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“Management Report

InvestInU AG – Comparison of
Nike and Adidas for a possible
investment”

© 2010
Page 1
Contents Page

Chapter 1 Executive Summary 3

Chapter 2 Introduction 4

Chapter 3 Business overview on Nike and Adidas 4

Chapter 4 Track record comparison 5


Chapter 4.1 Share price development 5
Chapter 4.2 Dividends development 6
Chapter 4.3 Total return on investment calculation 7

Chapter 5 Forecast comparison 7


Chapter 5.1 Share price prognosis 7
Chapter 5.2 Dividends prognosis 8
Chapter 5.3 Total return on investment calculation 9

Chapter 6 Risk management 9


Chapter 6.1 Stock performance evaluation 9
Chapter 6.2 Company performance evaluation 10
Chapter 6.3 Market performance evaluation 11

Chapter 7 Recommendation 12

Appendices 13
Bibliography 19
Illustrations & Tables 20
Abbreviations 20

Word count without Executive Summary: 2,463 words

© 2010
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Chapter 1 – Executive Summary
The following report is based on an investment scenario, where a team of analysts
has to evaluate two possible investments each of 10m€ against each other. As pre-
defined by their fond manager they can only compare Nike with Adidas. Other
relevant conditions are mentioned in the introduction.
The report divides into 3 main parts. It starts with an analysis of the track record of
both companies, comparing growth of share price and total dividends paid from 2006
to 2009. Out of this first round Nike seems to be the most appropriate choice.
In the second part the same analysis is performed based on the forecasts of both
companies, provided by analysts as well as companies’ management. Again Nike
looks more favorable then Adidas, even so Adidas shows evidence to close the
financial gap.
Both parts end up with a calculation of NPV and total CF to concentrate evaluation to
a single number comparison.
In the last part of this report, different kinds of risks have been investigated in order to
evaluate the reliability of the forecasts. This part splits into 3 subchapters; stock
performance, company performance and market performance.
Stock performance looks at certain key figures, which have major influence on share
price and dividends. Company performance investigates possible risks coming from
equity leverage and indicators that prove if the companies are able to finance their
planned growth on a stable base. Market performance takes a view on business
important indices in order to control targeted growth rate.
Like in the first two parts, Nike achieves the number one position and therefore is
strongly recommended by the analyst team.

© 2010
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Chapter 2 – Introduction
InvestInU is an investment company based in Germany. The company has recently
collected additional capital coming from EU investors to be invested in the sportswear
business. The total amount of money raised sums up to 10 m€ with a pre-defined
investment duration of 3 to 4 years and a weighted average cost of capital of 3%. All
investments are executed at the Frankfurt Stock Exchange (Xetra) and only in
ordinary shares. Due to this all share price calculations are made without currency
risk. For the dividends we assume a long-term currency exchange rate of 1.30 $ per
1€ (based on prognosis of Post Bank and Bayern LB). Risk factor is set with 2% and
equal for each possible investment. The fond manager has already identified two
companies for a possible investment: Nike and Adidas. A team of analysts has been
requested to evaluate which of these 2 companies would be the most appropriate
investment under the conditions mentioned before.
The analyst team agreed that it should concentrate on 2 main figures to answer this
question. They focussed on share price and dividends with further analysis if required
to substantiate their findings and add possible risks. Regarding risk management
stock performance as well as company performance and market performance have
been selected as main areas for additional investigation. The following report was to
be submitted to the fond manager by the 11th of July 2010.

Chapter 3 – Business overview on Nike and Adidas


Adidas and Nike compete in the global market of sporting goods business. Both
focus on three different business categories: athletic footwear and sports apparel
which stand together for more then 90% of both companies’ sales and sports
equipment (approximately 10% of sales). Currently Nike is seen as the number one
in the market, due to the higher revenues. Besides Nike and Adidas, analysts from
Dresdner Bank and Commerzbank see approximately six other competitors in their
peergroup (Callaway, Amer Sports, Puma, Asics, Billabong and Timberland) For
additional information please refer to Appendix 1 (revenues of Nike and Adidas).
When looking closer at their two main business categories, the superior position of
these companies can be easily identified.
Nike with 38.4% in 2008 and Adidas with 22.9% in 2008 dominate the global athletic
footwear market. Especially in the US market, Nike holds a very favourable position
with 41.7% market share in 2008, where Adidas only holds 12.3%. In the
international market this pictures changes significantly. Nike stands for 36.2% of the
market and Adidas for 29.8%.
Different to this business, the sports apparel market is by far more divided. In total
the Top 20 companies only stand for 45.6% of the market. Here Nike holds 9.5% and
Adidas 9.7% in the global market. Again, the US market looks different from the
international one. In the US, Nike holds 8.1% and Adidas 5.4% (which means, that
Adidas is only number three in the US behind VF Corp with 6.6%). In the international
market Adidas possesses the highest share with 12.7% in front of Nike with 11.0%.

© 2010
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Summarizing both companies possess solid positions in their main businesses with
regional advantages for Nike in the US and for Adidas in the international market. For
additional information please refer to Appendix 2 (market shares of Nike and Adidas).
The next chapter will evaluate what results the two competitors have been able to
generate out of there advanced position.

Chapter 4 – Track record comparison


In order to assume the possible outcome of this investment, the track record of both
companies needs to be reviewed first. The following chapter compares the
performance of Nike and Adidas in terms of share price growth and dividends growth
from 2006 to 2009.

Chapter 4.1 – Share price development


Nike has performed better then Adidas in terms of share price with a CAGR of +10%
from January 2006 to May 2010, while Adidas increased moderately by 2%.
Share
price
[%]
+2% CAGR
160
Nike
140 +10% CAGR
28%
120
Adidas
100
32%
80
60 Adidas
40 Nike
20
0
01.06 07.06 01.07 07.07 01.08 07.08 01.09 07.09 01.10 07.10
Time
Illustration 1: Comparison of share price development [month/year]

Management stated a main reason for the underperformance of Adidas in the last
annual report. They identified the “turbulence on the international stock markets
related to the crisis in the financial sector and fears the USA might slip into recession”
and “concerns about the Reebok business outlook” as two main drivers of the
downturn.

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Another key impact can be extracted from the financial statement of 2009. The net
profit of Adidas reduced more then 60% in 2009. Nike was capable of stabilizing
results with a minor reduction of only 20% in 2009. For additional information please
refer to Appendix 3 (share prices of Nike and Adidas).

Chapter 4.2 – Dividends development


Regarding dividends, Nike shows a distinct advantage in dividends paid out with a
constant growth rate of +18% CAGR where Adidas underperformed with a CAGR of
-6%.
From 2006 to 2008 Adidas kept dividends relatively stable but reduced them by 30%
in 2009. This measure was the result of a massive EPS reduction (-60%) from 2008
to 2009 as explained in the annual report 2009. Relatively seen, the DPS/EPS ratio
increased to 29% (compared to 16% in 2008) so nearly doubled.
Management of Adidas remarked this development as a general change in the
dividend policy that they will constantly pay out a higher percentage of net profit in
the future. Further explanation will be provided in chapter 4.2 (dividends prognosis).

+18% CAGR
Dividends
[$/€]
1,0 0,98
-6% CAGR
0,9 0,88

0,8
0,71
0,7
0,59
0,6
0,50 0,50
0,5
0,42
0,4 0,35
0,3
0,2
0,1
0,0
2006 2007 2008 2009
Illustration 2: Comparison of dividend development

After reviewing the last years’ performance of both companies under the perspective
of a possible share investor, Nike seems to be the better choice based on growth in
shareholder value (share price and dividends paid). The following calculation of total
cash flow and net present value substantiates these findings.

© 2010
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Chapter 4.3 – Total return on investment calculation
A possible investor with the conditions given in the introduction at the beginning of
2006 would have received the following total return at the end of 2009, calculated by
the net present value of January, 1st 2006:

Company NPV CF
Nike 2.90 m€ 5.64 m€
Adidas -0.77 m€ 1.19 m€
Table 1: Comparison of NPV and CF track record

As expected, Nike would have been the preferred investment. For additional
information please refer to Appendix 4 (calculation of historical NPV and CF).
Nevertheless, results from share price development have also shown that Adidas
only fell behind Nike in the beginning of 2009 and makes progress since that time.
Therefore, the next chapter will concentrate on the more important forecast of both
companies.

Chapter 5 – Forecast comparison


As the previous chapter has identified Nike as the investor’s choice, chapter 5 will try
validating, if the company is capable of sustaining its favorable position in the future.

Chapter 5.1 – Share price prognosis


Based on the latest report of Berenberg Bank, the target share price of Adidas is 53€
which would be an increase of 20% till 2012. Following this general direction we
assume a share price in 2013 in the range of 57-58€.
Berenberg justifies their estimation with 4 main reasons. They name first the “highest
earnings growth potential in the sporting goods industry”. In addition they mention
“the upcoming Reebok turnaround already in 2011/2012” and the “number 1 position
in the football category”. Also Taylor Made and adidas Golf (two main brands of
Adidas) run above their expectations.
Nike is expected to grow up to the range of 78-80€ per share, with an average P/E
ratio of 18 and an EPS prognosis of 4.38€, due to the report of EDMP Inc.
EDMP presents a thesis for growth that emphasis on four points as the main drivers
for their estimation. First is the recent restructuring of their business with a strong
focus on geographic divisions, second the dominant branding, third Nike’s high level
of yearly innovation and last the “extraordinary level” of connection to their
customers, while placing most recognized athletes to serve in their advisory board.

© 2010
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Chapter 5.2 – Dividends prognosis
From 2010 to 2013 both companies are expected to improve their dividends per
share significantly. Adidas (CAGR +29%) seems to gain ground in the competition
with Nike (CAGR +12%).
In case of Nike these results look similar to the historical performance presented in
Chapter 3. As the prognosis is based on the estimation of EDPM Inc. it has been
corrected by the difference between their values and the forecast of Nike for 2010
(EDPM: 1.22$ vs. Nike: 1.08$).
Adidas in contrast might receive extraordinary results. Analysts from Berenberg Bank
justify these results with over proportional growth of net profit as an effect of an
improved gross margin. For additional information please refer to Appendix 5
(Berenberg and EPDM forecast figures).

+12% CAGR
Adidas (€)
Dividends
[$/€] Nike ($)
1,53
+29% CAGR
1,4 1,36
1,21
1,2
1,08
1,01
1,0
0,82
0,8
0,69
0,6
0,47
0,4

0,2

0,0
2010 2011 2012 2013
Illustration 3: Comparison of dividend forecast

© 2010
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Chapter 5.3 – Total return on investment calculation
A possible investor with the conditions given in the introduction investing in June
2010 could receive the following total return at the end of 2013, calculated by the net
present value of June, 1st 2010:

Company NPV CF
Nike 2.15 m€ 4.71 m€
Adidas 1.40 m€ 3.81 m€
Table 2: Comparison of NPV and CF forecast

Still Nike seems to be the preferred choice based on these figures, but Adidas has
gained a substantial step in closing the gap towards Nike. For additional information
please refer to Appendix 6 (calculation of forecasted NPV and CF).
Besides the possible gains, the next chapter will take a closer look at the risks and
uncertainties of this scenario.

Chapter 6 – Risk management


There are certain risks that need to be considered before deciding for one alternative.
Especially risks regarding stock performance company performance and market
performance could have a serious impact on the presented scenarios of both
companies.

Chapter 6.1 – Stock performance evaluation


In stock performance evaluation both companies are compared against average
value per country of origin and business sector. There are three indicators of major
interest, market to book ratio, dividend cover ratio and price earnings ratio.
The market to book ratio identifies, if a company is overrated in terms of market
capitalization or in other words share price. Adidas with 2.1 is on the lower edge of
the average ratio for EU with 2.0-2.5. Compared to US average of 8.0 Nike’s
currently market capitalization seems to be undervalued with 3.2 (all average value
come from the book Key Management Ratios).
Dividend cover ratio signals, how save possible future dividends are even in unstable
times. In these terms both companies work below the average of the retail business.
Nike’s average ratio from 2006 to 2009 is 3.9 compared to the US average of 6.0,
same for Adidas with 5.2 against 8.0 for EU average.
Price to earnings ratio indicates some kind of amortization time in terms of
investment. The average ratio of Nike from 2006 to 2009 sets up at 20.0 against the
US average of 30-31. Clearly, Nike seems to be an underestimated company. Adidas
stands closer to the EU average of 20 with 19.1.
Summarizing, Nike is distinct undervalued where Adidas is not. It can be argued that
this might be the result of investor behavior, based on the lower dividend cover ratio
of Nike but then it should be the same for both companies due to the regional
© 2010
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difference in average cover ratios. For additional information please refer to Appendix
7 (stock performance).

Chapter 6.2 – Company performance evaluation


This chapter explains the possible risks in terms of company’s performance.
Debt to equity ratio is used to evaluate how much the equity of the company has
been leveraged. A too high level of leveraging can lead to volatile earnings due to
higher interest rates.
Nike’s current leverage of 0.5 is significantly lower then Adidas’ with 1.4 which means
that the general risk of Nike to become over leveraged is less important then for
Adidas.
Return on equity to earnings yield ratio should in general be close by or the same of
market to book value ratio. ROE shows the return that the company delivers to the
shareholder. Earnings yield represents the expectations of the shareholders in order
to hold their shares.
Nike’s ratio is with 3.9 over 20% higher then the current market to book ratio. Again,
this shows evidence of an underestimation. In case of Adidas both figures are exactly
the same.
The growth equilibrium indicates the highest possible growth of the company to be
paid only by internal finance rather then external financing. Both companies show an
extraordinary high value with 63% for Nike and 89% for Adidas. It can be deducted
that there is no possible risk regarding this point (definition comes from the book Key
Management ratios).
Last key figure to analyze possible risks in the company performance is the free
cash-flow per share. It allows a company to pursue opportunities that enhance
shareholder value. Without cash, it's tough to develop new products, make
acquisitions, pay dividends or reduce debt.

© 2010
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A forecast from various analysts combined from the online stock portal Onvista
shows that companies are expected to generate a high level of free cash-flow during
the following years.
+6% CAGR
Adidas (€)
+24% CAGR Nike ($)
FCF
[€/$] 5,48 5,47

5,0 4,84 4,77 4,82


4,5
4,0
3,56
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0,0
2010 2011 2012

Illustration 4: Comparison of free cash-flow forecast


In total both companies have delivered no obvious risk in case of their performance.
Still Nike presented partial advantage in the area of debt to equity ratio and return on
equity to earnings yield ratio. For additional information please refer to Appendix 8
(company performance).

Chapter 6.3 – Market performance evaluation


Revenues in the area of footwear sum up to nearly 50% for both companies.
Therefore, the global footwear index functions as an indicator to prove the sales
targets of Nike and Adidas. As you can see in illustration 5, both are expected to
grow below market average which means that their forecasts do not appear
overoptimistic.

© 2010
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Footwear Index
Nike +5% CAGR
Adidas +6% CAGR

Sales +7% CAGR


growth
[%] 131% 128%
123% 119% 123%
111% 117%
120 102% 114%
100% 111%
107% 106%
100% 100%
100

80

60

40

20

0
2009 2010 2011 2012 2013
Illustration 5: Comparison of sales growth forecast in global footwear market
Besides this index, the upcoming world cup in soccer is expected to further boost
sales of both companies. Especially Adidas, who is the leader in soccer shoes and
apparel, depends on this event. Comdirect Bank estimates the additional possible
revenues up to more then 1.3 b€. For additional information please refer to Appendix
9 (market performance).

Chapter 7 – Recommendation
Based on the historical results, the companies’ forecast and the risk evaluation, we
strongly recommend buying Nike shares rather then Adidas shares.
Nike promises a 54% higher net present value and a 34% higher cash-flow from a
possible investment. In their track record they have proven that they are capable of
delivering those results to their shareholders/investors. Additionally, Nike shows a
secure overall position in terms of stock performance, company performance and
market performance with even less risk compared to Adidas within the first two
categories mentioned before. Especially during the crisis, Nike has performed
obviously better then Adidas. Only in the short term (2010) Adidas might receive a
certain financial advantage due to the world soccer cup, but also Nike will profit from
this event.

© 2010
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Appendices
Appendix 1 – revenues of Nike and Adidas

+8% Adidas (€)


Revenues Nike ($)
+1%
[$/€] 19.176
18.627

16.326
14.955
15.000

10.299 10.799 10.381


10.084
10.000

5.000

0
2006 2007 2008 2009

Appendix 2 – market shares of Nike and Adidas


Footwear
INTERNATIONAL (US$ m) 2005 2006 2007 2008 USA (US$ m) 2005 2006 2007 2008
Nike 35.7% 34.4% 34.8% 36.2% 0 Nike 37.2% 37.9% 38.5% 41.7% ++
adidas 27.1% 27.3% 27.5% 29.8% + adidas 17.1% 14.5% 13.7% 12.3% --
New Balance 2.9% 2.8% 2.4% 1.9% - New Balance 9.6% 8.3% 7.8% 7.4% -
Skechers 1.4% 1.4% 1.8% 1.9% + Skechers 7.8% 8.5% 8.8% 8.7% +
VF Corp 1.3% 1.3% 1.5% 1.5% 0 VF Corp 3.2% 3.6% 4.0% 4.6% +
Puma 10.0% 10.1% 9.7% 8.9% - Puma 3.3% 4.0% 3.4% 3.2% 0
Collective Brands 0.6% 0.6% 0.4% 0.3% - Collective Brands 2.3% 3.0% 3.5% 3.3% +
ASICS 5.7% 5.7% 5.8% 5.7% 0 ASICS 2.6% 3.0% 3.1% 3.6% +
Fila 1.6% 2.0% 2.1% 1.7% 0 Fila 1.1% 0.9% 0.5% 0.5% -
K-Swiss 0.9% 1.3% 1.3% 0.7% 0 K-Swiss 3.5% 2.7% 1.6% 1.1% --
Under Armour Under Armour 0.0% 0.2% 0.3% 0.7% +
Mizuno 1.7% 1.7% 1.7% 1.6% 0 Mizuno 0.5% 0.5% 0.6% 0.6% 0
Others 11.1% 11.3% 11.1% 9.9% - Others 11.9% 12.9% 14.2% 12.3% 0
TOTAL BRANDED FW INTERNATIONAL
100.0% 100.0% 100.0% 100.0% TOTAL BRANDED FW USA100.0% 100.0% 100.0% 100.0%

Apparel
INTERNATIONAL (US$ m) 2005 2006 2007 2008 USA (US$ m) 2005 2006 2007 2008
Nike 8.9% 10.9% 11.0% + Nike 7.3% 7.5% 7.7% 8.1% +
adidas 10.5% 12.0% 12.7% + adidas 4.7% 5.0% 6.2% 5.4% 0
VF Corp 2.0% 2.1% 3.0% + VF Corp 4.5% 5.1% 6.0% 6.6% +
Quiksilver 2.4% 2.9% 3.1% 0 Quiksilver 2.5% 2.5% 2.5% 2.2% 0
Hanes / Champion 1.1% 1.0% 1.1% 0 Hanes / Champion 5.2% 3.9% 4.0% 4.3% -
PUMA 2.8% 3.5% 3.8% + PUMA 0.4% 0.5% 0.4% 0.5% 0
Columbia 1.1% 1.4% 1.4% 0 Columbia 2.2% 2.3% 2.2% 2.0% 0
Gildan 0.3% 0.3% 0.3% 0 Gildan 2.3% 2.5% 3.1% 4.0% +
Broder Bros. 0.0% 0.0% 0 Broder Bros. 3.9% 3.6% 3.4% 3.3% -
Billabong 1.1% 1.7% 1.4% + Billabong 1.3% 1.7% 1.6% 1.9% 0
TOTAL TOP 20 34.0% 45.9% 48.9% ++ TOTAL TOP 20 40.5% 40.2% 41.9% 43.1% +

Appendix 3 – share prices of Nike and Adidas

© 2010
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Nike
Year First High Low Last
1992 7.20 9.06 5.47 8.63
1993 8.66 9.27 4.62 5.07
1994 5.17 7.65 5.17 7.31
1995 7.35 12.88 6.35 12.88
1996 12.82 24.67 11.71 24.54
1997 23.65 32.85 17.64 17.64
1998 18.28 24.24 13.80 17.38
1999 17.35 31.00 16.50 24.35
2000 24.25 30.00 14.00 30.00
2001 29.50 32.20 19.86 31.90
2002 31.25 35.95 19.75 20.70
2003 20.60 28.28 19.50 27.00
2004 26.97 34.45 26.45 33.38
2005 33.66 37.95 29.02 36.99
2006 36.57 38.31 29.72 38.02
2007 37.28 46.40 36.81 44.73
2008 43.08 46.82 34.48 35.03
2009 37.08 45.54 30.64 45.54
2010 45.57 61.50 44.29

Adidas
Year First High Low Last
1995 9.71 10.07 8.97 9.70
1996 9.72 18.95 9.72 17.00
1997 16.72 34.77 16.72 30.24
1998 30.55 41.99 20.39 23.14
1999 23.58 25.75 16.93 18.63
2000 17.85 18.38 12.39 16.50
2001 16.25 21.00 11.95 20.88
2002 21.00 22.13 15.88 20.25
2003 20.70 22.75 17.27 22.65
2004 23.68 30.21 22.15 29.79
2005 30.25 40.63 28.05 40.09
2006 41.23 43.80 35.15 37.54
2007 37.83 50.64 35.29 50.64
2008 50.93 50.93 21.86 27.09
2009 27.09 38.75 22.73 37.94
2010 38.48 45.20 34.90

© 2010
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Appendix 4 – calculation of historical NPV and CF
4.5-year Investment
Period 0 (beginning 2006) Period 1 (end 2006) Period 2 (end 2007) Period 3 (end 2008) Period 4 (end 2009)
Dividends 0 117.249 122.132 166.134 213.333
Investment - 10.000.000 0 0 0 15.020.027
Share price 37,45 56,25
Nike Cash dividends 0,44 0,46 0,62 0,80
DCF - 10.000.000 111.666 110.777 143.513 12.532.522
NPV 2.898.478
CF 5.638.874

Period 0 (beginning 2006) Period 1 (end 2006) Period 2 (end 2007) Period 3 (end 2008) Period 4 (end 2009)
Dividends 0 102.314 121.803 121.803 85.262
Investment - 10.000.000 0 0 0 10.757.613
Share price 41,05 44,16
Adidas Cash dividends 0,42 0,50 0,50 0,35
DCF - 10.000.000 97.442 110.479 105.218 8.920.460
NPV - 766.402
CF 1.188.794

Appendix 5 – Berenberg and EPDM forecast figures


EPDM figures

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Berenberg figures

Appendix 6 – calculation of forecasted NPV and CF


3.5-year Investment
Period 0 (June 2010) Period 1 (end 2010) Period 2 (end 2011) Period 3 (end 2012) Period 4 (end 2013)
Dividends 0 147.692 165.470 185.983 no dividend before June 2014
Investment - 10.000.000 0 0 0 14.222.222
Share price 56,25 80,00
Nike Cash dividends 0,83 0,93 1,05 1,18
DCF - 10.000.000 140.659 150.086 160.659 11.700.657
NPV 2.152.062
CF 4.721.368

Period 0 (June 2010) Period 1 (end 2010) Period 2 (end 2011) Period 3 (end 2012) Period 4 (end 2013)
Dividends 0 106.431 156.250 185.688 228.714
Investment - 10.000.000 0 0 0 13.134.058
Share price 44,16 58,00
Adidas Cash dividends 0,47 0,69 0,82 1,01
DCF - 10.000.000 101.363 141.723 160.405 10.993.585
NPV 1.397.076
CF 3.811.141

© 2010
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Appendix 7 – stock performance
Market to book ratio
Nike Adidas
Market capitalization 27.698 7.902
Total equity 8.693 3.776
Market to book ratio 3,2 2,1
US EU
Average per country 8 2,0-2,5

Dividend cover ratio / Pay-out ratio

Nike Adidas
EPS 2006-2009 3,09 2,28
DPS 2006-2009 0,79 0,44
Average Dividend cover ratio 3,9 5,2
US EU
Average cover per country 2,5-3,0 4,5-5,0
US-Retail EU-Retail
Average per sector 6,0 8,0

2006 2007 2208 2009


Adidas - EPS 3,03 3,74 2,93 2,64
Adidas - DPS 0,98 0,88 0,71 0,59
Adidas dividend cover ratio 3,09 4,27 4,13 4,47
Nike - EPS 2,25 2,57 3,07 1,22
Nike - DPS 0,42 0,50 0,50 0,35
Nike dividend cover ratio 5,36 5,14 6,14 3,49

Price/earnings ratio
Nike Adidas
Average price/earnings ratio 20,9 19,1
US EU
Average cover per country 30-31 20

2006 2007 2208 2009


Adidas - EPS 3,03 3,74 2,93 2,64
Adidas - Share price (year end) 72,11 55,87 65,78 58,84
Adidas - price/earnings ratio 23,80 14,94 22,45 22,29
Nike - EPS 2,25 2,57 3,07 1,22
Nike - Share price (year end) 37,73 51,26 27,14 37,77
Nike - price/earnings ratio 16,77 19,95 8,84 30,96

© 2010
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Appendix 8 – company performance
ROE / earnings yield ratio
Nike Adidas
ROE 18,0% 6,5%
Earnings yield 4,6% 3,1%
ROE / earnings yield ratio 3,9 2,1

Debt/equity ratio
Nike Adidas
Total liabilities 4.557 5.099
Total equity 8.693 3.776
Debt/equity ratio 0,5 1,4

Growth equilibrium
Nike Adidas
Returned earnings 5.451 3.350
Total equity 8.693 3.776
growth equilibrium 63% 89%

Appendix 9 – market performance


Athletic footwear market prognosis
2009 2010 2011 2012 2013
Global Footwear index 100% 107% 114% 123% 131%
Nike (revenues forecast) 100% 102% 111% 119% 128%
Adidas (revenues forecast) 100% 106% 111% 117% 123%
US Footwear index 100% 108% 114% 118% 121%

% of sales per category


Footwear Apparel Hardware
Adidas 45% 45% 10%
Nike 62% 31% 7%

© 2010
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Illustrations & Tables


Illustration 1 (page 5): Comparison of share price development
Illustration 2 (page 6): Comparison of dividend development
Illustration 3 (page 8): Comparison of dividend forecast
Illustration 4 (page 11): Comparison of free cash-flow forecast
Illustration 5 (page 12): Comparison of sales growth forecast in global footwear
market
Table 1 (page 7): Comparison of NPV and CF track record
Table 2 (page 9): Comparison of NPV and CF forecast

Abbreviations
CAGR: compound annual growth rate
DPS: dividends per share
EPS: earnings per share
FCF: free cash-flow
NPV: net present value
P/E: price earnings
ROE: return on equity

© 2010
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