Financial Data and Key Metrics - Currency-neutral growth of 10.3% in Q3 2024, with underlying adidas business (excluding YEEZY) growing 14% [7] - Gross margin reached 51.3%, the first time adidas business margin exceeded YEEZY [7] - EBIT increased by almost 50% to €598 million, with an EBIT margin of 9.3% [7] - Net income of €469 million, with basic earnings per share of €2.44, up 75% [49] Business Line Data and Key Metrics - Footwear grew by 14%, Apparel by 5%, and Accessories by double digits [20] - Performance products grew by 10%, Sportswear by 4%, and Original basketball partnerships and skateboarding by 20% [21] - Wholesale business grew by 13%, Own Retail by 15%, and E-commerce (excluding YEEZY) by 25% [12][13] Market Data and Key Metrics - North America showed slight growth in the adidas business, with optimistic outlook for Q4 and Q1 [8] - Europe grew by 18% (21% underlying), China by 8%, Japan and South Korea by 17%, and LatAm by 30% [9][10] - Emerging markets grew by 20%, contributing to the overall 10% growth [10] Company Strategy and Industry Competition - The company continues to invest heavily in sales and marketing, with a focus on leveraging future growth [7] - Expansion into new markets such as Iraq, Bangladesh, Uzbekistan, and Nigeria through franchise partners [19] - Focus on localizing products and marketing to cater to regional differences [57] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit growth and a 10% EBIT margin in the medium term [66] - The company aims to be a "good company" in 2024 and a "healthy company" by 2026, with a focus on gross margin between 50%-52% and 12% investment in marketing [58] - The summer of sports events positively impacted growth, fueling momentum into Q3 [6] Other Important Information - The company settled YEEZY-related claims, resulting in a €100 million release in other operating income, offset by a €100 million donation [45] - Inventory levels are healthy, with 80% of inventory being current or future season products [90] - The company plans to open new stores in smaller Chinese cities and expand into new markets with franchise partners [18][19] Q&A Session Summary Question: Ability to maintain current top-line growth - The company expects to maintain double-digit growth in the future, with differences across categories, channels, and markets [66] Question: Impact of expanding SKU counts on profitability - Expanding SKU counts is expected to positively impact profitability, with a focus on having the right products for each market [67][70] Question: Drivers of North America growth - Growth in North America is driven by improved brand heat and positive retailer order books, with a focus on performance and lifestyle products [73] Question: OpEx and restructuring costs - The company incurred one-time costs related to Runtastic and IT infrastructure impairments, with ongoing efforts to optimize operating expenses [75] Question: EBIT guidance and CapEx - The company expects to spend less than the guided €600 million in CapEx for the year, with a focus on disciplined investment [78] Question: Share buyback and cash generation - The company prioritizes investing in the business and being a solid dividend payer, with potential for share buybacks in 2026 [85][86] Question: Inventory management and specialty running progress - The company has managed inventory effectively, with no issues expected in fulfilling Q4 demand [88] - Progress in specialty running is improving, with efforts to rebuild relationships with specialty retailers [88] Question: Full price sell-through and business model changes - The company sees potential for higher gross margins in 2025, with ongoing optimization of the business model [97] Question: Current trading and tariff trends - October trading is positive, with no significant changes in demand or promotional activity [100] - Tariff trends are strong but represent a balanced portion of overall sales, with growth across all categories [100]
adidas(ADDYY) - 2024 Q3 - Earnings Call Transcript