Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

Terms of One-Time Website Use

 

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

 

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

 

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's assigns A2/Prime-1 issuer ratings to adidas AG; outlook stable

06 Aug 2020

Paris, August 06, 2020 -- Moody's Investors Service, ("Moody's") has today assigned an A2 long-term issuer rating and a Prime-1 (P-1) short-term issuer rating to global sportswear company adidas AG (adidas). The outlook is stable.

"adidas' A2 rating reflects its leading position in the global sportswear industry supported by strong brand recognition, its robust track-record of sales growth and margins improvement in the last five years as well as its low reported debt and conservative financial policies" says Guillaume Leglise, a Moody's Assistant Vice-President and lead analyst for adidas. "Although its financial leverage will increase temporarily in the next 12 months owing to the impact of the coronavirus outbreak on 2020-21 earnings, adidas will benefit from favorable prospects for the sportswear industry, strong online capabilities and its good liquidity profile" adds Mr. Leglise.

RATINGS RATIONALE

adidas' A2 rating reflects (1) the company's leading position in the global sportswear market and wide geographic diversification, with €23.6 billion of revenues in 2019; (2) its strong brand recognition in the apparel and footwear industry supported by product innovations and significant marketing and sponsorship investments; (3) the positive long-term prospects of the industry with increasing health awareness of customers and increased sports participation rates in key emerging markets, such as China; (4) its solid track-record of sales growth and operating margin improvement over the last five years; and (5) its low gross leverage, good liquidity and conservative financial policies.

The company's strong brand recognition is a key pillar of its credit quality. The core adidas brand is amongst the most well-recognized and identifiable brands in the global sportswear industry. While this creates some reliance on a single brand for earnings contribution, Moody's believes this is well mitigated by the company's track record of products innovation, its high marketing and sponsorship agreements with world-class athletes, football clubs and national teams, which the rating agency expects will continue going forward.

Moreover, adidas has a solid track-record of sales growth outside of its historically core European markets while consistently achieving operating margins improvements. From 2015 to 2019, the company's net sales grew at an 9% CAGR, while its reported operating margin increased from 6.5% in 2015 to 11.3% in 2019. Moody's expects the favorable long-term prospects of the sportswear industry, together with continued investments in the brand, to support further sales growth and some margin expansion in the medium to long-term.

At the same time, adidas' ratings also incorporate (1) the impact of the coronavirus outbreak, which Moody's anticipates will weigh on the company's earnings and debt protection ratios in the next 12 months; (2) its exposure to the highly competitive apparel and footwear industry, which is characterized by changes in consumer habits, growing digitalization and increasing awareness over sustainability issues; (3) the company's sales concentration on a single brand; (4) the company's sizable commitments to pay fixed sponsorship obligations; and (5) the challenges related to the turnaround of Reebok, notably in the US market.

In 2020, the coronavirus crisis will hit adidas' operating performance and financial metrics and that of other apparel and footwear companies. Prolonged period of lockdowns across the globe, the cancellation of major sport events and depressed consumer confidence will reduce adidas' sales in 2020, while its profitability will be negatively impacted by incompressible costs such as sponsorships of athletes and sport clubs. In this respect, whilst the company's sponsorship strategy supports the brand recognition in the long term, Moody's cautions that the sponsorship contracts translate into large non-cancellable commitments, which amounted to €6.8 billion at year-end 2019. These large and fixed expenses weigh on margins and increase the company's operating leverage at times of adverse trading performance, as is the case in 2020. Moody's currently expects the company's operational performance to gradually recover in 2021 and 2022, not factoring in any other material adverse events in the company's main markets.

While adidas' adjusted leverage (on a gross debt basis) will increase substantially to around 3.5x in 2020 because of the coronavirus outbreak which will hit its sales and earnings, Moody's expects adidas to retain strong credit metrics over time. Moody's expects the company' sales to recover in 2021, resulting in its adjusted leverage (on a gross debt basis) to trend below 2.0x by end-2021 and to return to its pre-crisis level, of around 1.5x, from 2022. Before the coronavirus outbreak, adidas had strong Moody's-adjusted credit metrics (including Moody's adjustments), with interest coverage (EBITA/interest expense) at 17 times, EBIT margin at around 11.6% and retained cash flow to net debt (RCF/Net Debt) at 83% in 2019. While adidas has paid steady dividends to its shareholders and has increased its share buy-back program in recent years, the company maintains a strict net leverage limit and a large liquidity buffer, which denotes a rather conservative financial policy.

Moody's also takes comfort in the initiatives undertaken by the company to strengthen its liquidity to navigate these uncertain times. At the outset of the crisis, adidas secured a €3.0 billion syndicated revolving loan facility, maturing in July 2021, with a one-year extension option. This new facility comprises a €2.4 billion loan commitment from Kreditanstalt fuer Wiederaufbau (KfW, Aaa stable) and loan commitments of €600 million from a consortium of commercial banks. The company concurrently announced the suspension of its dividend payments and its shares repurchase program to preserve liquidity. Pro forma for the new KfW credit facility, Moody's estimates that the company currently has over €5.0 billion of liquid sources, including a stable cash balance of around €2.0 billion, broadly unchanged from end-March 2020.

Moody's regards the coronavirus outbreak as a social risk under its Environmental, Social and Governance framework, given the substantial implications for public health and safety. Also, Moody's believes the retail & apparel sector has an overall moderate exposure to social risks. With digitalisation and the rising influence of social media, apparel and footwear companies are struggling to be trendsetters and face more volatile demand and lower brand loyalty. As a sportswear company, adidas is not immune to the inherent cyclicality and changes in consumer preferences, including increasing awareness over sustainability issues and risks related to responsible sourcing. Moody's believes that these risks are mitigated by the company's strong digital capabilities, its long track record of sustainable product innovation and its public commitment to progress towards a circular business model.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook reflects Moody's expectations that adidas will retain strong credit metrics over time, despite the material impact of the coronavirus crisis on its earnings and cash flows in 2020. The outlook reflects Moody's expectations that (1) a gradual recovery in the company's revenues over the course of the next 12-18 months will result in its credit metrics returning towards their pre-crisis levels from 2022, and (2) adidas' liquidity will remain good.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

An upgrade is considered unlikely in the short term because of the uncertainties related to the coronavirus outbreak and its negative impact on the company's performance this year. Moody's could upgrade adidas' ratings over time if (1) it continues to successfully deliver on its long-term strategy, including the strengthening of its Reebok brand and an improved market position in the US, (2) achieves further operating margin enhancements, and (3) maintains conservative financial policies.

Quantitatively, Moody's could consider an upgrade if the company's (Moody's-adjusted) gross leverage were to trend sustainably below 1.5x and its (Moody's-adjusted) retained cash flow (RCF)/net debt ratio remains above 45% on a sustained basis.

Conversely, the rating agency could downgrade adidas's ratings if the company's operational and financial performance were to deteriorate for a prolonged period of time, such that its (Moody's-adjusted) gross leverage exceeds 2.5x especially if not sufficiently mitigated by sizeable cash on balance sheet, and its RCF/net debt ratio decreases below 35% for a prolonged period of time. A rating downgrade could also be considered should the company's liquidity deteriorate or if it pursues more aggressive financial policies.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Apparel Methodology published in October 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1182038. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

With €23.6 billion of revenue in 2019, adidas is the second largest company in the sportswear industry, behind Nike, Inc. (A1 negative). The company has over 2,500 own-retail stores, over 15,000 mono-branded franchise stores and over 150,000 wholesale doors. Its shares are listed on the Deutsche Börse in Frankfurt Stock Exchange, and adidas has a current market capitalization of around €48 billion. Its main shareholder is the Groupe Bruxelles Lambert, which holds around 6.8% of the share capital.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Guillaume Leglise
AVP-Analyst
Corporate Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Jeanine Arnold
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com