Adidas Financial Analysis - Example

• INTRODUCTION

From the time when it got built up in 1949 inside Germany, by Dassler Adolf, Adidas Company has been tantamount with sporting business (In Liddicoat, 2013). At present, Adidas Inc. is an international public organization as well as is amongst the biggest games brands in human race. It’s a family unit product name alongside its 3 stripes symbol known in business sectors over the globe. The organization's commodity range is limitless, extending from cutting edge games footwear with apparel to embellishments; for example, watches, bags, eyewear, and different sports associated merchandise and gear. Hiring more than 46,000 individuals around the world, Adidas Company comprises of approximately 170 branches counting TaylorMade-adidas Golf, CCM-Hockey Reebok, and Rockport (Adidas, 2000). The Company’s central station is inside of Herzogenaurach. The brand of Adidas is based on an enthusiasm for games magnificence and creative design for helping sportspeople perform fines as per their capability. It’s hence nothing unexpected that Adidas Group has bolstered numerous famous sportspeople competitors to accomplish incredible things in Olympic Sports. In England, Adidas group has collaborated and delivered Club GB from 1984. Adidas’ legacy with Olympic Sports goes back to Games within Amsterdam during 1928 after Adidas' sports shoes first appeared. Footwear along with dress through Adidas Group has been perceived on sportspeople at each Olympic Sports since. Actually, all UK award winning sports men and women in previous eight Olympic Sports dressed in Adidas items.

The aim of this article is to analyze the financial information of Adidas. The following are the sections of this report: section 1 analysis of the market significance and size of the market for Adidas. Section 2 involves evaluation of Adidas budgeting, revenues and expenses/ assets and liabilities. Section 3 is analysis of profit, and source of funding. Section 4 covers taxation, financial risks or challenges. Finally, section five covers any other significant financial issue relevant to the selected organization (where possible considering time limit for the oral presentation).

• THE MARKET SIGNIFICANCE AND SIZE OF THE MARKET

As a business sector orientated company Adidas consistently discovers and assesses purchasers' requirements to guarantee its items address these issues. It plans to surpass client needs by adjusting its commodity portfolio for meeting the shifting buyers’ needs. It’s this concentration towards its clients, combined with item and advertising advancement, which assumes an important function in the success of Adidas (Amis & Cornwell, 2005).

An international pioneer, Adidas serves/owns a ¼ (22 percent) of global sporty footwear as well as attire market. Inside of the US athletic footwear with attire marketplace, the biggest business sector for athletic footwear plus clothing in the world, Adidas owns 22 percent marketplace share. Within the competition to become the global pioneer in athletics clothing, Adidas trails at the back of Nike Company, which owns a global piece of the pie of thirty-three percent. Adidas might as of now trail at the back of Nike; however, its prosperous heritage and specialization on technology, notwithstanding a pioneering guiding principle that impeccably mixes advertising and innovation may assist. Adidas run in front of Nike and seize the top position in American along with developing marketplaces of Latin America with Asia (Strategic management analysis of Adidas: Conditions in the sports equipment industry and available resources, 2015).

Segmentation, positioning , targeting, in Adidas’ Marketing technique– Leading sportswear producer in Europe and the world’s biggest, Adidas Group gets segmented on the basis of behavioural, demographic, and psychographic factors. Adidas has 4 brands within its powerful portfolio – Adidas, Reebok, Taylormade, and Rockport aimed for diverse segment consumer categories. Adidas employs differentiated target technique to reach youthful adults, adolescents and kinds who posses zeal for sports and fitness. Though it aims consumers in 15-45 age band but a large portion of its clients are in 14-25 age bracket that range from top working group otherwise the lavishness category of consumers. User and benefit-oriented positioning involve the techniques Adidas employs to make unique brand inside the mentality of a potential customer. Through underscoring the importance of superiority items from a reliable Adidas is capable of maintaining its image essence (Amis & Cornwell, 2005).

Also, Adidas multifaceted product portfolio offers them a significant upper hand. By means of their product assortment, they flawlessly cover sports along with customer segments described as tactically significant to reinforce Adidas’ aim to motivate and involve customers to exploit the potential of game within their lifestyles. Adidas Group is performing well due to its separated positioning however Reebok brand which Adidas Group has exhausted years attempting to fortify, yet its condition is stumbling.

• BUDGETING, REVENUES AND EXPENSES/ ASSETS AND LIABILITIE

A budget refers to a statistical expression of a plan for specified period. The budget might incorporate planned revenues along with sales volume, resources amounts, expenditures along with expenses, assets, liabilities with cash inflows. It communicates tactical plans of companies, organizations, activities or incidences in measurable forms (Wiseman, 2010).

Financial plans assist facilitate the arranging of real operations through compelling administrators to think how situations might change as well as what measures ought to be embraced currently in addition by urging supervisors to regard issues sooner than they emerge. It additionally helps harmonize the organization’s activities by convincing supervisors to analyze connections middling their personal particular operation with those for different offices. More functions of spending plan include: (Wiseman, 2010).

• To manage resources
• To convey arrangements to different responsibility organization managers.
• To urge supervisor to work hard to accomplish budget aims.
• To assess manager’s performance
• To offer visibility inside of the organizations' performance
• For answerability

Adidas budget is over and over again compiled every twelve months; however, mightn’t be an unfinished budget, normally calling for considerable work , is an arrangement for transient future, usually permits 100s or 1000s of employees in different units (operations, HR, Information IT technology, and many more ) to record their planned expenses and revenues inside the eventual budget (Wiseman, 2010).

• • Adidas’ Assets and liabilities

The assets and liabilities are regularly recorded in a company’s balance sheet. A balance sheet shows the financial position of a company at a specific date and year (Bank of Tonga, 2014). Adidas’s balance sheet for the year 2013, 2014, and 2015 is displayed in the appendix section (Figure 1).

From the balance sheet, Adidas’ assets include current and fixed assets. The current assets include: Cash And Cash Equivalents, Short Term Investments, Net Receivables, Inventory, and Other Current Assets. The fixed assets for Adidas include Long Term Investments, Property Plant and Equipment, Goodwill, Intangible Assets, Accumulated Amortization, Other Assets, and Deferred Long Term Asset Charges. All total current and fixed assets for Adidas in 2015 is $14,495,000, $15,025,000 in 2014, and $15,983,000 in 2013. There was a decrease in assets in 2015. On the other hand, Adidas liabilities include current and long term liabilities. The current liabilities include: Accounts Payable, Short/Current Long Term Debt, and Other Current Liabilities. The long term liabilities include Long Term Debt, Other Liabilities, Deferred Long Term Liability Charges, and Minority Interest. The total liabilities were $8,360,000 in 2015, $8,228,000 in 2014, and $8,430,000 in 2013. There was an increase in liabilities in 2014 contrasted to 2014 accounting periods (Yahoo! Finance, n.d.).  

Figure 1: Chart showing aggregate assets for Adidas from 2013-2015 December

Figure 2: Chart showing the total liabilities of Adidas from 2013-2014

• • Adidas’s Revenues and expenses

Generally, profits and expenditures are recorded in a company’s profit and loss account (P& L). A profit and loss statement refers to budgetary statement which details the costs, expenses and revenues incurred amid a given timeframe, normally an accounting quarter otherwise year. Such records give information in relation to an organization's capability – or inability of – generating profit through escalating revenue, minimizing expenses, or all (Bank of Tonga, 2014). The Profit and Loss Statement for Adidas is shown in the appendix section (Figure 2).

The revenue for Adidas as of December 2015 was $4,145,000, $ 5,327,000 in September 2015, $4,518,000 in June 2015, and $4,385,000 in March 2014. We can see that in December 2015, the revenue for the company reduced by a large amount when compared to September, June, and March accounting periods. On the other hand, the expenses for Adidas include Research Development, Selling General and Administrative, Non Recurring, and Others, the total expenses for were $2,008,000 in December 2015, $ 2,015,000 in September 2014, $ 1,911, 000 in June 2015, and $1,787,000 in March 2015. The company experienced an increase in expenses in December 2015 unlike other months of September, June and March (Yahoo! Finance, n.d.).

Figure 3: Chart showing Total revenues for Adidas from 2013-2014

Figure 4: Diagram showing total expense for Adidas from 2013-2014

• PROFIT, SOURCE OF FUNDING

Profit/income refers to an economic gain, particularly the variation involving the money earned along with the money expended in purchasing, operating and creating a product (Bank of Tonga, 2014). Adidas experienced negative net profits of $59, 000 in 2015. This implies that the position of the company in financial terms in difficult currently.

Being a public limited corporation, Adidas obtains its major wellsprings of financial support from share capital. This (Share Capital) is defined as the funds generated due to vending shares inside of the corporation, as illustrates with the company’s statement of financial position. Such involves a kind of finance from external sources. Share capital sources of funding in favour of Adidas Group are very beneficial since it offers an immense quantity of funding to the corporation (Hardy, 2015).

• TAXATION, FINANCIAL RISKS OR CHALLENGES,

Taxation of Adidas’ products in other countries is the major challenge facing the company. This has led to increase in production costs and transportation expenses. Adidas has incurred a large amount in production and transportation expenses due to taxation by the government and this has lead to realize substantial losses in the 2015 financial decade (Adidas AG, 2015).

Also, the shares of Adidas reduced below 13% in following the slashing of sportswear product revenue targets in 2015, warning "strains” inside Russia along with negative sales of golf would strike its upshot. The corporation—which funded this decades’ football World Cup champion Germany—reduced its disposable income projection in favour of 2014 towards €655 million (872 million dollars) from €831-935 million range formerly forecasted (Adidas AG, 2015). Adidas Group alleged it was restructuring its Russian extension by decreasing subsidiary openings as well as augmenting shop closures, since it strains with such struck from feeble Russia’s rouble together with the chaos engulfing Russian nation and nearby Ukraine. Such latest pattern shift inside of the Russia’s rouble, along with increasing threats to customers sentiment plus client expenditure from ongoing tensions within the locale, signify increased threats to transient profitability addition from Russian state (Adidas AG, 2015).

Likewise, Adidas Group TaylorMade sales from golf trade—which contributes approximately nine percent of Adidas’ sales—decreased eighteen percent at an exchange-neutral premise. Adidas accused the sluggish insolvency of previous stock in TaylorMade, also saying it will hunt to streamline this golf branch to "line up the company’s costs to balance lower projections in favour of such golf business's enhancement (Adidas Group (Herzogenaurach) & Adidas-Salomon AG (Herzogenaurach), 2015).

• OTHER FINANCIAL ISSUES

A broad scope of product offerings, the organization likewise faces a threat of expanding demand individualization. Adjustments in buying power for buyers as well as having personal item preference have created it troublesome for Adidas to carry out successful forecasting and planning, which thusly likewise develops problems to manage stockroom and dissemination. Because of every one of these challenges, the organization discovers that it’s essential to reinforce or enhance its dissemination network.

With starting of commerce liberalization as well as the emergence of markets such as Brazil, India, and Russia, international production line of numerous commercial enterprises would require adjusting radically in nonstop way. Such involve the motivation; the problem of enhancing supply network for Adidas with the end goal that, the company may get developed early enough and it may get to be capable to manage future needs (Griffiths, 2005). Changes occurring all through the human race and emergence of various economies, require organizations from various commercial ventures to restructure and re-advance its supply and distribution networks.

Likewise, to manage expanding rivalry and augmenting systems, it additionally is vital for Adidas organization to rebuild and renovate its supply systems and in addition make utilization of modern supply instruments and methods. Adidas when additionally is capitalizes on some modern and innovative supply devices and strategies, would get to be capable to enhance its supply network as well as re-build it inside an approach to work viably in upcoming.

For creating organization supply system successful, it’s imperative for Adidas to perform change at first inside the shop and focus on continually increasing the usefulness onto the shopper and diminish its business expenses. Answers in such manner call for inside-store perceivability.