance and an authentic sportswear and lifestyle brand.

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