Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on ADIDAS AG. We currently have 16 research reports from 1 professional analysts.
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Profit margins down in Q3 16
03 Nov 16
Adidas delivered slightly higher than expected Q3 revenue but lower profit numbers. Sales were up by 14% to €5.41bn in the last quarter and by 15% to €14.6bn ytd (we had expected €14.42bn). The 9M EBIT and net profit numbers were +36% to €1.47bn and +51% to €1.03bn, while we had expected €1.63bn and €1.07bn, respectively.
Peers‘ gross margins are down, Adidas‘s is up
04 Aug 16
Adidas’s revenue growth moderated somewhat from Q1 (+17% to €4.77bn) to Q2 (+13% to €4.42bn), but the numbers are astonishing. Even more so are the group’s profit numbers. H1 EBIT was up by 57% to €905m and net earnings by 74% to €642m. Both profit numbers are historically high numbers, but include a sizeable gain from having given up the sponsoring contract with Chelsea FC.
Q2 sales and profits clearly higher than expected
28 Jul 16
Although Adidas will release its final H1 accounts only on 4 August, it has given some indications today. Revenue increased by 13% to €4.4bn and EBIT was up by 77% to €414m. This latter number includes a ‘mid-to-high double-digit million euro profit’ from the early termination of the sponsoring contract with Chelsea FC. Consequently, net earnings (from continuing operations) increased by 99% to €291m. Unlike most of its peers (i.e. Nike and Puma), Adidas achieved a higher gross margin which has supported earnings. This positive development has allowed management to raise its full-year guidance. Instead of revenue growth of 15%, it now sees sales increasing by the ‘high teens’. Simultaneously, the operating margin is expected to reach 7.5% (instead of 7.0%) and net profit to increase by between 35% and 39% instead of 25%. The margin difference is primarily the result of the one-off gain from the Chelsea contract.
Additional information for the 2020 strategic plan
18 Jul 16
Management released some additional information on how it intends to grow disproportionately through to 2020. Whether this strategy will be followed by the new CEO, who will join shortly, remains to be seen. The following text is the company’s press release: At an investor event today in Herzogenaurach, the adidas Group provided a status update and detailed its ambitions for its three strategic choices Speed, Key Cities and Open Source. The choices build the foundation of the Group’s 2020 strategic business plan, which was introduced in March 2015. By ‘Creating the New’, the group aims to achieve sustainable and profitable growth over the next five years by significantly increasing brand desirability. Speed Serving the consumer in the best way possible is a key driver of increasing brand desirability. As a result, the adidas Group will ensure that consumers always find fresh and desirable products at any given place and point in time. By re-shaping its entire business model end-to-end, from range planning to product creation, sourcing, supply chain, go-to-market and sales, the adidas Group expects to significantly improve its speed-to-market. As part of these efforts, the adidas Group will significantly enhance its capabilities to reproduce seasonal best-sellers to fulfil higher consumer demand (Planned Responsiveness) and improve its ability to create or capture the latest industry trends (In-Season Creation). In addition, the company will expand its programmes for products that are replenished on a constant basis to ensure the most iconic and desired products are permanently available (Never Out Of Stock). Driven by these ‘Speed’ initiatives the group expects to significantly reduce the risk of overbuying stock, capture additional revenues and notably increase margins: By 2020, the company forecasts to generate 50% of its net sales with speed-enabled products. In addition, the group’s share of full-price sales across all speed ranges is forecasted to improve by 20% over the next five years. “Our goal is to give consumers what they want when they want it. Speed is one of the most powerful levers for our group to do so. It will change the way we create, manufacture and distribute our products. It will revolutionise our current business model,” said Franck Denglos, Vice President Speed. “Speed will be a key competitive advantage for us as we transform the adidas Group into the first true fast sports company.” Key Cities With 50% of the global population living in cities and 80% of global GDP generated in metropolitan areas, these urban centres play a key role in creating trends, shaping global brands and building brand desirability. As a result, based on their global influence, their commercial relevance and their relevance for sports and street culture, the adidas Group defined six global key cities that it will focus its efforts on and that will serve as role models for the rest of the world: Los Angeles, New York, London, Paris, Shanghai and Tokyo. Across these cities, the adidas Group will disproportionately invest in marketing and retail experiences with the goal of maximising brand experiences. By creating an integrated brand and business ecosystem designed to elevate the brand’s presence across all relevant consumer touch points, the adidas Group aims to outperform its major competitors in these cities both in terms of market share development and brand advocacy. In addition, driven by a strong focus on key categories, the company expects to double its business in each of these urban centres over the next five years. “The influence of global metropolitan areas on trends and brands cannot be overstated. The fate of global brands is decided in global cities. If we want to be successful in the future, we need to win in key cities,” said Christopher Williams, Vice President Commercial Planning and Development. “Our focus on key cities enables us to activate our categories in the right areas and engage with communities in the most relevant neighbourhoods. All of this ensures that our brands shine where they have the biggest impact to drive brand heat. That is both within and – through the halo effects created – also beyond city borders.” Open Source In order to leverage the full potential of its brands and their DNA, the adidas Group aims to build a unique collaborative network and invites athletes, creatives, consumers and other partners to help shape the future of sport and sports culture. To increase its own creative capital and gain new perspectives, the adidas Group is providing these externals with access to internal tools, including the archive, materials, factories and data. The collaboration with Kanye West, which, in 2015, translated into the unrivalled reach of the Yeezy Season 1 fashion show and an unprecedented global sell-through rate of all Yeezy Boost sneakers since then, is a prime example of how the Group started to bring this aspect to life. The collaboration was just recently brought to the next level, making it the most significant partnership ever created between an athletic brand and a non-athlete. Another example of a game-changing Open Source initiative will be the opening of the first ‘Creator Farm’ in New York City in the fall of 2016. The design studio and creation centre will invite urban creative talent to fuel creativity and innovation in sports, outside the regular seasonal product creation calendars. In addition, as part of its Open Source efforts, the adidas Group will be collaborating with the best partners in other fields and will exchange core competencies to create unique brand value. The touchpoints reach from the core field of sport, sports health and monitoring to entertainment experience, manufacturing and sustainability. The award-winning partnership with Parley for the Oceans is as a very positive proof point for the early success of these initiatives. “We are the first sports company that invites athletes, consumers and partners to be part of our brand,” said James Carnes, Vice President Brand Strategy Creation. “Our portfolio of creative influencers and innovative partners such as Kanye West, Stella McCartney, Disney, Parley for the Oceans, Red Bull Media House, BASF and Google offers incredible opportunities for us to leverage our brands, showcase our creative potential and inspire consumers more than any other sports company. Together, we will co-create the future of sports.” SPEEDFACTORY All three strategic choices are supported by the group’s industry-changing SPEEDFACTORY initiative, which heralds a new era in footwear creation. This flexible model challenges the idea of centralised production and makes product close to where the consumer is. It opens doors to creation of product completely unique to the fit and functional needs of consumers, through a combination of the craft of shoemaking and cutting-edge technology. The new SPEEDFACTORY facility is all set to go commercial in Germany and will begin large-scale production in mid-2017. The addition of a second SPEEDFACTORY facility in the US at the end of next year will bring the total annual capacity up to 1 million pairs, with further acceleration of the rollout possible for the years thereafter. “With SPEEDFACTORY, we are challenging conventions and disrupting the status quo of our industry,” said Gerd Manz, Vice President Technology Innovation. “The consumers of today live in a constantly changing world. This shapes their behaviour and expectations. They demand newness and immediacy without compromise. SPEEDFACTORY will allow us to fulfil the consumer’s demand for speed, aesthetics and performance better than ever before and better than anyone else.”
More details on the SPEEDFACTORY
01 Jun 16
Adidas announced on 24 May the commercial production of shoes at an all-new SPEEDFACTORY in Germany in 2017. This factory is operated by Oechsler Motion GmbH, a company primarily known for producing plastic components for the car and medtec industries. Up to now, Oechsler has also delivered high-performance running-shoe base plates. Adidas and Oechsler have agreed that Oechsler builds an entirely new plant for individual shoe ware. By 2018, the plant is expected to produce 500,000 pairs of shoes. The plant is fully-owned by Oechsler, i.e. it pays for the investment and the workforce is employed by it. The plant is not allowed to produce shoes for any Adidas competitor. As a result, Adidas will not incur any financing needs either for the plant or for future working capital requirements, i.e. the so-called ‘Adidas SPEEDFACTORY’ is an extended workbench for Adidas but is not owned by it. If successful, this production technique, which is extremely flexible, will also be established in North America. It does not genuinely reduce the company’s dependence on supply from Asia, but it offers flexibility for the individual products consumers are looking and willing to pay for.
Adidas' management team may or may not change
15 May 16
Igor Landau, the Chairman of the Supervisory Board, was interviewed by FAZ. The question, whether Rorsted’s appearance as Adidas CEO will lead to a reshuffle, was answered with a “no”. At the same time, Landau stated that a new CEO would have the right to build a team that fits his needs. This suggests that the management team will not be changed during the course of this year but most likely in the not too distant future. Whether outgoing CEO Hainer will succeed Landau, when he retires as Chairman in 2019, was also not clearly answered. Hainer’s two-year cooling-off period will then be over and it remains to be seen whether or not Rorsted discovers inconsistencies when Adidas signed sponsoring contracts with corrupt sports organisations like FIFA and UEFA. Landau clearly stated that the Management and Supervisory Boards have investigated these contracts and that no wrong-doing was discovered.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
N+1 Singer - Morning Song 12-01-2017
12 Jan 17
As anticipated, the second half has again been stronger than H1 and results will be broadly in line with expectations. In line with this, the order book has continued to grow and is at record levels. This confirms that significant progress has been made in the Group’s shift towards its Technology Products division which, as targeted, contributed c.60% of group revenue in FY16. The small acquisition of Cable Power also gives a complementary boost to the product range. It is also worth noting the significant reduction in net debt, £1.0m ahead of our forecast. We remain supportive of the Group’s strategy and continue to see a bright future as this transition towards a design led technology solutions business continues. We look forward to more detail in March at the final results.
N+1 Singer - Small-cap quantitative research - Momentum screen refresh + 10 focus stocks
12 Jan 17
We have refreshed our momentum style screen for the first time since inception on 26 July 2016. As before, the screen selects the 25 stocks exhibiting the most extreme momentum characteristics, according to our measurement method. From these we have selected 10 to focus on. Since inception the screen has underperformed both the main small-cap and micro-cap indices against a background of generally rising momentum. We have noted a subset of the basket, where decelerating momentum at the time of measurement appears correlated with significant share price falls since selection. We shall monitor this factor with the new screen, albeit there are only two such stocks showing this pattern, namely Lamprell (not rated) and Gear4music (not rated).
23% profit growth in FY16 and a positive outlook in FY17 and FY18
18 Jan 17
FY16 results show a strong performance with 9.3% increase in revenue to £267.0m leading to a 23% increase in profitability as adj PBT increased to £40.2m (FY15 £32.8m). The 220bp improvement in gross margin underpinned the increase in profitability as legacy low margin projects continued to fall out of the mix. The 20.2% gross margin was ahead of the 19.5% forecast and in line with Group’s target of generating a through the cycle 20% margin. The forward sale announcements of five developments since the year end provide an increasing level of visibility on both FY17 and FY18, we estimate c. 70% of FY17 gross profit is currently derived from forward sold projects. The announcement on Duncan Road Stratford means the forward sold pipeline is already building into FY19. Current valuation does not reflect the forecast certainty with the shares trading on 9.0x FY17 earnings and yielding a prospective 5.1%.
N+1 Singer - Morning Song 16-01-2017
16 Jan 17
As the birthplace of Stephenson, Armstrong and Swan, the North East of England has a proud history of industrial and technological innovation. Despite local economic challenges, the region’s industrial heritage lives on through continuing success in high end engineering and technology. The recent takeovers of private equity backed SMD (subsea robotics) and Nomad Digital (wi-fi on the railways) are testament to this. The North East has also emerged as a leader in genetics and genomics with an enviable life sciences and healthcare infrastructure. Against this backdrop, we expect the region to continue to throw up attractive IPO candidates to build on the six new listings in the past three years. We expect 2017 to be far kinder to the existing portfolio of North East plcs than 2016 (a year to forget) with recent management changes one important theme for the new year. Our top picks are Hargreaves Services, Quantum Pharma and Zytronic (all N+1 Singer Corporate clients) and we are Buyers of Northgate and Grainger.