Higher Education Department

Lourdes College
Cagayan de Oro City

In partial requirement of the subject

Business Finance Wed 7:30 10:30AM

Presented to:

Professor Brian Hojas Alcordo

Presented by:

Cosme, Andre

Dumaloan, Diane

Jamin, John Kirby

Maruyama, Aika

Salada, Yashua King

Siega, Nicole

TABLE OF CONTENTS
Purpose 1

Executive Summary ... 2

Corporate Overview ... 3

Business Strategy ... 4

SWOT Analysis ... 5

Adidas Group List of Awards ... 6

Quantitative Analysis ............... 7

Financial Ratio Analysis ... 10

Comprehensive Analysis ... 12

Recommendation ... 25

Conclusion ... 26

References ... 27

Financial Statement of Adidas Group ... 30

Computation of Financial Ratios ... 35

Curriculum Vitae ...35

I. Purpose

Researchers have studied the financial ratios of the Adidas Group so that we could provide

the investors of the company the information about the companys financial health for three

years. The purpose of this paper is for short-term investment and is made available for the

investors who are planning to invest in a short-term investment in Apple Incorporated. The result

of the financial ratio analysis describes Adidas Group regarding the liquidity, profitability, and a

trustworthy company when it comes to investment. The researchers aim to give full information

to the investors that Adidas Group is managing the company efficiently and effectively during its

operation. Therefore, this paper would be of great help for the investors to analyze the company

which could help them to decide whether to invest in Adidas Group.

II. Executive Summary

The researchers aim to give the investors a full information about the company of Adidas Group

regarding its profitability and trustworthy when it comes to investment. This study shows the

corporate overview regarding the company background and business strategy that also shows the

firms objective to achieve Adidas Group short term investment. The researchers provide

quantitative analysis and comprehensive analysis in order to help investors know the

performance of the company for over three years. It compares ratios Adidas Group to Nike as

their main competitor in order to see the difference of their financial performance. Quantitative

analysis comprise liquidity ratios that Adidas Group will be able to pay off its debts when it

come due; asset management ratio that measures how effectively the firm manage its assets;

profitability ratio in which the company shows the combined effect of liquidity asset

management and debt on operating results; and market value ratios that relates the Adidas Group

stock price to its earnings and book value per share. Lastly, comprehensive analysis provides

complete analysis of the company whether it is a worthy for investment.

III. Corporate Overview

The brands of the Adidas Group complement each other in a unique way to help athletes perform

better, play better, feel better. Our products break records, set trends, make history and make

people healthier. Our brands - adidas, Reebok, TaylorMade Golf and CCM Hockey - help every

kind of athlete perform better, play better and feel better. At the adidas Group, we shape the

future of sport because we believe sport shapes lives for the better. It is not only about faster

shoes and fashion statements. Just as a shoe is more than padding and foam, there is more to us

than just the product. Everything we do is bound by one simple thought: we strive to help you

perform at your best. Your success is our ambition. Your defeat spurs us on to be better. Our

brands complement each other like the skills of an exceptionally gifted decathlete. Our

consumers brand love is based on our employees extraordinary passion for a sporting lifestyle.

With dedication, commitment and team spirit, we continuously innovate to establish new

benchmarks in everything we do.

Shaping the sporting goods industry sustainably is more than a job. Its our impulse, an attitude

that is truly dear to our hearts. It drives us. Shaping the future of sport means making products

people love. It requires an innovative application of creativity that goes beyond any one job,

department or brand. Wherever you sit at the Adidas Group, creativity means taking risks,

solving problems and being adaptive

GUIDING PRINCIPLES REMIND US OF WHAT IS IMPORTANT

Performance calls for focus and dedication. This is why we have set ourselves Guiding Principles

to make sure we stay on the right track. They remind us of what is important.

We are committed to continuously strengthening our brands and products to improve our

competitive position.
We are consumer-focused and therefore we continuously improve the quality, look, feel

and image of our products and our organisational structures to match and exceed

consumer expectations and to provide them with the highest value.

We are innovation and design leaders who seek to help athletes of all skill levels achieve

peak performance with every product we bring to market.

We are dedicated to consistently delivering outstanding financial results.
We are a global organisation that is socially and environmentally responsible, that

embraces creativity and diversity and is financially rewarding for our employees and

shareholders.

IV. BUSINESS STRATEGY

 The Adidas group strives to inspire and enable people to harness the power of sport in

their lives. Sport is our very purpose. Inspired by our heritage, we know that a profound

understanding of the consumer and their journey in sport is essential to achieving this goal. To

anticipate and respond to their needs, we continuously strive to create a culture of innovation and

creativity. Through our portfolio of authentic sports brands, we harness this culture and push the

boundaries of products, services and processes to drive brand desire. This, in turn, will drive

value creation for our company and our shareholders.

Adidas employs more than 53,731 people in over 160 countries produce more than 660

million product units every year and generate sales of 14.5 billion (all figures relate to 2014).

These numbers alone can easily suggest that Adidas Group is quite a complex organization. True.

But they keep things simple, lean and fast.

THESE ARE THE MARKETING STRATEGY OF ADIDAS:

The segmentation, targeting, positioning in the Marketing strategy of Adidas

Biggest sportswear manufacturer of Europe & one of the biggest in the world, Adidas is

segmented based on demographic, psychographic & behavioral factors. The Adidas group

has four brands in its strong portfolio Reebok, Adidas, Rockport & Taylor made meant for

different segment customer groups. Adidas uses differentiated targeting strategy to target young

adults, adults as well as children who have passion for fitness & sports. Although it targets

customers in the age group of 13-40 years but majority of its customers are of 15-30 years of age

who hail from upper middle class or the luxury class of customers.

They have Adidas-performance in Competitive sports,

 Reebok & Reebok classics in Active sports & casual sports, &

Adidas originals, Adidas Fun, Rockport in Sports fashion.

Mission in the Marketing strategy of Adidas

The Adidas Group strives to be the global leader in the sporting goods industry with brands

built on a passion for sports and a sporting lifestyle. We are committed to continuously

strengthening our brands and products to improve our competitive position.

Tagline

Impossible is Nothing. This is one of the most famous tagline by the company. This tagline,

which showcases the importance of fitness and importance of striving hard for anything you

desire, is one of the biggest asset the company has, and possibly summarizes the marketing

strategy of Adidas.

BCG Matrix in the Marketing strategy of Adidas

BCG matrix helps in identifying the strategic position & future course of actions of the SBUs

(strategic business unit).

Adidas has four brands under the Adidas group out of which:

Adidas & Reebok are stars; both of these individual brands have a strong market share but at the

same time the competition in this sports and fitness segment is very high. Other brands like

Puma, Nike also fight for a large share of the market.

Rockport & Taylor made is question mark This is because their market share is low but at the

same time there is a good potential for these brands. But when this potential will actually benefit

the company in a large way is yet to be seen.

Distribution strategy in the Marketing strategy of Adidas

As the consumer environment becomes even more dynamic with trends quickly changing,

Adidas is also increasing its focus on anticipating these changes and responding with speed.

They had aligned their sales with distribution strategy to enable and propel a heightened

consumer-centric Omni-channel mind-set. After analyzing the purchase process of their

customers, they came to conclusion that the interactive experience and the availability,

convenience and the size of the product offerings plays a major role in a successful distribution

strategy. In order to expand their distribution system they made the products available through

Exclusive stores (franchise model), Co-branded stores who source it from C & N and

distributors.

Brand equity in the Marketing strategy of Adidas- Sports centric activities predominantly

revolving around social media & community connect programs has helped Adidas to be one of

the biggest players in the sportswear. Each brand and sub-brand is responsible for bringing its

own distinct identity and positioning to life, through the creation of products, services and

experiences that provide platforms and frameworks for long-term market share and profitability

improvements. While Adidas and Reebok each have unique identities, heritages, technologies,

designs and reputations, the strategic principles and methods for driving future sales growth and

profitability improvements are common to both.

Competitive analysis in the Marketing strategy of Adidas

Adidas Groups multi-brand portfolio gives them an important competitive advantage. Through

their brand portfolio, they seamlessly cover the sports and consumer segments defined as

strategically important to support their Groups ambition to inspire and engage people to harness

the power of sport in their lives. Adidas is doing well because of its differentiated positioning but

Reebok, the brand Adidas has spent years trying to firm up, but its situation is faltering.

Large firms such as Nike & Adidas have grown immensely over the last two decades. Their

global reach has expanded through all continents, which is attributed to the changing lifestyle of

developing economies & emergence of Internet, E-commerce firms.

Market analysis in the Marketing strategy of Adidas

Due to the presence of counterfeit products & high bargaining power of customers it is very

difficult for these players to sustain in the market. Although the offerings are meant for sports

persons but major chunk of its buyers are normal people professionals, young children who dont

mind switching to other brands due to the changing competitive positioning worked upon by the

players. Industry is growing due to changing lifestyle, economics of the population & migration

from Rural to urban areas but at the same time demand supply mismatch & idle inventory is

resulting into shrinking margins of the players in this industry.

V. SWOT OF ADIDAS GROUP

STRENGTH

1. Adidas Company has a long heritage and high brand value since 1924.

2. Adidas sponsors major sporting events including Olympics and major sportsmen and teams.

3. Adidas has a much diversified product portfolio ranging from sports shoes, equipments to

clothing and accessories.

4. Distribution network: By selling it from online stores to company owned stores to supermarket

stores, Adidas has an effective distribution system for their products available through different

channels.

5. Branding by creating touch points with the community: Celebrity endorsements & sponsoring

major sports organizations such as FIFA, UEFA, NBA & Olympics has increased the awareness

of Adidas in the market & hence it has increased the highly targeted customer base as well.

6. Collaborations & memberships: Strong relationship within the sustainability area with

organizations such as International Labor organization, International Finance Corporation has

given the company an edge over competitors so that they can have a sustainable business.

7. Excellent advertising through TVCs, online ads, print media, hoardings etc.

WEAKNESS

1. Premium price range: High price range due to innovative technology & Production methods

have made the brand affordable to limited customers only, especially in developing countries.
2. Outsourced manufacturing: Adidas has 93% of production outsourced to 3rd party

manufacturers (largely to Asia) to avail of low labor cost & easy availability of resources. They

are running a risk of over dependency on outsourcing especially in Asian markets. Also, the

overall quality of products perceived by the consumers of developed economies is a major

concern as far as brand is concerned.

3. Limited product line: Adidas along with the recently acquired Reebok brands, has got only 2

brands under their group although they have got deep assortments within these brands. Thus,

there is more scope for product line expansion.

OPPORTUNITY

1. Develop new products to attract new consumers segment.

2. Market development: Entering into new markets will be the only way to succeed in the future

because developed economies are already having high competition.

3. Expansion in product line: Expanding its product line will open a new set of opportunities

while at the same time it can differentiate itself from the competitors by following this strategy.

4. Brand building by setting up sponsored sports academies,

THREATS

1. It has been facing strong competition from Nike and PUMA.

2. Demand of the products could decreased due to economy slowdown in European countries.

3. Social and environmental concerns due to Human right violations and employment practices.
4. Macroeconomic risks due to change in consumer spending and confidence.

5. Technological and design changes.

6. Unrest political conditions.

VI. LIST OF AWARDS OF ADIDAS

2015

Adidas Group included in Dow Jones Sustainability Indices for 16th consecutive time
Adidas Group ranks third among the "Global 100 Most Sustainable Corporations in the

World" and is recognized as best European company and leader in its industry
constituent of MSCI Global Sustainability and MSCI SRI Indices
continued inclusion in the FTSE4Good Index
continued inclusion in the STOXX Global ESG Leaders Indices
continued inclusion in the Euronext Vigeo Indices
reconfirmed inclusion in the Ethibel PIONEER and Ethibel EXCELLENCE Investment

Registers

2014

Adidas Group included in Dow Jones Sustainability Indices for 15th time
Continued inclusion in the FTSE4Good Index
Continued inclusion in the STOXX Global ESG Leaders Indices
Adidas Group among the "Global 100 Most Sustainable Corporations in the World" for

the 10th time in a row; first time in top 10 - ranked 8th

2013
 Adidas AG included in Dow Jones Sustainability Indices for 14th time - Industry Leader

for 10th time

Adidas AG again included in the STOXX Global ESG Leaders indices
Continued inclusion in the FTSE4Good Index
Reconfirmed inclusion in the Ethibel PIONEER and Ethibel EXCELLENCE Investment

Registers

2012

Inclusion in the Carbon Disclosure Leadership Index for Germany, Austria and

Switzerland
Inclusion in the Vigeo Group Indexes
Inclusion in the ECPI Ethical Index EMU

2011

Silver medal for Adidas AG as 'Sustainable Retail Company 2011

2009

Best rating by European consumer organizations

2008

Re-accreditation by the Fair Labor Association

2007

B.A.U.M. Environmental Award

2006

Product rated best for quality and CSR by Stiftung Warentest

2005

Environmental Manager of the year

VII. Quantitative Analysis

FINANCIAL RATIO ANALYSIS

Table 1.1
 Competitor Industry
2015 2014 2013 (Nike 2015) Average

Current 0.84 1.14 0.87 -

Ratio

Quick Ratio 0.82 1.13 0.86 -

Inventory 15.51 17.87 17.20

Turnover
Ratio

Days Sales 9.80 9.79 11.88

Outstanding
Ratio

Debt Ratio 0.66 0.67 0.57 - -

Profit 0.73 0.72 0.73 -

Margin

Operating 0.13 0.05 0.03 - -

Margin

ROA 0.09 0.02 0.01 -

ROE 0.26 0.08 0.05 -

VIII. Financial Ratio Analysis

In our financial ratio as shown in the table above, we analyze the financial ratio of Adidas

Company from 2013, 2014 and 2015. We evaluate the various aspects of a company's operating

and financial performance such as its efficiency, liquidity, profitability and solvency. The trend of
these ratios over time is studied to check whether they are improving or deteriorating. We also

put the financial ratio analysis of Nike which is also considered as the competitor of Adidas.

So Adidas Companys current ratio and quick ratio is part of the liquidity ratio, in the

company of Nike we also compute the liquidity ratio. The current ratio measures the company of

Adidas and Nike ability to pay short term and long term obligations and considers the current

total assets of both companies. First we solve the result of current ratio of Adidas from 2013 is

0.87, in 2014 is 1.14 and in 2015 is 0.84. In the company of Nike the result from 2015 is 2.46 as

we can see Nike has the higher result and has the ability to pay his obligations than Adidas. But

Adidas may have a problem on paying its obligations because of the trends and tough

competition in 2013 but on the other hand Adidas ratio in 2014 increases to 0.27 so the final ratio

of 2014 is 1.14 and in the year 2015 Adidas ratio decreases that has a ratio of 0.84.

In our next table the quick measures how well a company can meet its short term financial

liabilities. So we will show the quick ratio of Adidas from 2013, 2014 and 2015, as well as the

quick ratio of Nike from 2016. The result of the quick ratio on Adidas on 2013 is 0.86, in 2014 is

1.13 and in 2015 is 0.82 while in Nike is 1.78. So in 2015 Nike has a higher value than Adidas

meaning Nike is better than Adidas as shown in the ratio because the higher the quick ratio, the

better the companys liquidity position. Nike Company is more financially secure in the short

term. A company with a quick ratio of greater than 1.0 is sufficiently able to meet their short term

liabilities. So Adidas is low on sales but in 2014 was a good year for them that has a ratio of

1.13.
IX. Comprehensive Analysis

Adidas AG is engaged in the sporting goods industry, offering a range of sports brands across all

sporting categories. Adidas manufactures footwear, apparel and hardware. The Adidas brand is

structured in three divisions: Adidas Sport Performance, Adidas Sport Heritage and Adidas Sport

Style.

The company has approximately 100 subsidiaries in Europe, the US and Asia, each focusing on a

particular market or part of the manufacturing process. The Adidas-Salomon Group markets its

products under six brand names: Adidas, Salomon, TaylorMade, Mavic, Bonfire and Erima.

The sporting goods and equipment industrys major segments are sports apparel, athletic

footwear and sporting goods equipment. This industry includes those companies that design,

manufacture, and/or market sporting and athletic gear, including apparel and equipment for

fishing, hunting, hiking, golf, tennis, baseball, basketball, football, biking, rollerblading,

snowboarding, skateboarding, surfing, skiing, and hockey, along with playground and play scape

equipment.

Meanwhile, the inventory turnover ratio of Adidas Incorporated is lower than the previous year

but much higher than Nike and slightly higher than its industry, which is better because Adidas

Incorporated still managing its assets effectively despite from a slight decreased on its turnover.

Adidas incorporated is doing its best to be effective in managing its assets efficiently. The profit

margin of Adidas Incorporated is slightly decreased in 2016 due to its increased in dept. Adidas

Incorporated has the same profit margin ratio of Nike Company which means that both

companies have managed to pay their overall expenses during the year and was able retain its

sales fairly.
Lastly the return on common equity also decreased due to the overall financial activities of the

firm. Its net income decreases due to the investment used in short-team marketable securities for

raising its fund for the future use. But despite from it decreased in some ratios, Adidas

Incorporated is trying its best in managing its assets effectively and efficiently.

X. Recommendation

Based on the result of the financial statement analysis of Adidas Incorporated the

researchers gives information to the investors that Adidas Inc. is in capable in terms of liquidity,

profitability, and solvency. Based on the result, the inventory turnover ratio of Adidas
Incorporated is lower than the previous year but much higher than Nike and slightly higher than

its industry, which is better because Adidas Incorporated still managing its assets effectively

despite from a slight decreased on its turnover. The profit margin of Adidas Incorporated is

slightly decreased in 2016 due to its increased in dept.

So, the researchers encouraged investors to invest in Adidas Inc. because based on the

results of the company last year 2015 even though the current ratio is lower than the past year

2014 the Adidas can surely gives 100% the best quality of their product and develop new

products to attract new consumers to increase their sales and profits.

XI. Conclusion

Based on the overall result of the financial statement analysis of Adidas Company regarding

of its liquidity, profitability, solvency and trustworthy when it comes to investment therefore, the
researcher conclude that the Adidas Company is a strong brand and it is leading with the other

brands because of the quality and service of the products they are selling.

Adidas have grown immensely over the last two decades; their global reach has expanded

through all continents, which is attributed to the changing lifestyle of developing economies &

emergence of Internet, E-commerce firms. Therefore, based on the overall performance of the

company these would lead Adidas Company to be more liquid, profitable and will manage the

Company efficiently and effectively.