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ANALYSIS

OF
FINANCIAL STATEMENT
Instructor: Dr. Jonchi Shyu

BY GROUP 9 Boby Chandra M10401832


Kosasih Lorencia M10421828
Yulia Ratnasari M10421824
Wichida M10421822
OUTLINE :
Introduction
Global Market Industry Analysis
Ratio Analysis
Liquidity Ratio
Asset Management
Debt Management
Profitability
Market Value
Du Pont Equation
Z-Score Analysis
Conclusion & Suggestion
GLOBAL FOOTWEAR MARKET
Sport has become one of the most
popular leisure activities in the world.
The rising number of people running.
In the USA, according to estimates from
Running USA, an online directory of
races, there was an all-time high of
541,000 marathon finishers in 2013 of
which 43% were women and 47% were
40 years of age and older.
People buy sports clothing in order to
help them improve their performance by
taking advantage of technical
innovations.
There are also customers who wear
sports-inspired clothing because
it is trendy and fashionable.
MAJOR TRENDS IN
THE INDUSTRY :

1. Rising health & wellbeing


awareness globally.

2. Increasing active sports


participation rates.

3. Development of innovative &


technically advanced products.

4. Convergence of casual design


with athletic performance.
US THE LARGEST MARKET
QUICK FACTS of NIKE, Inc.
American multinational company founded in
1964 by Bill Bowerman & Phil Knight. Began
as Blue Ribbon Sports.
Headquartered in Beaverton, Oregon, US.
Approximately 62,600 employees worldwide
(As of May 31st, 2015).
Produces footwear, apparel, equipment, and
accessories.
Nike sells its own brands, Jordan brand,
and subsidiaries such as Hurley
International and Converse.

JUST DO IT
QUICK FACTS of Adidas AG
German multinational company
founded in 1948 by Adi Dassler.
Based in Herzogenaurach,
Bavaria, Germany.
Employing more than 55,555
peoples in over 160 countries.
ALL IN OR NOTHING

Produces footwear, sportswear,


equipment, accessories, and perfumes.
The brands of Adidas Group are
Adidas, Reebok, Reebok CCM
Hockey, TaylorMade - Adidas Golf,
Runtastic, Five Ten.
FINANCIAL FUN FACTS

The famous swoosh logo was created in On November 17th, 1995, Adidas had its
1971, nine years before the company first initial public offering (IPO).
went public.
The Adidas AG share is listed on the
In 1986, Nike revenues passed $1 billion German stock exchange in Frankfurt.
for the first time. The stock is part of the DAX 30 index,
which consists of the 30 major German
If you had invested $1,000 during Nike's companies.
initial public offering(IPO) without
reinvesting dividends, your investment Number of shares outstanding (as of
would be worth $729,575 today. December 31, 2015) : 200,197,417.
This represents a compound annual
growth rate (CAGR) of just over 20.7%. Average trading volume per trading day
(2015) : 1,199,167 shares.
Your original $1,000 investment would
have yielded almost 87 shares. Adjusted Market capitalization at year-end 2015
for the stock splits, you would hold 5,568 ( in millions) : 18,000.
shares today without dividend
reinvestment.
Source: www.investopedia.com/articles/markets/120315 Source: www.adidas-group.com/en/investors/share
BATTLE OF THE BRAND

Source: www.worldfinance.com/home/a-league-of-their-own-nike-vs-adidas
www.redhotpenny.com/blog/battle-of-the-brands-nike-vs-adidas
THE BATTLE FACTS
1
Theres $ 55 billion USD
at stake. China is the
5
second largest sneaker/ Social Media Wars:
footwear market in the (As of Apr 2014)
world.
3 Facebook Likes
Nike is taking over for Nike - 35.36m
Adidas as the official, Adidas - 17.16m
on-court uniform Twitter Followers
provider in the NBA.
Nike - 1.8m
Adidas - 0.9m

2
Adidas moved its
head of design from 4
Herzogenaurach to Three Nike
Portland. Innovation Kitchen
designers
defected to
Adidas.
RATIO ANALYSIS
1
LIQUIDITY
RATIOS
CURRENT
RATIO The current ratio is mainly used to give an idea of the company's
ability to pay back its liabilities (debt and accounts payable) with
its assets (cash, marketable securities, inventory, accounts
receivable).

The higher the current ratio, the more capable the


company is of paying its obligations, as it has a larger
proportion of asset value relative to the value of its liabilities.

Company 2011 2012 2013 2014 2015

ADIDAS 6,435 6,877 6,857 7,347 7,497


Current assets
NIKE 11,297 11,531 13,626 13,696 15,976

ADIDAS 4,281 4,374 4,732 4,378 5,364


Current liabilities

NIKE 3,958 3,865 3,926 5,027 6,334

ADIDAS 1.5 1.6 1.4 1.7 1.4


Current ratio

NIKE 2.9 3.0 3.5 2.7 2.5
CURRENT RATIO
4

3.50
3
2.90 3.00
2.70
2.50
Ratio

Adidas
2
Nike
1.60 1.70
1.50 1.40 1.40
1

0
2011 2012 2013 2014 2015
Year

During 5 years, Adidas has lower current ratio than Nike. It means
Adidas liquidity position to pay its liabilities is weaker than Nike.
Recommendation
Adidas must rise the current ratio by increasing the number of current
assets and reduce the amount of current liabilities of the company.
QUICK
The quick ratio is firms ability to pay off RATIO
short-term obligations without relaying on
the sale of inventories.

Company 2011 2012 2013 2014 2015

ADIDAS 6,435 6,877 6,857 7,347 7,497


Current assets
NIKE 11,297 11,531 13,626 13,696 15,976

ADIDAS 2,482 2,486 2,634 2,526 3,113


Inventories
NIKE 2,715 3,350 3,434 3,947 4,337

ADIDAS 4,281 4,374 4,732 4,378 5,364


Current liabilities
NIKE 3,958 3,865 3,926 5,027 6,334

ADIDAS 0.9 1.0 0.9 1.1 0.8


Quick ratio
NIKE 2.2 2.1 2.6 1.9 1.8
3.0
QUICK RATIO
2.3 2.6
2.2 2.1

Ratio
1.5 1.9 1.8
Adidas
Nike
0.8 1.0 1.1
0.9 0.9 0.8 Industry Average
0.63 0.53
'-
2011 2012 2013 2014 2015
Year

During 5 years, Adidas has lower quick ratio than Nike. Adidas also experienced quick ratio less
than 1 in some years. Its also well noted that Adidas has the lowest quick ratio in 2015. It means
that Adidas doesnt have the liquid assets to pay their current liabilities and should be treated with
caution.
Both Adidas and Nike quick ratio are higher than industry average. It means their liquidity position
is better than other companies.

Recommendation
Adidas must rise the quick ratio by increasing the number of current assets, reduce
inventories, and reduce the amount of current liabilities of the company.
Improve collection efforts in order to optimize capital tied up in account receivable.
Actively manage inventory levels, by continuing monitoring of stock levels as well as
centralizing stock holding and clearance activities, improving forecasting and material
planning processes.
2
ASSETS MANAGEMENT
RATIOS
INVENTORY Inventory turnover ratio showing how
many times a company's inventory is
TURNOVER sold and replaced over a period
RATIO

Company 2011 2012 2013 2014 2015

ADIDAS 7,497
6,435 6,877 6,857 7,347
Sales
NIKE 15,976
11,297 11,531 13,626 13,696

ADIDAS 3,113
2,482 2,486 2,634 2,526
Inventories
NIKE 4,337
2,715 3,350 3,434 3,947

ADIDAS 5,364
4,281 4,374 4,732 4,378
Inventory turnover ratio
NIKE 6,334
3,958 3,865 3,926 5,027
INVENTORY TURNOVER RATIO
8.0
7.7
7.2 7.4
7.0 7.1
6.0
6.0 5.8
Ratio 5.4 5.5 5.4 Adidas
5.24
4.0 Nike
Industry Average
2.0

'-
2011 2012 2013 2014 2015
Year

During 5 years, Adidas has lower inventory turnover ratio than Nike. A lower turnover
implies poorer sales and, therefore, excess inventory. Adidas ratio is slightly above
the industry average, indicating that its inventory turnover ratio at least as internsively
as other firms in the industry.
Recommendation
Adidas must rise the inventory turnover ratio by:
increasing sales (clearance sale)
optimize its inventory (improving forecasting and material planning processes)
A measure of the average number of days that a company
takes to collect revenue after a sale has been made.
DAYS SALES A low DSO number means that it takes a company fewer
OUTSTANDING days to collect its accounts receivable.
A high DSO number shows that a company is selling its
(DSO) product to customers on credit and taking longer to collect
money.

Company 2011 2012 2013 2014 2015

ADIDAS 6,435 6,877 6,857 7,347 7,497


Sales
NIKE 11,297 11,531 13,626 15,976
13,696

ADIDAS 3,113
2,482 2,486 2,634 2,526
Inventories
NIKE 4,337
2,715 3,350 3,434 3,947

ADIDAS 5,364
Inventory turnover 4,281 4,374 4,732 4,378
ratio
NIKE 6,334
3,958 3,865 3,926 5,027
DSO
60.0 54.90
49.62
44.95 45.09
45.0 48.87 40.05
46.69 45.56 44.21
41.40
Ratio

Adidas
30.0
Nike

15.0

'-
2011 2012 2013 2014 2015
Year

In the last 3 years, Adidas DSO is higher than Nike. It means Adidas has
more and more customers paying their bills very late. This receivables may
end up as bad debts that can never be collected.
Recommendation
Adidas must rise the days sales outstanding by collecting receivables faster.
FIXED ASSET
Financial ratio of net sales to fixed assets.
The fixed-asset turnover ratio measures a TURNOVER
company's ability to generate net sales from
fixed-asset investments - specifically property, RATIO
plant and equipment (PP&E) - net of
depreciation.

A higher fixed-asset turnover ratio shows that


the company has been more effective in using
the investment in fixed assets to generate
revenues.

Company 2011 2012 2013 2014 2015

ADIDAS 6,435 6,877 6,857 7,347 7,497


Sales
NIKE 11,297 11,531 13,626 13,696 15,976

ADIDAS 963 1,095 1,238 1,454 1,638


Net fixed assets
NIKE 2,115 2,279 2,452 2,834 3,011

ADIDAS 13.9 13.6 11.7 10.0 10.3


Fixed assets turnover
NIKE 9.9 10.6 10.3 9.8 10.2
FIXED ASSET TURNOVER RATIO
13.86 13.59
14.0
11.71
10.00 10.33
10.5
10.59 10.32 10.16
9.86 9.81
The trend of fixed assets turnover

Ratio
7.0
ratios in Adidas over the last 5 years
is decreasing (slightly increased in
2015), while Nike trend is increasing. 3.5
It means Adidas effectiveness in
using the investment in fixed assets '-
to generate revenues s decreasing 2011 2012 2013 2014 2015
year by year, while Nike is becoming Year
more effective. Adidas Nike
Recommendation
Adidas must rise the fixed assets turnover ratios
by using their fixed assets more effectively to
generate revenues. It must control their spending
for property, plant and equipment (investments in
the furnishing and fitting of retail stores) since it
became its major investing last year.
The amount of sales or revenues
TOTAL ASSET
generated per dollar of assets. TURNOVER
The Asset Turnover ratio is an indicator
of the efficiency with which a company
RATIO
is deploying its assets.

The higher the ratio, the better it is, since it


implies the company is generating more
revenues per dollar of assets.

Company 2011 2012 2013 2014 2015

ADIDAS
6,435 6,877 6,857 7,347 7,497
Sales
NIKE
11,297 11,531 13,626 13,696 15,976

ADIDAS
11,380 11,651 11,599 12,417 13,343
Total assets
NIKE
14,998 15,465 17,584 18,594 21,600

ADIDAS
Total assets 1.2 1.3 1.2 1.2 1.3
turnover
NIKE
1.4 1.6 1.4 1.5 1.4
TOTAL ASSET TURNOVER RATIO
1.64 Adidas has lower total assets
1.7 1.56 turnover ratios than Nike. It
1.44 1.50
1.39 1.42
means Nike is generating more
1.3 revenues per dollar of assets
1.28 1.25 1.27 than Adidas.
1.17 1.17 Both Adidas and Nike total
Ratio

0.9 assets turnover ratios are lower


than industry average,
indicating that both companies
0.4
arent generating enough sales
given their total assets.
'-
2011 2012 2013 2014 2015 Recommendation
Year Adidas must rise the total assets
Adidas turnover ratios by continuously
Nike using assets, limiting purchases
Industry Average of inventory and increasing sales
without purchasing new assets.
Reduce inventories and increase
sales by doing clearance sale
promotion for their old stocks
Collect receivables faster.
3
DEBT MANAGEMENT
RATIOS
A set of ratios that measure how effectively a firm
manager its debt.
TOTAL DEBT
Higher will increase shareholders ROE due to TO TOTAL
tax deductibility, On the other hand ; Lower will
more flexible, easily manageable, and enhances CAPITAL
debt holders confidence.

company 2011 2012 2013 2014 2015

Total Debt Adidas (million EUR) 6,049 6,360 6,118 6,800 7,696

Nike (million USD) 5,155 5,084 6,428 7,770 8,893

Total Equity Adidas (million EUR) 5,327 5,304 5,489 5,618 5,648

Nike (million USD) 9,843 10,381 11,156 10,824 12,707

Total Capital Adidas (million EUR) 11,380 11,651 11,599 12,417 13,343

Nike (million USD) 14,998 15,465 17,584 18,594 21,600


TOTAL ASSET TURNOVER RATIO
60%
58%
53% 55% 53% 55% 55%
45%
42% 41%
37% 37% Adidas
30% 34% 33% Nike

15%

0%
2011 2012 2013 2014 2015 Average

Adidas consistently maintain its capital structure (around 55%) and


increased by5% from the past five years.
Nike has lower debt ratio (in average 37%) but has been elevated by
7% from the past five years.
Recommendation
Find its optimum financial structure
Otherwise: default risks (i.e. bankruptcy, stockholder and
debtholder confidence, and flexibility) could occur
TIMES
It is usually quoted as a ratio and indicates how many
-INTEREST- times a company can cover its interest charges on a
EARNED pretax basis. Failing to meet these obligations could
force a company into bankruptcy.
RATIO
Companys ability to meet its debt obligations by
how many times interest expense can be paid.

company 2011 2012 2013 2014 2015

Operating Profit Adidas (million EUR) 1,011 1,185 1,254 883 1,059

Nike (million USD) 2,876 3,056 3,295 3,602 4,265

Interest Expenses Adidas (million EUR) 108 97 73 62 65

Nike (million USD) 32 31 23 58 60


TIMES-INTEREST-EARNED RATIO
160.00

143.26
120.00

98.58 Adidas
80.00 89.88 92.98
Nike
71.08
62.10
40.00
12.22 17.18 14.24 16.29 13.86
9.36

0.00
2011 2012 2013 2014 2015 Average

Adidas: in average 13.86 times


doubled from 2011 to 2015, which was 9.36 to 16.29 times respectively
Nikes 92.98 times in average: lower debt ratio (doubled debt in 2014)
Recommendation
Increase revenue: reinvesting its earnings to other profitable projects
Rebranding Reebok: only 10.35% revenue from total sales
Less focus on Reebok Hockey: only 1.87% from total sales
Reduce its operating cost
Money borrowed: borrow at lower cost of debt
4
PROFITABILITY
RATIOS
OPERATING Operating margin is amargin ratio used to
MARGIN measure a company's pricing strategy and
operating efficiency.
Return on sales: operating profit per dollar sales

The higher a companys operating margin,


the better off the company is

company 2011 2012 2013 2014 2015

Operating Profit Adidas (million EUR) 1,011 1,185 1,254 883 1,059

Nike (million USD) 2,876 3,056 3,295 3,602 4,265

Net Sales Adidas (million EUR) 13,344 14,883 14,492 14,534 16,915

Nike (million USD) 20,862 23,331 25,313 27,799 30,601


OPERATION MATGIN
14.00%
13.79% 13.94%
13.10% 13.02% 12.96% 13.36%
10.50%

9.60% Adidas
8.65%
7.00% 7.58% 7.96% Nike
7.31%
6.26% Industry
6.08%
3.50%

0.00%
2011 2012 2013 2014 2015 Average

Adidas: in average 7.31% earned less by 17.37% from 2011 to 2015 and
below industry average (9.6%)
Nike: 13.36% while Nikes is relatively stable.
Recommendation
Modifying Adidas pricing strategy: possibility of underpricing
Focus on efficiency and Just In Time approach
Apply sig sigma and lean operation management
Profit margin may also indicate certain things about a
companys ability to manage its expenses and pricing strategy
Profit margin is a useful ratio and can help provide insight
about a variety of aspects of a companys
financialperformance.

PROFIT
A higher profit margin indicates a
MARGIN more profitable company that has
better control over its costs compared
to its competitors.

company 2011 2012 2013 2014 2015

Net income Adidas (million EUR) 672 524 790 490 640

Nike (million USD) 2,133 2,223 2,485 2,693 3,273

Net Sales Adidas (million EUR) 13,344 14,883 14,492 14,534 16,915

Nike (million USD) 20,862 23,331 25,313 27,799 30,601


PROFIT MATGIN
11.00%
10.70%
10.22% 9.99%
9.53% 9.82% 9.69%
8.25%
Adidas: in average 4.23%
Nike: in average 9.99%
5.50% Differences between operating to profit
5.45% margin: 3.07% Adidas and 3.37% for
5.04%
3.78%
4.23% Nike
2.75% 3.52% 3.37% Main issue: Adidas high operating
costs
0.00% Adidas effective tax rate is higher
2011 2012 2013 2014 2015 Average than Nike.
Adidas Recommendation
Nike
Maintain current expenditures:
Adidas is more efficient in the
supporting activities
Focusing more in the primary
activities: increase sales and reduce
costs
Return on equity measures a RETURN ON
corporation's profitability by COMMON
revealing how much profit a
company generates with the EQUITY
money shareholders have
invested.

The higher the ratio percentage, the more


efficient management is in utilizing its equity
base and the better return is to investors.

company 2011 2012 2013 2014 2015

Net income Adidas (million EUR) 672 524 790 490 640

Nike (million USD) 2,133 2,223 2,485 2,693 3,273

Total Equity Adidas (million EUR) 5,327 5,304 5,489 5,618 5,648

Nike (million USD) 9,843 10,381 11,156 10,824 12,707


RETURN ON EQUITY
26.00%
24.88% 25.76%
22.28% 23.20%
19.50% 21.67% 21.41% 21.20%
Adidas
13.00% 14.39% Nike
12.61%
11.39%
Industry
11.33%
9.88%
6.50% 8.72%

0.00%
2011 2012 2013 2014 2015 Average

Adidas ROE is 11.39% in average and below industry average (21.2%); Nike is 23.2%.
Adidas ROE were unstable (Peak in 2013:14.39% and through in 2014: 8,72%) while
Nike is gradually increasing.
Issues in 2014:
Trend in golf dropped: Taylor Made sales dropped by 29%
Negative profit in Russia from geographical tensions
Weakening currency
Adidas in 2014: What a Disappointing Year!
Recommendation The Motley Fool
Strengthening hedging strategy
Hockey and golf campaign
Political turbulence: employ trend trackers and analyst to be more aware of worlds
situation
RETURN ON Measure of cash-on-cash yield and the
effectiveness of utilizing capital using NOPAT
INVESTED
CAPITAL Company's ability to use capital
efficiently and using it to generate returns.
The higher, the better.

company 2011 2012 2013 2014 2015

Operating Profit Adidas (million EUR) 1,011 1,185 1,254 883 1,059

Nike (million USD) 2,876 3,056 3,295 3,602 4,265

Total Asset Adidas (million EUR) 11,380 11,651 11,599 12,417 13,343

Nike (million USD) 14,998 15,465 17,584 18,594 21,600

Effective Tax Rates Adidas (million EUR) 0.277 0.293 0.29 0.297 0.329

Nike (million USD) 0.25 0.25 0.247 0.24 0.222


RETURN ON INVESTED CAPITAL
16.00%
14.82% 15.36%
14.38% 14.11% 14.72% 14.68%
12.00%

Adidas
8.00%
Nike
7.19% 7.68%
6.42% 6.32%
4.00% 5.00% 5.33%

0.00%
2011 2012 2013 2014 2015 Average

In average, Adidas yield 6.32% while Nike is 14.68% ROIC


Adidas tax is relatively higher by 5.54% in five years
Recommendation
Comparing with WACC
Guy, Choughari, Trotter (2013), estimated that Adidas WACC in 2015 is 9%.
Adidas 2015 ROIC is less than (5.52% < 9%)
Adidas did not generate enough value.
Find out unprofitable business unit: divest
The return on assets (ROA) shows
how profitable a company's assets
are in generating revenue RETURN
ON
The higher the ROA number,
the better, because the company ASSET
is earning more money on less
investment.

company 2011 2012 2013 2014 2015

Net income Adidas (million EUR) 672 524 790 490 640

Nike (million USD) 2,133 2,223 2,485 2,693 3,273

Total Asset Adidas (million EUR) 11,380 11,651 11,599 12,417 13,343

Nike (million USD) 14,998 15,465 17,584 18,594 21,600


RETURN ON ASSETReturn on Asset
16.00%
15.15%
14.22% 14.37% 14.13% 14.48% 14.47%
12.00%
Adidas (5.19% in average) earned
5.19$ net income using 1$ asset while
8.00%
Nike (14.47% in average) generated
14.47$ 6.81%
5.91%
Adidas 2015: 16,915 million EUR 4.00%
4.50% 4.80% 5.19%
sales and 13,343 million EUR total 3.95%
assets 0.00%
Nike 2015: 21,600 million USD 2011 2012 2013 2014 2015 Average
sales and 30,601 million USD total
assets Adidas
Nike
Recommendation
Focusing more in China, Western
Europe, and Latin America: net sales
>18%, 17%, and 12%
Divest stores and less focus on Russia
and Japan: net sales <1%
> through retailers
BEP
BEP ratio is used to determine how RATIO
effectively a firm uses its assets to
generate income.

The higher the BEP ratio, the more


effective a company is at generating
income from its assets.

company 2011 2012 2013 2014 2015

Operating Profit Adidas (million EUR) 1,011 1,185 1,254 883 1,059

Nike (million USD) 2,876 3,056 3,295 3,602 4,265

Total Asset Adidas (million EUR) 11,380 11,651 11,599 12,417 13,343

Nike (million USD) 14,998 15,465 17,584 18,594 21,600


BASIC EARNING POWER AND TOTAL ASSETS
20.00%
19.18% 19.76% 19.37% 19.75% 19.36%
18.74%
15.00%
14.37% 14.48%
15.15%
14.47% Adidas ROA
14.22% 14.13%
Nike ROA
10.00% Adidas BEP
10.17% 10.81%
8.88% 8.98% Nike BEP
7.94%
5.00% 6.81% 7.11%
5.91%
4.80% 5.19%
4.50% 3.95%
0.00%
2011 2012 2013 2014 2015 Average

BEP: Nike in average 19.36 and Adidas in average 8.38%


Adidas tax and interest effects is (3.79%), lower than Nike (4.89%)
Adidas tax and interest is higher

Recommendation
Invest more in non-operating activities to earn more revenue
Focus on lean operation management
5
MARKET VALUE
RATIOS
Price/
The ratio of the price per share to earnings
Earnings
per share ; show the dollar amount Ratio
investors will PAY FOR $1 OF CURRENT
EARNINGS.

P/E ratio is as a reflection of the


markets optimism concerning of
companys growth prospects.

Company 2011 2012 2013 2014 2015

ADIDAS 50.26 67.33 92.64 57.62 89.91


Price per share
NIKE 84.45 108.18 61.66 76.91 101.67

ADIDAS 3.20 3.78 4.01 2.72 3.32


Earnings per share

NIKE 4.39 4.73 2.71 2.97 3.70

ADIDAS 15.71 17.81 23.10 21.18 27.08


P/E ratio

NIKE 19.24 22.87 22.75 25.90 27.48
PRICE/EARNINGS RATIO 27.48
28 25.90
22.87 22.75 27.08
25.90
2119.24 23.10
21.18

Ratio
17.81 Adidas
1415.71
Nike
Industry average
7

0
2011 2012 2013 2014 2015
Year

Nike experience the higher Price/Earnings than Adidas. This means that the
investors is willing to spend more money for $1 of earnings with Nike, because of
strong growth prospects and belief that Nike have a higher good performance in
the future.

Recommendation
Adidas should focus on the whole performance of the company which reflect to
the trust of investors and also provide strong long term prospects.
A ratio used to find the value of a company by
comparing the book value of a firm to its market
Market/ value.
M/B ratio typically exceed 1.0, which means
Book Ratio that investors are willing to pay more for
stocks than the accounting book values of
the stock

Company 2011 2012 2013 2014 2015

ADIDAS 50.26 67.33 92.64 57.62 89.91


Price per share
NIKE 84.45 108.18 61.66 76.91 101.67

ADIDAS 25.48 25.29 26.20 27.52 28.30


Book per share

NIKE 20.26 22.10 12.17 11.95 14.37

ADIDAS 1.97 2.66 3.54 2.09 3.18


M/B ratio

NIKE 4.17 4.90 5.07 6.44 7.08
MARKET/BOOK RATIO
8

7.08
6 6.44
Adidas
Ratio
4.90 5.07
4 Nike
4.17
3.54
3.18
2 2.66
1.97 2.09

0
2011 2012 2013 2014 2015
Year

Nike experiences the higher Market/Book Ratio than Nike which shows judgment
or expectation investors against the company. The higher the ratio the company
was seen have a good increasingly prospect. This means that the buyer is willing
to spend extra money, because of high profitability and return on asset.

Recommendation
Adidas should divest less profitable product mix and regions so that it could
enhance its growth and market expectation.
Improve company performance comprehensively, especially its value chain.
6
THE DUPONT
EQUATION
DuPont The DuPont Analysis is a method of performance
Equation measurement which assets are measured at their
gross book value in order to produce a higher ROE

ROE = Net Income * Sales * Total Assets


Sales Total Assets Common Equity

The formula focus on expense


control(PM ), asset utilization(TA TO), and
debt utilization(equity multiplier)
ADIDAS

Profit Margin Total Asset Turnover Equity Multiplier ROE

2011 5.04% 1.17 2.13 12.60

2012 3.52% 1.28 2.02 9.90

2013 5.45% 1.25 2.12 14.41

2014 3.37% 1.17 2.21 8.71

2015 3.78% 1.27 2.35 11.29

NIKE

Profit Margin Total Asset Turnover Equity Multiplier ROE

2011 10.22% 1.39 1.52 21.67

2012 9.53% 1.51 1.49 21.41


2013 9.82% 1.44 1.58 22.27

2014 9.69% 1.50 1.72 24.88

2015 10.76% 1.42 1.70 25.76


Profit Margin
11.00% Because of profit margin is the
10.22%
10.70% weakness point. Adidas still have
9.53% 9.82% 9.69%
8.25% high Operating cost Therefore,
They should try to reduce
Ratio

Adidas
5.50% especially expenditure for
Nike
5.04% 5.45% marketing investment which is
2.75% 3.52% 3.78% accounted for26% of total
3.37%
operation expense.
0.00%
2011 2012 2013 2014 2015
Year
Total Asset Turnover
1.56
1.6 1.44 1.50
1.39 1.42

According to Adidas has 1.2


1.28 1.25 1.27
1.17 1.17
inventories 23.3% of total asset, Adidas
Ratio

0.8
They should decrease inventory Nike
stock and improve their credit
0.4
policy in order to reduce
accounts receivable.
'-
2011 2012 2013 2014 2015
Year
Equity Multiplier
2.4
Adidass ROE goes up due to
2.35 the equity multiplier. This is
2.13 2.12 2.21 simply making things more
1.8 2.02
1.72
risky, if company is getting
1.70 Adidas
Ratio

1.52 1.49 1.58 over-leverages.


1.2 Nike Adidas financial structure
0.6 relies heavily in its debt:
purchase assets using debt
'-
2011 2012 2013 2014 2015
Year ROE
26.00%
Adidas equity utilization is lower 24.88% 25.76%
than Nike, even though its equity 19.50% 21.67% 21.41% 22.28%
multiplier is higher
Adidas
Therefore, Adidas should 13.00% 14.39% Nike
increase its Net income, utilize 12.61%
11.33%
6.50% 9.88%
its equity more efficiently and 8.72%
effectively, and reduce its
0.00%
expenses. 2011 2012 2013 2014 2015
7
Z-SCORE
ANALYSIS
The Altman Z-score is the output of a credit-strength test
that gauges a publicly traded manufacturing companys
likelihood of BANKRUPTCY

The Altman Z-score, is based on 5 financial ratios that can be calculated


from data found on a companys annual 10K report. The Altman Z-score
is calculated as follows :

Z-score = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 0.999T5

Where :
T1 = Working Capital/Total Assets
T2 = Retained Earnings/Total Assets
T3 = EBIT/Total Assets
T4 = Market Value of Equity/Total Liabilities
T5 = Sales/Total Assets
Z>2.99 Safe
1.8<Z<2.99 Grey
Z<1.8 Distress
Adidas
2011 2012 2013 2014 2015
Working Capital 2,154.00 2,503.00 2,125.00 2,969.00 2,133.00
Total Assets 11,380.00 11,651.00 11,599.00 12,417.00 13,343.00
T1 0.19 0.21 0.18 0.24 0.16
Retained Earnings 4,348.00 4,454.00 4,959.00 4,839.00 4,874.00
Total Assets 11,380.00 11,651.00 11,599.00 12,417.00 13,343.00
T2 0.38 0.38 0.43 0.39 0.37
EBIT 1,011.00 1,185.00 1,254.00 883.00 1,059.00
Total Assets 11,380.00 11,651.00 11,599.00 12,417.00 13,343.00
T3 0.09 0.10 0.11 0.07 0.08
Market Value of Equity 11,018.00 14,760.08 20,308.54 11,773.49 17,999.98
Total Liabilities 6,049.00 6,360.00 6,118.00 6,800.00 7,696.00
T4 1.82 2.32 3.32 1.73 2.34
Sales 13,344.00 14,883.00 14,492.00 14,534.00 16,915.00
Total Assets 11,380.00 11,651.00 11,599.00 12,417.00 13,343.00
T5 1.17 1.28 1.25 1.17 1.27
Z-score 3.32 3.80 4.42 3.28 3.63
Nike
2011 2012 2013 2014 2015
Working Capital 7,339.00 7,666.00 9,700.00 8,669.00 9,642.00
Total Assets 14,998.00 15,465.00 17,584.00 18,594.00 21,600.00
T1 0.49 0.50 0.55 0.47 0.45
Retained Earnings 5,801.00 5,588.00 5,695.00 4,871.00 4,685.00
Total Assets 14,998.00 15,465.00 17,584.00 18,594.00 21,600.00
T2 0.39 0.36 0.32 0.26 0.22
EBIT 2,844.00 3,025.00 3,272.00 3,544.00 4,205.00
Total Assets 14,998.00 15,465.00 17,584.00 18,594.00 21,600.00
T3 0.19 0.20 0.19 0.19 0.19
Market Value of Equity 41,031.72 50,822.96 56,505.22 69,665.08 89,916.95
Total Liabilities 5,155.00 5,084.00 6,428.00 7,770.00 8,893.00
T4 7.96 10.00 8.79 8.97 10.11
Sales 20,862.00 23,331.00 25,313.00 27,799.00 30,601.00
Total Assets 14,998.00 15,465.00 17,584.00 18,594.00 21,600.00
T5 1.39 1.51 1.44 1.50 1.42
Z-score 7.92 9.25 8.44 8.43 8.96

Both company has Z-score located in the safe zone. However Nike is more considered
safe than Adidas, Nike have strong position especially in Market Value of Equity/Total
liabilities. Moreover, Nike also have customer base which make Nike have high sales and
profitability.
CONCLUSION
RECOMMENDATION FOR ADIDAS TO
INCREASE SHAREHOLDER VALUE :
Optimising their product mix
Rebranding Reebok
Modifying Adidas pricing strategy:
possibility of underpricing
Evaluate third parties contract
especially in credit term, so Adidas can
collect receivables faster
Improving supply chain efficiency and
inventory control
Apply sig sigma and lean
operation management
Focus on efficiency and Just In
Time approach
Improving the quality of
distribution
Focus promotion spend on well-
selected partnership
Find its optimum financial structure
Increase operating efficiency (tightly
managing overhead expenses, curtailing
operational investments, e.g staff hiring).
OVERVIEW OF ADIDAS

- Market capitalizationapproaching $19 billion and trailing 12-month revenues over $16 billion.
- The stock ended 2015 priced around $48 per share and with a price-to-earnings (P/E) ratio just over 8.
- The stock ended 2015 near its 52-week high, which was approximately $50 per share. It also yields a
dividend around 1.8%.
- Adidas has a more established market in European countries.
- Adidas expects to grow its top-line revenue by 15% annually through 2020.

Source: http://www.investopedia.com/articles/markets/012616/adidas-vs-nike-vs-under-armour-which-2016-nkeua.asp
OVERVIEW OF NIKE
- Market capitalization around $102 billion and trailing 12-monthsales over $31 billion.
- Nike ended 2015 priced near $62 per share, which is at the upper end of its 52-week range
of $45 to $68.
- Its P/E ratio is near 24, and it yields dividends of only about 1%.
- Nike is dominant across the globe; in particular, it maintains the largest market share in the
athletic apparel industry in North America.
- Nike's goal is to grow its annual revenues to $50 billion by 2020.
- The company also sees significant growth opportunities in China and in its women-focused
product lines.
COMPETITIVE DYNAMICS
Adidas is entrenched in market segments
domestically and abroad where it has
significant brand loyalty relative to its
competition. However, the company does
not boast quite the same level of high-end
sponsored athletes, which could harm its
Nike is the giant in the industry and perceived values relative to the other two

perhaps has the most to lose. Its shares companies.

reached all-time highs in 2015, and its


growth projections continue to be
aggressive.
Competitors like Under Armour will continue to innovate to
attempt to steal market share away, and the younger
generation of buyers may show signs of favoring smaller
brands and more transparently sourced goods that they can
obtain easily through online shopping.
B U Y, S E L L , O R H O L D ?
ADIDAS:HOLD
While Adidas is also a
mature apparel company,
the pricing for 2016 appears
attractive.
Its P/E ratio is much more
NIKE:BUY reasonable, and it pays a
betterdividendthan Nike.
Despite the company's stability,
Adidas is unlikely to
size and growth, investors should experience exponential
steer clear of investing in Nike for share price growth, but at its
2016. current price, it appears to
be a sound investment for
Nike is a mature company, and its 2016.
stock is hitting all-time highs. However, considering its
Those stock prices would seem to other financial ratios, it is
reflect its aggressive growth goals. better to wait and see.
If any of those goals waver, a stock
price correction is sure to follow.
REFERENCE :
www.adidas-group.com/en/investors/share
www.investopedia.com/articles/markets/120315
http://www.investopedia.com/articles/markets/012616/adidas-
vs-nike-vs-under-armour-which-2016-nkeua.asp
Adidas Annual Report 2011 2015
Nike Annual Report 2011 2015
http://csimarket.com/Industry/Industry_Data.php?ind=401
THANK YOU
FOR YOUR ATTENTION