Adidas, Nike, Puma Financial Analysis
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FINANCIAL ANALYSIS – NIKE, ADIDAS, PUMA Karl Budinsky, Michal Malcek, Pascal Bula, Philipp Schachten
1. Market & Product Analysis 2. Common-Size Analysis 3. Financial Ratio Analysis 4. SWOT Analysis 5. Recommendation
Sports Goods Market
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Market highly seasonal
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There is no regionally leading brand
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Difficult economic environment
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Potential market for “Sports lifestyle” 3 times larger than for performance market
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High amount of potential customers: WTO Report (2005): 400m obese & 1,6bn overweight
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Importance of women as customers established
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Growing demand for environmental friendly products
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Athletic Apparel – Global Market Shares (2008)
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Athletic Footwear – Global Market Shares (2008)
MARKET OVERVIEW
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Porters Five Forces
Industry Analysis – Sports Goods Industry Analysis – Sports Goods • High rivalry: => developed markets decreasing, competition for market shares in emerging markets • Marketing driven industry => „Symbolic“ competition • Continued research and development as well as product innovation
Bargaining power Bargaining power Of suppliers Of suppliers • Using production facilities in the Far East: => few professional large scale partners • Powerful brands • no threat of forward integrating
Threat of new Threat of new entrants entrants
• Other fashion manufacturers expanding their portfolio to sports lifestyle: low • Small threat by expansion of regional brands => high economies of scale and detailed know-how to act globally
Rivalry among Rivalry among existing competitors existing competitors
Threat of substitute Threat of substitute Products or services Products or services
Bargaining power Bargaining power of buyers of buyers • Distribution by big retail chains or own shops • Fragmented consumer pattern • Low switching costs for consumers
• For professional use: no substitute good • As fashion item: yes
Conclusion: Lucrative industry with competition of established dominant producers for market share with means of marketing
INDUSTRY ANALYSIS
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Nike at a glance
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Nike is the largest seller of athletic footwear and apparel worldwide by sale. The company specializes in the development and sale of athletic footwear, apparel and equipment. Footwear is Nike’s largest product category , representing about 52% of the company’s revenue. Nike sells its products in over 180 countries worldwide through its company-owned retail stores and internet sites, as well as through retailers like Foot Locker and Dick’s Sporting Goods. Trends
Nike Revenue by Business Segment
Source: NKE 2007 10-K, Item 6, pg. 27
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Nike Revenue by Geographic Region
Company-owned Retail Stores Increase Profit Margin Nike's Large Size Reduces Advertising Expenses Movement Towards Low-performance Footwear Global Market Slowdown Growth of China and Other Emerging Markets Leads to More Sales Source: NKE 2008 10-K, Item 6, pg. 28-33
COMPANY ANALYSIS: NIKE
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Adidas Group at a glance
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Adidas Group, the parent company of adidas, Reebok and TaylorMade Golf, is the world's second largest maker of athletic footwear, apparel and equipment by sales (2009) after Nike (NKE). Although the company makes most of its money by selling at wholesale rates to large retailers like Dick’s Sporting Goods (DKS), Foot Locker (FL), and Sports Authority, adidas and Reebok have sought to increase profit margins by increasing retail sales as a percentage of total sales. Trends
Adidas Revenue by Business Segment 2008
Source: Adidas Annual Report 2008
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Adidas Revenue by Geographic Region 2008
A successful repositioning of Reebok's brand image will boost the group's bottom line adidas group has relatively low US exposure and aggressive growth strategies in emerging markets
Source: Adidas Annual Report 2008
COMPANY ANALYSIS: ADIDAS GROUP
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Puma at a glance
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Puma Revenue by Business Segment 2007
The company manufactures athletic footwear (€1.4 billion, or 58.5% of 2007 revenue), apparel (€827.3 million, or 34.8%), and accessories (€158.3 million, or 6.7%) under four different brands: Puma, Tretorn, Mihara, and Rudolf Dassler Schuhfabrik Puma AG earns revenue by selling its footwear to retailers and specialty shops and directly to consumers though its website or retails stores. Source: Puma Annual Report 2007
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Trends
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Puma Revenue by Geographic Region 2007
PPR, a French holding company that specializes in retails and luxury brands, owns 62% of Puma’s stock since 2007 Emerging markets fueling growth
Source: Puma Annual Report 2007
COMPANY ANALYSIS: PUMA
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1. Market & Product Analysis 2. Common-Size Analysis 3. Financial Ratio Analysis 4. SWOT Analysis 5. Recommendation
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Nike – Bad graphs
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Nike is constantly increasing its Net Income percentage to Revenues, mostly because of good tax management and stable Selling/General Administrative expenses and stable Cost of goods sold
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Adidas has relatively stable Net Income as percentage of Revenues. Selling/General Administrative expenses percentage is bit growing, but company company is good at managing Cost of goods sold
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Puma is lowering its Net income percentage year by year, that is not a good sign. Main reason is growing percentage of Selling/General Administrative expenses
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Adidas has lowest percentage of Net Income (5,94% in 2008), comparing to Puma (9,22% in 2008) and Nike (10,11 in 2008)
Adidas
Puma
VERTICAL COMMON SIZE ANALYSIS
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Nike
Adidas
Puma
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Nike has very good Longterm Debt management (srongly lowered its portion in total equity & liabilities through years)
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Slightly growing percentage of account payable and Other current liabilities at Nike
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Highest percentage of Liabilities in total equity & liabilities at Adidas mainly because of realtively high Longterm debt
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Adidas has best management of Accounts payable
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Highest level of percentage of Accounts payable and Other current liabilities, but no longterm debt at Puma (just significant percentage in other long term liabilities)
VERTICAL COMMON SIZE ANALYSIS
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Nike
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Very low level Cash&Short Term Investments percentege at Adidas (lowest liquidity?)
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Highest cash level at Puma but strongly decreasing, that can be a signal of improvements in cash flow management but also a result of constantly lowering net income
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Along with decrasing level of cash there is increasing portion of Net fixed assets and Other current assets (where the cash is spent)
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Greatest goodwill and intangibles portion at Adidas, surprisingly low at Nike
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Accounts recievable management looks similar in all 3 companies (around 20% of total assets), but in case of Nike the percentage is slightly decreasing and in case of Puma, its slightly increasing and Adidas is stable at lowest level of those 3 (around 18% of total assets)
Adidas
Puma
VERTICAL COMMON SIZE ANALYSIS
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Horizontal Analysis – Net Income
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Horizontal Analysis – Total Assets
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Horizontal Analysis – Cost Of Goods Sold
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Horizontal Analysis – Total Equity
HORIZONTAL COMMON SIZE ANALYSIS
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1. Market & Product Analysis 2. Common-Size Analysis 3. Financial Ratio Analysis 4. SWOT Analysis 5. Recommendation
Liquidity – Current Ratio
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Liquidity – Debt-to-Equity Ratio
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Days in Inventory
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Profitability – Net Profit Margin
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Profitability – Return on Equity
KEY FINANCIAL RATIOS
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DuPont-Analysis for Nike, Adidas and Puma 2004-2008
DUPONT-ANALYSIS
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Pro Forma Analysis – Total Current Assets
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Pro Forma Analysis – Gross Profit
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Pro Forma Analysis – Total Current Liabilities
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Pro Forma Analysis – Net Income
PRO-FORMA ANALYSIS
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1. Market & Product Analysis 2. Common-Size Analysis 3. Financial Ratio Analysis 4. SWOT Analysis 5. Recommendation
Strengths – potentially positive internal effects
SIMILAR • Sponsor of top athletes • Strong at research and development • Global brand • Manufacturing high quality at the lowest possible costs NIKE • Number one sports brand in the world • No own factories • Production flexibility • High brand recognition and reputation • Performance driven ADIDAS • European market leader PUMA • Connection of fashion, style and sports • Lifestyle driven
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Weaknesses – potentially negative internal effects
SIMILAR • Income heavily dependent upon footwear market • Retail sector is very price sensitive • Increasing negotiating power of retailers • Very competitive market
NIKE ADIDAS PUMA
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Opportunities – potentially external positive effects
Establishment as fashion brand Development of business internationally Emerging markets (China, India) – new rich generation of consumers Global marketing events Sport is trendy
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Threats – potentially negative external effects
Exposed to international nature of trade Buying and selling in different currencies Very competitive market for sport shoes and garments Business model now commonly used Competitors are developing alternative brands Price sensitive retail sector Consumer price sensitivity Change in demand of the customers Consolidation of markets Alliances of competitors Political and regulatory changes Piracy
NIKE ADIDAS PUMA
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1. Market & Product Analysis 2. Common-Size Analysis 3. Financial Ratio Analysis 4. SWOT Analysis 5. Recommendation
BUY
HOLD
SELL
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