ADS.DE - adidas AG

Operator: Ladies and gentlemen, welcome to the adidas AG Q3 2025 Conference Call and Live Webcast. I am Maura, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sebastian Steffen, SVP IR and Corporate Communications. Please go ahead. Sebastian Steffen: Thanks very much, Maura, and good evening, good afternoon, good morning, everyone, wherever you're joining us today, and welcome to our Q3 2025 results conference call. With me here today is our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. Bjorn and Harm will take you through the highlights of the quarter, our financials, the outlook. And afterwards, we will open up the floor for your questions. As always, I would like to ask you to limit your initial questions to 2 in order to allow as many people as possible to ask their questions. And now before I hand over to Bjorn, we want to get everybody in the right adidas mood with this video. Let's go. [Presentation] Bjorn Gulden: Hello, everybody. I hope you enjoyed the live showings of what the brand has done over the last 3 to 6 months because we are actually very proud of what we have achieved. Also, very proud and happy what happened last night, where 2 of our teams, Germany and Spain, won each of the semifinals in the so-called Nations League. And we'll then need to play the final and it's always cool to have 2 teams wearing the 3 stripes play each other in the final, which happened pretty often, especially on the women's side. Also happy actually about what we did achieve in Q3. I think the momentum that we have seen globally even strengthened. And we feel that our teams in the different markets have been very active and has been a lot of positive feedback also when it gets to the activations we have for the future, for example, the workup that you see out there. What also very, very, what should I say, close to today happened was the Shanghai Fashion Week, where we showed up in China in a way that I think we've never done before. And last weekend with the ComplexCon, where we showcased both the jellyfish coming from our friend, Pharrell. And we had many, many versions of Superstar also with our partners from Hellstar. And I think all of you have followed the discussion about Bad Bunny and the Super Show, it happened to be at the same time where we had a Mercedes call up with him, which also did very well. So a lot of fashionable things happening, which is very, very positive for us. And also before we go into the numbers, important for us. We were again named the top employer for those working in the fashion from the TextilWirtschaft. And again, that's a research with ask the employees and the hearing that your employees are happy is always a great confirmation for us in management. And then the Forbes Research who looks at 400 of the biggest companies in the world when it gets to how it is to work for them when you share a woman, we also came up in the top. And again, a very positive story for us confirming that we are a good company to work for. The numbers, you've probably been through them many times. Last week, we reached EUR 6.63 billion in Q3, which is the highest quarter that we ever had, which, again, then for the adidas brand was a growth of 12% currency-neutral. Again, another very strong quarter when it gets to the margin at 51.8%, which was 50 basis points up. And then an EBIT of EUR 736 million, which then is an EBIT percentage of 11.1%, which, again, we are very, very happy with. If you then take Q3 to the 2 first quarters, you get to the EUR 18.7 billion in sales, 14% up for the adidas brand, a margin close to 52%, and then an operating profit of EUR 1.892 billion which is again about 10%. And so again, when we look back, we are very happy with these results. When you look at the regional growth, the North America grew only 8%, year-to-date 12%. I did say in the press call that if you take accessories out, you will see that both Apparel and Foot were up 14% and 11%, and that reason for the accessories being down is that we have a reset in the accessory business that will hit us this quarter. And it has to do with distribution. It also had to do with deliveries. But I don't think you should read too much into it. I think it was heavily exaggerated in some of the press. This is not something that is very crucial for our business. It is a short-term blip. And again, remember, accessories is 7% of our business, so you shouldn't worry too much about it. Look at Europe, the home market, we were skeptical last year that the growth will slow down because it was 9%, now it's back to 12%. We are 11%, what should I say, for the year, and a very strong development, again, both in our own stores and then especially on the performance side around different markets in Europe. Greater China. Again, you probably see a lot of, I would say, tough numbers from our competitors. We grew again double digit and are very happy with the development being up 12% for the year. And you probably know that the profitability also in China is improving. So we are very, very happy with the development that we currently have in China. Same with Japan and South Korea, up 11%, 14% for the year. Historically, 2 very strong markets for us where we had some issues, but very, very strong development now with new management in both of the markets, and feel we are in a very, very good way with very, very strong like-for-like numbers in our own retail in both those markets. Lat Am, still on fire. We are now a market leader in many of the LatAm markets, including Brazil. And as you can see, '21 and '24, extremely happy with that development. Emerging markets, of course, always a little bit mixed bags because it's a group of countries where you have quite some issues, but the team are our entrepreneurs and 13% and 17% confirms that. And that gives you then the Q3 number of plus 12% and plus 14% for the year, in a world, which I think you agree, is not the easiest to maneuver in. So very happy with where we are after 9 months. Wholesale growing at 10%, shows you the support from our partners. And again, happy with that. Own stores, up 13%, we are comping positive both in concept stores and in factory outlets. And we have added net around 85 stores in the last 12 months, and we will get back to that in a second. E-com, up 15% shows you that the digital side of the business is also working. And some of the pure players are actually doing better than the brick-and-mortar guys and so is also with us because we can showcase news quicker and wider than you can do in brick and mortar. That gives you the split of 63-37 and you see brick-and-mortar and e-comm than 22-15. I think we agree that, that's a globally a very healthy split. I talked about the stores. I think we have said to you now for a couple of quarter that what we are doing is that we're trying to open, I would say, impressive brand stores in bigger cities and in bigger trade communities. And instead of having 1 store buildup, we're trying to explore the possibilities in the different markets, as you can see here. And we are investing a lot in the creativity in the stores and I hope when you travel around the world that you get to see some of them extremely happy with the way we look. And they're also, of course, when we open a big store that looks like this, the numbers are also very impressive. As long as we fill it with the right product, which I think we have done lately. Footwear, again, you were skeptical. I think it was 9% in the last quarter. Now it's back again to double-digit, 11%. We have talked about the wish of growing Apparel at the back end of Footwear. So now we are doing that at plus 16%. And then the accessory issue, which, again, I explained that in the U.S., we have kind of a reset when it gets to both the sourcing because it was very China driven and the distribution and that caused that in this quarter, the numbers were negative, and that had an impact on the global accessory business. The performance accessories, meaning, for example, soccer balls is up. And I think I can promise you that you will see accessories very quickly coming back again. And I think I quoted I said we need to clean up something, but I think people, again, overdramatize that there's nothing that you should be concerned about that Accessory is only up 1%, knowing that, as you see here, Accessory is only 7% of the business. And I think we have said that when you have brand heat and you could focus on it, you should get more growth on Accessories going forward. So I think we have some reserve in our pocket, and you shouldn't look upon this negative. Footwear being 57%, Apparel 36%, again, as long as Footwear is above 50%, I think we are in good shape brand-wise. And then very, very important. Even if we have turned the company around on the lifestyle side and the heat, we have said that we have to celebrate sport. And I think when you see the activities from ultra marathon to marathon to running 100,000, basketball, soccer, cricket, whatever, I don't think we have ever been more visible in sports, and we're also producing a lot of content that is visible all over the world because that is what we want to do. That shows also up in the numbers. Our performance, meaning the Sports business is up 17%. Remember, we have told you that there are 4 categories that we need to win globally; football, running, training and basketball. I think you see in football that coming out of comp numbers from the euro last year, we are very, very strong now with our Footwear taking share, I might be arrested saying we are market leader, but that's my feeling on everything I can read. Very happy with the players and also very happy with the product. And then for those of you who follow soccer closely, the Liverpool launch was fantastic globally, although they haven't played very well lately, losing I think, 5 out of the 6 last games, the sales of Liverpool has been tremendous compared to what they used to sell. And again, I think we all know that Liverpool is a street culture city in the U.K., very relevant for the kids. We are extremely happy with that relationship and the way it was executed. Also very proud of the Ballon d'Or. You know that's where they give the prizes to the best players in the world. They give out 5 prizes. We won them all. We had the best male player with Dembélé. We had the best young player with our friend, Yamal. We had the best female player in Aitana Bonmatí. We had the best young female player in Lopez, and we actually also won the best goalie with Donnarumma also; 5 out of 5. I guess we will have to pay a heavy bonus to our sports marketing people because I don't think that's ever happened before. What shows you, why I'm proud and positive is that we were also able, the day after the Ballon d'Or to honor both Dembélé in Paris with both what should I say, outdoor marketing, as you see here and the store and the same in Barcelona with Bonmati. So again, the teams were then actually gambling on that they will win. They didn't have the insight. And we were able then to activate this overnight. So when people woke up, this was what you would see in those 2 cities. And I think this is the energy that we actually need as adidas then to win. And the same thing, we have launched the World Cup Ball. We used a lot of other celebrities and sports people to do that. I have never seen such a campaign ever done organic and I can also report to you that the sellout of the ball has been fantastic. And you have to remember, we have even started with the jerseys. The jerseys for World Cup will start to go on sale on November 6. So that's when you will start to see some impact of World Cup coming into the numbers, which will be very, very positive. Running, we have told you for the last 2 years that we are building our running portfolio up, changing both the collections and also, of course, going back again to running specialty to build credibility and the business. When you follow the marathons and the half marathons and other races you see we win half of them, very proud of what Sebastian Sawe did in Berlin. The weather was too warm; if not, he would have beaten the world record in sub 2 hours. He didn't because it was 27 degrees, but we will save that for next year. We also won the women's class with Rosemary. And again, I think it's not the weekend, where we don't win a major race somewhere because we have the best runners and the best product, that is also proven by this fact, we did set the world record on 100k. Sibusiso won in 5:59:20 and you can calculate the average pace, it's unbelievable. I think he runs 333 per kilometer. And again, with a shoe especially made for it. And again, this is part of our innovation pipeline to do extreme things that we can then feed into the more commercial line. And our Adizero line, which starts then with the Prime X and then down to the Adios Pro 4 is the best line today for racing shoes and speed shoes. And we are taking market share and we're growing this business very, very heavily. And again, this has been the strategy from the beginning that we start at the top and then we start to scale it into every day running and to comfort running. What you see here is new. This is what will go to market next year starting in February and then scaling up during the year. We have developed something called Hyper Boost, which is a new boost material, 40% percent lighter than the old Boost. Boost was the most successful midsole construction that we had, the most successful foam, but a little bit heavy. That's why we have been working for 3 years now to establish this. These are the sign directions, not necessarily the way the shoes will look, but it gives you some kind of feeling how we're going to attack the comfort training area. And then we will also use the foam as a platform into other areas in the performance side and also into Lifestyle. Don't forget that all the successful Lifestyle running shoes we had in the past, both those from Yeezy, but also NMD, for example, Ultra Boost was Boost shoes and that's why this is so crucial for us going forward. And we are very proud that we now have developed this. Training is a huge category that might be executed different from region to region, but what we are doing is that we're using our top athletes from different sports and then showcasing them in training in our products. We can tell that story everywhere. And what we also have done because training today consists of both running and strength, we have combined then the Adizero line with the Dropset line and then creating shoes that are both runnable and stable for strength, gym work, and that's then the Adizero Dropset, which you will see next year and which has received a lot of orders already from the retailers who love it, and we are very, very positive about that development. Maybe a surprise to you, we are then taking the originals into sport. We have seen, especially on the female side that we connect to that young consumer through our original line with the use of threefold and three stripes. And it was then a natural way then together with some of our retail partners then to develop a functional training line in functional fabrics and functional fit also with the design ethics of original. You see some of the samples here. And needless to say, the demand for this for next year is huge. And it's one way for us to differentiate ourselves in the training area where there's a lot of brands that have established themselves lately. But again, very, very positive feedback from the retailers around the world. Basketball, we all know we're a market leader, but we also know we have to invest in it. We have in the design and development of the product for a while now, had a very special language. And it's great to see that this language is now coming through also in sell-through. All our signature shoes are now doing well and the players that we're using are also extremely popular. And we have used them now not only in the U.S., but also in other markets. They've all been to China during the summer, and we see a lot of positive effect for them being active actually selling not only our performance product, but selling the brand as relevant in the culture. And then we have said it the way adidas did the brand, we want to be visible in all sports and also local sports that are relevant. That is why we are making products for more sports, and we also produce more content for those sports so that we get back again the credibility and authenticity that we used to have, and you see some examples of that here. In that trend is also track and field. For a while, we lost the visibility. We are now back again. And if you watch the World Championship on Tokyo, you saw we had more federation. There were more three stripes on the apparel and a lot more feet with our spikes and special shoes. That will continue because for us, track and field is the core of all sports also in the Olympics, and that's why you will actually see a wider investment for us going forward as more federations are actually able to change into our brand. Then finally, when it gets to sport, we have said to you many times, we need to be more American. We need to be a sports brand also in America. You can only do that by investing in the so-called American sports. That is, of course, starting with colleges. It is baseball, it is American football. It is also basketball. You see some of the people we have signed now over the last couple of months. We have also started to get feedback that we are attacking the clear market leader. That's not even the strategy to be visible and actually have personalities that perform. And I think that is also what we have achieved. The college sport in the U.S. is very, very special, very emotional and everybody who's gone to college is a big fan of their college and especially in American football, that is important. And you know that this college team draw attendances up to 100,000. You see that we are now starting to get a pretty impressive portfolio. And in that, what should I say, strategy of getting more visibility and getting more into the college merchandise business, we have then added both Tennessee and Penn State, which are 2 huge colleges when it gives both to the performance and also to the merchandising value. What we also have done is that we started to combine the American sports. So here, you see on the left side, Anthony Edwards and his basketball look. We have then made a clip. So Travis Hunter debuted in the NFL. He's the Heisman Trophy winner of last year. He is, I think, the only one who plays offense and defense, at least in his rookie season, and he's then playing in a clip that is designed the way Anthony Edwards basketball shoes. So a pretty cool thing, and it shows what we can do going forward in the U.S. Short about Formula 1. You know great success when it gets to the agreement with Mercedes, a lot higher sales than I think both we and the Mercedes thought, a lot of collapse, a lot of interesting stuff happening. And then on the left side, we announced that for next year, we will also do Audi. And again, we see a huge demand from wholesalers already in those 2 setups. And then, again, I'm repeating myself, but we are, of course, trying to take everything we do on the pitch in the stadium then to the street. And I think that's the magic of ours. We are using our athletes and our, what should I say, teams on both sides and are trying then to create the street culture out of not only basketball, but also other sports. We have talked about the need for doing this in football, and it's finally happening. We have never seen so high demand for soccer-related apparel as we do currently. And a lot of non-soccer fans are actually wearing retro jerseys or even the current jerseys or product that is coming out of the soccer world. And I think I've mentioned to it a couple of times that the Oasis collab, for example, are soccer pieces that have been batched up and the demand has been unbelievable for people that has not any connections to football. And then on the footwear side, EVO SL, our $150 Evo Adizero shoe without the carbon plate meant to be a running shoe, but gone widely on the lifestyle side, best-selling running shoes currently and the best named running shoes in many, many markets, a great development for us. So when do they get to lifestyle, you saw performance growing at 17%, Lifestyle now growing at 10%. Again, this was always the strategy that you build the heat through marketing and lifestyle, you sell shoes, then you hope that it will also go into performance and then you start to commercialize apparel that has actually happened. And two, the haters, who are the people who don't like it, Terrace is not over. We have grown Terrace every quarter. So Q3 was actually the highest quarter ever also of the Samba. I think the key to it is, of course, that you're not selling the white black and the black white more and more and more because you're actually putting, what should I say, a limit on it. But when you work on materials and you work on different, what should I say, Collabs and you keep the excitement in it, all Terrace shoes are doing extremely well. And especially in certain markets now, the Spezial is doing great. And as you probably know, Spezial has never been a lifestyle shoe before. So -- it's not over, and it's a huge business, and we will manage this business probably longer than many of you had expected. The Campus was more a freebie that came unplanned with the heat of the brand. We did then put a lot of shoes in the market. It worked perfectly. But we also said we will then start to limit the Campus because we were waiting for the Superstar to come. And let's face it, the Superstar is from a construction point of view and from a target consumer probably closer to the Campus than to anything else. We talked about Low Profile. Yes, it has been growing and growing. It's not as big as some people thought. But I think I can promise you that the same thing is here. You need to invest in SKUs, you need to invest in materials, then it will continue to grow also into the spring of '26. And then we have the Superstar, which we again told you we were delaying. But right now, we are pushing it for fall, especially now in Q4 and then into spring next year with global campaigns, a lot of activations. And again, although the language is global, the content is very local. And then may be new to you, you will start to see the Triple White coming back. There are clearly signs that Apparel is going more preppy and more college and then Triple White will be again coming back. And as you know, the Stan Smith is probably the typical shoe to go to when that is happening. So we have limited the pairs heavily. You won't find Stan Smith discounted anywhere, but we will start during next year then both with Collabs and loading up that shoe because we want to be ready when these things are going commercial. And then the final thing on the lifestyle that we talked a lot about, Lifestyle Running. Yes, we admit that all the brands have had a big trend, both on '90s and 2000 running and that we had many options starting with the retro thing all the way into 3D printed shoes. Many of these shoes are now starting to get volume. None of them are the winners right now, except for EVO SL. But when you look to the left, you see Adistar, where you will see the Jellyfish coming out of Pharrell. You will see takedowns of that hitting the market, and you will also start to see a lot of 2,000 retro running shoes from us with Open Mesh and Metallics, which are already selling very well, and we will start to scale them because we see that the demand is there. And then the final thing where people laugh a little bit is Lifestyle Football. We talked about it in Apparel. You will see soccer-inspired product going also fashion, where we put soccer uppers from the past or also present, and we put them on different constructions. Very different opinion if this is going to be commercial or not. We will have limited pairs in the beginning, and then we will scale it if we see the demand is there. But at least on her, it seems like there is demand there also to scale it. Then on Apparel, we have great success, especially with Her, especially very colorful, the use of 3 stripes, of course, a lot of them are not original. But I think where we have been even better than anybody else instilling innovation in materials. We have denim. We have a lot of knit constructions, and we have a lot of innovation that has not normally been in the sports industry. And this is especially where then people online has a huge success because they can showcase it very quickly, and we've been very quick to the market. Very, very proud of this. Grace Wales Bonner has helped us a lot. I think she had a huge impact on the success of the Samba, to be honest. She has now been made the head creative for Hermes Men, a great honor to her, but I'm also happy to report she will not leave us. She will continue to work with us because we have a fantastic relationship with her, and this will, of course, help us. In general, collabs, a lot of discussions. If there are too many, has it lost this interest? No, it hasn't. If you look at this page, you see some of the ones that we work with. Down left, Hellstar has been great for us in the last couple of months. I mean, Chavvaria has been great for a while. And in general, I think we all have to agree that you need Collabs. You just need to make sure that they fit the market where you're using them. and that you never do too many at the same time. Then at last, accessories. Again, I tried to explain that accessory and performance, great, including soccer balls. All markets actually done well. There is a small clash in the U.S. that we need to fix, and we will fix it. And I'm pretty sure that when we get to next quarter, you will see it fixed already. So don't read anything into it. That was not the intention. So with that background, I hand back to Harm, and then Harm will give you the more details about the numbers. Operator: This is the operator. We are not receiving audio from the speaker line. Harm Ohlmeyer: Can you hear me now? Operator: Yes, sir. Harm Ohlmeyer: Good. all right. Then I'll repeat it again. Thanks, Bjorn, for the update, and I would like to bring some more details to the financials now in the next couple of minutes. Apologies for the short technical issue here. So as always, we start with the net sales. And as Bjorn said already, record net sales from an absolute point of view in Q3 was EUR 6.6 billion. That has been a great achievement. And of course, the most important number there is 12% currency-neutral growth for the adidas brand. Of course, for the people on the call here, you always look at the 8% currency-neutral, which includes Yeezy in the prior year for the reported number, which is 3%. What we believe is relevant as well to show you the next chart, it's a lot of numbers on there, but sometimes we probably forget what percentages mean in absolute numbers. And I want to start on the upper left where we see 17% growth in Q1 for adidas brand and 12% and 12% in Q2 and Q3, so overall 14%. When we look at the absolute numbers in currency-neutral terms, we actually grew EUR 900 million in Q1, EUR 600 million in Q2, and another EUR 700 million in Q3. So we believe it's important summarize that for the first 9 months, what we actually have achieved with the adidas brand. So it's a EUR 2.2 billion in constant currencies in the first 9 months. And then, of course, you got to deduct then the EUR 600 million from Yeezy sales last year. And then you have an FX impact so many currencies, that is a negative EUR 600 million as well leading to only EUR 1 billion nominal growth that you see in the P&L being reported. We believe it's just right to show these numbers in absolute as well to actually showcase again what our brand and sales teams have achieved with great products and good execution on the sales. When it comes to the gross margin, of course, a great story as well is almost 52% or 51.8% in correct terms. It's 50 basis points above prior year. This is again a very, very good achievement. And if I go to the details and decompose it a little bit, a huge, huge credit to our sourcing organization, making sure that we get reasonable prices in strategic relations with our suppliers, still some positives on the freight side, even so some of the transportation lead times are complicated in today's world. The business mix is still positive. And also from a discounting point of view, we did a great job the last couple of years and now it's stabilizing and still very, very good sell-through of our products when it comes to the underlying drivers. Of course, you know that FX has still been negative. It's just directional when you look at the bars here, but we also talked a lot about the tariffs. Of course, they are negative in the U.S. And you see that is a new thing compared to Q2 call that we had some mitigating actions there as well. That led us still to the very, very good gross margins, 51.8%. So very good achievement, and you can imagine where it would have been without the tariffs in the U.S. When I go further down the P&L line, of course, as always, we say, we keep investing into marketing with almost EUR 800 million in Q3 and actually 10% up or 12% of net sales. Great, great campaigns, as Bjorn alluded to earlier, fantastic product launches and relentless opportunities with our partnerships, whether it's on the cultural side or on the performance side. So very, very well usage of our marketing. Also on the operating overheads, you see there's great leverage with minus 8% or 3.5 basis points. And you see for the first time since the third quarter '21 that we are below 30% when it comes to the operating overheads. Okay. Part of the truth, you might remember also that we had a release in our other operating income with the settlement of Yeezy of around EUR 100 million, and we did a donation of around EUR 100 million in the operating overhead line as well in the third quarter last year. But the real number now, forget about last year, is still below 30% on the operating overhead, which actually leads with a great gross margin to now 11.1% operating profit of EUR 736 million. If I decompose that again from a profitability point of view, similar to what I did on the net sales, great achievement in Q1 with almost 10% already in the second quarter, 9.2%, up from 5.9% and then a very, very good achievement in Q3 with a profitability of 11.1%. That is a great achievement again to the teams. And when you look at the first 9 months with 10.1%, we actually where we wanted to be in '26. That's a great achievement in the first 9 months. Of course, we all know given our guidance that will not be sustainable for this year, but that's where we wanted to be for next year we achieved in the first 9 months. Of course, there have been some questions below the line as well, and I want to spend some time on this one to explain that more clearer. When I start with the net financial results, you see the EUR 4 million plus last year. So during that quarter, we had some stabilized currencies, whether it's the Argentinian peso, the Turkish lira or the U.S. dollar was still stronger. So we had some positive effects from an FX point of view, but also from a hyperinflation point of view. And now the comparison to this year looks dramatic with the almost EUR 90 million. But also there is now a devaluation of the Argentinian peso of the Turkish lira. We all know where the U.S. dollar is right now. So these are the effects that we had in Q3. But it's also important that -- to note that this is normalizing in the fourth quarter again. And well, I wouldn't have imagined that I talk about the election in Argentina with Milei, but we had our Argentinian General Manager here yesterday as well to give an update. So these are also important events for us as a company. So that's why we believe that election and the outcome just want to stabilize again in Q4. Similar things on income taxes, was very low last year, but also this year, it's a pretty much normalized rate with some withholding taxes in there, but that will also stabilize in the fourth quarter. So 2 notes on this one. In the first 9 months, if you looked at the numbers that the operating profit was up 48% in the first 9 months, the net income was up 52%, and that is something you should expect as well more leverage in Q4 on the net financial results. It's normalizing. And you can definitely take away today that the tax rate for the full year will be around what you have seen in the first half. So anywhere between 24% to 25%, hopefully closer to the 24%, which would definitely drive the net income faster than the operating profit and respectively, the earnings per share as well. When it comes to the inventories, also that is a topic, 26% currency neutral up. And I would like to move to the next chart very quickly because also that is something that we are not concerned about. I said it on the last call already, we went probably too low in '24 with a lot of discipline because we came with a lot of inventories into Q4 -- into 2024. So this is where we have a low level last year. We actually made the strategic decision to bring products in earlier, especially World Cup related. So we wanted to make sure that anything around World Cup related, whether it's [indiscernible] or federations available to remain and continue to remain a reliable partner for our retailers that when the demand is there and of course, where we need to ship in for the launch date that the product is already here. And you know that the supply chains are volatile nowadays. So we didn't want to take any risk. So we took them early. What's most important for us internally is that this product is current and with either current this season or for future seasons already, which means spring/summer '26. So also there, you will see an update going forward as well in the next quarter where we definitely go in the right direction again. The same is on accounts receivables. That shows the success that we have with our retail partners. It's not just about D2C, so 22% up. That is not 1:1 the growth in the third quarter, but that's where we see that we have great relations with our retailers, and that also gives us confidence for the fourth quarter when it comes to the cash generation. But before I go there, most importantly, the operating working capital, I've been on this call many, many times. We said if we get below 20% of operating working capital over net sales, we are an excellent company; if we are anywhere between 21% to 22%, we are a pretty good company, and we are still in that range, and we will definitely make sure that we stay within that range and over time, get below the 20% again. That all led with the investment into working capital that the cash got reduced from EUR 1.8 billion to EUR 1 billion. I also said on a previous call that we expect to generate a lot of cash flow in the fourth quarter. And rest assured, we still believe there's probably around EUR 800 million to EUR 1 billion of cash flow being generated in the fourth quarter, which is linked to the inventory increase for the World Cup, which will be reduced and also the accounts receivables that we will cash in, in the fourth quarter. So that's what you should rely on here as well. When it comes to cash and cash equivalents, you see the development here, which led to the EUR 1 billion and also important adjusted net borrowings have been reduced from EUR 5 billion in the second quarter to EUR 4.8 billion. And just as a side note, some of you might remember that we're maturing a bond in November and probably stay tuned for that one. We believe we want to refinance that one in due course, which we believe is also a good message to the capital market because once in a while, the last one we had in '22, we also want to test the market and be a bond issuer in the market once in a while. So that's what you should not be surprised in the next couple of weeks that this could happen. Overall, when it comes to the leverage, we are very stable, which is important for our rating agencies as well. So also no surprise there regardless of what our cash position is. So overall, very, very confident when it comes to the P&L, when it comes to the balance sheet. And with that, Bjorn will finish up with the guidance. Bjorn Gulden: Great, Harm. As you see on this slide, you have seen that many times, we are now into the third quarter, if you will say, some out of 4. We did tell you at the beginning of '23 that we think that this should be a 10% EBIT business. We gave you the different components. And it's pretty cool to see that after 9 months in the third year, we basically hit it with the numbers that you see here and are currently showing you that this is a 10% EBIT business model even if we are not doing everything perfect and even if I would say the world is not that easy to maneuver in. What is very, very crucial, I think, in the business model going forward is this, I don't know what other brands or consumer companies are telling you. But to be a global brand with a local mindset, I think, is crucial, if you are consumer-focused and for us and also athlete focused, you need to be close to the consumer. And unfortunately, there is no global average consumer, the way many consultants and agencies are trying to sell you, the consumer in different parts of the world has their own, what should I say, taste and willingness and are also influenced by different things. And that's why it becomes more and more important to be more local, especially between Asia, with China driving it between America and Europe because there are big, big differences, not only in consumer taste and facing of sports and activities, but also now in supply chain, given all the political tension we have. So again, getting the best people in the market and giving them the authority to make decisions. And in many cases, even the authority to make products becomes important. And then, of course, the role of a headquarter then is, of course, to keep the brand together to provide innovation and concepts. And of course, also maybe the most important thing to make sure that we have the right people in the markets and in the right functions and of course, also provide the systems that we need. And when it gets to creating product, I think this slide is also important for you because we are now making products in all these centers. And these centers are then in addition to having a part of the global, what should I say, creation like LA has for basketball and U.S. sports, they also, of course, have the, what should I say, the clear goal of supplying the local consumer with the products that they need, and that goes for all these centers where you see there are now 5 of them in Asia. And again, the speed to market by actually producing in China or in India is, of course, much bigger for those local markets than there are for Europe and America, where you have very little production, and it's not easy to actually find a supply chain who can make footwear for you. So I think you need to be very, very, what should I say, conscious about this development because I think it's the key to be successful. And I think, for example, our success now in China is because of this setup. We have the ambition to be the #1 sports brand and all our, what should I say, leaders in the market should have the ambition of being #1 in their market. We are, of course, aware of that we will not be #1 in all the markets that will be naive. But if you are hired in Adidas to run a market, you should have the ambition and you should talk to us what you need when it gets to investment and infrastructure to be #1, and then we will together see where we can reach it or not. There is one exception, that is the U.S. The market leader there is so far ahead of us because they've done a fantastic job living the culture, and we have not done it over the time. But we have a clear ambition there to double our business. And we do think with the story of our brand, with the history of the brand and the resources we have that we can start to be a sports brand again in the U.S. with all the things I have explained to you and then also extend that into lifestyle and culture. And that is why we also have a management now sitting in both L.A. and in Portland who has all the tools to do that. And the way we do this globally is, of course, to have the best product. I mean our pipeline and products, I think, has improved a lot. We have talented and creative people, and we have a great supply chain. It is, of course, also the way we present ourselves in the stores. We have said that we're using a lot of creativity to actually build stores that are that also connect to the local culture and to the possibility of utilizing what is allowed or not because you see many of these stores would not be allowed to do here in Germany, but the creativity in other markets we need them to utilize. And then very, very important, the activations and the visibility around the world, not only global, but also in the local markets so that you connect with the consumer and you also let the consumer be part of your activation has become much, much, much more important and all the social media and all the platforms and also actually physical events have become tremendously important around the world. And that's where you, of course, need a lot of talented people with a lot of energy, and that's what we have. So back to the end of this, the outlook, you remember our initial guidance for March, double-digit growth for our brand, if you take Yeezy out. If you include everything, high single digit currency neutral and an operating profit between EUR 1.7 billion and EUR 1.8 billion. Where we are now is that we keep, of course, the brand being at double digit. We have narrowed the high single digit to be around 9%. And then we say that our operating profit will be around EUR 2 billion. Yes, we know that we are in a challenging world. I don't need to repeat that. And we also need again to remind ourselves, we have no Yeezy, neither revenues nor profit in these numbers. And then the other considerations that you need to have is that we think that the positive side is that we're better than we expected after 9 months. And the attitude in general from the consumer and from the retailer is actually more positive than we expected. I know somebody reacted to that there were no strong order book in there. But remember, there's only 2 months left of the order book. So that's why we took it out. There is not a lot to talk about when you only have November and December open for the order book. So that's why that's not removed. There's nothing other into that number. And then the negative thing, which, again, we have to address. I mean, I know you don't like us to talk about it. But of course, there is a direct impact on the tariffs. We told you that the gross impact, meaning how much more duty it would be on the products that we thought we would sell was more than EUR 200 million, and we have mitigated for I would say, almost half of that. So now the estimated negative impact on our P&L, meaning what would the profit be higher if we didn't have tariffs would be around EUR 120 million. This is not a scientific number because it's an estimate, right? So you need to be careful when you try to say is it's EUR 117 million or EUR 123 million because we don't know. And then what we don't know, and again, I think maybe we are too honest about this because you read a lot of criticism into it, is of course, that the indirect impact of the tariffs, no one knows. And prices increases, normally consumer buys less, and that is not only in our sector, but in all sector. And that's why we don't know and are flagging it. And I assume that everybody will flag it after a while. I think maybe we flagged it early and got criticized for it, but I do think that's better to be honest about it than actually trying to hide it. And then, yes, sitting in Europe, there are quite some negative FX impacts when you consolidate your numbers, both on your top line and also on your bottom line, and that's just the way it is. And I'm sure that you understand that. The good thing about ending '25 is that we're going into another great sports year. It starts with the Winter Olympics in Italy, which again is not huge commercially, but it's a great event that will be having interest also for the smaller sports and the winter sports. And then we have this fantastic World Cup that will come in the U.S., Mexico and Canada. I would like to say one comment about that, too. We have said that this is a EUR 1 billion business or more. And people say, of course, that's on top of everything. I mean you don't know that. I mean it's obvious that it is -- some of that is additional, but it's never been an event where everything that you sell for an event is on top of everything else. So you have to have that in your mind when you do your math. And then the last slide I will show you is this. When we met the first time at the beginning of '23, we had the situation over there where we did EUR 300 million. We told you that we had the 4 years plan to get to 10%. And I do think I'm allowed to say that we're pretty proud of the development that we have done. Not everything we have done is fantastic, and we are by far not perfect. But I do think you have to admit that we've done a decent job in a very difficult market. And yes, maybe the market will always be difficult. So I will continue to say that. But the need to change things, especially in the development of products and in the supply chain and also the way you go to market and change the attitude has been enormous. And I'm very, very grateful and proud of what our people have done. So with that, I hand over to you again, Seb. Operator: This is the operator. We are not receiving audio from the speaker's line. Sebastian Steffen: We're now ready to take questions. Operator: [Operator Instructions] First question comes from Ed Aubin from Morgan Stanley. Edouard Aubin: So I guess I've got 2 questions on Footwear, Bjorn. So the first one is on Classic and Terrace. So did I understand correctly that you said that Terrace was still growing year-over-year in Q3. And if we look ahead in 2026, if you look at the Classic segment, the slide that you showed us, can Classic expand if Terrace contracts and so how you see that? So that would be question number one. And then question number two, still on Footwear, I am sorry. On the opportunity with kind of Lifestyle Running, one of your distributor a few weeks ago, JD Sports, not to name it, showed a slide showing that for them, at least Lifestyle Running is substantially bigger than Classic. So I was just wondering to what extent how much an opportunity this category? Obviously, you're already making good inroads in Lifestyle Running. but if you can help us kind of size the opportunity, that would be very helpful. Bjorn Gulden: Two good questions, to be honest. Yes, I said and I confirm that the Terrace Group was actually bigger in Q3 this year than it was in Q3 last year. And that even the Samba from a selling point of view is actually bigger than it was a year ago and that we have continuously grown what you call Terrace, these 3 shoes. Again, I think many people are surprised by it and maybe some of our own people too. But the fact of the matter is that with the innovation that we've done on design and materials, we kept it hot. And we have gazillions of different SKUs around the market when it gets to different versions of it. And of course, some market have stagnated and we stopped supplying growth, but other markets are still on a growing trend. And that was also the reason why we were careful with Superstar. And to be honest, also careful with some of the low-profile side because we didn't see the need in, as you correctly say, in the classic range to oversupply too many franchises. We are now transferring the Campus volumes into the Superstar because that's more of the same consumer. And then as I said, when Triple White is coming on, the whole Classic area will get another boost and that is typically then that we will then load on the Stan Smith. I think it's also correct what JD showed you, although it's different from market to market, what they call Lifestyle Running is substantially bigger, especially on the male side than the Classic side. But again, many of the so-called Lifestyle Running shoes might from some of our competitors then not be running. But if you look at it now, we can be very honest. I mean, New Balance and my friends from ASICS have had a big run on shoes from the '90s and from the 2000. And even Hoka and On to be honest, have with their so-called performance shoes also had a run on the Lifestyle side, maybe for an older consumer depending on where you are in the world. So I agree with you, if you cume all that, the category is actually bigger. And that's why it's been so important for us then to put more effort into the Lifestyle Running side, and we have. I mean the EVO SL was meant to be a performance shoe, but it's then gone Lifestyle also. So that's a huge volume for us. The SL 72, which is the 70s running has been great for us. And then some of the other running models have been, I would call it, mixed. What you will see now is that you will, a, see that we are coming out with products around the Jellyfish, meaning the Adistar shoe that Pharrell did with different takedowns. And then we have a series of shoes from also the 2000 with Openmesh and metallics that is already starting to sell. So we will grow in Running Lifestyle in '26, no doubt about it. Will we be market leader in any other segments? I think that's too early to say. And then we have to admit that with the success we had in the Classic, you couldn't expect that we also have the same success in Running, right? There is always a sequential effort here. And then what I'm very, very positive about is, of course, the development of HyperBoost because that form, when we go from performance into lifestyle, you have to remember that all our lifestyle Boost shoes that were new, did well when coming with Boost. And you should not underestimate that comfort and cushioning, extreme cushioning has a lot to say in that segment. So we are very optimistic about that segment, and that's why we put so much effort in actually developing HyperBoost. And yes, it's taken 2.5 years, but that's why it's also a very good product. So I think that's my answer to your 2.5 questions. Operator: The next question comes from Jurgen Kolb from Kepler Cheuvreux. Jurgen Kolb: A quick one, just housekeeping for Harm. You guided for -- you expected EUR 2 billion of roundabout cash at the end of the year. I guess, with the guidance on free cash flow in the fourth quarter, this is still on and you're quite confident to achieve that, just to double check here. And maybe on prices, I think on Reuters, there were some comments on your reaction on the tariffs in the U.S. Maybe, Bjorn, you could double check and again, talk us through what you have done so far in terms of the prices in the U.S. and what we shall expect going into 2026 in order to mitigate the tariff impact. Bjorn Gulden: I can do it first, and Harm can fill in at the back. The mitigation that we have done, which is about EUR 100 million mitigation from where we started with the EUR 200 million plus down to the EUR 120 million. How many components? One is, of course, in the sourcing in the sense that we have worked with suppliers to get better prices of some of these products. It has then been increasing pricing on new products. You have to remember that the price of a product that hasn't hit the market that is not known. So of course, that's where you can increase it without getting a negative reaction that you're increasing. We have tried to keep all carryovers at the lower price points at the same price, so no increase for the consumer, but therefore, better sourcing or more efficient sourcing and then we have increased prices on some of the expensive models because we believe that the consumer and the higher end will be less sensitive to price increases. And then again, then lifted prices on new models that have never been priced before. So that's not going to be visible for anybody else than us. And of course, some of the retailers have been part of the development. That's basically what we've done. Now I have to tell you that the price increases you see in the market and that you can read about the question is, are these prices then going to stay for the consumer or are discounts going to go up? And I think when you look at the U.S. right now, it's pretty heavily discounted. There has been some big brands that have had a lot of inventory. And I think maybe independent of tariffs, there was a lot of discounted products out there and I think that's what the jury on what's going to happen when it gets to sales, meaning the value of the product. And then the margin on the product when it gets to discounting, I think the jury is still out on that because we need to take and counter at the end of the year and then especially at the end of Q1 where most of the products that are then being sold are actually with a higher tariff on the buying price. So I think that's all I can say to you because everything else is just 100 assumptions, right? We actually feel that we told you very early that the gross impact of this in the financial year of '25 will be EUR 200 million plus. We have reduced it to EUR 120 million, so we think we have done a good job. And remember, we were very, very early telling you that we have removed China sourcing almost completely from the U.S. So we're not exposed to this 100% duties that he has done as of November 1. So let's see what the other people say, and then we can compare notes. We feel we've done what we could do. And again, I actually feel pretty good about it. But how the consumer then in the end reacts on everything happening, I think it's too early to say. Harm Ohlmeyer: On your question on the cash on the balance sheet, the EUR 2 billion. I said to the last time, and I confirmed it earlier in the call, will it be exactly EUR 2 billion, depends a little bit on FX and a little bit on the timing. So I wouldn't have sleepless nights if it's EUR 1.9 billion or whatever, but the goal is still to collect on the receivables, and that's what we plan for. So whether it's EUR 1.9 billion or EUR 2 billion, you know, don't get sleepless nights over it, but we want to get close to the EUR 2 billion, that's correct. Operator: The next question comes from the line of Geoff Lowery from Rothschild & Co Redburn. Geoff Lowery: Just one question, please, on China. Could you talk a little bit more about what's powering the performance in terms of product and distribution? Obviously, you've done tremendous cleanup work there over the last couple of years, but the outperformance against the market is looking really very marked at this point. Bjorn Gulden: The strategy in China has been, of course, to compete both against the success of the local brands and, you know, to the Western brands. And we figured pretty quick out that to do that, you need to have more local initiatives and utilize that you have factories in the market so you can go to market quicker and you can actually work with less inventory. So we developed this creation center in Shanghai. We put together a team of Chinese management that also used to work for Adidas in the past and has then worked in other brands to learn how local brands do it and then come back again. And we have, you know, as we speak, between 50% and 60% of the product that we sell, especially on the apparel side, is designed and developed in China. So they are not the same product as you would then design and develop for America or Europe. On footwear, most of the model are franchises that comes out of the global range, but they might be tweaked when it gets to materials. And then there are certain pockets of product that are only for China, also in the lifestyle, even in originals, and especially in performance. We see that the local brands have brought a lot of quality into price points between [ EUR 80 and EUR 100 ], where we were not competitive. And we have then used the creatives and the developers and the factories to develop them competitive products against that. And we have in those, you call them third, fourth, fifth tier cities where the local brands are dominating, we have started opening stores then which focuses on, I call them this value products and have a special offer for them. I think our success when you look at double digit growth and also the margin that we have is because that we have changed that model to be local and that we give the authority to very, very good people. And I also have to say that the energy, I think the LatAm team and the Chinese team are probably the two teams that has, in a market, the highest energy when it gets to actually chasing business, when it gets to where the consumer is. So I would say that's the reason for the success. And I also think it's the only way in the future to get success. I don't think you can sit in neither in the U.S. nor in Europe and just design a collection and tell them to sell it. I don't think that works anymore. Operator: The next question comes from Wendy Liu from JPMorgan. M. Liu: I have two, please. One is on the World Cup. I think, Bjorn, you previously mentioned that it will be a EUR 1 billion opportunity. Would you mind sharing a bit more details about the drivers behind this EUR 1 billion, and how does this compare with previous World Cups? This is number one. Number two, I wanted to go back to the 10% EBIT margin target you had for next year. If I look at this by region, it looks to me like it was really like North America where you probably still have a bit of gap. And then I look at Q3 numbers, 12.4% EBIT margin in North America was actually better than previous couple quarters in last year, despite you have this tariff headwind and you no longer have [ EV ]. So I just wanted to ask what were the drivers and what are your expectations about North America EBIT margin into 2026? Bjorn Gulden: The EUR 1 billion, I think is the number that we have said that we assume that World Cup can bring when we look upon both what we're selling of replicas meaning connected to the teams and cultural relevant I would say products around World Cup. I think the discussion that some analysts have had is this then fully in addition and what I said is that you can never say it's fully in addition because you have to remember that the stores, when you put World Cup product in, you take something else out. So you can never say it's fully, what should I say, in addition. I wasn't at Adidas in the previous World Cup, so I'm not sure, but I would assume that this is 40% or something higher than what we had before, just to give you a ballpark number. And the number is not final. As I said, we launched the ball three weeks ago. It's been tremendously successful, so we might actually take more orders and produce even more than we planned. We are launching the replicas for the home jersey on the 6th of November, so we will see the reaction to that. I will not be surprised when I look at demand around the world that, that will also increase, so the business might even be higher. And we are pretty sure that we will do EUR 1 billion, and I would not be surprised if it is more. When it gets to the 10% EBIT target, I think we've talked about that from a global point of view, and it was the assumptions in '23 that we will keep basically the mix of the business when it gets to D2C and wholesale the same. And with, of course, the development in certain markets that are higher than they are today, You know that the U.S. market, to get really profitable in the U.S., you need scale, and you can clearly see that our profit margin in the U.S. historically has been lower than our major competitors, and that is just because of scale. The improvement that you have seen this year already compared to last year is, of course, that we are doing a better job. The local, what should I say, development, the investment in American sports, the performance in our own stores, have improved the EBIT margin in the U.S. Having said that, there is a huge upside to that if we get more scale. So it's clearly a target for us and also our American management, of course, to grow over proportionally in the U.S. and then put some of that into the leverage when it gets to getting a higher EBIT margin. I think that's my feedback. Operator: The next question comes from Warwick Okines from BNP Paribas Exane. Alexander Richard Okines: I've got one on gross margins, one on costs, please. On gross margins, discounting was a fairly neutral dynamic in Q3. Have you reached the limits of what you can do in full price? And then secondly, on operating costs, I wonder if you could just comment a little bit more about what's happening there. Have you been taking OpEx out of overheads, and if so, have you got any examples of that, or is the cost story more about leverage and the movements in currency? Bjorn Gulden: You know, the gross margin, that has different components because when it gets to the D2C business, we have been very strong on sellout on inline products. The only place where we've been a little bit more promotional has actually been on e-com. And that is because e-com in general has been, you know, I would say aggressive on discount. And we were probably too restrictive on it last year, mainly because we didn't have enough product. And this year, we've been better in supplying product, we have decided to follow certain events more aggressive. But it's not hugely different, though, because the full price sellout has been very strong. The other discount where you don't control, of course, is what are the retailers doing. And depending on how much inventory is in the market from other competitors, and I do assume you are aware of that big competitors have a lot of inventory that the retailers have discounted, And then, of course, that hurts your full price sale because if you are at full price on EUR 100 shoe and the competitor is on 50% on EUR 200 shoe, then, of course, you will sell less. That's just the math. And we hope, of course, that the inventory level in the trade will go down so that the discounting will be slower. But again, that's outside of your control. On lifestyle products and on the new performance product, I would say that our sell-through rate has been very good. But of course, in a very heavy discounted environment, you had sometimes a slower sell-through because of the discount level in general. But that is very different from market-to-market. But sell-through on full price for us has not been the problem, and I think you see that also in our margins, so we're actually very happy with that. When it gets to the cost, I'm looking at you, Harm. Harm Ohlmeyer: Yes, Warwick, good question. There's probably three things I would like to mention. First, I mean, we have been very, very disciplined in the organization around the world because we believe in the past there was a culture of you need to have more people in order to grow the business. And now we put it the other way around. If you do more with one account, whoever the account is, it doesn't mean you need to have more people, right? And even if you, you know, develop the products, you know, I mentioned earlier, the Oasis product is more a batched up, you know, you know, soccer products and you don't need more people in order to do an Oasis range, right? So we put a lot of discipline in, you know, what are the commercial opportunities without asking, you know, for more people. So that has been very disciplined. Secondly, as we said, we have simplified how we run the company overall. We have empowered the markets. It's a new operating model. And we, of course, there were some tasks that we used to be in headquarters that are now being taken over by the markets or there have been duplications, right? And you know that we had a volunteer relief program at the beginning of the year, so that is definitely something that is contributing to that as well. But it's first and foremost simplification of our processes, avoiding duplication. And of course, if you do that, we need fewer people, and that's what you see continuously in the P&L quarter by quarter. Yes, you have a good point. FX helps as well. I mean, that brought the absolute number down in that quarter. But at the end of the day, I want to highlight again, Q3 is a very clean quarter when you look at this here, and that shows you that we can be below, you know, 30% when we have the right top line, right? So that's why I believe regardless of any comparison or path or whatsoever, we show in, you know, with a good top line, we have a clean, you know, cost as well, and that brings us below 30%, and we are not done. Operator: Next question comes from Robert Krankowski from UBS. Robert Krankowski: I've got like two questions. Just first one on the top line, second one on margins. We are almost in 2026 and given your strong confidence around the World Cup, the running category, the lack of easy now in the base, anything that you can see and or any reason why you shouldn't grow double digit in 2026? And then second one on gross margin, like again, we are looking at the gross margin close to 52%, so upper end of your guidance. And next week, we are going to see all the benefits probably of the mix with upper strong growth, as well as some of the transaction effects coming. So how should we think about the gross margin range? Is it more now 52% to 53%, for example, in 2026? Any comment would be really appreciated. Bjorn Gulden: You should be a sales guy, right? I think when you look at '26, we're not guiding it yet. It's the same thing always. We are very conservative when we look into the future because we don't want to disappoint you. We want to bring Q4 behind us. We want to see what's going on in the world. When you look at the industry and you look at what we think we have in the pipeline, I think you're right. But the external factors is; a, how is retail reacting to the uncertainty? How is the consumer reacting? And what other political tensions are getting into the way? Who knows? And the reason why I showed you the slide at the end of the presentation, where we've gone from EUR 300 million EBIT to EUR 2 billion, is, of course, that we think we have; a, taken risk in the sense that we bought enough and marketed enough to actually get there, because growing double-digit three years in a row is, of course, a risk in an environment. And secondly, in the transition to the new business model, you have to remember we changed a lot. So I think it's about, again, how confident are we that we can continue to grow in an environment that they're uncertain? And how can we make sure that we have a base in our organization and the way we work that is aligning to this growth with a new business model? And I think that's the only risk factors. I'm 100% convinced that Adidas is a brand that can stabilize over years a double-digit EBIT. And that the growth to take market shares should be double-digit in most markets, depending, again, what else is happening. And I don't think I can say something else than that because you're going to arrest me, you know, first quarter if something goes wrong, right? When it gets to the margin, is it 52% to 53% again? That, of course, depends on where we are growing then. Are we growing in the e-com side ourselves and in the D2C because, you know, we can do that? Then you're probably right. Are we growing in the markets with high margin like China? Then you're right. The growth for us in the U.S. is, of course, the one with the lowest margin. That's the way it is. So it depends, again, on the mix going forward. But in principle, when we said 50% to 52%, we did not believe that we already would be at 52% now, right? So we have achieved this margin higher or quicker than we thought, and not because of the mix but because of the success in the growth and maybe also because all the brands then didn't have the success that we had. So, again, there's many factors. And, of course, you always want us to be very accurate, but it's very difficult because there's so many variables. We are taking shares, I think, in all markets currently. We have a pipeline of products that we believe in. But of course we do not know these external factors. And of course we don't know what the competitors are doing, especially when it gets to being aggressive on discounts and pricing. So I think that's all I can give you. And I'm looking around if someone wants to add anything. Operator: Next question comes from Aneesha Sherman from Bernstein Societe. Aneesha Sherman: I have two please. The first one's about your running business. It's been growing at strong double digits all year in contrast to the slowdown that we're seeing in some other big running brands. Can you remind us how big your running business is and are you seeing any pressure on order books for 2026 given how competitive this category is becoming? And then related to that, my second question is around marketing. So marketing, you've ramped it slightly through the year. You're still guiding for that 12% level, but we've now seen some big competitors ramping up marketing, trying to gain share. Do you still think 12% is the right level given the increase in competitive intensity, or is there a possibility you might push that up a little bit higher next year? Bjorn Gulden: I don't think Harm will give me more than 12%, to be honest. And I'm not even sure if increasing it will make you more efficient. I mean, marketing is a funny thing because the number itself doesn't necessarily mean that you're better. And I think even in our 12% is not like we will look back and say all the 12% we had were invested the best way. So I think there's room within the 12% to actually do it better. My marketing people will kill me now for saying it, but I think that's the case. So we don't have any plans or needs right now to go above 12%. The beauty would be if we could find ways of actually taking the percentage down, but we also don't have any plans about that because we have said that investment level, when it gets to having the assets, you know, we invest about half of the money in actually having relationship with federations, with teams, with athletes and celebrities and the rest to activate them. And so far, I think that that's been a decent number. If that is changing, I mean, you say people are ramping up, and we don't really see that because, yes, there are some brands who are ramping up, but there's also someone who's slowing down. So when it goes to the competitiveness by actually signing things, I feel it's pretty stable. The best athletes and the hottest celebrities are always getting more expensive. But when you look at the width of it, I don't really see any big differences. The running business, your question is, again, an interesting one. And to quantify exactly how big running is depends on what shoes do you put in there. But I would say it's around EUR 2.5 billion, which, again, when you put that into the context, you will see it is a pretty big running brand. But again, we have created that mostly on the higher end of the pyramid and on the speed thing. And if you look at competitors that have been very successful, they have been much more in the everyday running and especially in the comfort running. And I think we learned from that, and that's also why this hyperboosting is so important for us because we really, really believe that there are Adidas consumers that love a brand who didn't have the products available that they would like to buy from us. And all research that we have done shows that. And we believe that the sector of comfort running, because heavy cushioning, instep comfort, and all those things are also things that people are looking for in their non-performance, what should I say, shoes, meaning in the lifestyle and comfort area. So this hyperboosting is for us very important. We might be a little bit late to the game in your eyes, but we didn't have it ready yet, and that's why we waited. And again, since we were growing anyway and running on the high-end side, we also didn't see the necessity of it. And the third thing is you have to remember we went out of running specialty, meaning that we didn't have any, what should I say, activities and relationships with running specialty because previous management thought we could go D2C on it. To build that back again, a; to hire people to be in the running communities and also to get the specialty to buy into you again, is, of course, something that takes time. And in many, many markets, we were totally out, and the share we have in running specialty in many markets are still very low. And as we're building that with more innovative products and more visibility, of course, we see huge potential in the running category. So that is the category I think that has the biggest potential in performance side to grow in. Operator: The next question comes from Piral Dadhania from RBC. Piral Dadhania: My first question is on the top line, and my second question is on share buyback potential. So sorry to have to come back to this, but could you just help us understand perhaps for the first half of 2026 whether the wholesale order books, which make up like 60% of your revenue base, is showing double-digit revenue growth? I think when you took over, Bjorn, you talked about 10% revenue growth through cycle. So is there anything, aside from obviously the external macro, which is very uncertain, but I think that's true for not just your company but your competitors, is there anything beyond that within your control that would lend itself to a different outcome for '26? And then the second question is just on the buyback potential. I think it's fair to say that the Adidas share price and equity valuation doesn't appear to be fully reflecting all the strong execution and the performance that you're delivering, including relative to peers. I think, Harm, that the initial targets when you guys all took over was to reduce the leverage to 1x net debt to EBITDA to build up a gross cash balance to close to EUR 2 billion, which it looks like you'll achieve either by the end of this year or into the first part of next year. So do we think that a good use of growing free cash flow, especially as the working capital position starts to wind down, as you suggested in your prepared remarks, may be useful in sending a positive signal to the equity markets and to start buying back your stock at a discounted valuation? Bjorn Gulden: I mean, the simple answer to your first question is no. There's no reason why we shouldn't only internal-wise get to the double-digit growth. I think that's fair. And buyback is not my area of speciality, so I give it over to Harm. Harm Ohlmeyer: Piral, thanks for acknowledging that the capital market didn't get our story in full. And that's probably true. So we actually, we look at that when you look at the share price, right? But, first and foremost, we say we want to invest into the operational business. What we have done, you have seen that in the operating working capital. Secondly, you want to be a solid dividend payer, which is always on the 30% to 50% of the net income from continued operations. And then of course, you know, I have a good, good analogy. And what I said, I was one to have EUR 2 billion of cash on the balance sheet. We either, you know, achieve the year end or with some rounding, you know, getting there in Q1. Yes, there are always some cycles from a working capital point of view. But you're absolutely right. So, but that's definitely something we will look into next year when it comes to share buyback, not this year, unless we believe we want to be opportunistic here or there, and then we want to do something short-term, right? But right now, let's get to the EUR 2 billion first and then look at that for next year. That's probably the most logical answer. But we always, you know, look at that opportunistic as well. Operator: Next question comes from Thierry Cota from Bank of America. Thierry Cota: Actually, two questions on Q4 and H2 '25. You've said your implied guidance leads to 6% to 7% organic growth rate in the fourth quarter. So what do you think would be the factors of such a slowdown versus Q3, especially when the Yeezy headwind drops to about 1%. And the second question would be on the EBIT. The EBIT guidance, the new one for '25, implies about EUR 100 million EBIT in the fourth quarter. So what do you think would be the drivers of such a decline versus Q4 '24? So you're on your decline when you remove the one-offs that you saw last year. And I would like to ask, would that be linked to the DNA, which it seems was pretty low in Q3? So is there a catch-up that we could expect in the fourth quarter and impacting negatively the EBIT? Bjorn Gulden: Well, I think as always, Q4 is this quarter where people react to different things, and we are always careful guiding for Q4. It's always the same because we are dependent on that retailers take their order book. We are dependent on what happens when it gets to discounting on the digital side. That's why I think historically you always see me guide very, very conservatively on Q4. I think that's the only reason. And, you know, there might be in the way that we are trying to improve ourselves that we will also have some one-offs that we will do in Q4. So I think it's just a conservative outlook and the need not to say anything that we actually disappoint you because that's always in the way we talk. And then I think there was a question to you, Harm, wasn't there? Harm Ohlmeyer: Yes, there's nothing specific on the depreciation that you called out, and that is not the reason for the Q4, but I want to echo what Bjorn said. I mean, when you get ready for '26, we have achieved a lot in the first nine months, and there's nothing specific we look at last year as well, or even going back in history, what our Q4 was. There's some seasonality in this one, but there's nothing specific we want to call out. So as Bjorn said, I want to make sure that we achieve what we say and then get ready for the World Cup here. Thierry Cota: Sorry, just a follow-up. The DNA again was particularly in Q3. Was there any particular reason for that? And should we expect a rebound in fourth quarter? Harm Ohlmeyer: I'm not aware of any specific reason, quite honestly. Let me come back to you then, Thierry, but I could not say there was any specific in Q3 or anything special for Q4 relative to Q3, but -- and if you look into this one, I'm not have anything specific. Operator: The next question comes from the line of Andreas Riemann from ODDO BHF. Andreas Riemann: Two topics here. One is tariffs. In the past, you stated that the market for takedown versions of tariffs would be larger than the market for original versions of Samba or Gazelle. So today, you didn't mention that. So how relevant are those takedown versions at this stage? And then what markets is the penetration of the takedown versions already quite high? This will be the first topic. And the second one on the cash flow, Harm, you mentioned the EUR 800 million or EUR 1 billion to be generated in Q4, that operating cash flow, right? That's from my side. Bjorn Gulden: Yes. I think I quoted that because normally, when you have higher end price points, the market for the takedowns is bigger, I have to tell that the sell-through of the higher end, meaning the originals, has been so high. So still, the higher end is actually bigger than the takedowns. Having said that, if you look at the family channel, of course, they have followed all these trends. So you will find takedowns of all the [ Terrex ] shoes in the market. But it is true that in this case, and it might have to do that, you know, the original classics and [ Terrex ] are, you know, between EUR 100 and EUR 120. So it's not expensive, expensive, that the higher end of the market has actually been bigger than the takedowns. That might change as we are converting more of the takedowns also into the same materials as we do upstairs. But to be honest with you, because we've been so successful upstairs, we haven't pushed the takedowns as much as I thought that we had to. So this is more of a, what should I say, coincidence in the sense that it has worked so well in the distribution upstairs, also in our D2C, that the need for doing takedowns hasn't been there. So I think this is a very unique situation, to be honest. Harm Ohlmeyer: Yes. And to the second question, we indeed talked about operating cash flow, you're right. Sebastian Steffen: Maura, we have time for 2 more questions. Operator: Next question comes from Anne-Laure Bismuth from HSBC . Anne-Laure Jamain: Yes. My first question is regarding the FX. So can you tell us or help us to quantify what would be the tailwind from FX on margin in 2026? My second question is related to tariff. Actually, regarding the tariffs in Vietnam, a final trade agreement is expected soon. So is there any industry expectation on Vietnam tariff changes for the sportswear industry? And maybe your last one regarding the performance in the U.S. So you talk about the reset in accessories. So is it a one-off impact? So does that mean that all things being equal, you can return to a double-digit growth rate in Q4 -- thank you very much -- in the U.S.? Bjorn Gulden: Well, the tariff for the U.S. hasn't changed. They came out and said they keep it at 20% and then negotiate in categories that might be exempt. But there's nothing new on that. So all products currently is at 20%. And we are not assuming any reduction because that would be dangerous. But, of course, we hope with Vietnam and other markets that shoes and apparel would be exempt. But that's not the case. And I think that came out actually yesterday for many markets, if I'm right. And then when it gets to the US, the accessory business that is not performance-oriented has been, I would say, first of all, a lot China sourcing. So, of course, that had to change. And secondly, it's been in the distribution that you're trying to upgrade. So, It's not a one-off in the sense that there is something you do from today to tomorrow, but I think there's good, good chances that that will come up again to double-digit increases. There's nothing drama in this, to be honest, and maybe we didn't explain it well, but it did hit us in Q3 for those reasons, and then there are plans actually to improve that very quickly. There is also no inventory sitting anywhere to clean up. I think people under or overestimated the impact of this. So I think accessories being global is 7% of our business, and we have said all the time that it should grow quicker over time. It's kind of the last thing in the sequence of footwear apparel that accessories come. And we grew it 1% now, and I do think that in the future when we get to '26, we should see double-digit growth there. I think that's my only answer to it. And don't read too much into this because it is not a big, big thing, to be honest. Harm? Harm Ohlmeyer: Yes, When it comes to the FX for '26, I understand you all want to have a concrete percentage or number for your spreadsheets, but I can just promise you there will be tailwind, given where we're hedged. But there's more than just the U.S. dollar. There are other currencies as well, whether it's the Japanese yen. I talked about Argentinian peso, Mexican peso, the other currencies as well. We have sizable markets, meanwhile, not just in Latin America, but around the world. But also, assume it will be tailwind when it comes to Euro, U.S. dollar. We also are fully hedged already for spring-summer '26, but there are also some open hedges. We normally hedge only 80% of our exposure, so it also depends on where the spot rate is, and we always run a simulated hedge rate if you would close it today, but of course we are waiting. It will be more tailwind if the dollar goes to $1.25, then we probably struggle on the translation again. But overall, we are going very positively from an FX point of view into '26. That's all I can say. Operator: Today's last question comes from the line of Anna Andreeva from Piper Sandler. Anna Andreeva: Happy to have made it. A follow up on North America. Great to hear about the double digit strength in footwear and apparel during the quarter. Can you talk about how lifestyle is performing versus performance in the U.S.? Is Terrace still growing in the U.S.? And what are you seeing with sell-through in Run Specialty and other wholesale partners? And then separately on gross margin, improved very nicely sequentially in the region, despite the tariffs. Maybe talk about what drove that and sustainability of that as we get into the fourth quarter. Bjorn Gulden: I think it's fair to say that the growth in the U.S. has been more lifestyle-driven than performance. I do think it's fair to say that for us to be a real sports plan in the U.S. we need to continue to invest, to get better distribution of a market share in the sports trade is very low. And you're asking about the Running Specialty. We were almost out of it. So we expect actually over the next 18 months to see a pretty high growth when it gets to Running Specialty because you're coming from a low base. And we are a hundred percent sure that the investments that we're currently doing in American sports, connecting to both college and professional sport will help us to get much better distribution with the [indiscernible] of this world and the academies and also in the specialties. So I think it's fair to say that it's obviously been lifestyle-driven so far. Anna Andreeva: Terrific. And on gross margin as a follow-up. Bjorn Gulden: Yes. As I said, I do think that the gross margin in the U.S. is, of course, dependent on that you get good distribution and that you avoid discounting. I do think also that the margin in general in the U.S. has to do with scale. There is an upside on margin in the U.S., no doubt about it. You have seen improvement, and that has, of course, to do that we have had better sell-through, and we got more of the right product into the wholesale business and we have run especially our factory outlet much better than we used to do, but that has clear an upside. So we see optimistic. Okay. If you take the tariffs out, which, of course, is then the negative side of it. But everything being equal, we should be able to build gross margin and actually our operating margin in the U.S. over time because we have not run that market optimal, to be honest with you. Sebastian Steffen: Thanks very much, Anna. Thanks very much, Maura. And of course, thanks very much to Bjorn and Harm. And thanks very much to all of you for participating in our call today. . Before concluding today's call, I would like to highlight that we will be welcoming a group of investors here at the World of Sports next week. We talked quite a bit about our excitement about our product pipeline, be it Hyperboost, be it our new Original sports line, be it the Superstar, but also the material updates within tariff. So if you're interested in experiencing that, then please let us know, and we'll be happy to host you next week as well. If you have any more questions to ask, then please feel free to reach out to Adrian, Philip, myself or any other member of the IR team. And with that, thanks very much again for your participation. We wish you a good and golden autumn season and look forward to chatting with you soon. Bye-bye.

Operator: Ladies and gentlemen, welcome to the adidas AG Q1 2025 Conference Call and Live Webcast. I am Maura [ph], the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Sebastian Steffen. Please go ahead. Sebastian Steffen: Thank you very much, Maura [ph]. Good evening, good afternoon, good morning, everyone, wherever you're joining us today and welcome to our Q1 2025 results conference call with our CEO, Bjørn Gulden; and our CFO, Harm Ohlmeyer. Before Harm and Bjørn will talk you and take you through the puts and takes of the quarter and explain our expectations for the rest of the year. I would like to ask you, as always, once again to limit your initial questions to 2 during our Q&A session in order to allow as many people as possible to ask their questions. Thanks very much. And now before I'm going to hand over to Bjørn, we will start with a video to get everybody in the right adidas mode. Let's go. [Video being played] Bjørn Gulden: Yes, hello, also from me. I hope that you enjoyed the video showcasing the feeling we currently have in the brand. The picture you see on the screen, you probably don't know but it's Bad Bunny, our hero in the Latino countries. And he is helping us selling a lot of different products. Also low profile, as you can see on this picture, we have talked about low profile for a long time. Having now also moving into the main consumer and then also helped by an artist like Bad Bunny. But mostly, we are a sports company. And those of you who followed us this weekend, we had a fantastic weekend first with the Road to Records on Campus, where we had about 200 professional athletes running different distances and as you can see, even setting world records, national records. And then we also celebrated together the adidas family, we had 2,500 people running 5Ks in different speeds. And again, it showcases the enormous power of what we are doing and the spirit we are creating here on our fantastic Campus. But even better was what happened then in the other competitions, you probably saw that we won both the men's the women's London Marathon and where Assefa actually won with a new world record. In addition to that, I think we won both in Madrid and Hamburg. So there's no doubt that we currently not only have the best athletes but also probably the best shoes. And of course, that is very, very important for us. Important is also that, as we promised you, we feel we had a very strong first quarter. To be honest with you, it was actually stronger than we expected, I think partly because we have very good product that we have launched; and secondly that both the brand heat and the operation in the different markets is actually working better and better. And that's despite, of course, the challenges that we have talked about and has now been accelerated by the U.S. tariffs. We will be back to the tariff issue at the end of presentation. The numbers, I'm sure you've seen many times but of course, we have to give them again. Net sales reported currency-neutral of 13%. If you look only for the adidas brand and take YEEZY out, it was even 17%. Very proud of the development of gross profit, more than 52%, up almost 100 basis points. If you look at all the adidas business, up 160 basis points. And again, it showcases again the strength of the current line and the fact that we're able to sell it boldly to see and with a wholesale partner but very little discount compared to what has been done before. So that all gives us then the EBIT or the operating profit of €610 million which is then almost a 10% that we talked about we would like to achieve in our business model and as you can see, almost a 400 basis point improvement. And again, I know it's only a quarter and I also know we're only 2 years into our 4-year plan but I think you can see that in a decent quarter with decent operations, we are able to deliver 10% EBIT. Of course, we will not do it this year but we think in the midterm, we are actually able to do that. And I think the first quarter actually is a proof that that is achievable. We are a sports brand and the culture that are born from it but performance is very important for us. So we have talked about this for a while that we changed to you about this. We have been running the activations and a lot of campaigns over the last 3 months. And what is very, very important is this local execution. I think you all agree that the world has become more local and that's why we have put a lot of energy on talking to the consumer locally. That means in the global frame of the campaign but always in the mind of hitting the consumer with what is locally relevant. And I think you see those examples here on the screen. Same thing goes for performance. Although we have a huge, I would say, heat on the lifestyle side, our performance launches have become more and more important. And we are in all the category launches, launching products that are both innovative and good-looking, meaning that we are taking share. Here, the same thing, the sports that are relevant are not only the big sports but also the longer sports. And we have the same strategy in our product offer as we have in our marketing offer that we allow the markets then to focus on what is important for them and are executing that as good as we can. In general, we have said it for a while that visibility in sports is important. And when we are visible in competition, we should also talk about it. That's why the digital content is important. And if you follow us or you follow sports in general, you will see that Three Stripes in our logo, in our athletes are more visible than ever. And that's a clear strategy that we think is currently important. But as said, brand heat and the culture born from sport is important and we also know the industry would never be as big if it was only performance. So lifestyle is very, very important on the commercial side. Same thing here since 18 months, you know we have changed the visual language of our lifestyle business. We have simplified the T4 logo. And it's the same theme here. We have a language which is global but the execution is extremely local. And when you look at this issues, you see the energy that the different markets are doing and the different tools and the different avenues they take extremely proud of the local energy when it gets to actually pushing the brand for the right culture locally. And the same thing here, you cannot create brand heat if you don't create a lot of new products. We have, of course, certain franchises that are doing extremely well. But the heat is being created by updating the franchises, by giving new materials, by doing limited editions and of course, a lot of collabs and activities that we had in the last 3 months has been very, very, very high. And it is the same thing here, very strong activation locally both when it gets to the product and of course, also the activations around the product. On this screen, you have to notice one thing, up in the right corner, you see animal print. Every style that is currently going lifestyle-wise with animal print is doing extremely well. And it's one of those small things that you're actually creating an enormous heat right now and where we have probably been leading the trend. When you then look at the sales numbers, again, very, very happy to see that all markets are growing. North America, you see the adidas brand up 13%. The whole business up only 3%. But that is, of course, that we missed the YEEZY business that we had a year ago. And as you know, the more YEEZY business, there's no more inventory. That whole thing is history. Europe on top of very strong growth over the last 18 months, another 16% for adidas brand. Greater China up 14%. There's no doubt that our Chinese team are taking market share, extremely happy with the development there. Japan and Korea, we talked about that we were a little bit skeptical about the Korean business because of the destroyed warehouse and the trapped merchandise. They have been able to turn the business into growth despite this. Although we have a couple of million units actually trapped in warehouse but same here. And the brand is trending positive in both the 2 trended markets in Asia. LatAm, been on fire for a long time, same this quarter with us 27%. And the same goes for the emerging markets being up 25%. So all in all, currency-neutral up 13% and adidas up 17%. And as I said, higher than we had planned, higher than we expected but of course, also an attribute again to the great work that our teams are doing. We look at the channel wholesale of 18%, of all retail stores of 13%; e-com, down 3% but you see that excluding YEEZY and main adidas brand, up 18%. And this is, of course, the €150 million we sold in March last year of the YEEZY product that is missing. And as you can see, a very strong development digitally than for the adidas brand. That gives us the 65-35 split this quarter. Again, this varies from quarter-to-quarter depending on where the consumer is. And as you can see this quarter, brick-and-mortar then growing stronger than e-com that gives the 21-14. I'm sure that when you get to next quarter, the wholesale business will probably be a little bit lower in the D2C higher but that's the fluctuation that you see. We don't have a global target for this balance. We will in the individual markets be where the consumer is. And as you can see, that is currently then between 60-40 and 65-35. We continue to invest in our bourgeoisie flagship stores and stores in general. I think we have opened around 70 stores in the last 12 months, opened net 70 stores. We have opened, I think, 230 and closed around 160. And as you can see, we really tried to modernize our fleet. The last one we did was actually in Las Vegas, I think you see it here on the screen, on Friday. And showcasing the brand with great stores and great merchandise is, of course, part of the strategy and that will also continue. We it gets to the division, Footwear leading again with growth of 17%. Apparel gone from almost negative numbers to now almost double digit and accessories also now following the trade at plus 10%. Again, we are starting to sell more apparel and there's more demand for apparel. But as we said many times, we need to manage apparel more carefully because of all of the apparel in the market and all the discounts. But again, you start to see that getting close to double-digit growth as well. That gives you the almost 60% split footwear and non-footwear, 61% footwear, 32% apparel and 7% accessories. I think you all agree that is a very healthy, I would say, split. That was kind of the intro and then I hand over to Harm, who will take you through the details of the quarter financials. Harm Ohlmeyer: Thanks Bjørn and good afternoon, good morning from my side as well. And as always, I shed some more light into the P&L and the working capital and the balance sheet. And as you're very familiar with the P&L already as we preannounced last Wednesday, I give you just the highlights of the net sales again. Bjørn talked about it, so 30%, both nominal and currency-neutral growth. And again, very clearly, the adidas brand growing 17% which is a more meaningful number. And again, for the last time we talk, excluding YEEZY that's why it's 17%. The same, you also see on the gross profit that you could compensate for the margins that we generated with YEEZY last year as well. So we are 90 basis points up. And if you look at the adidas brand, again, an indication for the future, we are actually 160 basis points up. How did we do that with some more details? Of course, as we are selling more and drive more volume, also our factories in Asia and a better planning for these things, so the product costs are favorable for us. Trade has been planned better and has normalized. So there was a slight positive again in Q1. The business mix and the currencies have been neutral. We continue to have strong demand from the consumers and from the retailers out there. So the promotional cadence has been limited. So that has been a positive as well. And then as you can see, YEEZY, of course, is a negative but could be fully compensated. And again, FX since some quarters has been neutral. Going to continue with that one. We keep investing into marketing. As we said, always plan your models around 12%. You see here, it's almost €90 million more in absolute terms, 14% up. Even more important is the operating overheads. I know we had €200 million of one-offs in '23 and €200 million of one-offs in '24 again. But now as we are driving towards a healthy company and being a good company and then '25, you see that the leverage is coming now. It's pretty meaningful in the first quarter with 3 percentage points, only 3% growth despite the 30% currency-neutral growth that we have. And we always said that we have an infrastructure and organization that can cater for €30 billion business. So that where you see that for the first time in a very solid way in Q1. That, of course, leads to a significant operating profit and Bjørn mentioned it, 9.9% is, of course, not 10% but a good indication that we are clearly on a progress to be a good company and this shows the potential to be a healthy company in '26. Yes, only 1 quarter but more to come. So it gives us a lot of confidence, regardless of the tariffs, that we are on the right track to become a healthy company again. When you become a good company, again, you also see in the more details when I go below the operating profit which is probably news from today when I give you the details towards the net income that the financial income has normalized. We actually participate also on the cash on the balance sheet that we get some interest on, so 41% more on the income. And even more important, we are avoiding some of the expenses that we had last year. I mentioned that last year, we had some repatriation of cash from countries in Latin America. And of course, we had to deal with hyperinflation accounting treatments here and financial expenses primarily for Argentina and Turkey. That is largely behind us, at least not in the dimension that we had last year. And you see also here the normalization. That's what we always say, going forward, if you have a net financial expenses of €30 million a quarter, it's probably something you can play around in your models. That leads to a significant increase of 139% in the IBT. And then also the taxes, what we kept saying when we have a normalized profitability, we get it to a normalized tax rate again, around 25%. That leads to a significant increase of the net income of 155% to €436 million and the basic earnings per share of €2.44. That's the P&L. When I come to the balance sheet, you've seen the inventory is up 15%. This is again according to the plan as we want to be a growth business, especially with the adidas brand. We said we want to grow in double digits. So that is just needed in order to fuel the growth and the demand that we have in the future. When you look at that from the development point of view, as Bjørn said, YEEZY is behind us. You still see that last year, we had some YEEZY stock still in our balance sheet. We finished with €5 billion at the year-end, now at €5.1 billion. And it's still probably slightly growing into the future. Also linked somewhat to the tariffs that some will come, some we don't know but expect that to grow slightly as well to the end of Q2. But again, no worries. The aging is very, very solid fresh product and it's definitely a benefit right now to have that inventory, especially in the U.S. When it comes to receivables, that is a reflection of the growth that we have with our retail partners. You have seen that we are growing significantly with our retail partners and that is reflected in the accounts receivables. The same on the accounts payable, that is reflecting what we owe our suppliers in Asia. That gives you an indication also that we are sourcing much more, not just in value but also in volume. Of course, that is reflected in the inventory, as you have seen earlier. That all leads to operating working capital. That went up slightly as well but that's where it's probably more important to look at the ratio. We always said we are a healthy company, dropped below 20% of operating working capital over net sales. If you're around 20% to 22%, we are a good company. And as we are building up inventory for the future growth, expect it to be slightly above 20%. But again, a healthy company means that's our ambition to be below 20%. So also that very, very good development and very, very strong on the balance sheet. That's being rounded up with cash and cash equivalents €1.4 billion. You might remember that we finished with around €2.4 billion at year end. We used that to invest in the working capital for the future growth. But on a like-for-like from last year, €400 million up or 32%, also very, very solid development. And also good to have that in a volatile environment that we are maneuvering through with confidence. That shows you on the left-hand side that we are making progress on the cash, on the balance sheet and more to come. And of course, the same thing, adjusted net borrowings are going down as we keep paying back our long-term debt through our bonds that we have taken in the past. So that is also according to plan. And our rating agencies, Standard & Poor's and Moody's, will be quite happy to see the next chart because also we came down from a level -- net leverage ratio from 4.7x in Q1 '23 to now 1.6. And our internal target is to always be below 2 in our financial policy. So we have some flexibility but that shows you that not the P&L is in good order but the balance sheet is in good order as well. And that is -- we are well set up for the future. And with that, handing over to Bjørn again. Bjørn Gulden: Thanks, Harm. So that explains to you where we are currently after the quarter. Harm explained where we are after 1 quarter. We have 2 more years to go before we are kind of at the end of this phase of our plan and it's standard to tell you where we think we are going. First of all, I think you agree, we feel we are and have been the hottest brand for a while. It started, of course, with the tariffs but you also know it's not only the tariffs. We have extended the Samba, Gazelle and into Campus and SL72. And again, for those of you who think that this is the interest, don't worry, the heat of these 5 is being managed. And of course, if you now go into the regional environment, you will see that we're selling on a much wider scale than what we did about 12 months ago. The next thing in the marketplace that you will see grow is low profile, talked about it for a while. We clearly see globally now that especially for her, different styles are taking off. And we clearly, clearly see that she's adding these to her locker but we even see it, as I said in the beginning on some of the male styles and especially with what we have done with our friend in the Latino markets. The next thing which is important for us and, of course, value-wise, it's going to be very, very, very big for us is lifestyle running. Lifestyle running either come from you activating all shoes again or coming with technologies that you kind of tweak. What has happened now is that shoes the moment to go in the performance side that's gone lifestyle. And you know we've done a lot on the adidas range. We have this EVO 1 and EVO 2 which is the lightest and probably the best running shoe in the world winning marathons. We put that together with SL in the opening of Olympic ceremony. We have done takedowns like the Pro 4 which is also winning marathons. And then we ended with training shoe that you see here, the Evo SL at €150 selling price. That's certainly because of the design, the comfort and I'm sure also because of the activations that went also lifestyle. And it's currently our best-selling shoe in many, many markets, in many, many retail, what do I say, channels. And we will extend this into more material versus a lot of colors and it's a shoe that you will see very, very visible. But that's only one, the line-up on lifestyle running is huge. Here you see some of them where we combine classic silhouettes like SL72 but also the LA Trainer. We have the own comfort area, where I urge you to look at Adistar. That's also inspired by [indiscernible] for us a couple of months ago. We have in the Vistech area on the right side, the new Climacool shoe which is a 3D-printed shoe which was meant to kind of be an incubation of a technology but certainly goes volume. So across these 9 models, you will actually see them being quite volume drivers in certain markets. You will not see these as global trends, meaning one shoe goes everywhere. But you will see some of this being very, very commercial in some of the markets and other styles being in other markets. And I think this is so crucial that you also understand that the localization of the offer because extremely important these days. When we then go to the classics again, we talked about the Superstar as the next movement out of tariffs. Then we did tell you that it was not necessarily for us to launch it given that the classic shoes that were already in the market were doing so well. So we have phased the launch of the Superstar from different markets to different timings. And you will continue to see a lot of activations with our partners like Pharrell. And you will see activations like going back to when I was young in the 70s to roller skates. And this is just one example of what you will see with Superstar. And don't forget that Superstar in White/Black and Black/White are the big issues that we ever had. So you will, over the next 2 years, see that the Street will be clearly have the Superstar being extremely visible. Apparel, we have told you for a while that apparel was doing extreme well with the pure players in the digital world but not so visible in brick-and-mortar. That has started to change. And I think it's fair to say that track tops, bottoms in all kinds of materials and shapes, we are now very hot. And you see it now in the streets in almost all the markets. And the demand for apparel right now is also much, much bigger from our retail partners than it was only 3 to 6 months ago. Important is also that it's not only in the higher end of the market but also on a wider scale. And we clearly see that this casual look, combined with the retro look and especially with Three Stripes is high in demand. For the lifestyle side, always important to remember, we are a sports brand. And the strategy we started out with 2 years ago was, of course, to try to create heat. I think we've done that successfully. I agree that some of it is luck, some of it is timing but it's also hard effort. And then to take the heat that we now have created both in footwear and in apparel and the commercial visibility to then drive performance. I think you will all agree it's easier for a consumer to buy our running or training shoe if she is already positive to our brand from the lifestyle side than it is opposite. And that's, of course, what we are now trying to do and where we see we're making great progress in all markets with almost all retail partners. And I can promise you that we are and will invest more money into sports and more resources into sports because we are, of course, aware of that, that is our future and that we need to have the background in performance to continue to be strong both in the lifestyle area, the comfort area and in the more commercial area. The 4 sports or the 4 categories that we need to be visible and successfully globally are, for me, football. I think we are the leader and we are very, very optimistic what's happening next year. We are making huge progress in running, both on the performance side, especially when it gets to running fast and winning and running from A to B as fast as you can but also in the everyday running and in the comfort area, we're making progress. And as I already said to you, to trigger that into the lifestyle area is for us very, very important because that's something that has been missing for some years. Training, I mean, everybody around the world that is doing sports need to train. We have to be aware of that the training market is not necessarily global, meaning that you need to approach it both marketing-wise and to a certain degree, product-wise more local. That's what we're now doing. And then basketball will continue to be important, especially for the U.S. market but also in many other markets because the culture coming out of basketball is actually global. And then in addition, we talked about it for a while. We think we need to be visible across many, many sports both global and locally. And as you know, there are many, many sports that are extremely important in certain markets, although they don't have the global appeal that some people are talking about. What is also a little bit cool, in my opinion, is that this image of not having a lot of, what should I say, innovation which adidas had, was in my opinion, wrong. We have a lot of resources focusing on innovation. It's therefore a little bit cool to actually be named a fast company when it gets to innovation. And when you see the innovation that we are bringing in running which probably is the most technical category, proud to see that the Pro 2 now also won the men's marathon in London. Although the female winner which also set the world record was actually running that Pro 1. So we have 2 shoes out there which are setting the best times in the world. The women's workup in England will be a launch for us on women-specific rugby teams. Same thing there, a lot of energy and innovation going in to serve the best. And going to the Europe in Switzerland, same thing, very specific product made for her, both from a fit but also from a plate point of view to avoid injuries and increase performance. So again, very, very focused innovation on the athlete that is going to perform in Three Stripes. We talked a lot about football. The World Cup in the U.S., Canada, Mexico next summer. We already did our launch. We were in L.A. a month ago with about 500 guests showcasing all our products both for the performance and from the culture side, the -- what should I say, the adidas family with Messi and the [indiscernible] and other people were there to kind of celebrate it. And I think it's fair to say it's probably the best launch that I have been to ever when it gets to a collection and a concept for the event. And needless to say, although we now have the tariff issues, we're really looking forward to showcase our brand in the U.S. next year because we think we should be the clear leader in that tournament. What is also cool and new is the way football culture has now spread around the globe. Although many people are not necessarily soccer fans, the soccer culture, meaning old and new soccer strips product coming out of the soccer, what should I say, area are now going fashion. I have never seen this before both for male and female. And of course, this plays straight into our hands when you see what is going on in the market. And of course, we think that will even strengthen towards the World Cup in U.S., Mexico and Canada. Going forward, how do we then think we can use all this? To continue to grow double digits, as you know, is our target. Well, we need to be a global brand with a local mindset. And I say local again and again and again. The world is developing in a way that you need to be successful locally. And locally, it always starts with the consumer and the athlete. We need to give her what she wants and what we can give her within our frame. The markets are responsible for the offering and the marketing that we're doing in the market. And a market for me is a cluster that can own the inventory and can actually find the synergies in the best possible way. And then headquarter, the global side is, of course, to set the strategy, to give it the frame, to fund the projects, to come out with innovation and of course, make sure that adidas has a future that is going to be in line with what we have promised. To do all this, it is very important that we need the best people in the markets in China and in India and in the U.S. We need the most talented people that can take all the tools that we give them and actually use them so we're winning in the market. Local strategy does not work if you don't have the best team and if you don't give them the freedom to move and that is what we are currently doing. So all of this, you remember, a couple of months ago, we gave you the guidance for this year. We said that if you exclude YEEZY, we should have a double-digit growth. If you include YEEZY, it will be high single digit. And with everything we knew, we thought we would then promise you an operating profit or EBIT between €1.7 billion and €1.8 billion. We did, though, tell you that there was some uncertainties around the world that you should be aware of and that could have an impact on the full year. And surprise, surprise, that came. And as you can see on this a little bit messy screen, it shows you in green what the current increases are in the duties compared to when we talked to you the last time. You also know that on top, you have the duties or the tariffs that were initially initiated by the U.S. and then suspended for 90 days. So currently, on the import, we have the green duties on top of what we had when we set our guidance and when we actually did our planning. But of course, there is a danger that we will go back again to the top of the screen to the higher duties when the 90 days are over and we don't really know. So what have we done? We have, of course, custom care as much as we could before the 2 dates and the different duties were activated. We have, of course and we are still, analyzing all kinds of the different scenarios. We have rerouted products out of China that was meant to the U.S. market than to other markets. And we have, of course, done different pricing reviews. I have seen that certain presses writing that adidas is raising prices. That is, of course, not true. What we said is that should the duties stay, then of course, there will be price increases in the U.S. market. And then we will not be the first one to move on prices but we would follow what the market leaders are doing. So should the duties go away, again, there will, of course, not be price increases. But I think we all agree that should this duty stay or even be higher, then, of course, it will cause a price increase in the market in general, not only in our category. What we also did was that we got all the major suppliers together here in Herzo. We had about 300 guests here for 3 days which we do every year, to be honest. But of course, this was also then a topic, how can we in the chain between the suppliers of the brand and the retailers work in a balanced way so that we all can get through this uncertainty the best possible way. That is, in our opinion, almost always the best way. So back again to the guidance. We do actually confirm the guidance the way we initially gave it but you need to consider the following that better-than-expected Q1, strong order book and as I hope you also confirm, the strong attitude towards our brand globally would, in a normal world without the tariffs, have caused us to raise our guidance, both topline and bottom line. But given the direct impact of the current tariffs that we see and the danger of these tariffs going even higher after the 90 days period plus the possible negative impact on the consumer in the U.S., we warned that there might be some negative pressure on this because we don't really know. But again, we confirm under the things that we know, we believe that we can currently gain more momentum in the other markets. And remember, U.S. is only about 20% of our business. So we can kind of finance the losses that we're doing on margin in the U.S. by then overachieving in the other markets. That is the current outlook that we give you. And then whatever happens, we do believe that we have the brand, we have the talented people and we have the resources to manage through uncertainty. We are focusing very, very much on achieving the best success that we can in the other markets. And again, for 80% of our business, these tariffs have no impact. And then the whole service organization is, of course, focusing on helping the U.S. so they can make the right decision. I think with that, we think -- as always, that in sports, we should be a winning team and feel that at least we are on the right way. And with that, I hand over to you, Seb, for the next step. Sebastian Steffen: Yes. Thanks very much, Bjørn. Thanks very much, Harm. Maura, we're now ready to take questions. Operator: [Operator Instructions] The first question comes from Ed Aubin from Morgan Stanley. Edouard Aubin: So 2 questions. First of all, Bjørn, some of your peers in the apparel and footwear world have been talking about some consumer weakness over the past few weeks back, particularly in the U.S. Have you seen any weakening of demand at the sector level, number one? Number two, on the 10% tariff increase that you just talked about, just to understand, if you wanted to fully pass on this 10% price increase, everything else being equal, what type of prices -- price increase would you need to take? And assuming that tariffs would stay at about 10% for the remainder of the year and forgetting the indirect tariff -- impact of tariffs, would you be in a position to meet your €1.7 billion, €1.8 billion operating profit guidance? Bjørn Gulden: To answer your last question, I think you had 3 there, if I'm really honest with you. But yes, we think that we can achieve our guidance with those duties for the rest of the year. That's what we are currently working under that assumption. On your first question, when it gets to the demand, we have not seen any, what should I say, direct change in demand for our product in the channels that we are. You know at the beginning of the year, there was some, what should I say, weaker demand due to different things. But we cannot say that we, over the last 8 weeks, have seen any lack of demand because of this. And then the third question, yes, the price increase is -- you have to remember the 2 things here. I mean one is what price increases do you need to actually pay the duties? And you can do the math on that. But then the question is, what is then needed to actually keep your margin both for us and the retailers? So of course, the real increases are higher than the duty. But again, I don't want to give you any numbers because you can do the math yourself because there are many ways of putting the assumptions in here. We feel that we have the tools to get through this the best way. You probably know we have reduced China export to the U.S. at a minimum. Although China is a country of origin, when it gets to production, it's actually up for the rest of the world and of course, for their local business. And then when you look at the other countries, the duty increases that are there are currently at 10%. So it's the same. So there's no reason to change any strategy. But should the duties for the different markets, Indonesia, Vietnam or whatever, be then difficult -- different, then of course, we will then start to allocate product in a different way. But currently, we keep the plan, China for the U.S. to a minimum. We keep the production where it is from the other markets. We have not initiated any price increases but are, of course, observing what the markets are doing and then we will inform you as we go. Operator: The next question comes from Piral Dadhania from RBC. Piral Dadhania: So my first question is just in relation to the formation of the wholesale order book for the autumn/winter '25 product which I imagine you're currently taking orders for. Could you just give us a flavor as to the kind of discussions you're having with your retail customers in relation to forward-looking orders? Is there any change in their sentiment or their approach towards placing large orders in anticipation of potential changes to the tariff regime in the U.S., for example? And then my second question just is a clarification, Bjørn. In your prepared remarks, you talked about the 10% EBIT margin target as being a midterm target. If I'm not mistaken, I thought previously, we were sort of trying to work towards that 10% by 2026. Is there any -- just to clarify, is there any change in terms of the time frames that you're working towards, notwithstanding, of course, any potential headwinds from U.S. trade policy? Bjørn Gulden: No. There is no change in the 10%, '26. '26 is, for us, midterm. So I think that's in -- depending on when you were sitting when we talked in '23, 2026 was midterm. So it's just a way of talking about it. When you look at the order book for the second half, globally, there is no change in the order book, meaning that there's no cancellations. Every retailer outside the U.S. has no reason why they should change anything and there is no change in the direction of the order book. The U.S. order book is full for Q3. It's still going on for Q4. And it's the same thing there, there is no changes in the behavior other than people are uncertain, meaning we order and then we see, right? But we have no cancellations. So currently, it's business as usual, expecting then a confirmation of what's going on. And again, regardless what the retailers are nervous about, they will need good selling product, right? And we think we are in this unique situation that we have also in the U.S. now a good momentum, meaning that they will need our product to sell. And then together with both the suppliers and the retailer, we then have to agree upon what are the prices and what are possible discounts if duties should then change or be confirmed. I hope you have the understanding that to give straight answers is very difficult for you don't know what duty are tomorrow. I mean you can imagine that there are so many scenarios. So we feel very calm. We focus on the 80% that is doing well. We focus on delivering the product to the U.S. that we think we can sell. We talk to the trade, we observe any price changes. And as soon as we see something, we act and we will act on it. I think that's the only way you can act today. And of course, we talk about this every day and feel that we have a very good, what should I say, communication internally on different activities. But it is uncertain which -- it is the way it is. Operator: The next question is from Erwan Rambourg from HSBC. Erwan Rambourg: Well done on a very strong beginning of the year. Two boring questions, pardon me. First of all, could you give a bit of details in terms of the split of regional production going into the U.S.? I think you said China was minimal but can you quantify that and maybe give out the 2, 3 countries of origin that count? I imagine Vietnam and 1 or 2 others in Asia. And then secondly, can you give us the percentage of dollar hedging that you have? What level is that in '25 and '26? What percent of invoicing is hedged and at what level, please? Bjørn Gulden: For the North American market on footwear, I think I've told you before that North America is having China sourcing around 3%, going, of course, now towards 0, that the balance between Vietnam and Indonesia is very much the same. It's about 1/3. And then the rest is spread in -- around the many, many markets. So I would say, Vietnam, 1/3; I would say, Indonesia, 1/3; and the rest spread among the other markets. I think that's the split on footwear. And then on apparel, it is actually no dominant markets. I think Vietnam is around 15% and the rest of the markets are around 10% and it's spread between countries like Pakistan, Egypt, Indonesia, even Europe. So it is very, very different and very balanced. And the China sourcing for apparel is less than 2%. So, I think -- again, I need to be careful because I don't have the insights on the other brands but I think we have taken care of whatever you can do on sourcing as much as you can and reduce China for the U.S. to, as I said, almost nothing. Some specialty issues are still there but I mean, we will work on that. And then the rest of the portfolio is very balanced. And I don't think that there would be something now that will make us have to change a lot on that, to be honest. But again, who knows. So for the currency, I look at Harm and he will give you that. Harm Ohlmeyer: Yes. Of course, a good question. I'd say volatility of the dollar as well. So a short answer to this one, when it comes to spring/summer '25, of course, we are done with our hedges. And you should be aware that, of course, some of the hedges that we closed, you always know that we normally hedge to the beginning of the production season up to 80%. And then we did close the remaining hedges during a time where the dollar was feel stronger. So you will see some headwind in Q2 when it comes to this that I expect. And we have some more volume that we sourced as well given our growth trajectory. We are still having some open hedges for Fall/Winter '25, where we take the benefits of a weak dollar right now. So that should offset each other pretty much for the year. So that's how we look at '25. So definitely some headwinds in Q2, some tailwind in the second half. That's largely how we are looking at that. When it comes to '26, of course, there's more open opportunity that the dollar would stay where it is right now. We took advantage of some forwards already. So that should be a tailwind all along as the dollar stays where it is. And then, again, we always said we are praying for a weak dollar for the future. That will definitely help us in '26 and also in '27. What we should not forget, however, there's always translation impact as well. And it's good to have a weak dollar in general for us. But it's also, from a translation impact, when you have a strong euro against all the other currencies, you also have some translation impact, right? And normally, these things come in sync. But sometimes you have 1 quarter where you have a double whammy in one direction and then a double whammy in the other direction. So -- but overall, don't expect too much in '25 from a weak dollar but definitely opportunities in '26 and '27. Operator: The next question comes from Jürgen Kolb from Kepler Cheuvreux. Jürgen Kolb: Indeed, 2 questions, a little bit away from all the tariff questions. First of all, on markets. Emerging markets continue to be extremely strong. And that now over quite some time and also from an absolute level, have reached a quite attractive level. I was wondering if you could maybe talk a little bit about the top 3 markets as to what you're seeing there, what the drivers are or what makes really this overall market and then specifically the top 3 markets, so attractive for you and what's the driver behind it? That's the first one. The second one, Bjørn, you mentioned the 4 categories that you think adidas should be very strong in. And it's again, number 4 basketball. Still relatively small, if I'm not mistaken. How have you developed here? How is the current performance specifically in the U.S., obviously? And how is Jerry Lorenzo helping you or not helping you? And what's the plan to attack this category even more aggressively maybe than in the past? Bjørn Gulden: Well, first of all, in basketball, you are right. the performance category is not as big as people think but it has a huge impact on your connection to that street culture. And eventually, if you do well in performance, you will sell more of basketball classics, right? So that's the recipe. We have the luxury currently to having at least 2 players that are doing extremely well. We have Anthony Edwards which currently with the Timberwolves are up against LeBron and the Lakers doing extremely well. And as you probably know, his shoes has done extremely well and we are now launching the number 2 also. And it seems from the reaction that is very positive. And then we have Harden playing at the Clippers. And believe it or not, the Harden 9 is the best-selling Harden shoe that we ever had and that's also developing very positive. And if you look at the design of those 2 shoes, it's a little bit the new language of adidas basketball. And it's obvious that that is doing something because we're taking share and we're getting more distribution. From the same time, we have changed the management. So we have a new manager for basketball that has come in. We have been able, I think, to really get some activities going in the L.A. office which is producing a lot of creativity and that's why we look very positively into basketball for the future. The way you measure basketball is, of course, very difficult because some brands put the classics into it and we are now splitting between performance and classics, not to confuse. And we see good growth now on the performance side and especially on the signature side which I think we are almost the only one who currently see. And then you know that the basketball culture from a lifestyle point of view goes into many markets. And especially for us, ironically, it's been very strong in the China market which right now is a little bit ironic but it's a fact. So we feel we are on a good way. I can hear in your tone that you don't believe in adidas basketball as much because we probably talked about it many times. But I do think we have now an American group, we have American creative, American leadership sitting in L.A. And we give them the freedom from Germany. So they should have all the tools to be successful. When it gets to the emerging markets, I think we need to first agree that the emerging market is not one market. It's a cluster of many markets. And we have put it in the hands of a management team that are a little bit entrepreneurs. They're sitting in Dubai and are running markets from the Middle East into markets like Australia and New Zealand and all the way to India. So it's a very -- I would say, it's a diversified group of markets. But we need to cluster it somewhere Instead of clustering here in the headquarter, we have then Thomas Davis and his team doing it. David, Thomas, Thomas David -- doing it. And I think they found this, what should I say, balance between creativity, energy and local freedom within a frame and that's why it's working. And to be very honest, it works in all the markets. It's not like there is 1 or 2 or 3 markets that you asked for. We have a very strong development in the Middle East. We have finally a strong development in India and we have to turn our business in Australia and New Zealand. So it is a very, I would say, interesting group of markets that are playing a little bit different than what we do in the big, what should I say, classic markets. I think that's how I should answer it. We could go into each of the individual markets but I don't think really it matters. Like for example, we talked about India and cricket for many times. Now it's the same thing happening in Australia, where we're going into network for her and we're doing also real football for him. So we're kind of adopting to the things that we have talked about also in those markets. And needless to say, that's what you need to do to be a sports brand. And with the power of the Three Stripes and the global assets we have then on the lifestyle side, it's certainly the recipe then the right management gets attention on. So that's the reason for it. Operator: The next question comes from Warwick Okines from BNP Paribas Exane. Warwick Okines: The first is back on tariffs, please. If I understand you correctly, you're saying you don't plan any price rises at the sort of current level of tariff. But if tariffs do go higher and you feel you have to raise prices, would it make any sense to spread those globally? Or would they all fall in the U.S.? And then the second question is, could you just give us a bit more flavor about the conditions in Latin America? And how much of your growth is being driven by volume? Bjørn Gulden: Well, there is no reason to raise prices outside the U.S. because of the tariffs. I mean there's always a discussion about what is the right price level compared to your heat and your selling, so there might markets where you say you can take higher prices but they're not initiated of the tariffs. So the discussion we're having on the tariffs is only for the U.S. And again, we have said that we will not raise prices right now but we will see what happens in the market. We do know that there are brands that are more dominant and more dependent on the U.S. market than we are. We also know that there are brands that are more dependent on China sourcing for the U.S. market than we are. So we do expect that people will start to raise prices should these duties or all the duties be confirmed and that's what we're following. And we are then in a reactive mode and not in an active mode. I think that's the only way of saying it. So again, we do not plan to raise any prices outside the U.S. We do not currently plan to be a price increase leader in the U.S. but are following what's happened in the market. And I think we both know that should the duty stay at 10% or should they be even higher, then, of course, price increases at the end will be there because there's no way that people can swallow this through the industry, neither the brands nor the retailers. And again, don't forget that when you talk about this, it's not only our sector, right? It's all sectors. So I think we are doing the right thing, having 20% of our business in a market where we don't need to lead but we can wait and, what should I say, then react to what we see in the market. Harm Ohlmeyer: Well, when it comes to Latin America, I know a lot of people ask the question whether the growth is only coming from the value through hyperinflation in Argentina. But I can tell you, first, we are clearly the number 1 brand across all of Latin America, almost in any market in Latin America. And we are growing volume in every market in Latin America as well, including Argentina. Yes, of course, it helps to show the value growth as well from an inflation point of view. But in a hyperinflation environment, consumers are buying -- actually or they pull forward their buys given the inflation. So the volume growth is significant, also in Argentina. So everything very solid. And similar to what Bjørn said to emerging markets, we have a very, very solid management team in Latin America. These entrepreneurs, they find solutions in different environments. But very clearly, the number 1 brand in Latin America and volume growth is in every market. Operator: The next question is from Thierry Cota from Bank of America. Thierry Cota: Two of them, please. First, we've seen very low OpEx inflation ex marketing in Q1. I was wondering whether you think that overhead expenses could be flat or down in your terms for the rest of the year given the non-recurrence of the one-offs in H2, the overall cautiousness of the spend and the appreciation of the euro? And the other question, just for clarification, you reiterated the full year guidance. I was wondering whether in the recalculation that you've made, you include any tariff effects, price effect or not. Or you're just basically comfortable with the full year number target given the strong Q1 that you've just reported? Bjørn Gulden: Well, in our guidance, we have put in the assumptions of the things that we now know. And we think we have the momentum in the rest of the world and to actually accelerate both bottom and topline so we can achieve it should the duties than come in regardless what happen to prices. You can calculate this in 100 different ways but it doesn't really mean anything. We will fight to reach our guidance as long as we have the chance to react within the frame that we currently see. Should all the duties be 49% and 125%, then of course, we will have to talk but we can't imagine that that will happen. So I think that's the only answer I can give you. With everything we need, we still promise you that we will deliver our guidance. And then hopefully, there are some good news coming around in a short period of time and shouldn't it, we will have a discussion. But don't forget that for the rest of the world, this has no impact. So 80% of the business is business as usual. So it is currently a local problem that we need to solve but we don't have the facts that we can solve it yet. So I think I'll leave it by that. And on the overhead, Harm, I'll give it to you. Harm Ohlmeyer: Yes. And of course, we shouldn't forget when we talk about the operating overheads, first and foremost, our focus is on leveraging our infrastructure and not necessarily declining the operating overhead. And we shouldn't forget excluding YEEZY, we have been growing 17% currency-neutral in the first quarter. And again, with that growth, assuming that the operating overhead in absolute terms will be flat or negative is probably a little bit too ambitious. We did a lot of measures in markets and also in headquarter to prevent the cost increases. And that's what you're seeing in Q1. But again, the focus is to get the leverage right and do it right also for the organization over time. But you have seen in Q1 that we're on the right track also to what we believe is our formula for 2026 that we get to an operating overhead ratio around 30%, ideally below 30%. That's where we're right on track with the growth trajectory that we have. But again, the focus is on leverage. And we shouldn't forget, we just talked about emerging markets in Latin America. If you grow like 20%-plus and you're an inflation market, you also have inflation on the cost. And that's where you expect salary increases in these markets as well. So that's part of the reality. They become bigger. But the discipline is in our new operating model that the central costs are well managed, well under control. And then, of course, we are growing in the markets with some costs as well but leveraging the topline that we have. So again, the focus is on leverage, not on declining the operating overheads. Thierry Cota: And just maybe as a follow-up, so the 30% that we've seen in Q1 effectively, supposedly could be maintained in the coming quarters, do you think that eventually, you'll be able to be at 30% for the whole year, not this year, naturally but for whole year, including a higher number in Q4? Harm Ohlmeyer: Well, of course, it's getting easier, especially when we talk about Q4. But again, our goal is not to get to 30% in '25. There are a lot of things are still happening with the growth that we have. But again, we are on the path to get on a full year to the 30% number in '26. That would be the expectation. But right now, in '25, I'm not going to give you quarterly guidance. But you're absolutely right, in Q4 with the one times that we had, it should be easier to leverage over that sales growth. Operator: Next question comes from GJ Lowery from Redburn. Geoff Lowery: Just one question, please. The discussion around increased localization of your business, can you give us some thoughts about what you mean -- what that means for the longer-term financial model? Do you think it means more sales volatility or less, more working capital or less, more marketing budget or less? I'm just intrigued by the sort of deglobalization that you appear to be talking to and I wondered how you thought it joined up with financials? Bjørn Gulden: Well, to be honest, with you, I think it will actually help profitability at this scale. You have to remember that, for example, the U.S. and China now have two complete different supply chains. I mean you clearly see that U.S. cannot source from China and China should source local for local. So the 2 biggest markets, when you exclude Europe, are independent anyway. And I actually believe that with the scale that we have, let's say, with €30 billion, then it's better to have 3 dedicated, what should I say, go-to-market processes with supply chain that are each doing €10 billion than having one that is doing €30 billion because the synergies in the €30 billion are lost in the complexities. So I don't see any way of, what should I say, growing double digit on a stable base, making sure that we are efficient on marketing and even on working capital, unless you go local. The worst thing for a brand is to push product into a market that the consumer doesn't want because then you know the discount is killing both your brand heat and your profitability. So the SKU counts and the standard going-in margin that people calculate and you say you can save €0.10 on a shoe or whatever is irrelevant compared to the discount rate you do on the inventory that is sitting in the wrong market. So I am, since a long time, a big, big, big, what should I say, fan of going local because there's no way you can sit in a headquarter and understand the difference between Australian, the Indian and the Norwegian market because they're very different. So our goal is to set up go-to-market processes and link that into factories. So we both from a design and development and sourcing can be more efficient for the consumer where he or she is. And I think, to be very honest, we have showcased it already. I mean the gross margin improvement that we had over the last 24 months and the success is partly because we have changed this already with the right attitude. So again, I see -- it's the opposite. If you want to have one big machine doing it all and you make the assumption that the world is global and the consumer wants the same and you put it through the same machine, I don't think you will be able to stabilize neither your growth, your margin nor your working capital. So I don't see any other, what should I say, way. If you look at our exposure China to the U.S. and we say it's 3%, that is -- that would not be possible if we don't think local. So I think when you analyze all the brand, then you need to look upon what is their sourcing setup for the so-called local markets and maybe they need to also rethink because I don't see any option, to be honest. Operator: Next question comes from Aneesha Sherman from Bernstein. Aneesha Sherman: Bjørn, you talked about adidas' demand strength in the U.S. Given that strong demand position and the strong sell-throughs you're seeing, do you think you have better pricing power in the U.S. compared to your competitors and could take up prices without hurting demand as much in the market? And then related to that, you talked about a few different mitigation strategies for the tariff costs. You talked about consumer pricing, potentially renegotiating with suppliers. There's also the option to renegotiate with retailers and you talked about rerouting product. How do you think about the timing and the prioritization of these? So if we hear the final tariff rates announced by the U.S. administration in early July, how quickly will you be able to execute these different moves? And should we expect some near-term headwinds in H2 before you're able to roll out all these changes to be effective in 2026? Bjørn Gulden: Well, I think the pricing power you have is always depending on what's happening in the market. And as I said, I think our strategy will not to go as the first mover on price but we'll actually look at the other brands, especially the American brands and then follow. I don't think we -- being, I would say, a smaller player in the market compared to at least one brand should lead this. And I don't think it would be in our interest. And let's face it, on a global scale, we don't need to. Are there certain products that we can take up in price isolated? Yes. But I think we need to look at this in the totality and also make sure that we are a friend of the retailers and that we don't take up prices now on their best sellers so that we look good and let the burden on them. So it's a matter of managing this imbalance. And that leads into your second question. We had all the suppliers here. We have, of course, talked to all the retailers. And this is for me a little bit the same as we had in COVID is that we are moving into big uncertainties where everybody is nervous and you cannot try just to take the advantage yourself. You have to think about both your retailers and your retail partners. So yes, our goal is with the retail partners to find a way, of course, to be more efficient for the American orders then should this duty stay but at the same time that we commit to the quantities for orders and forecasts that we've given so they don't need to lay off people and don't run into problems. And at the same time, we have to not forget that the retailer, should we get increase in tariffs, we cannot only put the tariffs on the wholesale price but then we also need to increase the retail price so that they can do the margin on this, right? So I think this is really a situation where the balance in the chain between supplier, brand and retailer needs to go hand in hand and that's what we will try to do. And that's also the discussions that we're currently having. So, I don't think I can answer it to others. How quickly can you do those things? Well, you can change prices tomorrow, right? That's not the problem. But again, you have to do it then in a way that the chain is then in balance. Sourcing changes, I don't really see necessity of because, as I said, we are so small in China that should the high, high, high duties in China stay, it won't have a huge impact on us and any changes. And I do assume that the deals that are being made with the big export countries will be similar. And should they be similar, then it doesn't change any allocations when you get to what country origins we're using. And I think we told you already that in apparel, we're very balanced between the markets. In footwear, we are, of course, for the U.S. market more dependent on Vietnam and Indonesia. But again, we feel that given that we cannot produce anything in the U.S. that is any meaningful in volumes, we will try to keep the balance with our suppliers the way we already have and then move as soon as we see what the market is giving and be very agile and fast when it gets to things that we do with speed. We did accelerate very quickly all we could when we heard about this to get custom clearance before the fourth and the ninth. So I think we've shown speed already. So I don't think I can say anything else, to be honest. Operator: The next question comes from Robert Krankowski from UBS. Robert Krankowski: So first one, I just wanted to clarify because we mentioned the U.S., no change in demand. But, Bjørn, could you talk about the beginning of the Q2? Have you sustained double-digit momentum? And is it both including/excluding YEEZY? And then, the second question is more about the other regions. I think we focused a lot about the U.S. but I just wanted to touch on other regions. Like 4 of your 6 regions have already delivered or exceeded 50% gross margin. And I understand there's a lot of seasonality in your business. But looking ahead for the remainder of the year, do you see a reason why Greater China and Europe could not reach the -- or even exceed the 50% to 52% or upper end -- exceed the upper end of 50% to 52%, while emerging markets in Japan/South Korea sustain these high gross margin levels? Bjørn Gulden: Well, you know it's always easier in Q1 to have a high margin because that's where you have most of the launches and to keep the margin through the whole year at the same level has always been difficult. And I think we also need to be very, very, what should I say, conscious that we need to make sure that we work together with the retailers to keep, I would say, our supply clean and help them should there be inventory that is not moving. So I think we need to be careful of promising exceeding margin through the year, to be honest. You also know that the margin is also a result of the mix between wholesale and D2C. And as I said, we are currently supplying the wholesaler almost with priority compared to D2C to be service-minded. We had to do that, in our opinion, to get better distribution. We have quite some new categories hitting the floor running. Lifestyle is one of them. We have more performance products on the way than we had before. So I don't want to promise you that. Is there a possibility over long term to have a higher margin in these markets? Of course, there are and there is an upside to it. But I think it would be wrong now to model that for the rest of the year. We think, to be honest, with the uncertainty in the Q1 that we have shown and the fact that we're confirming the guidance is a statement that we believe in the future and want to be very careful of overpromising you anything now in the rest of the year with the danger of then, what should I say, disappointing you which we don't like. I think that's the only thing I can say. Robert Krankowski: And on the second... Bjørn Gulden: The current trading -- yes, again, we haven't seen any slowdown that you could connect to this, to be honest with you. I see reports and I read reports and I hear but we can't see it. As you know, there was volatile demand in the market beginning of the year and there's been many explanations for that. But we haven't seen any impact now of the tariff discussions on the sale, neither in performance or the value chain nor the lifestyle side because of this. We cannot confirm that. But we read about it but we cannot confirm it. Operator: Next question is from Adam Cochrane from Deutsche Bank. Adam Cochrane: One quick question for me. In terms of the performance that you've seen in the marathon and the happiness that you've got with the product line-up, is now the time that you think you can really double down and win in the running category? Bjørn Gulden: Yes. This is a little bit difficult to answer in the sense that 2 years ago, if we had the shoes that we have today, I'm not sure it would have worked because I don't think the trade was ready to take adidas up as a running brand. But I think given the success we've had and the many, many consumers now have a positive feeling to adidas, the interest from the trade is much, much bigger. And that, combined with that we're winning a lot of marathons and rewards when it gets to the product, of course, it is the time to double down on running, definitely. So you are spot on when it gets to -- that this is very, very much a priority for us the next 18 months, not only in the racing, what should I say, community but also in the everyday running and the comfort running segment that we have seen so many other brands be so successful in. So you're absolutely right. And the irony then is that that also leads into the lifestyle area which you know that many running brands today that were meant for comfort has actually ended up being lifestyle shoes. So we think that a little bit luck again, that the timing of creating heat in lifestyle then having certainly a very good running range, even stretching into new models that you will see in the comfort range that will come in '26, we think that it is a great, what should I say, chronological sets of events that would help us. So yes, running, priority. And yes, we are doubling down on running in the next 18 months. Adam Cochrane: As I've got you, one more springs to mind for Harm maybe. Do you think given the scale of the euro-dollar movement that will enable you -- given the lower cost of goods sold across the rest of the world, if you were to hold prices in the rest of the world, would that subsidize anything that you need to do in the U.S.? And is that something that you would consider as a lever? Harm Ohlmeyer: Well, the starting point is always, whatever we do in the rest of the world, we want to run a profitable business in the U.S., right? So you might have in the short term that you can compensate some of the dollar weaknesses through the short-term tariffs that you might have in the U.S. I get that question and there's a good answer to this one. But again, in the midterm, we want to run a profitable business in the U.S. And Bjørn alluded to, if the tariffs would stay or they move away, it's a different story. But if they would stay, we want to be fair to all of our partners, whether it's the suppliers, the retailers and how we share that countermeasures. But it's not our objective in the midterm to raise prices in other markets or using a currency that might be just of short nature because it might flip again very quickly. So that's not our strategy. It can help us probably in the short term to technically mitigate. But in the midterm, again, we want to run a profitable business in the U.S. regardless. And then we continue to run profitable business in the rest of the world. So in the midterm, it doesn't help. Sebastian Steffen: Thanks, Adam. Maura, we have time for 2 more questions, please. Operator: The next question is from Monique Pollard from Citi. Monique Pollard: So 2 from me just focused on the U.S. One's a quick clarification question. I'm a bit confused by the North America YEEZY sales that are implied in the 1Q '25 data because it seems different to the North America YEEZY sales that were implied in 1Q last year. From the 1Q data last year, it looked like North America was under 50% of YEEZY sales but this data suggests North America is sort of over 60% of YEEZY sales. I didn't know if there's been a change in reporting of those YEEZY sales. And then the second question I had was just on North America. So ex any potential impact from tariffs and second-order implications on the consumer demand, I guess I'm thinking about lifestyle and performance in North America. You've got the AE2 launching with AE1 having been such a big success in basketball and then the Superstar, I guess, starting to scale. So do you think the North American momentum ex anything from tariffs could actually accelerate as we go through the rest of the year? Bjørn Gulden: Well, again, to the U.S. market, we, of course, need to invest more in American sports. So when you look at our investment into American football, baseball and basketball, it is increasing because we know that to sell to the kid also training another gear on the performance side, we need to be more American. So that's going on. And it is a huge target for us to get better distribution with the academies and the DICK'S or the Scheels of this world. And we feel that we now have the right products. But of course, we need to do this over a longer time. So there is a clear target to increase our performance side in the U.S. for that kid. But as I said, that will take a long time. When it gets to the lifestyle side, we have a momentum, especially with her. And we know that we need to get more growth with him. That's why a lot of the investments now are also towards him. But in total, we feel that we have all the elements that will give us a double-digit growth in the U.S. and you saw that in the last 2 quarters. And again, we don't see why that should change because of the tariffs because as I said, the trade and the consumers continue to buy something and why shouldn't they buy us if we have momentum. That is the, what should I say, the philosophy. When it gets to YEEZY, I'm not sure I understand your question. But we sold in the full, what should I say, first quarter last year, €150 million of YEEZY which is then missing this year. So when you're measuring the sales, you take adidas against adidas, then it's 70% up. If you take adidas sales now which is the only one we have because there's no YEEZY to sell, then you take them through the combined YEEZY and adidas sales, last year, we only have 13%. So I'm not sure what sales are missing. Most of that is, as you can see, in the U.S. and most of it was in digital. That's why you see that those 2 numbers are different. But there's no change in reporting. And if you really need the details, I'm sure that Sebastian can give it to you later but there's no change in those numbers. Sebastian Steffen: Thanks, Monique. We'll follow up later. Operator: Last question for today is from Jonathan Komp from Baird. Jonathan Komp: Certainly helpful today. I understand that you're embedding a lot of new uncertainties while maintaining guidance for the year. If I could just ask to try to understand the seasonality of your margin performance that you're expecting for 2025. First quarter, a 9.9% operating margin. Typically, the first quarter is near, or even above in most years, the full year operating margin that you deliver. So I'm just trying to understand, as we think about the balance of 2025, why that may look different based on the assumptions embedded in your guidance? Bjørn Gulden: Well, you're right. I mean the first quarter is normally our best quarter. If I should, in my whole life, say, the historical and strong Q1, weaker Q2, strong Q3 and weaker Q4. That's kind of the way the operating margin comes through a year. That's why we didn't guide 10% for the full year in 2025. And I think you will see the same seasonality now that -- Q1 very strong, next quarter will be everything being the same, weaker than Q1 from an operating margin. There might be some negative effect on top of it because of duties, depending on what's happening with the merchandise that's arriving, what happens but it should be that huge. Then Q3 should be very strong, depending on -- or given the order book we have and the size of the business. And then Q4 is always depending on what is in the market when it gets to discounts, what are the take-backs that you have in markets like China. So it's a more volatile, what should I say, quarter. But your assumption is right. I think right now on top of this, you have the uncertainty what could happen to the duties which no one knows, right? So we feel when we tell you that we keep the guidance that we're pretty, I would say, tough. I think most people will backpedal on their guidance. We don't because we believe in the momentum and we see the strength also outside the U.S. But again, as you can imagine, there are many uncertainties that is created or this duty thing because you don't really know what the cost of your product is tomorrow which is very, very unique. Jonathan Komp: Yes, that's very helpful. And then just one follow-up. On the footwear business, the 3 main growth drivers that you're working to scale up, low profile, lifestyle running and Superstar. Bjørn, could you maybe just give a little more context and road map in terms of how you see those models starting to contribute over the next few quarters and over the next couple of years? A little more detail there would be helpful. Bjørn Gulden: Well, I think low profile is a trend that will last for 2 to 3 seasons and go away again. Running lifestyle is a trend that has been there always but we, for whatever reason, lost it for a while. I think when you see the effort, that should be the biggest category next to the classics that we have already success with. And again, it should be very, very specifically a segment that we continue to invest in so we don't lose it again like we did some years ago when we lost the success of Boost and NMD. So I think we are more conscious now on bringing innovation and bringing more models to the market so that we can have winners all the time and not have the volatility. And then Superstar is, of course, the biggest shoe that we've ever had. It does compete with the Campuses and to a certain degree, even other shoes that you already have success with. But important for us is that when you go to a Foot Locker is that we have a good offer on the classic courtside which is currently the Terrace and the Campus, then you add a low profile to it, then you add Superstar to it and then you can start to manage out of some of the volumes that you have in Terrace that we on the running wall have both classic shoes like the LA Trainer or the SL72 that in the comfort area, bringing in new like we do with the UFL. And then on the Vistech more aggressive side, we have Climacool, both the OG shoe and we have the 3D-printed one. And then in the Vistech side, we also have the Megaride which we will start to see that we put even soccer up around it because it's a trend that we see, especially with the male consumer in the U.S. And then we will come up with silhouettes that you haven't seen before. There is quite some, what should I say, creative work happening that uses running technologies on new offers that the market hasn't seen. And then basketball, we think that given that another brand has such a market share that we should grab some of that. And we think if we use the resources that we have better, we can, not only with Antony Edwards and Harden but also with other, what should I say, franchises be more successful and grab share that we'll not only sell more basketball shoes but actually create heat also for that consumer in other areas, including apparel. So I think there is a clear strategy how to do this and then it's up to us then to deliver it. Sebastian Steffen: Thanks very much, Jon. Thanks very much, Maura [ph]. Thanks very much, Bjørn and Harm and thanks very much to all of you for participating in our call today. This concludes our Q1 2025 results conference call. As always, if you have more questions, please feel free to reach out to Adrian, Philip myself or any other member of the IR team. We're very much looking forward to meeting with you over the next couple of weeks, be it during our road shows, be it at one of the conferences during conference season or be it here at our beautiful campus in Herzo. We've talked a lot about the product during our call and I can only reiterate what I said in the past, Herzo may not be the center of the universe but I can definitely tell you it's worth visiting. We have more than 30,000 product of our spring/summer 2026 season here on display. And we've talked a lot about the newness that we see in lifestyle running. We've talked a lot about the breadth that we see on the classic side in lifestyle. And not starting to talk about apparel, Bjørn has talked about the World Cup tent that we've built here. So if you happen to be in Europe, if you want to make the sidestep to Herzo, you're all invited. We will actually have several broker-hosted visits during the month of May and June. And if you want to be part of that or visit individually, please feel free to reach out and we're happy to host you and show you around. And with that, enjoy the remainder of this beautiful sunny day, enjoy some of the Champions League action tonight and speak soon. All the best. Bye-bye.

Operator: Ladies and gentlemen, welcome to the adidas AG Full Year 2024 Conference Call. I am Maura, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Sebastian Steffen. Please go ahead. Sebastian Steffen: Thanks very much, Maura. Good evening, good afternoon, good morning everyone, wherever you are joining us today. And welcome to our 2024 full year results conference call on a beautiful sunny day here in Herzogenaurach. Our presenters today are our CEO Bjørn Gulden and our CFO Harm Ohlmeyer. And while there is actually a lot of newness in our product pipeline, as you will see and hear in a minute, there is not much new about the agenda of this call. As always, we will kick it off in a second with Bjørn and Harm taking you through the puts and takes of the quarter and the full year and explaining our outlook for 2025 to you. After that we will move to the Q&A part of the session. And also here, as always, I would like to remind you that during the Q&A session, you limit your initial questions to two to allow as many people as possible to ask their questions. Thanks very much in advance for sticking to that rule. And now, before I'm going to hand over to Bjørn, we will start with a video to put everybody in the right mood. Let's go and enjoy. [Video Presentation] Yes. Hello, everybody. Also from my side, I hope, as always, that you enjoyed the video showing all the things that happened in 2024. And I think if you remember a year ago when we talked to you about the year, we said it would be a year in the spirit of adidas [Indiscernible], a sports year. And we always have to remember that we are a sports brand. And we hoped that 2024 would be the revival of adidas again, given all the sports events that were happening. And I'm very, very happy and actually proud what we did achieve in 2024, it was a great year. And the events that we talked about many, many times, both the Euro and the Copa was great events for the fans. And of course, also winning with Spain and winning with Argentina was of course, the right signal for us to you and to the consumer. And also the Euro in Germany, where there was a lot of negativity also to the jersey you see on the picture with the away jersey, we were able, despite the announcement that we will leave the FBA under 26, to actually oversell many, many times the forecast and the expectations. So it was an extremely successful summer for us when it gets to soccer or football. And then going into the Olympics and Paralympics was the same story. A lot of skepticism, but it ended out, in my opinion, being the nicest Olympics and Paralympics ever. And again, although we wished we had even more athletes in federation, I think we showed off as a brand that we could be proud of and it came to the right time. And I think, in general, if you follow sports, we showed up both, I would say, on the footwear side and the apparel side and also outside the stadium around sport in a -- yes, I would say it in a way that is linked again, to the old Adi Dassler spirit. And I would like to remind one more thing, because for me, this was maybe one of the most emotional things, especially Olympics. Although the Summer Games in Berlin was in 23, next weekend, it starts the winter Special Olympics in Italy and for me when we talk about we want to change people's lives through sport I don't think I've seen any athletes or friends or families being so affected by sports like these ones. And I hope you have the time to follow it and support it because it's really, really moving and again a great thing that we at Adidas are doing and a lot of our people when we now dressed up all the winter Olympics worked here on our campus and I think it was extremely motivational and a great thing. But it wasn't only sports. I think you would agree that it was the year where we had the hottest shoes. We had talked about the so called Terrex shoes for a long time. The Samba, Gazelle, and the Spezial which we educated to you two and a half years ago is Terrex has been scaled and of course been extremely important for us and I think also for the trade to generate excitement and sales. And that was followed up during 2024. We bought the Campus, which is not the Terrex shoe, and SL72 as a classic shoe. When you look at that picture and you see how that has dominated in many markets, we know that this has happened over the last 18 months. This is of course the reason for the brand hit again. And it shows the enormous power of our brand and our three stripes, and of course makes our job easier and makes us also proud and also optimistic about the future. We think the future will A, probably be low profile, starting when the weather gets hot. There is a lot of talk about it. It hasn't really commercialized yet, but we and other brands of course have many silhouettes on the way to the market. And we think it will be an extension of the Samba, what should I say, trend. At least we are ready and then we will see how the consumer will react. More importantly, both short and long-term is of course lifestyle running. We have talked about it also for 18 months, the need to get lifestyle silhouettes into the lifestyle area that can be scaled. And, I think from talking to the trade that we finally have silhouettes that are doing extremely well. On the left side you see our Evo SL, which is coming out of performance. It's a takedown of what we did with Adizero Evo and with Pro 4. And it's now €150 Evo SL without the carbon plate. And it's flying in all channels. We can't keep it in stock. And we are, as we speaking, increasing capacity, both from the tooling point of view, but also for the factory, and this will be several million pairs over the next 12 months. But not only that, we have four or five silhouettes now in the running space that are being incubated and many of them already with, I would say, good to very good results and maybe also an innovation. You see the 4-D printed Climacool shoe, which is the first foam based printed shoe in the market, will be in the market already in April, and it's also getting orders from the trade in much, much bigger numbers than we thought. That's the same thing there. We're scaling it up and it will be something that you will see in the market more and more over the next 12 months. And then already a year ago we said that after Terrex, we will then also start to scale the Superstar. We did then delay it in certain markets because there were no need because the heat of the Terrex and Campus was so high. But we have started releasing some peers in certain markets and as you can see here, a lot of collabs from working with Farrell, with Edison Chen and doing a lot of activities around it. This will be a hot franchise. Although it will of course scale at different speed in different markets, depending on the volumes that we will then start to release in the market. And believe me, it will not stop there. There is a lot of innovation in design going into the second half of 2025 and also, of course, into the spring of 2026. And I can assure you that both in performance and in lifestyle, the pipeline is full. It's now up to us to face it rightly together with the markets. And I hope you come here the next couple of weeks and months so you can see what we have in the showrooms. We have this luxury of being in sports and lifestyle and we say, the magic happens when we're united. I think you were all excited to see that we brought the Trefoil back again on the pitch with the second and third jersey of some of the big clubs. You see some of them here. And we have generated this soccer culture in the street that I don't think we ever seen before. People are now dressing in soccer jerseys from the past, both licensed and unlicensed. And this is, of course, a direction which is very, very good for us. And we are 100% sure it would last into the World Cup next year. And it is sport footwear and apparel. Don't forget that even the Samba is an old soccer shoe which maybe initiated this. And there's quite some franchise sport on footwear and especially apparel that is in the pipeline going into the summer of 2026. Then new for us and probably also for you. We launched a couple of weeks ago our cooperation with the former one team of Mercedes AMG Petronas. Great. what should I say, core lab partnership that happened in a very short time. I think we didn't even have a year from when we shook hands till we actually have the first product. Initially doing very well, great drivers, great concept in what should I say? Market that we are new to. And don't forget this is actually a commercial deal with us that we will make money on, and I'm very, very happy with this relationship and there might be more to come. In general, I think I told you before that we have about 3,500 partnerships either through celebrities, players, athletes, federations and teams and we adding a couple every day. And here are some of them. Extremely proud of, of course, that we have Bonmati, the Ballon D’Or winner as a female soccer player and that we were able to sign Yamal, who I think we have to agree is maybe the biggest talent that exists. And for the U.S. Travis Hunter, who won the Heisman Trophy, which has a huge following in the street culture in the U.S. will be a very, very important partner for us. And generally you see here some of the personalities that will be important going forward. Very happy with who we have in the different markets. And as I said, there is movement here all the time. We talked to you beginning of 2023 that we had some work to do. And 2023 was of course about fixing that and then we promised you in 2024 that we'd be a better company. And as I said in the beginning, I'm proud what we delivered. You remember we grew the sales to €23.6 billion almost €23.7 billion, which is 12% of currency neutral. We were extremely happy with the development of the gross margin. I mean, Harm will explain you a little bit more about it later. But that 50.8, 330 basis points improvement, that shows you that we have the right product in the market. And of course that our discount level was much lower than what it has been in the past. Our operating profit or EBIT ended then at the 1337 which is up 400% from last year. And I think we did deliver on all the KPIs the way we promised, or actually a lot more than we promised. And as I said again, we are proud and very happy to see that. What was cool was that in Q4, although it was a volatile market on the retail side, we did actually accelerate our growth. And you see it here that all markets had double digit growth except for Japan, South Korea, that was mainly due to a warehouse in South Korea that the roof collapsed. So we were trapped on merchandise. So for all, what should I say, business purposes, there were double digit growth everywhere. And I hope you also note that North America for the first quarter in a long, long time are up double digit. And that gave us then the adidas brand growth of around 18% in Q4 which again was much better than we initially had expected. For the full year that gives you then basically a flattish sales number in America, plus one for the adidas brand. Remember heavily negative at the beginning of the year, double digit growth in Q4. And we told you all the time that North America is kind of lagging six to nine months behind the rest of the world. So that showed out to be true. Europe continued through the whole year with fantastic growth up 19% or 20%. Greater China, a good turnaround. Great job of the team being up 10. Japan, South Korea we talked about up 10, despite the issues. LatAm very very strong. I think we are clearly number one in the region and most of the countries in LatAm up 28. Emerging markets. Our entrepreneurs in difficult and spread around markets up almost 20%. And that give gives you then the total growth of the adidas brand of 13 and the currency neutral growth of 12. If you look at the channels, our wholesale business grew at 14% again showing that we have better sell throughs and better performance and still have very good interest from our retail partners. Our own retail, that means the brick-and-mortar stores grew 15%. Can tell you that like-for-like our concept stores were up more than 20% and the factory outlets in the mid-single digit. And that again tells you it was the high end and not the discounted part that was growing. And as you also know in the factory outlets we had a lot of clearance at the beginning of the year and at the end of the year we didn't even have enough merchandise to actually do the sales that we could have done. E-com plus 6% the way we report it, if you take the easy sales out, even up 18. And again, for those of you who believe that we are not interested in digital or e-com, that is of course not true. And the investment in e-com A, from the way we present the product and the way we try to improve is of course continuing. But I think it's important that both brick-and-mortar and e-com and especially our wholesale business is very important for us, depending on where the consumer goes in the different markets, that gives you the balance of 60, 40 between wholesale and D2C. D2C being spread around 20 or 50, 50 or 22, 18. And again, these numbers are not targets. They move from quarter to quarter depending on where the consumer goes. And we are extremely flexible on this global number. Important is that we optimize it for what the need is in the different markets. If you look at the divisions led by footwear, again up 17, very strong number. Apparel starting with negative numbers and then growing double digit at the back end of the year up six, and then accessories, which normally is where you actually exploit the heat of your brand into cash up only 2. Of course we can do better, but as you also know, we can't put priorities on everything. So the way this is, again showcases where we put our priorities during 2024. That gives us the healthy balance of over 60% in footwear, 35 in apparel and 6 in accessories. Again, I think a very safe split between the different divisions. What the product is meant for or the way we categorize it. Performance up 9. So almost up double digit growing through the year. Sportswear, the lower, more commercial end of both footwear and apparel with the performance level up 6%. And then of course the higher end of lifestyle basketball partnerships and skateboarding with up 25. And to be honest with you, lead the brand by lifestyle to create heat, then exploit it in performance and then commercialize in sportswear is kind of the strategy. And again, looking back, I would have signed off for this split anytime in the last two years if we could have agreed upon it up front. I think that was kind of the background for where we are. And then I hand over to Harm to kind of give you the results then with the different KPIs. Harm Ohlmeyer: Thank you, Bjørn, And good afternoon also from my side. And it's a pleasure now to give you some more details on the P&L and also on the balance sheet. And as always, I want to start with the kind of executive summary that Bjørn alluded to already. So key number here, besides the 24, almost €24 billion net sales. It's 12% currency neutral growth. And then of course what's important for you, the underlying adidas brand is even 13% hub currency neutral. Because I will say it many, many times, there has been €650 million of Yeezy business that of course will not be repeated in 2025 when we talk about it. As you said, very healthy gross margin. We are in control of the inventory, we are in control of the discount. I'm going to give you some more details in a minute. That leads into an operating profit of €1,337 million [ph] up 400%. More importantly delivering a 5.6% operating profit. This includes €200 million of Yeezy profit. But I come to that later how we decompose also the puts and takes of the operating profit. But I also would like to go to the development that we had from the beginning of the year. And I know many of you said we have been very conservative with our guidance at the beginning of the year on January 31st where we said it's mid-single digit increase and 500 million operating profit. And of course we sold some Yeezy’s and we did better than we expected. And again we changed it in April 16, then in July 16 and then October 15, so pretty much every quarter we went out ad hoc and we moved from mid-single digit increase to at the end of the day the latest guidance was around 10% and we moved from 500 million to 700 million 1 billion and then at the end 1.2 billion operating profit. And even that compared to the guidance we beat and came up with an ad hoc, I believe January 21st. And I want to reiterate, I talk to many of you, I don't want to be on record to do that again with four at ad hocs. Love to do it if it always goes in the right direction. But we believe you also have a better grab on the business that we know that we don't need to go out hopefully every quarter. But of course as always we under promise and want to over deliver. So it's not just easy. I mean how we get from the 500 million to the 1.3 billion. Underlying there was 600 million adidas brand. That is really everything that Bjørn talked about from the product momentum and brand momentum and all the work that the teams have done is seen in the adidas brand and that's how we led to the 1.3 billion. So it's not just a easy story, that's very important to bring that across. And then of course the acceleration of Q4, when you just look at Q4, you'll see a 19% currency neutral growth. And also there many of you remember that we had readjustment of the Argentinian peso last year in Q4 and rest assured that 90% is the real currency neutral growth, and the Argentine peso has nothing to do with that one. And again, there's some Yeezy’s still that we did in Q4. So from an adidas brand point of view, it would have been 18%. You also see all the gross profit, 520 basis points up. For the full year we had been 330 basis points up. You also see there what we always talked about, some easing of the currencies, so that even helped in the fourth quarter. So with 49.8% and more importantly 520 basis points up. And then the €57 million in profit of course significantly better than the loss of €377 million the year before. But if you have done your homework and read through the announcement this morning, there's also €150 million onetime cost in Q4. So it could have been €200 million operating profit as well. But that's the acceleration in the fourth quarter that we had as well. So with that I want to decompose a little bit where we are from a gross profit and the puts and takes. And I want to go through that one. Of course there's a positive from a product cost point of view. It's not just the volume that we are scaling, but also utilize the capacities in our factories in Asia in a better way. That gives us better product costing. In 2024 freight have more than normalized, so there was still a benefit in 2024 compared to the year before. The business mix, of course it's positively contributed to tariffs as well, because you can imagine all the products that we have sold there. There's significant business mix and benefit from the terrace setup as well. Very, very disciplined, especially in e-commerce when it comes to discounting we really controlled and that probably led to some slower growth even outside of the Yeezy business in e-commerce, but very profitable growth in e-commerce because we did less discounting. And then inventory provision, you remember, we had a lot of old inventory that we had provided for in previous years. But we sold that successfully as well. And of course we reversed some inventory provisions from the prior years. Also in the margin that was a positive. Yeezy, you can see in the picture here, only 30 basis points still a benefit from 50.5% to 50.8% but a minimal base benefit. And again for all of you on the call, the starting point for us in 2025 to compare to 50.5% gross margin. Still very healthy, very happy with that one. And you see in the call out here, when it comes to Q4 you see no Yeezy effect in Q4. And of course the negative currency effects that we had for the full year are already fading in Q4. And I will probably talk about the dollar ups and downs later on. That will keep us busy. But I also want to give you some hint on where we will be in 2025 and what you can expect from a gross margin point of view. So we still believe we can continue to see better product cost given the volume that we plan to grow, how we utilize our factories, how we are more agile in our sourcing approach. When it comes to freight and business mix, it's probably more neutral discounting, especially in North America as we always said, we are six to nine months behind. We still did a lot of clearance at 24 in North America. That is mainly contributing to less discounting also in 25, so that should be a slight positive. Inventory provisions. We have clean inventory. Yes, we have 5 billion inventory at the year end, but it's very, very clean, so do not expect significant further benefit from releasing provisions from the past. Yeezy will be gone. So that's a negative. But only the 30 basis points. And FX, in the past I probably talked about some tailwind, but we all know where the dollar moved, and then it moved luckily again today to 107. So credit to all the banks or not, because they said last week still it will go below parity. Then it went to 107 today and you remember I'm still praying every day that it moves to 110, but my prayers are being heard. It sounds like. So with 107 we are more relaxed on the FX as well, so it's going in a good direction. So these are the puts and takes of the gross margin. So we are confident that this is also under good control. Moving further down the P&L, I want to highlight probably two things. One is the other operating income which is a significant improvement of 100 million in that line. And of course that is linked to the settlement that we reached with Yeezy in the third quarter. We talked about it, but I want to remind everyone, we had a release of the risk that we put into the P&L in previous years. And through the settlement, we released €100 million in other income. That is the increase at the benefit in 2024 versus 2023. But at the same time, we put further €100 million donations in that went through the P&L that we granted to our adidas Foundation to be donated from a cash point of view in the coming years. So that's a neutral effect. And then as I mentioned earlier, there has been €200 million onetime costs. They will not repeat themselves in 2025 million. €50 million of that roughly in Q3 and another €150 million roughly in Q4. So -- and of course, there's a easy profit of €200 million in the overall operating profit. When I decompose that again to just be very, very clear, the starting point is €1.3 billion. We released, given the settlement, €100 million in other operating income. Then we did the donation of €100 million, so it's neutral, both of these. Then we had one-off costs of €200 million that will not repeat themselves in 2025, and of course, the Yeezy profit of €200 million in simple math will also not repeat itself. So for you, it's easy math for us and also for you. So the baseline in 2024 is €1.3 billion. And that's what the starting point is also for we to compare to in 2025. I hope it's very simple and very clear. But I just want to remind everyone what the starting point is. If I go further down in the P&L, there has been quite some talk in the past about financial income and the financial expenses. You see that we take the benefits of higher interest rates. So we gained €20 million more through putting our cash at work as well, so higher interest, but we also had some countries where we had some financing costs where we didn't recapitalize fully. So they are local financing their growth. And of course, in some countries, we still have to deal with negative currency effects in very volatile world around ourselves and that are the puts and takes, but also 2025 should be much smoother when it comes to the net financial expenses. There was a lot of talk last year about the tax rate of 189%. I explained that many times last year. But also here, we always said if you get to a better profitability, the tax rate will normalize and that's what you see here. It's around 26.5%. And of course, our expectation is that, that will further improve over the years to come. But I would say it's largely normalized, and now that will lead to a net income of €824 million. Going to the balance sheet, starting with the inventories. I said during the last couple of calls, we have probably seen the lowest inventory in 2024 given the growth profile that we have, and that is actually coming to fruition. We finished the year with €5 billion, 11% up. That gives you an indication based on the increase that we gave in our guidance that we needed to have that inventory to fulfill our demand going into 2025 as well. And when you see the development of that still in the previous quarters with Yeezy in there, but also there you see there is no Yeezy at the end anymore. So there's just, I want to confirm that again, not one Yeezy shoe left in our inventory. So it's €5 billion of fresh inventory that is also needed to fulfill the demand going into 2025. When you go further down the balance sheet, you have accounts receivables, 26% up. That also gives you an indication on what the wholesale growth had been in the last couple of months, depending on the payment terms that we have with our customers, but very normal and very high correlation to what we are selling into wholesale as well. Accounts payable, of course, is going up as we are building up the inventory. That is what we to pay to our suppliers in Asia as they are producing and shipping the products to us. That is up 36% currency-neutral, and a highlight, all in it together, is the development of the operating working capital, which is probably the best seen in this graph here where we are coming from in Q4 2023 from 25.7%, almost 600 basis points down to now 19.7%. I feel on record when we talk about a healthy company, in operating working capital, we are probably ahead of where the P&L is. I always said, if we're below 20%, we are absolutely a healthy company and managing our working capital very, very well, and that's why also gave a guidance. I've probably seen conservatively some of you again of 21% to 22%. As I said, below 20% is definitely best practice in the industry. We keep investing into the company as well under the brand capital expenditure. We did spend €540 million. We gave a guidance of around €600 million again for 2025 million. So we keep investing, but also not overshooting there. So also there are no concerns. €600 million on a steady state is probably a good number to have in your Excel sheet. Where do we invest it, primarily to the brand in controlled space. So the new stores, upgrading stores, shop-in-shop in wholesale, that is where half of the investment is going into. We are rolling out S/4HANA to modernize our infrastructure on the tech side and IT side as well. And you also see in logistics, we have the capacity to grow further with the warehouses around the world. And yes, there is also the one or the other being added or modernized, but the majority goes into the brand representation at own retail or on our wholesale accounts. So also good development. Cash is important in today's world. The world became very volatile and it's becoming more volatile every day. So it's good to have €2.5 billion in cash on the balance sheet. That also gives us some higher appetite in risk that we can invest into the future. So I'm very, very happy to see that, and I'm pretty sure you have some questions, what we're going to do with that cash in the future. But first and foremost, we will invest it into the operational business. And of course, that will lead to a better rating, hopefully going forward as well. As you see here, the cash development is very positive compared to the last couple of years. And even more important, the adjusted net borrowings has come down significantly. And I'm pretty sure we have surprised positively our rating agencies Moody's and Standard & Poor's as well with this number here, getting significantly below our financial policy target of 2.0, finishing the year with 1.5 on the net borrowings over EBITDA ratio, very, very healthy again. And this gives us the foundation for further growth and investing into the right areas. So we believe it's good to have a strong balance sheet and good leverage in our overall business. That also allows us to pay some dividend. So also here, almost 3 times up from €0.70 to €2 per share and the total payout will be €357 million. That reflects the stronger balance sheet, the cash on our balance sheet, the confidence into our outlook, and of course, we are now within the range -- target range of 30% to 50%, even a little higher than the average with 43%. So pretty happy where we are with that one as well. And then hand over to Bjørn again to tell you a little bit more what we do with our cash. Thank you. Bjørn Gulden: Yes. As we have told you, a couple of times, we created the DDRS [ph] Foundation, which are led by external people. Sylvia Schenk is there, for example, also Dr. Edward Moses is there and a group of other people. So they manage the money that we actually put into the foundation and make sure that they support projects fit for fighting hate and discrimination, sport for sustainable development and access to sport for vulnerable groups. We have through our P&L the last two years put in around €200 million, €210 million. And in addition to that, we have donated around €50 million. So the total amount of, what should I say, money that has gone through our P&L for donation is then somewhere between €250 million and €260 million. And I think I’m very thankful and also proud of this because this is, of course, something that was made possible by some decisions that we made. ESG, of course, a topic and I want to make very, very clear that our commitment to improving the environment and also to work on everything that improves human rights in our business is still there. You can see that we reduced our carbon incentive intensity per product by a little bit more than 5% since 2022. This is in line with our targets. We are almost at 100% recycled polyester. The CDP, the organization that screens companies for what they do to improve the climate, has given us an A. That's a up form an A minus last year. And as many companies, of course, we are changing all operations to 100% solar. That's for both U.S., Canada and Europe. And this is just part of what we're doing. If you look at human rights, you can see some of the results there. The rest, you can read in 242 pages in our ESG report, which again, I would say is crazy. And I think we all have to agree we need to simplify this reporting with the interest of you and of us. I hope you guys talk to your compliance people and that we can start to work on things in a little bit more constructed way because our annual report, I think, is almost 500 pages. And I can say that I doubt if you read it in a way that you remember the most important thing in that 242 ESG pages. But it's a different topic, but the bureaucracy to drive a business here in Europe is, in my opinion, out of control. I would also like to say a couple of things when it gets to our employees. We are now around 62,000 employees. They come from 170 nationalities, and you see it's a little bit more women than men, 51-49. We currently at our leadership 40.7% being women, and we still think as a normal evolution of our business, the way we drive the business that we should be a 50-50 man/women setup. And I think you will see that the development continue. We, as a management, grew more or less have been here for two years. We have talked to you as a group, at least Harm and I have since beginning of 2023. So we are halfway there and we said that we will define ourselves as a healthy company if we achieve the following, which I repeated many times, which is a double digit growth year, it's a margin between 50 and 52. It's marketing around 12%. I think I said that also when I was at Puma, although I hear that I didn't invest enough in marketing, which is interesting. But I repeat that I think 12% is enough and cost base of around 30% gives you the 10% EBIT. And Harm and me, when we met before I joined, agreed that with everything we know of this industry, if we're doing a decent job with the current structure of the business, we think that 10% is achievable and our goal is to get there and then we can talk about what's then after that. If you then try to explain how we got there, at least for me personally, it's of course luck because you're coming into a company that is not doing well. It's of course easier than to be part of changing it than it is to actually be part of something that is very successful. So I personally have been lucky. I think for the company timing has been positive. You're all aware of that the big competitor is struggling. And you're also aware that the world is very volatile. And the volatile world, where the biggest one is struggling is of course an advantage for someone who wants to change their model. And we'll get back to that in a second. What is most important is of course, effort and attitude. And it's obvious that many, many people in our organization have done an unbelievable effort to turn this around and that the attitude to wanting to do business and wanting to solve issues has had a dramatic change. As an example, we sourced 140 million more pairs of shoes last year than we did the year before. And of course that is impossible in a planned business if you don't have the right attitude and the right effort. And if it is in sourcing or if it is in sales or in marketing or in finance or in any other function. I am very, very proud of the way the people have stepped up to actually turn this company around. And that is of course what always has been the adidas DNA and which I we have woken up again. But you also have to be aware of that we had to break a lot of internal processes and rules to get there. And I think we all understand that if we want to be a 10% EBIT company or more stable going forward, what has brought us here will not be what will bring us further. So we need to do some changes to adopt our business model and our organization to achieve this. And the biggest, biggest, biggest, biggest thing is to reduce complexity. We have built an organization that is very, very centralistic. Based on that you can actually achieve the same success in all the markets almost with the same merchandise and the same processes. And of course, the way the world has developed over the last 5, 6 years, that does work. That's why we have brought from the market into headquarter and in headquarter works on trying to define new operating models or one operating model that then mirrors the way the world is actually developing, and very simplified. It should be a surprise, and you can call this strategy common sense. It starts with the consumer wherever he or she is. And the closer we are to the consumer by the decisions we take, both from the product we put into the market and how we market it, of course, the probability of being right increases. And if you're sitting in a market and a market can be a country, it can be a cluster of countries or it can be a region, of course, they have to be responsible for the commercial success in that market. You cannot do that from a headquarter. And then the headquarter, and it could be headquarters, it might be that you have functions sitting in different locations. But if we say now in Herzog -- we, of course, have to build the frame for the brand. We have to make sure that we define what categories that we find what technologies that we could into research and into innovation that we also support with systems. So the headquarter roles will not be less important, but it's not going to decide what's we're going to sell in a city in the other side of the world. And this is important because it means that we have to put decisions into the immediate level of the consumer, and we have to have strong local leadership that we trust. I think it's the same in politics and it is in the business. You don't need rules for everything when you trust people, and you can or you have to make sure that you get rid of a lot of the bureaucracy because we have so many hindrance in our business to do business both internally in our organization, but believe me also in the market here in Germany within the EU. And I think this has to change, if not, we'll not be competitive. So with all this in mind, we worked with different departments and different processes and identified work streams how can we reduce complexity and be more right in what we're doing in a more simple way? And these work streams, again, from the bottom up, not from the top down, identified that most of the complexities are actually being created in headquarter. And we did then define that we have up to 500 roles here in the headquarter that are obsolete. It's not persons that have done anything wrong. It's not the persons itself, but it's actually roles. And therefore, we initiated and the program to see if we could, with the voluntary program, actually reduced these roles from 500 then to zero. The process is underway. We still have, I think, 2.5 weeks left to go, then hopefully, we have enough voluntary people in scope that will then leave adidas so that we can do this in a very, what should I say, good way. Should that not be the case, that there will be a social plan that will then, what should I say, support the rest of the levers. Anyway, not the fun thing to do, but necessary if we want to be competitive and be the best adidas. And the best adidas in the current world is definitely a global adidas, but with a local mindset. And of course, it starts in Europe where we are sitting with our headquarter and have the longest addition. We have to be the market leader in this market. There is no excuse for us not being number one, and all functions here, including the business unit, needs to be sure that what we do in the market is the best and that we win. Do we then go to America, it's obvious that there are differences. The American Sports, the college sports, the high school sports are all things that is very different than here in Europe. And there is no secret that the American brands are much better than the European brand in connecting to the make consumer because of this. That's why both in Portland and in L.A., we now have creative centers, we have business units, and we'll be much, much more local in the way we invest in sports and much, much more American we try to connect to the consumer. And this is necessary. If not, we will not be successful. And we have to admit, of course, we don't need to be number one in America because that's an illusion. The competitors are so much stronger that we can definitely grow and become much, much stronger in the U.S. than we have historically been. Greater China, same thing, again. A lot of consumers that are very interested in our sector. But of course, it's the same thing there. The sizes are different. You can produce locally. It's only monobrand and you control the space. The influencers are different. The sports are different. So again, here, we need to give the local management authority to go to market and produce the product that they want to have in front of the consumer. And don't forget you can today not really export from China to the U.S. And at the same time, the China market should be supplied out of China factories. So for all intensive purposes, you have two different supply chains between China and America. We have only 3%, 4% of the products sold in the U.S. coming from China. So it's already almost 100% different. I am extremely important that we're growing double digit in China again. And any statistic you will, you will see that we're taking market share. South Korea, very special market, very spend oriented, that market that started the Samba trend, but also in general, highly influential, both for the Chinese market and from the Japanese market. We have a creation center in Tokyo that then services both Korea and Japan. I have to remind you again that we had problems in Korea in November that the roof of a major DC actually collapsed because of snow, and we still have a lot of product trapped in that inventory, which means that the growth that would normally be in there will not be so easy to do in the next couple of months because we're working on, of course, a, separate warehouses, but also to actually get access to the inventory that has been trapped. Japan maybe the most conservative market in the world, very Japanese, very focused on having designs, materials and quality being Japanese. And we have the same thing here with new management, Japanese, that is a very, very, what you say, seniority guy in the industry. Full freedom also in working with Equation Center and we have in very, very short time connected much closer to the wholesalers and the retailers in the market and you see it pays out. LatAm, I think all statistics I see we’re number one in LatAm, number one in most of the markets, a very agile team, very focused on servicing the market, big differences from market to market, very successful in Mexico. Even with the province in Argentina with high inflation and difficulties importing products, very successful and very, very happy with that development. And as I said, I think we are clearly number one in that region. Our entrepreneurs are, of course, the people that take care of emerging markets. New markets, Middle East, but also markets like India all the way down to Pacific. So not really one market, but a cluster of markets that needs to be serviced individually of a group of people. And I think we have done tremendous steps in actually connecting with the consumer. The examples are, of course, the Indian cricket team and what we have done in Indian, but also prolonging with the All Blacks and focusing on the sports that are relevant. And now in Australia, after many, many years not being in the relevant sports in Australia, we are finally back again to be a real sports brand there too. Same thing here, extremely happy with the development and so much energy coming out of this team. One of the pictures here is the women only stores that we have in Riyadh in Saudi. And I think if you ten years ago had said we will have a women only store in Saudi, you will not believe it is true. So a lot of these markets that, of course, have different systems and had a lot of problems, they are making progress. And in my opinion, sports is only helping and extremely proud of what we see in many of these markets. So 2025, we are already two months into it and yes, the market is difficult and volatile, but so far we are in really good shape and feel that we are doing the right steps. We are of course taking the success of our footwear range and the brand heat and now also transferring that into apparel. You know that if you walk the streets last year you saw a lot of three striped shoes from the tariffs, from the Compass from the SL-72 and others, but you saw little apparel. We didn't push apparel into the stores, but we started to sell a lot of apparel through the online pure players and through our own channels. And now you clearly see that that visibility is increasing. So you will see a lot of retro styles, you will see a lot of colors, you will see a lot of wovens, you will see a lot of new materials. And there's a freshness in apparel that we bring to the market that makes us very, very positive of the rest of the year when it gets to apparel business. And then maybe backwards, but I'm 100% sure this is correct. When you are creating brand heat on the lifestyle side, it's also easier to get more distribution and more sales in the performance side. Maybe on football it's different, because it's such a different segment. But bringing back the Predator and bringing back the F50 together with the sports and soccer culture we've done on apparel has of course given us tremendous growth in football. And when originals and football works, then Adidas is doing well. And we are very optimistic about the football range both for 2025 and 2026. Running. Huge category, and there is a huge running boom around the world. And of course we have not had the right product in the right amount in the right markets. But to be honest with you, we couldn't even do the that because we couldn't grow more than we had because we couldn't even, in my opinion, execute it properly. So we focused on bringing innovation, do the Adizero line correctly, making sure we were winning marathons, that we signed up the right runs, very visible in all the marathons and we are taking market share in all, I would say the performance categories where people buy shoes to run faster from A to B. Now when you then look at everyday running and comfort running where all the brands have clearly done a better job on us, we finally have the right product range. So in the next 12 months you will see totally new Supernova range. You will see new Boost material and new Boost product which will impress you. And I'm 100% sure that we will take market share outside of the high end performance side because we have the right product. And in addition to that, the shoe you see on the screen is again the Adizero Evo SL, which is in my opinion the hottest running shoe now in the lifestyle area. Although the shoe is also selling in a specialty side and in the sporting goods stores. I think we have it now in 92 different colors and materials. So a wide array of different looks on the same last in the same material in a very, very comfortable form. Basketball, surely the most difficult category to be big in, given the strength of our major competitor. On the other hand, with the athletes we have, with the design direction we've taken and the price points, we clearly see that we finally are starting to get better results. And again, the business unit sitting in LA is for the first time real, what should I say, operational and the things that are coming out of there makes us also positive And you know we need visibility with players and products in NBA to sell other classics. So this is a major part of our strategy for the U.S. going forward. And again, we will not be a market leader, but we will take share, and we are going definitely in the right direction. A category which we should be strong in, training. We are making huge progress in markets like Europe and in LatAm. We have not made the progress that we need in America. And again, we all know that this is a major focus for us going forward. We know that all the brands, new brands are very successful in the U.S. We have seen new Collabs, which I'm sure you read and locked upon. And of course, we are working on Collabs, different distribution and I would say, the key for the American market because going forward, training will be crucial for us, both in apparel and fitter. The good thing is on footwear, we have now 3 franchises that actually were bought in Asia in America and Europe, so there are positive signs. But on apparel, we still have quite some work to do. And then outside these categories because I kind of mentioned many, many more, including Golf, including U.S. sports, including tennis, but of course, you don't have all that time. What is important is that we will continue to invest more in the width of sports and in the depth of sport. That also means in smaller sports that are not commercial. And this is, again, in the spirit of Adi Dassler. We want to go back again to be the sports brand of choice for the athlete. Also in smaller sports where it is to get visibility and credibility and necessarily not to get the commercial success going. This creates energy and innovation. It creates fun for the designers and the cost of being in this smaller sports is not necessarily huge, but I think we, as adidas should not even look up on the cost and Harm have given me money, so we will continue. And you will see some announcement where you will probably be surprised but is in the spirit of getting credibility, visibility and fun with sports and athletes. And then of course you ask what kind of events can you then copy what they did last year? There are no events this year. Of course there are. The Women's Euro in Switzerland will be, in my opinion, a great commercial and image event for women's football and football in general. There is huge interest increase and the offer coming out of us and other brands is much better than before. The television coverage is better and that's why that is a huge event for us. The Women's Rugby World cup with the All Blacks is fantastic for us. And you will start to see a lot of campaigns also going towards women's rugby. The women's Cricket World Cup will be hugely important for the Indian market. And again of course then we support it. And then, then you have kind of the test for the World cup next year, which is the club World Cup that is going to be in the U.S. this summer where we of course are the major sponsor and will have many teams. And then I can promise you anything that brings us closer to the consumer, to American sports. Being in high school, being in college, being in any of the American sports has high priority for us. And you will see that every month, every quarter going forward. So finally we talked about this many times. We cleaned up our logos. The performance logo on the left side, the three fold on the right side. We took adidas away because the logos are so strong by itself. We created a visual language for results, which you see here. You will see doesn't matter if it is in Tokyo or if it's in Europe or America. The visual language is the same, but the content might be different. It might be local celebrities, it might be local products. But wherever you go in the world, this is how we look. And I think it's time, right? It is us and very proud of it. And when you then get to performance, we change the impossible is nothing to you got this. Why? Well, we think the attitude of you got this is much more right. It is trying to take the pressure away. It is having an attitude that I think we all would like to have that we don't need to worry because you should just do it. That's not ours. Because it is not only about winning, it is also about enjoying sports and enjoying what you are doing. And the attitude of this chapters have in my opinion been done extremely well by our creatives. And I'm going to play a couple ones because they really touched me. And if you're an athlete, you will now get goosebumps. [Presentation] Bjørn Gulden: I think we all need someone to make us believe. And as I said, if you've been an athlete and are an athlete, I think you know what we talk about at least. I think this message is so right. I think we made 52 of these stories and they're all authentic. So you will see stories with stars, you will see it with not so famous athletes and they all authentic stories which is again in these days so important. And I know who my plus one was. Maybe you know too. So where does this bring us? As always, we give our guidance and as you can see here, excluding Yeezy, that means for the leaders brand, we promise you double digit growth. If we have Yeezy into the base, then of course it is first only high single digit growth because we need to replace the €650 million Yeezy product that we sold in the year of 2024. And if we add that all up under those circumstances, we promise you an EBIT and operating profit of €1.7 billion and €1.8 billion. I know you very well, you will say why so low? And you get concerned, of course our ambition is higher, but you know that we will never go out and promise you something that we cannot deliver. And again, you're sitting in February and you look at the market and you say, are we going to have tariffs in the U.S. or are we not going to have tariffs? Are they going to be tariffs of all the countries? What is this inflation going to cause in the markets? I think you need to give us a quarter or two before we start to talk about what the potential are. We feel very comfortable with this guidance and then it might be, even if Harm doesn't like to do an upgrade, that we will allow ourselves one later in the year. But again this is what promise you and that is in the environment that you all know that we cannot, what should I say, guarantee what will happening in the world. We can guarantee you once, that is we will take market share, our order book is good, our sales is good, but we cannot control what is happening with total retail. And I hope as good long term shareholders you will agree to that. So we have been through this many times. We think we are on the way of delivering the 10% EBIT in 2026. This is what we have said. This is the math. And again, everything being equal, the time for us is now and I hope you then have some good questions. Only two at the time. Sebastian Steffen: Thanks very much Bjørn. So the time is now for your questions. Operator: Maura, over to you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Piral Dadhania from RBC. Please go ahead. Piral Dadhania: Good afternoon. Thank you for taking my question. My first one is just on the wholesale channel. I was wondering if you could give us an indication of whether there was any timing effects related to the delivery of wholesale orders, particularly in Q4 where the channel accelerated to a mid-20s run rate of growth versus a low teens number in Q3 and whether that would have any impact in Q1 of 2025? And then secondly, just within wholesale, just to understand, the European regional guidance is high single digit after a fairly strong 2024, partly supported by football we understand. Is there anything you're seeing in the wholesale order book for autumn/winter 2025 that gives you any reason to be cautious on the European regional outlook? And then my second question is just on the buyback, which is very nice improvement in the free cash flow generation and very nice improvement in lowering the debt load on the balance sheet. So congratulations on that. I think historically, Harm, you've talked about the ability to revisit the share buyback should the net debt-to-EBITDA leverage ratio go below one times. And on our numbers, we think that happens in 2025. So is there a scenario in which you may reinstate the share buyback perhaps in 2026? Thank you. Bjørn Gulden: The way I count, that was three questions, but I'll answer the two first one and then Harm takes the third one. Nicely done. On the wholesale channel and Q4 impact on Q1, the answer is no. There was nothing pulled forward. There was just either preorders placed and then a lot of reorders. So no impact on Q1, no. The wholesale number for Europe, which is high single-digit, which could be 9.9% theoretically, we haven't seen any slowdown other than a lot of European retailers struggled in general with, I would say, volatile demand. We have seen strong numbers, but we are in an environment where we have to take into account it's not only us. So given the growth we had last year of 20%, and given that quite some of the retailers were flagging that they were nervous about the economy and the traffic and actually even through the last couple of weeks, the weather I think that coming out at a high single digit was kind of smart to do. But there is no -- the order book is strong, and our performance at the beginning of the year is strong. So there's no red or orange flags on that. Harm? Harm Ohlmeyer: Yes. First, Piral, thanks on credit on the free cash flow generation. I appreciate that. And yes, I mean, first, it's very, very good to have a strong balance sheet in today's world and a more volatile environment where every morning, you wake up and see some new news. So we're very, very happy that we made good progress, and there is a strong balance sheet. Now we're using that cash to build up our inventory as well. We shouldn't forget we have some seasonality as we go into more double-digit growth again into 2025. That's what we want to see happening first. I'm pretty sure you will generate a lot of free cash flow again in 2025. And we talk about a share buyback or not, there's definitely nothing for 2025. If the world is normalizing, we might look at that in the second half what we want to do with the capital allocation. But rest assured, the capitalization is first, investing in the operational business, than paying dividend to our shareholders and then we might consider a share buyback, but that is our topic purely for 2026. Piral Dadhania: Great. Thank you. Operator: Next question comes from the line of Edouard Aubin from Morgan Stanley. Please go ahead. Edouard Aubin: Yes, hi guys. Thank you for taking my questions. So my first question, Bjørn, is on the competitive landscape. Obviously, you don't have a crystal ball, but do you expect the competitive landscape to be more adverse than in 2024 or less? I mean if we look at the industry leader, it has been quite disruptive in terms of discounting and still today, but hopefully, things should normalize, but at the same time, they may also get more shelf space in the second half of the year. So just your view overall on the competitive landscape? And then on the gross margin, so really impressive numbers in 2024, given limited EC benefit and less benefit from China than historically. But if we look, Harm, at 2025, so you kindly broke down kind of the moving parts in terms of headwinds and tailwinds and the 30 basis point headwind from easy, the market seems to believe that kind of the tailwind in terms of the product cost and discounting would be about 102 -- sorry, 50 to 100 basis point benefit offsetting again part of the offsetting the easy headwind. Does that seem correct? Obviously, you don't guide, but in terms of your gut feeling, if that makes sense in terms of the magnitude of the potential improvement? Thank you so much. Bjørn Gulden: To be honest with you, I don't think that the competitive landscape will change in a way that they will have impact. I think the only thing which worries me maybe in general, be what happened with inflation tariffs in the U.S.? And how is the retail landscape in general. I don't see our competitors' actions having any short-term impact on us. There has been quite some discounted product in the market for a long time, and we still did very well on full price. And I haven't seen any product launches or anything that I heard about that should have a material impact on what we are doing. There are, of course, the running brands that we talked about many times that are doing well, and they will probably continue to do well, but that doesn't really have an impact on our business. And I'm sure that the major player will work through his issues, but I'm sure he also needs some time to fix things. So I would say that we're not really looking at competitors and getting higher heartbeat, but we are, of course, not aware of what will happen in the retailer market should this tariff thing start to move left and right. Because it's obvious that, that will make the retail market in the U.S. go down when it gets to volumes. But again, no one knows yet. As I said, if it is China only, it won't have any impact on us isolated because we hardly use China for the U.S. But there are many people who're using China, though it will create inflation anyway and then we don't know what's happening. So -- but no, we focus on the consumer and the different clusters and markets and feel that we have the answers for 2025, and then we will see if competitors are doing something, but we feel pretty confident right now. Harm? Harm Ohlmeyer: Yes, on the gross margin, it's a really good question. And what I need to remind everyone, we normally hedge 80% of the U.S. dollar in the euro or other currencies as well. And we all see that the spot rates have been rather difficult for us in the last couple of months. Now they became very favorable today when you look at some of the spot rates or how we need to hedge for the future as well. So what I'm saying is it's a very volatile environment from a currency point of view as well. And I can't confirm what you calculated there, Ed, but what I can confirm, pending something, forget about easy the 30 basis points, we will definitely cover that. But I'm also very, very confident that we will exceed what we have done in 2024. So definitely, we are targeting to improve what we delivered in 2024 at 5.8%. So we are confident about this one. And of course, there are always some external factors. I mean, you have a midyear election in Argentina where we don't know what's going to happen. If Milei [ph] is going to be confirmed that it could be even better. So -- but the main message is without going to all the puts and takes, we are very confident that we can improve compared to 2024. Edouard Aubin: Okay, thank you. Operator: Next question comes from the line of Aneesha Sherman from Bernstein. Please go ahead. Aneesha Sherman: Thank you so much. Bjørn, a question for you around tariffs. So you're going into your third year strength. You talked about it being scaled up. Where do you think you are in the cycle for tariffs? And are you still seeing double-digit order book growth? And kind of how much longer do you expect tariffs to keep growing above the market? And then one for Harm on your margin guidance. Can you give some color on how you're thinking about sensitivity to top line performance. So for example, if the top line growth were to actually come in at double digits for the group as per your ambition, what kind of leverage would you -- incremental leverage would you expect on the kind of 6% to 7% operating margin guidance? Thank you so much. Bjørn Gulden: You have to remember that two years ago, when we started December and we -- I think we indicated your tariffs because I don't think it was something that people knew what was. There was, in the beginning, no volumes. So as the real volumes that have gone to the market has really been scaled for the last, I would say, 16, 17 months. And you have to remember that tariffs is just a subsegment of classic court shoes. So both the Superstar and also the Campus is not the tariffs the way we classify it. To the three shoes that are in the tariffs area, the Spezial, the Gazelle and the Samba, they are in different life cycles in different markets. And we manage these franchises, not as global franchises, but we manage them market by market. So it's obvious that the Samba are in certain markets at a level where we manage now the volumes. Although the order book demand is still up, we are starting to manage that. The Spezial is not at all what should I say, manage because the demand is increasing in all markets. And the Gazelle is a shoe that is very good in some markets but not really relevant in other markets. So it's a pretty, what should I say, mixed setup of how we manage them. Important for you is that we don't manage this global because global is average, right? I mean if you sell 100 in one and 0 in another, the average is 50%, and it is meaningless, so we put all the issues available for the market. And then the markets are selling them both from a preorder and also from a reorder with forecast, and then we adjust that from a month-to-month and in certain markets, even from a week-to-week. The full what should I say, block of tariffs is still not saturated, meaning that there is still growth in the area, but of course, at the level we are you need to manage that. That's why it's important, for example, in the U.S. to start to scale the Superstar over time because that's a much more American shoe, especially for the male consumer than any of the 3 coming out of tariffs. And remember, Campus came as a surprise and was also scaled in many markets. So we're not worried that 3-stripe classic shoes, the way we manage them, still has legs to walk on. But of course, we need to make sure that we also put other products on the shelf. That's why the Evo SL, which doesn't come from court, but come from running was such a nice surprise for us because it took off like a rocket, and it's scalable into millions of pairs, which we hadn't planned it to. In addition to that, you have the 3D printed shoe out of Climacool, which was also only meant to be a small thing, which had turned into be a monster. I mean, we can't produce enough of it. But it's an interesting thing because it's gone commercial in the retailer's eye. Then you have the first running shoe coming out of the LA center, which is a shoe called Kokana, which all the American kids that comes out of American football loaves, which will start to hit the market. Then you have, the Mega ride, which is our VStech answer to what is happening in the market. And you have the old Climacool and the equipment shoes that are trending. So we have a big group of running shoes that are in different phases of what should I say scaling them into be commercial which is completely different than 12 months ago when we basically had SL72 as a test. So we feel when we talk to retailers that we can now fill the classic wall terrace and other styles and we can start to fill the running wall in addition to the basketball shoes that are starting also to do better. So we feel we are in a much wider shape than we were a year ago. And should we get to the stage that we feel that we need to discount any of the terrace shoes, we will of course reduce the volumes. And remember, we do not allow discounting of the standards colors, only seasonal scholars like everybody do on franchises. So with that tik, I give back to you. Harm. Harm Ohlmeyer: Yes. Aneesha, on your question on the margin. And of course, if you get to our ambition to grow double-digit reporting and you compensate for the €650 million Yeezy business, that will be incremental profit in absolute terms to the business as well. And that will be over proportional to what we are guiding right now. So there will be a benefit. But secondly, you also to look at how the currents are developing. I mean, if the dollar is getting to parity, we have a higher top line, probably on the same absolute profit, so it might have an impact on the percentage profit. The other way around, if the dollar is getting really weaker and the RMB would be weaker, then we have a higher percentage for profitability. But first and foremost, the absolute profit would be favorable if we get to our ambition of double-digit growth and compensate for Yeezy. And then we always said we want to have a linear development towards our 2026 target of 10%. So that is part of our ambition, and you can do the calculation of where we're coming from in 2024. If it would be ideally linear to get to the 10%, that will be a good indication as well if you get to higher net sales. That's pretty much where we are. Aneesha Sherman: Thank you. Really helpful. Operator: The next question comes from the line of Warwick Okines from BNP Paribas. Please go ahead. Warwick Okines: Thanks very much. Good afternoon. Two questions, please. Firstly, when you talked about the need to simplify the organization. I don't want to underplay it, but it's removing 500 roles in headquarters enough? Or is that the extent of what you're doing? And then secondly, in your annual report, it shows that the cost of promotional and advertising commitments increased nearly 30% to €8 billion. Does that indicate rising costs in maintaining your authority in sports, or that you're just signing up your partners who longer contracts? Bjørn Gulden: Well, the second one is just long-term contracts that have either been renewed or added. So there is not anything else to that. And as you probably know, we have resigned some of the big ones. There are some announcements around the corner. So when you know all those, you will know where the math is coming from. The 500 roles, does that -- is that enough? Well, it isn't of the way we looked at it now. Remember that this is to reduce, what should I say, the complexity and headquarters. It doesn't mean that we're not going to add people in the markets. So when we did this analysis -- and again, we've done it pretty thoroughly, this was what we identified to be the necessary steps in Herzog. That again does not mean that we don’t need to do things other places in the world, but it starts with headquarter. And most complexity starts with that we’re doing things in headquarter that hinder also doing things simpler in the way we go to market in the market. So I would say yes. I mean and then you know we are moving people around on other, what should I say, programs and we are hiring people in the market. So we don’t say every little detail we do in the organization, but this in Germany is a major thing, right? Taking 500 rolls out of a headquarter in Herzog. So you don’t win the popularity price when you do that, right? And you shouldn’t. But it is necessary, probably not short term, but it's necessary for us to start to work in a way that we get the best out of this brand. And I think both Harm and me agrees that even if it has a cost impact, we have accrued for this, and of course, in Germany, getting rid of people cost something, we take the hit now. I think there is a quote that you should change the roof while the sun is signing. If it's not too late, and we feel at least we have some sun, and that's why we decided to do it now. But not pleasant, I mean, as you can imagine. Warwick Okines: Yes, got it. Thanks a lot. Operator: Next question comes from Geoff Lowery from Redburn Atlantic. Please go ahead. Geoff Lowery: Hi there team. Just one question really. Can you develop your thoughts about the future marketing model a little bit more? I'm quite struck by your observations about needing to do more and more sports and more locally and yet you're recommitting to the 12% of sales number for marketing, which kind of suggests the return on that marketing is as high despite the evolution in model. Is that a fair way to think about it? And how do you think about it in coming years? Bjørn Gulden: Marketing, there's no formula of what is right in marketing. 50% is the emotional and 50% is rational. What I'm saying is that you cannot only invest in the big sport that are commercial, at least I think so. And I think adidas need to be different. I know the brands by having the Adi Dassler attitude of being visible also in smaller sports and being, therefore, the athlete, not only because of marketing the way you look, but also internally in creation. Innovation people and design a love to work on things that are different. If it is a ski jumping boot or a bobsleigh shoes, or it is a riding boot or whatever, if we can work on creativity that are outside things that you need to brief in to be commercial, you're creating this excitement, which adidas used to have. And I think we want to bring that back. And now you have to remember that if you're signing a soccer startup can be €1 million, €10 million, €20 million, there's enormous investment in it. If you're signing a skier it's not even the shoe laces of soccer player, right? So the point is that when you're doing €3 billion in marketing, you can find money to do things a little bit different than only doing running, basketball, soccer. And that's what we're trying to do. The 12% in marketing is not scientific. It might be 11.5%, it might be 12.2%, but I think what we try to tell you is that we think that 52% margin, 13% marketing, 30% cost gives you 10% EBIT. There are variances in this, maybe we do 52.5% margin, and then you can do 12.2% marketing, and you still at 10.3% EBIT. So I think this is not a simulation of exact numbers, but it is a philosophy. And I think we have an agreement about this. I hope you agree that doing cricket in India makes sense, both from an image and commercially. Having the All Blacks in Rugby we don't play Rugby Germany makes sense. Mikaela Shiffrin is the biggest ski star in the world, we can use them more. And you can go on and on and on, and you can find ways that can combine the emotional and the commercial in a way that it fits our, what should I say, adidas' vision. Don't forget that should you grow 10% every year, that's €2.3 billion or more, 10%, 12% of that is €250 million. So even if you keep your , what should I say, percentage flat and you keep your long-term contract, there's always flexibility. And again, we have a snowboard in China, which is the biggest one in China, who would have thought that. So we have a breakdown or in China who is great. So again, this is a moving thing. And I don't have the answers, but I have hungry people that are trying to find things that are relevant, and that's what we're trying to do. There is no more scientific to that because the ROI in marketing in your models, if they really worked, they wouldn't work again because then we will all do the same. I haven't seen one model on ROI on marketing that works. So again, Nike paying 3 times more than we did for the DFB. I mean how do you find a model that says that's the right? They still do it, right? So again, there is a subjectivity in this, and there's an emotional part. And the important thing is that the leadership and the markets agree upon the direction that we kind of are backing up the investments that we're doing. And at least, I feel over the last 18 months to 24 months, we all have agreed to this. And any big investment we discussed in a bigger group. So I really, really feel that it is good. And in a couple of weeks, you will see a couple of announcements that I think you all agree to. And they are both rational and emotional. Geoff Lowery: Thank you. Operator: The next question comes from the line of Erwan Rambourg from HSBC. Please go ahead. Erwan Rambourg: Yes, hi good afternoon. And congrats on the journey so far. So I'll stick to thanks a lot for the useful reminder of the framework for margins. To get to 10% EBIT margin, I think you said you needed 50%, 52% gross margin, 30% SG&A, 12% marketing expenses. You're already there on gross margin and marketing expenses. So should we understand that you'll get a lot more operating leverage on SG&A in the next year or two? And if that's the case, why do you get more operating leverage this year or next than you got last year despite very good growth? Is there a reason for an acceleration of that operating leverage? And then secondly, on the U.S., you saw a pretty fierce rebound in Q4 last year. I don't want to sound too short term, but the past few weeks have seen a few macro headwinds accumulating. At the same time, you're saying the U.S. is lagging 6 months to 9 months relative to a few other markets. So should we expect -- or is it your assumption that the U.S. outperforms other markets this year, sort of playing catch-up relative to Europe or other incredibly strong markets last year? Thank you. Bjørn Gulden: Well, the second one is, of course, that our assumption is that we should grow double digit in the U.S. starting now and forever. I have to do a disclaimer though because we don't know what these tariffs will cause in the whole market. But with the lack of market share that we have in the U.S., but still, in my opinion, with a great infrastructure and the right focus, of course, our goal must be to grow double digit every quarter or at least every double quarters or half year because you can all have variances within the quarter. So the answer to that is yes. And again, we believe that we should have the ambition to be number one in all markets except for the U.S. Why not number one 1 in the U.S.? Well, we are so far behind and our competitors are strong that I don't think we should even say it because it's an illusion, but we should have a clear, clear goal with our management to give the tools that we can take market share constantly and become a much bigger sports brand in America because that is doable. In all of the markets, I don't see any rational reason that we shouldn't have the ambition of being number one. That doesn't mean that we will reach it in all markets. I know that would not happen. But I think any GM that works for the leaders in the market should be asked, what do you need to be number one, if you are number two or if you even worse are number three. And then we should try to give him or her the tools to be number one. That must be our ambition with a brand that is 75 years old, who has an awareness in the high 90s and have a global infrastructure. That's how we think. And then when it gets to the U.S., again, I don't know where you're sitting, but there is, of course, now the big question mark, should he put tariffs only on China? Okay. Then we will not really be impacted in the beginning from our own margin because we don't source from China. But the people that do source from China will, of course, raise prices and then you have inflation. And when inflation goes up in a segment, then volumes go down, so it might also have an impact on us. Everything else being equal, we still have to take market share. So if the market is up, we will be up more. Should the market be flat, we can still be up. Should the market be heavy down, we should be less down. That's kind of the math on this, but we don't have any numbers on it. To your first question, on your leverage, yes, I mean, it's pretty obvious that the leverage in the beginning of a turnaround is more difficult to get because we haven't really looked for any cost cutting or real efficiencies. We have been looking at making sure we produce what the consumer wants. Service the retailer and growth in front of the consumer has been important. Going forward, of course, we should try to find the leverage much more specific. So your assumption is correct. Erwan Rambourg: Okay, thank you so much. Operator: Next question is from Adam Cochrane from Deutsche Bank. Please go ahead. Adam Cochrane: Good afternoon, thanks guys. The first question, given the external volatility that you're talking about, can I just check, is that more macro-related in the last few weeks than adidas specific? I just wanted to clarify when you're talking about some of these concerns, whether it's something that you're seeing in your numbers or is just something that you might theoretically see in the wide... Bjørn Gulden: No. I'll stop you. There's no adidas. So we don't get the misunderstanding. There's no volatility on us, but there has clearly been if you follow retail has been some volatility in traffic and conversion in the U.S. uncertainties. And there has been some uncertainty in Europe because of the weather and general consumption, but not with us. There is nothing that worries us internally on our own development, zero. Adam Cochrane: Okay. That's great. And then what I was going to ask, given volatility, can you just remind us how much you can flex your production and your capacity either up or down given the volatility is question number one? Bjørn Gulden: Well, last year, I improved my volumes in footwear by 45%, 140 million pairs. And I think in apparel it was 25 million was something. So my flexibility upwards is always there. Flexibility downwards is different because then you have to, what should I say, work I would say, by extending your delivery times, but it's all doable. And the way we work with our suppliers and the transparency we have with then, we have a great deal of flexibility right now, to be honest. And don't forget that we have been a hot brand now to work with because we are growing €2.3 billion. So the growth in percentage might not be so impressive, but the volume for the suppliers have been very impressive. And you know how that works? They will tend to drive towards the people they believe will increase volumes, right? So if all the brands are growing 20%, 30%, but the base of, I don't know, €2.5 billion, that is, of course, in the big scheme, a lot, lot less for the supplier than for us. So right now, I would say that the demand, or what should I say, the request from suppliers to work for us is pretty high, which is very different than it was 24 months ago where we have cut capacity. So I think we are in good shape when it gets to having the flex that we need to do to control both demand from a positive side and then also to control at least midterm inventory should there be a real problem in retail. But again, we are not at that stage yet. We haven't cut any orders yet at all and have an order book that has been growing until yesterday for both Q1, Q2 and into Q3 of this year. So there's nothing in our numbers that worries right now, but we all see the news, right? So... Adam Cochrane: And the second question is one that -- I'm sure you won't give me an exact number, but the success that you've had in increasing the full price sell-through, would you be able to indicate how much more there is to go in terms of full price sell-through? And then you talked about the U.S. still having an opportunity. As a benchmark, how far behind the other market is the U.S. in terms of its full price sell-through? Thanks. Bjørn Gulden: I can't give you any exact numbers on that because it's impossible. We have more than halved our discount on our direct channels. So that tells you what has happened in our own stores. And the like-for-like performance we had in all our own channels was very strong. When it gets to the retail partners, you remember that our retail partners can discount whatever they want. We don't have the power to do that. But when we look at their margin with our product and their sell-through rate, it's enormously good. And then you know that even if should something slow down, I think we are far away from getting a lot of discounts because there are other brands that are on the shelf with much worse sell-throughs that we are having. So right now, we still feel very, very strong when it gets to us having products where the retailers will make money with it compared to other brands, and we don't feel that we are under pressure to discount in our own channels for the time being. I don't think we really have inventory issues anywhere, to be honest. So right now, knock on the woods, should the world be okay, and should your friend not install tariffs in a way that it will create a lot of noise. I think we are in very, very good shape to be honest. But again, we don't know. Adam Cochrane: All right. Thank you. Sebastian Steffen: Thanks, Adam. Mora, we have time for two more questions. Operator: Thank you sir. The next question is from Jürgen Kolb from Kepler Cheuvreux. Please go ahead. Jürgen Kolb: That Frankfurt, nothing to do with tariffs. Just a quick one for Harm. You mentioned that your expecting or hoping at least that the rating agencies may increase or may look deeper into the financials and potentially upgrade the rating. What impact would that potentially have, let's say, 1 notch or 2 notch improvements here? And then the second one, for Bjørn, probably. You mentioned it that you have good transparency in the order book until Q3, and I was wondering if you could maybe fill us in on a little bit more details in terms of how is that broken down into lifestyle, leisure, performance, category-wise, region-wise? A little bit more color on the order book, that would be helpful. Thank you very much. Bjørn Gulden: When I start to break that up, it gets complicated. What I can tell you is that we have no markets that doesn't have a positive order book. And we have no categories that is not a positive order book. I think that shows you where we currently are the flex between the different order books, we need to be careful about. Because in 2025, you can imagine, we had a huge order book on soccer for the Euro which, of course, is not there now, but then we have all the soccer products. So I don't think I can give you anything else that we clearly see we're growing in both performance and lifestyle. And we have an order book which is positive in absolute all markets. Jürgen Kolb: Good enough. Harm Ohlmeyer: Yes. When it comes to rating, Jürgen, it just confirmed that we have a healthy P&L and a healthy balance sheet, but there's nothing we can really buy for this one unless we go to the next crisis that we have a better, better rating. But at the end of the day, we don't plan financing. We probably pay back the bond that becomes due at the second half of the year. And at the end of the day, confirmation of our road map, and it's a very good factor overall. But there's nothing that fundamentally changes our P&L or balance sheet just confirmation. Jürgen Kolb: Understood. Very good. Thank you guys. Operator: The last question from today comes from Robert Krankowski from UBS. Please go ahead. Robert Krankowski: Hi, hello. I've got like two questions. The first one will be on top line. I just wanted to check the start to the year. The commentary was very reassuring, but I just wanted to see whether it's still double digit as we saw in Q4? So that's the first one on top line. And the second one, I just wanted to come back to gross margins. I appreciate that you guys expect an expansion versus 2024, but it's quite impressive to see that Q4 2024 was ahead of Q4 2019. Should we assume that this kind of trend of narrowing the gap versus margins pre-COVID in 2019 can continue in Q1 and 2025 and Q2 2025? Thanks. Bjørn Gulden: Well, the first one, I don't think I should answer. But yes, the growth so far this year is double digit. And then Harm. I didn't say that officially, right? It just slipped my tongue. Harm Ohlmeyer: Well, we shouldn’t forget when you talk about the first quarter, we are probably on record right now. They’re a really good start, but we shouldn’t forget that we sold some Yeezy’s last year in March and we are comping these. So that’s always the question with Yeezy, without Yeezy that still keeps us busy when we talk about it. But yes, very good start to the year. When it comes to the gross margin, yes, the corridor is narrowing. That’s what you can assume. We made good progress in Q4. That’s a good assumption. But I want to reiterate again what I said earlier. FX is probably neutral, but again, we are very, very confident that we make further progress. And just summarizing again what Bjørn said earlier, we are in the corridor with the gross margin. It’s always not that difficult to spend 12% on marketing. And rest assured, you will see leverage on the operating overhead in 2025. And I just want to restate it again. We will not repeat the €200 million onetime cost. And of course, we see complexity reduction programs that we have. We accrued for most of that already in 2024, So there will be benefit as well. And we will make good progress from where we finish 2024 with 34% to also make there hopefully linear progress to what we need in 2026. So expect that to be a focus for us and the one KPI in our little formula that we haven’t achieved yet, but that’s what we’re working on. Robert Krankowski: Great. Thanks. Sebastian Steffen: Thanks, Robert. Thanks very much, Maura. Thanks very much to Bjørn and Harm and also thanks very much to all of you for participating in our call today. As always, in case there are any further questions, please feel free to reach out to Adrian, Philip, myself or any other member of the IR team. We're also very much looking forward to seeing many of you over the next couple of days and weeks as part of our road show activities. And with that, thanks very much again for your participation. All the best. Bye-bye. Take care.

Operator: Ladies and gentlemen, welcome to the adidas AG Q3 2024 Conference Call and Live Webcast. I am Maura, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Sebastian Steffen, Head of Investor Relations. Please go ahead, sir. Sebastian Steffen: Thanks very much, Maura, and hello, everyone. Welcome to our Q3 2024 results conference call with our CEO, Bjørn Gulden; and our CFO, Harm Ohlmeyer. In a second, Bjørn and Harm will take you through the puts and takes of the quarter. But before we go there, as always, I would like to ask you that during the Q&A session, you limit your initial questions to two in order to make sure that as many people as possible can ask their questions. Thanks very much in advance for sticking to that rule. And now before Bjørn is going to kick it off, we’ll start with a video to make sure that everybody is in the right adidas mood. Here we go. [Video Presentation] Bjørn Gulden: Yes. Hello, everybody and welcome to our Q3 call. I hope you are all in good shape and in a good mood. We are in a good mood. If you follow the news yesterday, you saw that Mrs. Bonmati won the Ballon d’Or and we are in a good mood because you can see that the store in Barcelona was already this morning decorated in honor of her. So it shows the speed that we have celebrating our athlete and also trying to utilize it commercially. So, very happy to see that. The weekend was also great for running. Our Patrick Lange won the IRONMAN on Hawaii, setting the course record. And as you can see in our Evo shoes, Yomif set the world record on half marathon, 57:30 and Agnes won also the women half marathon in the second best time ever 63:04. So again, I am showing it, because it shows the commitment we have to sports and that things are actually working and that innovations in products also is working on the athletes. Mentioning for the last time, but the summer of sports was important for us. I hope also for you. I think both the Euro, the COPA and also what happened in Paris was great. Of course, our team’s winning is one thing, but also the way we activated it and the mood, it puts both our retailers. And I will also say to a certain degree of our partners and consumers it was great. And I think it’s also part of the reason why I can say that the summer of sports did what we hoped for. It fueled our growth also into the third quarter. We did another hook, so you know the numbers, but just to repeat them quickly before Harm later goes through the details. Currency-neutral, 10.3% growth. If you look at the underlying adidas business without YEEZY, even 14%, very healthy gross margin of 51.3%. If you then exclude YEEZY you will see it’s even stronger. So it’s the first time that the adidas business had a higher margin than what YEEZY had. Operating overhead still heavy investment in sales and marketing and maybe not the leverage that you’re hoping for, but we said all the time that the leverage will come in the future. And we feel also very comfortable that it will happen. But as you know, we will continue to invest heavily in sales and marketing. All that gives us an EBIT of €598 million, which is up almost 50% to last year and EBIT margin is somewhat 9.3%, which is in the area of the midterm 10% we talked about. So that also gives us confidence for the future. I repeated this many times, but I have to do it, so you don’t forget it, 2023 breakeven and a transition for the company that we promised to make 2024 a little bit better. And I think we have. I’m proud to say that I think we delivered what we promised and a little bit more. And if you look at the regional breakdown for Q3, we see the following, the big numbers are then the currency-neutral total numbers and the underlying business is then without YEEZY. So that’s the adidas business. And as you can see, the leaders business in North America growing, but you also, of course, see the impact then on the YEEZY business. This is the second quarter in a row where we have a slight growth the adidas business. And with the order book that we have for Q4 and Q1, I’m pretty sure I can promise you that you will see different growth numbers and be very optimistic about the near future in the North American market. Europe, still very strong, plus 18% and 21% for the underlying business. China, a lot of discussions around China and how difficult the market is, we grew 8% in the adidas business and feel we’re taking market share. Very happy with the way the team works and also optimistic about the near future. Japan and South Korea are very strong at 17% in the underlying business. LatAm at 30, strong, as always, emerging markets – and that gives us the famous numbers that we grew 10% and underlying at 14%. And I think we can say that, that’s actually a quarter stronger than what we had expected when we started the quarter. If you then look quickly year-to-date, not big differences, but you see there the underlying business in the U.S. is still at minus 3%; Europe at plus 19%; China plus 8%, South Korea and Japan at 11%, LatAm at 27% and emerging market at 20% and that gives you then the 10% growth in total and 11% for the underlying business. And again, in line with what we have promised you. If you then look at the channels, wholesale business growing at 13%. And again, I want to mention here that, of course, the wholesale business in the U.S. where we had very negative order book is now building and for the first time, we’re now looking at order books in the next quarters that are actually up and even up double digit, that is why we probably are more confident than we have been before. Own Retail of 15%. Concept stores comping very, very strong double digits, but now also slight improvements in the factory outlets. That has been flat or flattish because of lack of merchandise. So positive development in both those channels. E-com reporting minus 3%, but that is, of course, when you take YEEZY out, the underlying business is up 25% and there shouldn’t be a big surprise to you. Also, that is now full price and very little discount compared to what it used to be. So very happy also with that development. And that gives you then the 64% wholesale and 36% D2C . And now you see brick-and-mortar a little bit stronger than e-com, of course, because of the minus 3% in the total. We continue to invest in retail concepts. I’m actually pretty proud of this because these are 2 women’s stores and when you see 1 is in South Arabia and 1 is in Dubai, it shows how the world is changing. Needless to say, both stores are doing well. And I think women’s stores only is a concept that we will try and test and work on also in the future. It is obvious that given that how many female consumers are buying our brand that female-only stores also could and should have a future. We continue also to invest in what I say, flagships and image stores. Here you see some of them around the world, L.A., Seoul, Sao Paulo, Chengdu in China and also a pop-up store in Paris, an amazing lineup in Paris when we did that pop up stores will be used celebrities, football players to curate in-line products and the interest was great. And I think all these stores that you see is part of continuing to build the heat and it’s, of course, an investment that we will continue to do. Maybe a little bit different, but here a sign again that we’re expanding the brand into areas where we haven’t had the footprint. First, on the left side, you see the future cities in China, that is the smaller cities in China, where we have then decided to go with a new format also competing against the local brands. And as you can see on the slide, we’re planning to open 3 in the stores during ‘24, I think end of the quarter, we are a little bit more than 200. And again, this is the China developed products sourced in China and going against the local markets. You see also franchise in markets where we haven’t had a real footprint countries like Iraq, Bangladesh, Uzbekistan, Kyrgyzstan, Azerbaijan, Vietnam and Nigeria. Again, important for us to spread the brand also into those markets that can have a growth in the future. And we do that mainly with the franchise partners. And then may be interesting for you for other companies. Foot Locker opened the first store also in Saudi Arabia. And when you look at the wall, we look pretty good. We then look at the divisions, continued strong growth in Footwear at 14%, Apparel at 5%. That’s similar to what we had in the last quarter. And then very, very good again that Accessories is up double digit, and you see a healthy development also in the divisions and that gives us almost 60% still for Footwear, 34% Apparel and 7% accessories. And I think we will continue to see that we will accelerate also Apparel when we get into the future of both ‘25 and ‘26. Important for the brand is the balance in the different categories, performance that people buy our product in sports now up 10% which is important. Sportswear, the more commercial packages at plus 4% and then original basketball partnerships and skateboarding, which has been building the heat up 20% and of course, important for us that we have growth in all these categories. I think you would agree that compared to 18, 20 months ago, we have now a very strong lifestyle portfolio. You’ve seen this slide many, many times, the scale franchises tariffs with Samba, Gazelle and Spezial, interesting to see that some of them develop different in different markets. There are stores, cities and regions that – where the Sambas is the strongest, but other regions, the Spezial is now the strongest and surprised, there are also markets where the Gazelle is the strongest. So you see that all three franchise is still very strong. And then when you add Campus to it, four still very, very strong growing franchises. We talked to you last time about Retro Running almost a surprise of the success of SL72. And as you can see here, we are scaling that in line with demand, and you see that spring-summer ‘24 with much higher what we did in ‘24 and very, very happy with that development. We talked about Low Profile, I think, for 2 quarters. Still not scaled, but we clearly see that we have an offer that is starting to show, I would say, big interest from the consumers, especially in Asia, where we have launched it in China, Korea, Japan. And I think I’ve said this to you all the time that when you get into March, April next year, I think this is going to be a commercial segment for us and probably also for some other brands. We took the chance to also use it as, I would say, segment by itself at the Paris Fashion Show here at the Stella McCartney show where both the athletes and the models were walking – was using Low Profile models from us and reaction in the fashion media, if you looked at it, it was very, very positive. We have talked about Lifestyle Running for a long time. We need to get that going. We have told you that we have a lot of offers on the way. And here, you see, I would say, some of them, they come from the classic side that we talked about, but also modern and what we call Vistech. Then we have, I would say, more price aggressive thing coming out of sportswear. And then we have also lifestyle versions of the Adizero which you probably also saw Pharrell having at the opening of the Olympic games. Something which is pretty cool is the Climacool. It’s a 3D printed shoe, but in a soft version, that means that the fit and the feeling is great. We have done small launches of it already, working very well. And this is an area which we think we can start to scale slowly because it’s a total new way. And again, it’s soft. So it’s actually not sure that only looks cool and different. It also feels great. And that’s why it’s also in the Climacool family because of the availability. On the right side, you see Aruku. You remember, we talked about that for a long time. The direction of the very, what should I say, big export [indiscernible]. Aruku means walking in Japanese, and it is a very, very comfortable shoe that also especially is now catering for the wide genes and the new look. And the initial reaction has been very positive, and you will start to see this going mainstream during the first half of ‘25. And then Superstar, the big issue that the brand ever had. We will launch it as a relaunch and the white black, black white during ‘25. We will phase this first in the U.S. because that’s probably where the shoe has the biggest demand and then a little bit delayed into Europe because of the lack of need to be honest, to have another court shoe on the wall. We are doing quite some incubation already, linking it with our designers, showing it that different fashion shows and there’s a lot of activities around it. And I think all retailers that you speak to are very excited about this. We are continuing with our takedown strategy. So for any, what should I say, franchise, we go upstairs in the higher price point with originals, we do takedowns, not identical, of course, but with the same trend. And needless to say, in the family channel and other, I would call them, commercial channel, this has been very popular and it’s starting to show also in our numbers. Apparel, we have said all the time that we need to lead the brand in footwear and then capitalizes on Apparel. You clearly see on social media and also in the I will call it more fashionable environments, a lot of 3 stripes and a lot of, I would say, cool outfits with our brand. You will start to see that also more in brick-and-mortar in ‘25. Right now, the people that are on the e-com and the pure players are having a real, real nice what’s we they run with it. And of course, we will then start to scale that more and more. But it’s not only fashion. We are a sports brand. And as you know, our offering there should be as good, if not better, and we’re spending a lot of time on it. I think all of us in management and in all markets agree that we need to invest even more in sports, both in the depth and in the width and what we’re doing. Of course, some of the visibility that take some time. But I have the feeling that every week when I watch our results and our visibility is improving, so actually very happy. Starts with basketball, which we know is the most difficult category to be successful in the U.S. Other signature shoes are doing better than better. And I think it’s fair to say right now that demand is actually higher than supply and that is, of course, good. We know that performance basketball drives a lot of street culture in the U.S. and that you can capitalize the new classics. And with the success currently, of course, way behind Nike but still highly improved from ourselves. We feel comfortable that we are also there in the right direction. Running, talked about it many, many times. We feel that we have the right products, the innovation on the top side, we are now trying and I would say with certain success also to widen it into everyday running and to comfort running. And we feel that the reaction from the trade is good and that we have products in the pipeline that commercially can be very important for us in the future. A fun story is that the Evo 1, the €500 shoe that is setting the world records has also had a huge demand in certain markets Here, you see our Beijing store, where we launched 200 pairs for €500. People were sleeping outside the store to buy it, and they were all sold out again for €500 pair after 1 hour. And now we will launch another 200 pairs for the Shanghai Marathon, but we will do the same thing, and I will not be surprised if people would also sleep outside that store. Football, as we said, a great year for football. I think we did a great job with the [indiscernible] in footwear, also been very happy with the launches of our jerseys. And then it’s very cool, and you actually now can see also the 3 fall on the pitch with our clubs and how that then goes into the fashion side of the business and creating the soccer culture, which I think we have to own. And of course, when you put the old heroes, as you can see in the back from our top clubs in a campaign, it becomes very exciting. And needless to tell all these products have sold out very, very quick. In general, when we try to combine fashion and sports, we have this unique blend that I think we can do. You see here on the left side, we’re trying to put our athletes into the fashion shows. And then we’re trying with our core labs to be very despite by sports. You see that here cap by cap, where we have soccer inspiration and you will continue to see a lot of this going forward, both with us as adidas but also in Y3 and also with many of our, what should I say, core labs both on the fashion and the design side. The 1 that was very successful both on and off the court where we picked Messy and Bad Bunny together, a, with the Gazelle outside the stadium and then with the F50 in the stadium. And of course, Pharrell starting to use the Evo 1 in the opening ceremony at the Olympics, but also in its normal life, of course, extremely important for our visibility and image. So again, I think ‘24, we promised you we would be a better company. I think of the three quarters, we probably can say that we are and to give you a little bit more insight on the numbers for Q3, I now hand over to Harm. Harm Ohlmeyer: Thank you, Bjørn, and good afternoon and good morning from my side as well, and I would like to give you some more details now on the P&L but also on the working capital and the balance sheet. So starting with the top of the P&L. First, on net sales, Bjørn mentioned already solid growth with 10% currency neutral growth in Q3 and underlying, which, of course, is more important and forward-looking 14% currency initial growth. So definitely a good quarter on the top line. Even better the gross profit for the first time. And in many quarters, we went to 51.3%, so 2 percentage points up. if I decompose it a little bit more on the next chart, you actually see that there was a benefit of product cost, better product cost partly because we’re scaling tariffs and overall, our volume growth that we have, the freight has normalized. Of course, the original mix is positive in the overall product mix, but most importantly, the discounting either on e-commerce or retail stores and to the wholesalers as well to make money for them as well, that’s very important is much, much better. We had some help on inventory provisions because last year, as you remember, we still had some elevated inventories and some aged inventory. So we sold some of the products, so we have some tailwind on this one. But you shouldn’t also forget that the FX was still significant. It was more than 1 percentage point negative. That is not just the U.S. dollar, but there are other currencies as well, whether it’s the yen or the peso, some things went against us. But again, and for the first time, YEEZY was negatively contributing to the gross margin. So underlying, you should look at the 51.3%. It’s even slightly better if I take YEEZY out of it. So very, very happy with the gross margin development towards where we want to be also in ‘25 and ‘26. If I go further down, and I know you’re interested in the operating expenses. But before I go there, I want to be very, very clear happened in the P&L this time because, as you know, in the release, we settled with YEEZY all the claims that we had on both sides in Q3, that’s why we had to release and other operating income around €100 million. These were accruals, given the risk that we have seen in prior periods, so either in ‘22 or ‘23 where we accrue these things. And given the settlement, we had to show that and release it at other operating income. At the same time, you see in operating overhead expenses that we did another donation of €100 million. So it’s pretty much a wash two of these, and I’ll come to that in a second again. So it’s also important to note that over the course of the last 20 or 21 months, we now have either donated already or accrued and committed to our adidas foundation around €250 million from the YEEZY proceeds as donations and that is significant, of course, not all being spent, but there’s still a lot of good we can give back to societies. And that will leave us with €50 million profit in our operating profit from YEEZY based on what we have sold in Q3. To be very clear on the bridge because all of you will ask, how solid is the €598 million from an operating profit point of view. Again, what I just explained, if we look at the other income, the accrual is it of €100 million and then the nations, it’s pretty much a wash. And then, of course, we have €50 million of YEEZY profit that you now can say, okay, the real underlying operating profit is closer to €548 million. But be reminded we always said, going forward to generate leverage, two-thirds of the leverage in the operating overheads will come from our net sales growth and one-third will be measures into the infrastructure or personnel expenses, rightsizing it. And rest assured, every quarter, we’re doing something without talking a lot about it, but also in Q3 it’s definitely to the amount that is slightly bigger than what you see in the YEEZY profit. So you can make up your own numbers, whether it’s now €548 million or €600 million, but we have some in the ballpark depending on how we look at the one-times. Now going further down, there were some concerns on the financial expenses in the past. I also want to decompose this one on the financial income, pretty steady. We still get some interest given the cash on the balance sheet, not much change, Q3 last year to this year. What really has changed are the financial expenses last year, remember, we had a significant impact from hyperinflation adjustments in Argentina and Turkey. That’s the majority of this. Now it’s more normalized with €25 million. And going forward, it will not be as good as the €4 million net. But again, also going in a good direction when it comes to the net of the financial income and financial expenses leading to a much better IBT of €601 million. And we always said there was a second concern, our tax rate became pretty significant last year, sometimes even above 100% with needed some explanation. But now in Q3, it was 22% or year-to-date, it was actually 26%, which also is a good indication for the full year, quite honestly. We are now back to a normalized tax rate. And of course, we’ll try to improve that going forward even slightly. Given these two factors on the net financial income and the taxes, we now see a net income of €469 million or basic earnings per share of €2.44. That is, of course, a good development in Q3 as well and real earnings per share is actually 75% up. So much to the P&L, very happy with the developments and more to come. When it comes to the balance sheet, again, inventories are very well controlled and very disciplined in all the markets, still current to 3% down. Even more importantly, when you look at the development of this, only €50 million of YEEZY inventory lift by the end of the quarter, the end of September. And rest assured, that will move as we speak, definitely in Q4. It will get to 0 very quickly or pretty much as we speak. But you also see there were some concerns do we have enough inventory because it’s so low right now and so healthy that we can deliver the growth that we are expecting in Q4 and going into ‘25. If you really deduct the YEEZY inventory, you actually have €250 million more than in Q1 and rest assured, €4.5 million overall is a good inventory base and especially healthy inventory and not a lot of aged inventory in that. So I’m very happy where we are. Of course, given the growth of the wholesale business now, we also – our receivables went up by 13%, pretty much in line with the growth of wholesale. And you see an indication that accounts payable, which is an indication of what we are buying our suppliers, 31% up, doesn’t concern me because this is what you will see now, €4.5 billion is probably the lowest inventory you will see for the years to come and expected to be slightly up in Q4. But you also see that we need to buy some volume and have expectations of growth, of course, in Q4 and going into ‘25. But overall, operating working capital also highlight when I go back, even back to Q3 ‘23, we are now at 20.6% operating working capital. When we talk about being a healthy company in 26 from a P&L point of view, would – I always said when we dropped below 20% of operating working capital we are very, very healthy in managing our inventories and overall balance sheet very, very well. So, also very happy where we are. Lastly, when it comes to cash and cash equivalents, despite the fact that we repaid the €500 million bond that became due in September, we still have €1.8 billion on the balance sheet by the end of September. That, of course, helped us, on the one hand, to increase our cash, as you just saw, but also reduce our adjusted net borrowings more cash bond being repaid, so €1 billion improvement with some give and take. Also very, very healthy and that helped us to get to our net leverage ratio significantly improved over the last 12 months and now almost at the smaller than 2x financial targets that we set ourselves. That also led to Standard & Poor’s removing the negative outlook to a now stable outlook, which is also testament of the improvement that we have done on the balance sheet. So overall, very happy with the development in Q3, both on the P&L, on the balance sheet and then lastly also on the operating working capital. And with that, over to Bjørn again. Bjørn Gulden: Thanks, Harm. Just a quick – I mean you know the number anywhere, you remember we started the year at mid-single-digit revenue increase. Now we are at around 10%. And on the operating profit, we started around €500 million, and now we are at around €1.2 billion. The assumptions for this is the following. You know that the remaining YEEZY inventory, which is €50 million at the start of the quarter will go down to €0, but you also know that this inventory is now being sold off to retailers and to partners we don’t expect any operating profit on it, so it’s €50 million in sales and €0 in profit. And to be very honest, you’re very close to having done that these days. So we should be very, very clean very, very soon, making promise that we are €0 when we get to the end of the quarter. We will continue to have some FX headwind, as Harm said, and then we will continue to invest heavily in sales and marketing because that’s what we feel we need to, and I think you agree to that. I have two slides on YEEZY just to make sure that we all know what we have done. You see on the top, you see the sales effect of YEEZY, the €150 million, €200 million, plus the expected €50 million in Q4 that gives you around €600 million in sales for the full year. And every quarter, 1 to 3 gave an operating profit of €50 million. We expect €0 in Q4 and that gives you then the contribution of €150 million and as you can see, the inventory going from €200 million at the beginning of the year then to €0 at the end of the year. If you then look at the guidance, as I said, we started at €500 million. Then with all the YEEZY drops, we generated €150 million of EBIT. And then the underlying business is – will be €550 million better than we started with, and that gives you then the €1.2 billion, which is currently the outlook. I hope this is a simple way of looking at it. And then internally, we say that the time is now. I think we have a quote internally that we have a generational opportunity to have a new generation of consumer hook to our brand. I think we have all the ingredients to actually achieve a business again that adidas deserves. And we do that by being a global brand with a very local mindset. We think that we need to be so close to the consumer that we need to accept that there are differences between the different regions, and that’s the business model we are now looking to set up over time. I was very happy to see how we set new apparel collection because it’s a global collection and with the content of actually marketing it was very local and we were able to generate or activate both our athletes and other sellers all over the world and I think we did it in an excellent way, actually, I’m very proud of that. Remember, our road map, as I said, 2024 being a better company, next year being a good company, and I think with everything that we can see the products that we have presented both for the first half and the second half, the order book we have for Q1 and partly to Q2 looks strong. And that’s why I would almost be ready to say that we are and will be a good company in 2024 and then as you know, the goal for ‘26 is not only to be good but also be healthy. And we define healthy back two years ago saying we need to grow double digit, achieve a gross margin between 50% and 52%, continue to invest around 12% in marketing and then, of course, get our leverage to 30% overhead and that gives you the famous 10% EBIT. I think also convinced that we can achieve that. I have a couple of updates in the organization. You probably saw that some days ago that Arthur Hoeld will leave us in the Board. He was the Chief Commercial Officer, been with the brand for almost 25 years, done an excellent job, but then decides not to extend this contract, we together and decided then to actually do a change now. We will have – hang on a minute, we will have Mathieu, as you see here, taking his role. Mathieu has been our GM in France. He’s been the GM in Southern Europe and its been now the GM for the European business, and you see the impressive numbers. I’m very, very happy to add him to the legal Board or have added him already. You see also that Michelle has been on the Board for a while now taking care of global human resources, people and culture. Harm has then, in addition to finance gotten supply chain and tech. Mathieu, as you said, new in global sales and I then take care of the brand for the time being. And then not in the legal board, but being in all board decisions and being in every meeting is [indiscernible] sits in Hong Kong and is in charge of what we call sourcing and product operation, business and development. And I think this Board is a very strong Board with the competencies that we need. One more change. Jan Runau after 33 years in our company being the face and I would say, the voice of the brand has decided to go for early retirement, a big thank you to him. He has been a very loyal and a very, very three stripe, threefold and performance logo guy, and he will stay as a friend and a member of the family living very close to headquarters. We then decided that Sebastian we’ve also been now 10 years with the brand. I think it was five years in the brand even earlier, now being charged of Investor Relations, but he will then also take on corporate communication because we think that makes sense to put that together and that Sebastian. I think I hand over to you and congratulations and good luck. Sebastian Steffen: Yes. Thanks very much, Bjørn, for the kind words for the wishes and for the opportunity to lead the combined communication functions going forward and very much looking forward working with strong and very experienced teams, both on the IR and corporate comp side. to drive our internal and external communication going forward. Before we move to the Q&A part of this call, please allow me one more comment because I also want to make sure to congratulate Jan on a fantastic career. I had the privilege of working with him for more than 15 years in different roles. And I have to say I really enjoyed working with him over many, many years during good times, but also during challenging ones and always felt this was a great partnership between Jan and myself between his team and mine throughout all the years. So I wanted to say thanks very much, Jan, for this and all the best for the future. And with that, I’m going to hand back to Moura to moderate our Q&A session. Operator: [Operator Instructions] The first question is from Edouard Aubin from Morgan Stanley. Please go ahead. Edouard Aubin: Well, hi, guys and congratulations, Sebastian, great news. Sebastian Steffen: Thanks. Edouard Aubin: So two questions for me. Bjørn, on the top line first, I know it’s very premature to talk about 2025 guidance. So I’m not going to ask you for this. But if you look at kind of out of the next 4 to 6 quarters, what’s your kind of sense in terms of your ability to more or less maintain the current underlying top line growth that you’ve posted in Q3. I don’t know if you’re willing to enable to comment on that? So that’s question number one. And then question number two is, it seems that adidas as an organization is casting a wider net, so to speak, in terms of your presence in terms of distribution channels in terms of sports, you talked about U.S. sports in terms of offering more SKUs, more price points with the takedown and so on. So to what – so obviously, that’s going to have a positive impact on top line, hopefully. But to what extent that could negatively impact your profitability and your ability to reach a 10% plus EBIT margin in the medium term? Thank you. Bjørn Gulden: Hi, I think it’s pretty obvious that the way we have told the story that we expect to grow around 10% double-digit in the future, right? So we don’t see any, what should I say, signs that we will go away from that. There might be differences in categories in channels, in markets, but our goal is, of course, to continue that momentum because we think that’s what the brand deserves. And that’s also what I would say we think we have the resources to do and that’s what we will try to do. I think when it gets to the visibility of the brand, meaning what categories, how many articles in different markets and what sports. Yes. I think you’re right that we will see more of us because you sell more, you need to do more. But I don’t think that will have an impact on our earnings negative, I think it’s actually positive. Again, we believe that there is a big difference between America, Europe and, for example, China and India and that we need them to cater for the right product and the right activities in those markets. And with our size we think SKU count and global SKU count doesn’t really matter. If I produce locally for China, in China, and are produced, I don’t know, internationally for Europe in different factories, it has no negative or positive impact other than I hopefully have the right products. And remember, our biggest enemy is, in my opinion, not the going in margin on having efficient SKU counts but it is of having too much inventory that no one wants to discount. So I feel Harm showed you the inventory at €4.5 billion, we’ve been growing with that inventory. We have a very healthy order book. We have expanded the SKU counts the way you count it. But you look at our gross margin, and I think we feel very, very good where we currently are. So – the goal is not to lose profitability by being more right to the consumer. It’s actually the other way around. And I think we still feel comfortable that the business model and everything we see can cater for the double-digit EBIT margin. Edouard Aubin: Thank you. Operator: Next question is from Zuzanna Pusz from UBS. Please go ahead. Zuzanna Pusz: Hi. Thank you for taking my questions and congratulations to Sebastian. So just maybe, first of all, North America, so you returned to growth, I think, faster than was anticipated. So any chance you could maybe share with us what has driven that would you say is it overall the market or was it more brand specific? And if so, what type of products have driven that? So any incremental color on that would be very helpful. And then second, I would say, question is on OpEx. So, Harm, it was very helpful, you shared with us some of the sort of drivers in some of the, let’s say, moving parts within OpEx,-But I think we’ve seen some news flow about I think you closing the Runtastic offices in Austria in a couple of other bits. So were there perhaps any other special items, one-off maybe restructuring costs and OpEx that we haven’t discussed so far? And just a very quick follow-up. So it’s not a question. The double-digit growth for sales that you mentioned for next year and let’s say, going forward, is it ex-YEEZY or with YEEZY. So that’s just a clarification. Thank you. Bjørn Gulden: I think it was a question. It wasn’t a follow-up. So you have three. I mean the North American. If you think about the story we’ve been telling you over the last 18 months, we clearly said that we started this period with a lot of bad inventory in the U.S., we started in, I would say, a very negative brand heat. So we said that the turnaround in North America will take longer. What has happened now is that because of the success we’ve had in our own channel and with the inventory that the retailers are buying into, they have started to give us more space. And that is translating for the first time now Q4 going forward in a positive order book for North America. We haven’t had that. So we’ve been able to achieve a flattish sales plus 1%, plus 2% in the underlying business the last two quarters by actually selling more on a negative order book. And right now, of course, the retailers are always trying to find the brands and the product where they can sell more and make more product. And that’s why we’re seeing. And that’s across, I would say, categories and different distribution channels, both on the performance side, but it’s also on the lifestyle and the commercial side. So it’s in general that I think our offer and the brand heat of adidas in the American market is being perceived as positive. That’s why we feel comfortable about the growth with the visibility that we see in the North American market and it had to come that way, right? Are we then at the end, what we need to do in the U.S. to become mid- and long term, a very strong brand? No, we have a lot to do – but I think we put the elements together. We have a new management driven by an American. We have our famous office in L.A. that sits on a lot of talent. We have cleared now all the YEEZY product. So we’re kind of starting again on a fresh new start with an inventory, which is also much more healthy. So I think we feel a lot a lot better than we did 12 months ago and are therefore, I would say, pretty optimistic. When it gets to the double-digit growth, I think the difference, the €600 million or whatever YEEZY product is 3% kind of, right? So we see the 13% or 10%, if you do the math. And let’s hope that we achieve both because we will at least be double digit. And then if it’s 10% or 13%, we will see right when we go through the course. OpEx. I hand over to you, Harm. Harm Ohlmeyer: Yes. Thanks, Zuzanna. And you’re absolutely right. I mean Runtastic is part of what we did in Q3. And for the respect of our employees, I didn’t want to sell mention it again, but as you question it. yes, Runtastic part of some of the onetimes in Q3, but we also did some impairments of some of the IT infrastructure, also given the digital changes that we did. We always do some balance sheet cleanup here and there and of course, they have some element of severance as well. So if you add it all up, it’s definitely more than the €50 million underlying operating profit from YEEZY. But again, we don’t want to talk about restructuring reserves or whatsoever there in Q3. So we just do the right thing in the right way at the right timing. And rest assured, we will continue to do that also in Q4. And I’m not going to give an indication how big it could be, but we will continue to do these things at the right time and in the right way. And as I said earlier, all eyes on ‘25 and ‘26. I want to make sure that we use every quarter to get somewhat better. And again, 2/3 of the leverage will come out of the net sales growth and roughly 1/3 will come out of the right measures. And again, it will not be one big one, but there will be smaller ones here and there, but that’s really part of it. Zuzanna Pusz: Thank you so much. Operator: Next question is from Piral Dadhania from RBC. Please go ahead. Piral Dadhania: Good afternoon, everybody. So my first question is just on EBIT guide. The full year €1.2 billion guide implies a breakeven Q4 number. I take on board everything you’ve said. However, I just wanted to understand whether there is conservatism baked into that and whether we should just straight reverse the $100 million IAS 29 impact in the prior year, which becomes a straight benefit of the same amount? My second question is also a financial one. Apologies, but the CapEx run rate for the 9-month period is €300 million. However, I think you’ve guided on a full year basis to €600 million. So could you just help us understand whether you plan to spend the remaining €300 million in a single 4Q period or whether that CapEx number on a full year basis could land below guidance? And just following up on Zuzanna‘s question, I don’t think you answered her third question on whether the 10% growth is in core ex-YEEZY? Thank you. Harm Ohlmeyer: Yes, probably Piral starting on the CapEx, again, when I’m confident about some conservatism is definitely on the CapEx side, with the €300 million, first 9 months, we’re not going to spend another €300 million in Q4. Again, that doesn’t mean we’re not going to invest, but it’s part of the, I would say, discipline in the overall company that operating over leverage starts with investing more cautiously and where it really makes sense given where we are, because you don’t need to remodel factory outlet every three years or whatsoever which people like to do. So there is some level of discipline in there. And of course, we have built an infrastructure over the last couple of years. There was probably bigger than what we needed in the short-term, but we have great warehouses around the world. We have a great IT infrastructure. We have a great digital infrastructure. So, again, most of the CapEx goes into some of the S/4 Hana implementation and some remodeling and some new stores. But again, that’s pretty much where we are. When it comes to the EBIT guide, I get that on the operating profit. If you deliver €1.28 billion in the first nine months, it looks conservative if you want to get to it for the full year at €1.2 billion in the guidance. But please remember, I mean in ‘22, we lost more than €700 million in Q4. Last year, we lost, I believe €377 million. And yes, Q4 is not our strongest quarter. We try to get better. But as I mentioned also, we always do the right thing in the short-term for the long-term. And if you see some opportunities here in there, all eyes are on ‘25 already. And that’s why I want to make sure that we deliver a solid and good quarter. And we will definitely look at that when the time is right. Bjørn Gulden: I am not answering the third question. I think what we said is that the Yeezy business is about €600 million, so it’s 3%. So, it’s either 10% or 13%. If you look at it, we guide on the underlying business, but who knows we will also shoot to reach the 13%, but we haven’t guided for ‘25 yet. That’s why we answered it the way we did. We think that the company needs to grow double digit to get the leverage, right. And we will do what is right, depending on how the world is moving in the different markets, but we will not try to, I would say, prostitute the brand just to reach a number that we promised you on the top line. So, be a little bit patient with us. We have a very strong order book for Q4 and Q1 and Q2, actually, what we have visibility of. And then let us manage that in the progress that we will guide more specific when they get there, but adidas brand needs to grow double digit in the mid-term to get where we want. And as I think we can achieve that. Piral Dadhania: Alright. Apologies for that. Thank you. Bjørn Gulden: You don’t need to apologize. Operator: Next question is from Jürgen Kolb from Kepler Cheuvreux. Please go ahead. Jürgen Kolb: Yes. Thanks very much. Sebastian congrats, first of all, all communication now in your hands, also congrats to Jan, obviously, for having been for such a long time at a company, quite unusual. Two questions from my side. First one maybe for Harm, after normalization of the tax rate, working capital doing fine, EBIT growing, so cash generation seems to really speed up, can you remind us on your stance when it comes to share buyback and what criteria should be fulfilled to maybe revive the share buyback program? And the second one for Bjørn, you mentioned you are seeing that adidas is gaining another generation. Maybe you can elaborate a little bit on that. Is that rather an age group? Is that more fashionable customers? Is it on a regional basis, or what have you seen here that you can maybe provide us with additional information on what that really means. Thank you, guys. Bjørn Gulden: Yes. I will start. Of course, the whole new generation is wider than only age, but we all have to see that there is a consumer group that both from a fashion and performance side has not within our brand. There is a big brand that they have been with for a long time on the lifestyle side. And there are other, I would call the niche brands that have been on specific areas. If it’s fitness training or it’s running. And what we clearly see now because of the heat of footwear is that, that consumer, especially her, is now hooking up with our brand for the first time. And if we do our job well, I think we can work with her, and of course, also with him, but especially with her for a longer period with many categories. And I don’t think the brand has seen this for a long, long time. You all know, you had of course a success with many different areas, but then it was for sample in Yeezy on the high end or it was soccer as a category. I think we now see with the consumer group that through the success of original footwear on the high end we are able then to take that consumer into many categories, and that’s the goal. And that’s why I think it’s an opportunity, but the brand hasn’t had. And remember, it is with a fresh inventory with a, call it, a new energized management group that says we have all the resources that we need. And actually with, I would say, demand that is going across channels and across categories and across markets. And that’s very unique. It’s not only China or not only B2C, but it’s wider. And I think that is kind of a very lucky situation to be and then to look into the mid-term. And that’s why we say internally that it’s now up to this group. And of course, the people we have in different functions and different markets than to take the opportunity and not be afraid because these opportunities doesn’t come that often. That’s why we use the generational opportunity as a wider, what should I say, topic. And I think it’s actually a very good work. Harm? Harm Ohlmeyer: Yes. Good question, Jürgen. And of course, I am on record that I would like to have €2 billion on the balance sheet and cash, and there is no doubt, we will get there very quickly. And then I have a good problem to have what to do with the cash. But you are absolutely right. I mean the operating profit will go up. The interest or the financial expenses will go down. The tax rate will continue to improve. So, we definitely pile up more cash on the balance sheet, which is a good problem to have. So, what can you do with that, and first, we invest significantly to enter our front foot, so need to be financed first, of course. And then secondly, we want to be a solid dividend payer, right. And we have done in the last couple of years, but we want to go back to our policy of 30% to 50% or let’s call it an average of 40% of net income of continued operations should go back to the shareholders. And then maybe in ‘26, you need to talk about share buyback. But right now, it’s not the problem that we try to solve and we shouldn’t forget we live in a pretty volatile world right now. So, it’s good to have a strong balance sheet. I am not worried about exceeding the €2 billion and maybe we come up with some other ideas what to do better with this one. But that’s for the future. It’s a good problem to have, but the first priority would be investing in the business. And then secondly, being a solid dividend payer, then we will see. Jürgen Kolb: Very wise investments. Thank you very much. Operator: The next question is from Warwick Okines from BNP Paribas Exane. Please go ahead. Warwick Okines: Thank you very much. Good afternoon everyone. Bjørn, I just wanted to go back to the comments you made on the last conference call when you said you had pulled forward inventory and you thought you might struggle with supply. Could you just talk about how you manage this in Q3 and how you are managing it into Q4? And then my second question is just around the progress you are making winning shelf space in specialty running, perhaps comment on any progress you have made in the last quarter or two quarters? Thank you. Bjørn Gulden: Yes. I think what I said last year is that, last quarter was that the growth we were having, we were of course needing to use the inventory we had. And if we had orders on items that were meant to be on Q3, we actually delivered them to please the retailers. And we have been doing that all the time to be honest. But as you can see now, the inventory has been building, so we have been very good at delivering. I hear about delivery issues in the industry, but I do really believe that we have done a tremendous job of chasing, what should I say, production. And we have had very good partners being able to fulfill whatever we have placed orders. So, I don’t see any issues that we have too little inventory to actually do the business we need to do in Q4. But I don’t need to tell you that when you have franchises that you see in the lifestyle area that is certainly exploring and they are exploring in different facings in different markets, you are short sometimes. And we have also taken inventory that was meant to our own channels and giving it to retail partners to please their need. So, there is some flexibility in our system. And especially in the U.S. where we start and then have a negative order book, we have been able to hit our numbers, of course by working with all inventory and also risk, what should I say, rescheduling inventory, whatever is. So, it’s I would say, a big effort of the team to actually be able to do it, but you don’t need to be afraid that inventory will be an issue not to hit our numbers, I think. And the second was, specialty running is improving. But you remember 2 years ago or whatever, adidas left specialty when it gets to actually servicing their accounts with people. It was meant to be a D2C or a digital play. We are hiring people in all the markets, both from a sales, but also from a, I would say, an expert in being in the running community, and we see actually share in running specialty improving, both on what is selling-out and selling-in. But again, I don’t need to tell you, when you look at our product and how they perform and on the highest level, then of course, we should have a higher share. But I think this is where we need to also be a little bit patient, and not only look at the top line and chase every business, but make sure that we service the retail or the specialty retail in a way that they are happy with us and take the time to build back the relationship that we had. But I think also here in most markets, we have the tools, and definitely, we have the product. Warwick Okines: Thank you. Operator: Next question is from Monique Pollard from Citi. Please go ahead. Monique Pollard: Hi. Good afternoon everyone and two from me if I can. Firstly, on inventory, obviously you have talked about clearly your inventory being in a really good position, and Bjørn, you just mentioned being happy with the level of inventory in terms of fulfilling the future demand. I think a comment that’s been mentioned this morning was at about 80% of the inventory you have on book now is the current or future season product. And I just wanted to get a sense of how that compares historically and sort of what that could mean for full price realization. And then the second question, just a question for you, Harm, on the tax rates going forward, I think you had made a comment when you were going through the presentation that, you were suggesting that the level of the current tax rate is sort of where we should expect going forward, is that right? Is that how I should understand that the 3Q tax rate should be the level as we go into next year? Thank you. Harm Ohlmeyer: Yes. First on the inventory, I mean I don’t want to give you a detailed percentage, yes. We are very happy with the current level of inventory. If one gets trended and most of the inventories actually fall with the ‘24 inventory, what we have in all the inventory spring-summer ‘24. If you go into ‘23, it’s almost like – what do you say in English, negligible. I am not sure it’s the right word. But it has – there has been heydays, we had – that’s been as healthy as it is right now. But if I compare it to the last, I would say, 3 years has never been that healthy in that current. So, that’s why we are very happy with the aging of the inventory, probably as good as it can be. And then secondly, it’s also the right amount of inventory for the growth that we want to fulfill in the future or the demand that we want to meet, so very happy with the inventory. On the tax rate, just to be precise, when I said year-to-date, it’s 26% that’s an indication also for the full year ‘24. And of course, as we expect higher profits in ‘25, the tax rate will further improve. But again, don’t get carried away given that we have a pretty normal, tax rate was 26%, it will improve gradually, maybe the percentage point here, but it’s not jumping now from 26% to whatever. But you know what our historical rates have been. And over time, not immediately in ‘25, but over time, we will get to these – back to these rates. That’s what we would expect. But again, to be precise, 26% was the indication for ‘24 and then it will be slightly improving going into ‘25. Monique Pollard: Excellent. Thank you. Operator: The next question is from of Geoff Lowery from Redburn. Please go ahead. Geoff Lowery: Yes. Hi there. Just a two-part question, please, on North America. Firstly, I was very struck that you made more money in LatAm on approximately half of the revenue in this quarter. Is the answer for U.S. profitability in the end, simply sales and scale, or are there improvements in the operating model and/or gross margin that you can deliver? And second, could you talk about the tariffs trend and where we are with it in North America specifically, please? Thank you. Bjørn Gulden: I think that trends are delayed in the U.S. about six months, both on the high end and also in the commercial channels. We also because of the lack of orders from the trade did not do a lot of risk buys for the U.S. market, because we didn’t want to get into trouble. So, we haven’t given away quite some top line in the U.S. in the last six months because we didn’t have the inventory that we could have had. In hindsight, I think that’s positive because that means that there is a trend that we prolonged and it gives us time then to launch some more franchises with a healthy inventory. So, I don’t think that fronted at all. And I went, I would say also that the Superstar especially with the male consumer is probably a shoe that do excellent in the U.S. and both. I would say, strengthen the connection to what we call the U.S. street culture together with what we are doing in the American sports and also on the U.S. basketball market, which we – I think for the first time in a long, long time, have higher demand than we supply on our signature shoes. So, I think that’s – when it gets to the profitability, I mean there is no doubt that the U.S. market is the most difficult one to run profitable for a European company. And that’s why there is quite some adjustments that we need to do compared to other markets in the business model. And that’s what we tried to tell you for a while. It’s having an American management with the authority to invest in American sports also have a dedicated supply chain on certain products and the sign office in L.A. connecting to the, what should I say, street culture. I think it’s a lot easier to be successful in LatAm for any brand than it is to be successful in the U.S. for European brand. And I think that what you see in that EBIT number. Having said that, we are all very optimistic about the future in the U.S., given the setup and the structure that we now have in place. Geoff Lowery: Thanks Bjørn. Sebastian Steffen: Thanks Geoff. And Maura, we have time for two more questions. Operator: Thank you. The next question is from Adam Cochrane from Deutsche Bank. Please go ahead. Adam Cochrane: Good afternoon. Thanks for the questions. First question is in terms of your, a good pipeline, you have got a good inventory position. But given how much benefit you have had from better full price sell-through in the last year, is there much more to aim for in terms of better full price sell-through into 2025, because a lot of the other drivers of gross margin should be sort of moving into your favor as well, hopefully. And if you can do more on full price as well, it should be quite a good outlook for gross margin in 2025, is that fair? And then secondly, on the business model, and operational changes that you have planned and you have outlined. How far along this journey to, I presume most of the changes will be complete by 2026, it feels like you have done more in 2024 than you originally anticipated. If you had to draw a sort of timeline with percentages on, how much of the change do you think has happened in 2024 and needs to be done now in 2025 to get to your ideal business model by 2026? Thanks. Bjørn Gulden: Your last question is a difficult one, because yes, we have done quite some changes in the attitude on how we have attacked the possibilities with the consumer, but that doesn’t mean that we feel we are in the end of being a better company operationally. I think we have broken our system and the way we were supposed to work by effort instead of organizing it. So, we still have some work to do in the business model, optimizing it. And it’s about the philosophy, again do you need big supply chain, or do you have four smaller ones within a frame. And do you dedicate your product development to China, India, U.S. and Europe in a different way. And we are gradually moving towards that as the world is also moving. So, I don’t think we will ever be finished with the changes in the business model because you will always try to optimize it, so I can’t answer you. I think the attitude and the company of being consumer-centric and being product focused and consumer focused has happened maybe quicker than we thought. And if you have a scale from 0 to 100, maybe we are at 75. But we still have quite some things to improve the way we go to market around the world to be honest, especially probably for the U.S. market. And then the full price, yes, I think we need to be a little bit careful because when we talk about full price, there are markets like the Chinese that are never really full priced. If you look at e-com, there are activities all the time. If you look at e-com in general, you have to work with a certain commercial discount policy. So, I am not so sure that we can get more full price sales the way you measure it because you need to also be pretty aggressive with the market. I think we had a luxury now that our lifestyle product has been hitting very, very high sales list and have been able to, what should I say, carry the margin. And I think the addition we would have is then, of course, to sell more apparel because apparel normally carries a higher margin, and we haven’t utilized that yet. So, that’s a positive time. I think a year ago or 18 months ago, we have said that we had to be between 50% and 52% margin without Yeezy, now we reported 51.3% already, so I think we have achieved that. Do we see upside on the margin going forward, yes, I think there is an upside. But you know us, we don’t like to prove if [ph] anything before we can prove it, but the price points in the market that we see for the different products together with the sourcing prices and the cost should allow you to actually have a higher margin if you do everything right. But I don’t want to promise it, to be honest with you. And then the more you are investing in the small sports and why do you go in your offering, the less margin you might have on the edges, right. So, I think the 51%, 52% margin is a good number to have as a planning number. And then we can see if we can improve it or not, and – but yes, there is some upside. Adam Cochrane: Okay. Thank you. Operator: Today’s last question is from Aurelie Husson-Dumoutier from HSBC. Please go ahead. Aurelie Husson-Dumoutier: Yes. Good afternoon everyone. Thank you very much for taking my question. I have two as well. The first one is on current trading by region. And any big discrepancy to signal versus Q3, any market becoming more or less promotional if you could give us an idea of what’s going on in October, that would be great. And my second question is on the tariff trend that has been a key growth driver in the recent quarters. Could you give us an idea of how much category or the family of products represents in total group sales? Is it mid-single digit, high-single digit, double digit? Any color on that would be very useful. Thank you. Bjørn Gulden: We don’t normally give update on trading, but October is good. Let’s put it this way, we don’t see any big changes in demand for other products neither in our D2C business nor in our wholesale business. And then again, we tried to manage the demand as good as we can and are now focusing on building the right assortments for both spring and fall of ‘25 and we feel we are in a very good, what should I say direction. When it gets to the size of the tariffs, again, it depends on what you define as tariffs. Again, there is a lot of, what should I say, definitions of tariffs and on different price points. I don’t think we will ever let a category be so big that it stages for us. And you have to remember that although it’s very, very strong in creating the look of the brand on the top end, it is not necessarily where the only growth is. So, we are growing in, I would say, all categories and all types of product outside tariffs as well. So, I think I will leave it by that because whatever I will answer, you will be wrong, and I wouldn’t like to be wrong. Aurelie Husson-Dumoutier: Okay. Thank you. Sebastian Steffen: Thanks Aurelie. Thanks everyone. I think we will leave it by that for this call, so thanks very much to Bjørn. Thanks very much to Harm. This concludes our Q3 2024 conference call. As always, you can reach out to either Adrian, Philipp, myself, or any other member of the IR team if there is any questions that you would still like to ask. We are very much looking forward to seeing and meeting many of you over the next couple of days and weeks as part of our road show activities. And with that, thanks very much for your participation. All the best. Bye-bye. Take care. Operator: Ladies and gentlemen, the conference is now over.

Operator: Ladies and gentlemen, welcome to the adidas AG Q2 2024 Conference Call and Live Webcast. I'm Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sebastian, Head of Investor Relations. Please go ahead. Sebastian Steffen: Thanks very much, Alice. Hello, everyone, from sunny Herzogenaurach and welcome to our Q2 2024 results conference call. Our presenters today are our CEO, Bjørn Gulden; and our CFO, Harm Ohlmeyer. As always, I would like to remind you that, during the Q&A session, you limit your initial questions to two to allow as many people as possible to ask their questions. Thanks very much in advance for sticking to that rule. I hope that you are as excited as we are about the Olympics. So before we're going to dive into the quarter, and I hope you got that metaphor here. Let's have a look at the latest chapter of our brand campaign, you got this. [Video Presentation] Bjørn Gulden: Yes. Hello also from my side. I hope you are enjoying the Olympics as much as we do. I think so far, it's been great events and following up the Euro and the Copa, we are in the middle of a beautiful sports year. I would also like you to remind you about one thing, and that is that we are still celebrating our 75th birthday. And as you can see from the slide, it's been a great event for us to celebrate. Here you see from Herzo, we had more than 20,000 people celebrating with us. We had the, what we call the grand side, the adidas with us. We had Herbert Hainer with us. We are Jackie Joyner-Kersee with us. And a lot of other celebrities that celebrated the fantastic history in the company we are. And last week, we also celebrated in Portland with 4,000 people, so there is a good spirit in the adidas family and very, very unique. We have talked to you many, many times over the last 12 months about the hope that 2024 would be a great sports year. And I think we all agree it has been so far. It's also therefore great to report that our business is improving. You probably know all the numbers, but I'll take you to them very quickly before Harm later goes through them in detail. Again, our currency neutral sales were up 11%, and the DDoS underlying business was up even 16%. And as you know, that's way above what we thought it would be. And it's a combination, of course, of a great sell-through and also that retail is again showing great interest for our brand and products. As important, the gross margin, as you can see here, the underlying margin is up around 150 basis points to 50.8%. When you compare it to last year, you see it's down 10 basis points, but that is, of course, that we had a huge as sales of €400 million in Q2 last year, all through e-com. And this quarter, we only had €200 million. That's the difference. So again, a very healthy gross margin on the underlying DDoS business. That gave us an EBIT of €346 million, which is almost twice what we had last year. And again, a very, very positive development that then altogether made us increase our outlook guidance for the rest of the year. And we now talk about the high single-digit growth for the full year and an EBIT of around €1 billion. Again, back to the sports. We said all the time that we look forward to the Euro, the Copa, and of course, what's going on in Paris, both from Olympics and the Paralympics. I think you agree with me that the Euro and Copa are two great events. I think here in Germany, it was a fantastic euro, A, from the environment in the stadium, the atmosphere, but also the way the fans and the whole country showed up. And for us, Spain winning the tournament even greater. And as you probably have read in all media, we also had a much higher sales of jerseys, not only what we delivered into the trade, but also the sell-out through the trade was way above expectations. And as you can see, approached 3 million jerseys . So a great, great also commercial event. I would also like to say that our own people, the way they activated the euro, the way we have customers, the different games and the way we celebrated both the brand and football was very, very good. So a big thank you to our teams. I think I will also, in the discussion of Federation, like to add this slide. Spain is the federation that wins everything. Remember, they won the World Cup for women last year. The men's team have won both in Asians League and the Euro in 2024 and a weekend ago, the under 19 also won the Euro. In addition to that, they went under 17 both for girls and boys. And I think the women's team also won the nation's league. So, Spain is basically winning everything. And as you probably know, we have a long-term contract with them and are very, very happy for that. When you then go to the Copa, same thing, great event. We had eight Federations at the start. Both teams in the final Argentina and Colombia was playing adidas and again, Argentina won. And as you will hear later, we used this also to extend the contract with Argentina through 2038. So, I think we have the best Federation in Europe, and we probably have the best Federation in the world under our contract and will be in 3 Stripes for a long, long time. Here also the same thing again. The commerciality was great, and we sold almost 2 million jerseys around what should I say, the teams and events. Now, some of you are then calculating the sales for Q2, but you can't do that. You have to remember that the launch of these jerseys were done partly pre-Christmas, partly pre-Easter, and partly through the tournament. So, that math doesn't work the way you would like it to work. We said to you 18 months ago that 2023 was about, kind of, establishing a breakeven company and try to get to know each other and start on a journey. We then promise you that 2024, we should be a better company. And I think when we look through the revenue that we have for Q2, I think we can say we are pleased with what we have achieved. Even in North America, where the total business was down 8% currency-neutral, the underlying business for the first time in a long run time is up. So, the adidas business is up 2%. Europe on a fantastic drive of 19% in total, up 24% in the underlying China, 9% both on the total under underlying business. And I think I have to say that we're taking market share now every month in China in a difficult market, but many, many things have changed over the last four years. I'm very, very proud what the team is actually achieving. Japan and South Korea, up 6% in total of 10% in the underlying business, also a strong development. And then LatAm still on a high role of 33% and 34%, emerging markets up 25% and 28%. And that gives you then the numbers that you already know, currency-neutral growth at 11% and the underlying business being up 16%. I'll give you just quickly here without any animation, the first half. You see North America being down minus 6%, the underlying minus 5%. So there you see the improvement from Q1 to Q2. Europe, 17% for both; Greater China, 8% for both; Japan, South Korea, 7% for both; LATAM 25% for both; and emerging markets 21% and 22%. And that gives you the total growth at 10% and underlying at 10%, which then includes Q1 and Q2. Back to Q2, the wholesale business for the first time in positive territory and very strong, up 17%. You remember, we had a negative order book for a while. And of course, now we have a big interest both on the brand and on the products for our retail partners, and that caused and this, I call it, almost enormous growth of 17% because that was, of course, not planned. And of course, we are struggling to deliver the demand that we currently have from our retail partners, but it shows that the retail partners is, again, interesting to work with us. And we, of course, very interested to work with them closer than what we have done in the past. Our own retail of 15%, again, very strong. I'm very proud to see that our concept stores, the full-price stores is growing even faster than that because that shows you that when we put together our lifestyle product, both from originals and from sportswear together with performance, the consumer is coming and see and he is also buying. E-com, a negative number in total, minus 6 but if you take ECL, up 31%. And this is where you, of course, have to remember that all the easy sales in Q2 last year were almost all going through e-com. That's the reason for this difference. That gives you a 59-41 split between wholesale and retail. And on the D2C, it's almost split equal with own retail being 22% and e-com being 19%. And I think this is under the current circumstances and our current partnership, a healthy mix. A lot of good things happening in front of the consumer, both in our own stores, but also with our retail partners. You see here some examples. So for example, the JD activation in Paris, you see the foot locker, the activation we did in Berlin. And you see some great space in South Korea, having again, I have to say that the brand probably looks the best ever on the lifestyle side in South Korea, which we'll go back to in a second. And then two things which I would ask you to have a look at. There is a new store in the stadium in -- at the Benevia, Real Madrid, three times bigger than it used to be, fantastic development where you can really see both Real Madrid and adidas as a brand. And then very proudly, we opened our Yeezy sales store on time, three with before the Olympics, great, great achievement for our retail team that we manage that. And because we are so proud of it, here's a 50-second video of the store with no sound and no customers. It's the only time you will see it like this, and I urge you to take a look when you are in town. [Video Presentation] So I hope you liked it. As I said, 2,800 square meters full of adidas products in an environment and a location which is great. And again, I repeat, very proud of it. If you then look at the divisions, continued growth in future of 17%, both growth in performance and in lifestyle apparel for the first time growing in a long, long time by plus 6. It's not only football, but of course, football and football culture is part of it. And then the only negative number is accessories with minus 8. There's many onetime reasons for that. We had some big FIFA deals last year that caused high numbers. And we have had some issues with our licensee in the US. I think that we also have to admit that we haven't prioritized accessories. We have been very focused on turning the FITZONE apparel business. And I'm pretty optimistic that when we get into next year, you will start to see also accessories in positive numbers. That gave you a split of 61% footwear, 33% apparel and 6% accessories. Again, FITZONE should always be more than 50%. And we know it's more difficult to grow in FITZONE and apparel. So, again, very -- what should I say, I would say, proud, but feel very good about that split. If you then look at a little bit the consumer groups, the lifestyle side led by original basketball partnerships and skateboarding being up 16%. If you take Yeezy out, even 34%. So, here you see how we've been able to replace the Yeezy business than with adidas branded business. If you look at sportswear, which is everything that does not have the original logo, but still is lifestyle. That also includes the lower price points you see for the first time in a long, long time, also in positive territory. And then our Performance business, up 14%, of course, led by football, but we also have positive numbers in basketball performance. We have positive numbers in running, which you know is very, very important for us. When it gets to the lifestyle, we showed up at Fashion Week in Paris with our own show with Y-3 for the first time in three years -- in five years, sorry. Very important for us to showcase that side of the brand. You know that also Japan and also Real Madrid partly played with the Y-3 logo, so we're starting to use our design wear also into sports. We did some or actually a lot of activities also during the week, for example, we [indiscernible] and then Pharrell came out and supported us with some of the new launches, both showcasing low profile and Superstar. And then the opening in Paris, you clearly saw him wearing the EVO. I'm very proud, and he loves that shoe and the technology. So, there's more to come on that side. And when you look at sales, you see a group of celebrities from sports and culture that joined us for the night before the opening. We have an Adidas House, which you are happy to visit Downtown Paris, where every day, every evening, we have a lot of our friends and family coming. And it's really, really cool because adidas is something very special when it gets to the Olympics. The way we merged, the history represent and how we merge fashion and music, culture with sports. Many of you are looking at our products, and I also hear some noises that says it's too risky what we're doing. So, I want to explain to you again what we have told you. We said we were scaling up tariffs starting with Samba then going into Gazelle and Handball Spezial. Currently, the demand is still higher than supply. So, there's no risk on this currently. Then we extended it into Campus, which is not the Terrace shoes, but it's coming out of skates, a more profit look also what should I say, more trending towards men. And then what you should not forget we said the retro running is the next silo. We did it with SL 72. And yes, there was some noise, and we did some mistakes, but happy to report that the shoes is the best seller in retail and the volumes are really starting to grow. So, this will also be a big franchise for us, both for men and women. And the good thing is that current sell-through is higher on men than on women. So, a great, what should I say, franchise for the future. We then have the whole low profile area, which we have talked about is a trend that we see coming out of martial Sports like taekwondo, but also out of water sports. And as you know, we have a lot of history here. And it's great to see that there is still a lot of activity, which was the underlining the trend. We see the sell-through in Korea, which is the leading trend country is strong. It's not scaled up yet. So there is not really in the numbers, but it is a trend that I think you should watch and as you know, with the three stripe heat we have, we think we can play a major role in this trend in the next 12 months. And I think you will see it especially in spring/summer 2025 as also a scalable trend. We talked about lifestyle running. That is a leg that we need to get going again. We have five, six projects that it's underway. And as I said, again, they're coming at the back end of the year meant to be scaled and during 2025. You see the Ruko here, which is currently being reviewed very well, and there's to come on this side. And then finally, we have the Superstar, which you know is the more selling shoe we have in our family. We told you that we are cleaning the market that we're starting to rebuild the heat on it. We're not scaling it currently because let's face it, we don't need it right now. But there are many versions of this now in the marketplace on the high, high end with very, very little supply, and we clearly see that heat is growing. And at the point in time, we will tell you that we will let it go. In general, and I hope you see the same three strides, both on footwear and apparel, and we, as a brand, are really showing up in the street. We clearly see an apparel that track tops and pants are trending. You see it more in the streets that you see it in the trend because as you know, apparel into the retail partners didn't really grow until now. But now in our own channels and also in retail part the pictures you see here is really the picture that people want. And there's currently a big, big demand buildup in these kind of products. What I'm also really proud is this, we know that soccer and football has never been really lifestyle, what should I say, drivers. It's come more from basketball. But over the last months, our teams by taking all jerseys, new jerseys combining it with lifestyle pieces have generated that -- this sweet -- or soccer street culture. And of course, there's only one brand who can own that and that's we and you will see more of this, you will also see the original logo also on the performance side with some of our clubs. And I think we're on to something really, really interesting here because of the heritage of football is, of course, adidas it looks good and it's both male and female and it's actually global. So I'm very, very proud of what the teams both in soccer in originals has done here. To sum it up, proud and feel very good about our lifestyle portfolio. But as you know, we are a performance brand, and it's not true that we're not investing in performance. It's also not true that we're not growing in performance. And when you look at the offers we have, a ticket football, with the F50 the Predator and with Copa. I personally believe we have the three bestsellers in the industry. We see the growth there, and we feel very, very good about our product. In running, we have over-invested competitor business. We have the Evo, which is probably the most innovative, what should I say, running shoe in the market today, for example, the Olympic gold winner in trial plan, the female side, one in the Evo. And most, what should I say, marathons and half marathons, are on actually by the Evo. We also have reintroduced the Ultraboost 5. We Pro-4 coming in Adizero. We have the Supernova for the specialty. And this is only part of what we have because our offering running very, very wide and deep and you will see us growing in the future. Training a category, which is very important. For the first time in a long time, we have the DROPSET 3 as a global shoe, actually selling very low markets, and our positioning and strength is starting to also gain market share, both for her and for him. So you will also see more of us in training, which, of course, is a huge category when you look at it from a global point of view. Specialty Sports, the sum of many, many sports. You remember, big discussion if we should focus on fewer sports and more sports, and I think when you see this picture, we definitely want to go back again to the dealer space where we dominate the visibility also the smaller sports. And you see already the Olympics where we participate in 41 different sports when it gets to footwear. And you will see us work directly or with licensees to have visibility and be a brand that really connects to the athlete also in smaller sports. Outdoor happy to say that I think on the top end of trail running with the graphic speed. We have the best innovation in the market. We starting to take downs and we actually believe in outdoor both on fits and apparel and its an important category for us that we know we can improve both our distribution and our marketing. Golf great growth during COVID or coming out of COVID, a more stagnant market after that, but same here, both on footwear and apparel, we are taking market share and very, very, what should I say, aggressive in the market. And also don't forget that the apparel side of Golf is also a lifestyle driver for a certain consumer, and that's why we will continue to invest in Golf. And then we have the target to become, again, a very important sports brand in the US market. To do that, you need to be visible in the American sports. Here, you see both baseball and American football. That's very important. We signed Texas Tech because it's the college where the homes came out, great activation. And in general, the new team in America is investing more in American sports. And I think you will see that over the next months and quarters that the visibility will go up. Basketball probably the most difficult category for a European brand to be successful in. We have now three franchises that are working, the Anthony Edwards, the Harden and the Don Felix [ph] that means that for the first time in a long, long time, we have sell-through with our retail partners that they really appreciate. And I really, really can promise you that investment in basketball, both from a product development and the visibility with players are increasing. We're getting some credit for the things we do on the performance side, both here with basketball because the sell-through is good or in running [Audio Gap] probably be in the shoe of the year in most markets also here, as you can see in China. Our teams, although the soccer season for the clubs are over, we did actually win quite some tournaments and leagues and cups in the last season. Now we are in the preparation for the next season. And of course, with high ambitions with our clubs I've said many, many times that India Cricket is important for us, and you know they won the Cricket T20 World Cup, which we were very proud of. We have signed and supported many athletes who has done great performances before the Olympics, and I'm 100% sure that you will see that continue into the Olympics. And then in the last quarter, we have signed quite some athletes, many of them in the US, and we have signed teams and federations. Maybe you would like to look again at Asembia [ph], Champions League Club, Anta Frankfurt here in Germany. I mentioned already takes our stack and totally new, the German Hockey Federation will also change to three stripes. So a lot of exciting things in scholar and in bigger sports For extensions that are important for us, Candace Parker, maybe the best -- the best female basketball player has stopped playing, but she has now joined us being in charge of women's basketball, so a clear commitment to that sport and who could be better at leading it as her. Anthony Edwards, we have extended the contract. So I think, firstly, he's the future of the NBA. We also extended the Olympic partnership with the team, Great Britain. And then very important, we have assured Argentina to playing with three stripes until at least 2038. So from a timing point of view, I think that was also close to perfect. And then finally, you probably saw the Olympics yesterday, the female team from New Zealand, and Olympic Gold, and we are actually just now celebrating the 25th anniversary with the short video showing a little bit of the keep spirit of them. [Video Presentation] Again, for me, the Black Ferns and the All Blacks, probably the two teams with the biggest team spirit that you can talk about. We had All Blacks here in the training cap before the World Cup, where they unfortunately lost final, and we work very, very close also with the Black Ferns and congratulations to the Olympic gold medal yesterday. And I think with that, I give over to Harm to take you through the details of the numbers. Harm Ohlmeyer: Thank you, Bjørn, and a warm welcome also from my side and as you know, with a new focus on the product and a better go-to-market process. This is being reflected positively in the financials as well. And I want to give you some more details on how they developed. First and foremost Bjørn mentioned that already on the net sales, we are growing 11% currency-neutral. If you exclude the Yeezy revenues in both years, then actually the underlying business, which is more an indication for the future was already growing 16% currency neutral in the second quarter. Even more important is the gross profit. You see here that 10 basis points down compared to prior year, but I want to decompose that a little bit. Also the Yeezy effect here. If you start on the left-hand side, if I take the Yeezy business out from last year that was contributing roughly 200 basis points to the gross margin. So really, the underlying business was 49%. If you do the same math the Q2 2024, you see it would be 50.5% as the impact was much smaller in 2024, the second quarter of Yeezy. So that gives you the mathematical calculation of 1.5 percentage points improvement on the underlying gross margin. What is it driven by? I mean, first of all, we talked about freight quite a bit in the past. So freight better product costs are improving as well as we are filling the factories have a better utilization with our partners. We have less discounting, as we mentioned many, many times. We have an improved product mix. And of course, original plays a role here. We have some impact on inventory provisions because the aging of the inventory is much better. And we talked about currencies as well at the beginning of the year when we gave the guidance. We always said that 3 to 4 percentage points in gross margin impact. I believe it's fair to say in the first quarter is more at the higher end of that impact in the second quarter was the lower end of that impact of 3% to 4%. That's really what's in the gross margin. If you go further down on the P&L, I want to highlight the marketing expenses. We actually spent €90 million absolute more in the second quarter compared to last year. That has given all the brand campaigns and the product launches that we have done that led to an increase in the ratio of 12.1%. We always said in the future, plan in your model is around 12% of marketing. We don't want to save there to get to our 10% profitability by 2026. And what we really need to work on the operating overhead and the overall infrastructure. You see here that we are 2% down or €25 million down actually €35 million down to 33.2%. To be transparent here. Of course, we had some one-times last year that didn't repeat. We had roughly €110 million donations and €50 million of strategic reviews last year. So to full transparency, we're actually slightly up, but we are still leveraging over the growth, and that is one of the plans towards 2026 as well to get more leverage in the future out of our infrastructure as we keep growing double digit. That all led to an operating profit of €346 million. And also there, there's only €50 million contribution of Yeezy in there, but also there full transparency, what's the impact of Yeezy is. If you go further down the line from operating profit to net income, you see in the second quarter, unlike the first quarter, the financial income expenses have normalized compared to last year. We had some one-offs in Q1 2024 that you have made transparent. And then also, when it comes to the income taxes, we are now at 30.5%. And also that is a clear indication for the full year. I can give a commitment today that we will be with our new guidance of €1 billion operating profit. We will be below 30% tax rate, and we are further normalizing that ratio as well. And overall, the second quarter now leads to €211 million net income, which is more than doubling from last year. When you go further down to the balance sheet, talking about inventories. Again, big, big improvement, €1 billion or 17% currency-neutral down. If I go a little deeper here, you probably remember, end of 2022, we had €6 billion inventory. If I compare it to the respective quarter last year, we are €1 billion down and now at €4.5 billion -- around €150 million Yeezy inventory still left that we want to sell at cost for the remaining months to come. But again, rest assured, €4.5 million is -- €4.5 billion is very healthy. It's a good aging. It's across the board, including the U.S., we have healthy inventories now and expect with the growth profile that we have, not just in the second half, but going into 2025, that this number will increase over the quarters to come. So, it's very, very healthy. And a lot of work has been done around the world with a lot of teams dedicated to this one. Of course, as we are growing the wholesale business for the first time in quite a while, the receivables are going up slightly, but even less than our wholesale growth with 10% currency-neutral up. That is expected. The same with accounts payable as we are sourcing more product for our growth in the future, so also that 70% up. But we see trended effort on inventories and accounts receivables and accounts payables kind of balancing out our working capital improved significantly as well. If you put that in comparison to the past, we had in Q2 2023, to 27.1% working capital over net sales, now, we're down to 21.7%. That is already better than the guidance that we gave at the beginning of the year of 23% to 24%, and we are very optimistic for the remainder of the year. Hence, we changed our guidance and upgraded to 21% to 22%. Just for everyone, again, I always have been on record if you get this number below 20%, just a good, but really a very, very healthy company. And that is, of course, the goal for the future that we get to what ideally below 20%. But the guidance for now, for this year, 21% to 22%. Of course, that helped us also on the cash and cash equivalents, we are now up to €1.7 billion, almost 67% up. It's very healthy. I always said we want to get above €1.5 billion. We have achieved that faster than we would have expected. That also helped us to get a better ratio now adjusted net borrowings and EBITDA ratio, which is important, not just for us operationally, but also for S&P and Moody's. So, our commitment to both rating companies and my personal commitment is to get this ratio below 2.0%, which is a very healthy level. That's the level that we had in the past. And you see the progress that we have made. I'm not promising for this year, but are clearly getting there next year, but there's still some months to go this year. So, let's see -- but you see that both adjusted net borrowings improved significantly. And also the EBITDA ratio improved significantly now. So, with that, I want to hand over to Bjørn again. And I'm pretty sure you have some questions later, but let's go through the guidance first. Bjørn Gulden: Thanks Harm. And then to explain to you the steps that we've taken. We are using this slide again. Remember, in March, we said it will grow mid-single-digits, then we increased it after a while saying mid to high and now July 16 at our -- ad hoc, we said high single-digit increase. For the same -- for the profitability, we went -- started at 500 and we increased to 700 and now we are around the 1 billion. The assumption for this is as follows; it means selling the remaining Yeezy inventory at cost. And we have around €150 million left of the inventory. And that means we are currently not assuming any operating profit or any contribution on that inventory. We still expect to have strong FX headwind. And you know that has an impact both on the top line and on the gross margin. And we will continue to invest in the future and not try to look good from the numbers. That means we will continue to invest and maybe overinvest compared to the ratios when it gets to marketing and sales. Again, to explain you the Yeezy, so there's no misunderstandings. Yeah, the contribution or the sales we had on Yeezy in the first quarter was €350 million. Then in Q2, as we said, it was €200 million. We do expect, as we have said repeatedly now to sell the leftover of the inventory at €150 million, and that would then be that the total sales of the Yeezy products should end around €500 million. On the profit side, we had €50 million contribution both in Q1 and Q2. And since we're selling or assumed to sell inventory at cost, that means zero contribution in the rest of the year. And that means that you're then ending with an operating contribution of €100 million at the end of the year. If you then look at the impact of the guidance, again, you remember, we started at €500 million. Then we had the first drop of the contribution of Yeezy at €50 million. And then the underlying business improved by €150 million, that's why we said that we had a guidance of €700 million. Then we had another €50 million coming from Yeezy and the underlying business then adding another €250 million, and that's where you are then at the current guidance of €1 billion. Why do we believe this is possible? Well, of course, it is that the current product we have in the pipeline, both that is in the stores and on the way to the store is strong. And that we know we are adding commercial products to the trade in the next three to six months, and you see some of the examples here. You do have to understand that some of the growth you had in Q2 also were demand that could have been delivered into Q3. We didn't pull anything forward to look better, but what we did, of course, was to try to use whatever retail or whatever inventory we had to fulfill demand. So I urge you not to believe that 16% underlying will be 25% in the next quarters, because we won't have the product for it. And it's pretty, pretty obvious that the demand currently on many product types are higher than what we are going to supply. Just have that in your mind. And then remember, we said 2023 breakeven company, 2024 a better company, and then 2025, we think we should be a good company. And then in 2026, we promised you to be a healthy company, and we define that to be a double-digit growing company that has 50% to 52% gross margin. That's where we already are, that continue to invest around 12% in marking working budget, and then have an operating ratio of around 30%. And of course, that is the challenge because that has two aspects. It has the growth and it has the efficiency on the cost line. We think this is all achievable and that brings you then to what we call a healthy margin of 10% EBIT, which is what we expect to do. Again, we are in the middle of Paris. I think personally, it's been a great start to the event. I think it's been great at the opening ceremony. The stadiums are full, the atmosphere in the city is good. And, of course, we, as adidas also look great. We have told you many times that we have shoes -- 49 different show models for 41 different disciplines. We have added Federation, and we have added athletes. Of course, we always wish we had more, and I'm sure we will have more in the future. But so far, I think the brand is looking great, and all feedback we're getting both from people interested in sports, the athletes and even from retail is great. I did already mention to you, Pharrell is showing up and EOSS shoe at the opening. And if you look good, Zidane was also, of course, in adidas shoes, although at triple wide because we were not allowed to show the stripes and Zidane is a very disciplined guy but again, he looked great and is a very, very, very important member of family. So far, the Olympics has been great. I think we won 12 or 13 gold medals so far. And in many of the smaller sports and again, I cannot say how happy I am that the Olympics are going on. I think it's the right time, and I think it's a big, big party after the Euro and Copa, and I hope you all celebrated as we are doing. So with that, I think we can conclude that we are as a management, happy where we are through 2024. I think we have turned the brand quicker around in front of the consumer that we had even hoped for. You know to turn around a company is always a matter of how much time you have. And I think I personally have had luck with the timing, the timing is always crucial. And then I think the team has worked very, very hard to do this. And I think we can showcase that some of the things we're doing is really working We all know we have a lot of work to do in front of us to be healthy and very good adidas but I'm convinced we can bring adidas back again to where we used to be and be a very, very good company for the future and the best sports brand that exists. And I think with that, I hand back to you, Seb. Sebastian Steffen: Thanks, Bjørn. Alice, we would now be ready to take questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Zuzanna Pusz with UBS. Please go ahead. Zuzanna Pusz: Hi. Good afternoon. Thank you for taking my question. I'll stick to the rule. So just two for me. Maybe the first question on Q3. I understand that, obviously, it would be quite unreasonable to extrapolate sort of your earlier comments that the growth would accelerate every quarter, given how impressive Q2 was already. But can you give us an idea of that sort of a mid-teens underlying momentum is something that we could reasonably assume for Q3 or should we take into account the fact that maybe there were some sort of one-off orders related to the Euro's. Just so we get an idea of, obviously, I hope no one is going to expect 25%, but just to know that mid-teens growth is something reasonable given the strong brand momentum. And the second question is on gross margin. I guess there was some impression in the morning that maybe your outlook in the press release, there was a comment on the gross margin, but maybe it sounded a little bit more cautious on the FX. So I was wondering if you could maybe give us an idea of how we should think about FX in H2. And it's specifically if some of the emerging market currencies, which I believe are usually unhedged maybe that is adding a little bit to the gross margin pressure in H2. Thank you Bjørn Gulden: Yes, I'll start with the top line. I think that the demand will be very strong also in the second half. I think it's more about supply, to be honest. And, you know, we said to you earlier this year that we expected the air to start flattish and then grow into double digits in the second half. Now we manage double digits in the first half, which was not planned. And, to be honest, we have, of course, struggled to supply that. You also see that the wholesale business growing 17% in the quarter. We started then to give them, what should I say, a product that they hadn't ordered at the beginning of the season. And at the same time, our likes are very strong. So I think the demand is going to be higher than what we're going to report in numbers because I don't think supply will be there. So I don't know, to simplify it, demand will be double-digit, and I think we maybe can reach double-digit, but you shouldn't believe that the sales numbers will be as high as you maybe think based on the numbers we did in Q2. The question is also even if we could supply it, would we supply it? Because we need to now manage certain franchises in certain markets with certain retailers in a smart way. So I think the 10% growth is probably what we promised you at the beginning of the year, double-digit growth in the second half, and I think I would stick to that. And then let's see if there is an upside to it that we can then report after Q3. But we will be a little bit careful of many reasons, which I hope you appreciate. When it gets to FX, I hand over to Harm. Harm Ohlmeyer: Yes, Susanne, you probably referred to what we had in the press release at the bottom where we said there are significant currency headwinds. That was a generic comment, not especially for H2. So we have been one of the first brands saying at the very beginning of the year when we gave our outlook, don't forget the translation impact on FX and the FX impact on the gross margin overall. I just mentioned it earlier in the first half, we had the 3% to 4% currency FX on the gross margin. So for the second half, do not worry about the FX. It will get better compared to the first half. There's no doubt, yes, there are some smaller currencies in emerging markets or Japanese yen that has not developed positively. But overall, it's going the right direction. But what you should not forget in the second half, there is, of course, a channel mix that plays a role. We had an unprecedented comp growth in our concept stores, excluding Yeezy. We had 31% e-commerce growth. And again, our strategy is to work with our retail partners and accelerate the wholesale growth. That is a little impact. And of course, with the growth in original and football, our ambition is to grow running and other categories in the second half that has a slight category impact. But overall, again, FX is not the factor in the second half compared to the first half. We probably start to get some tailwind there as well, and we are getting all armed for 2025 as well. So don't read too much into the bottom of our press release. It's all good. Zuzanna Pusz : That's excellent. Thank you. Operator: The next question comes from the line of Warwick Okines, BNP Paribas Exane. Please go ahead. Warwick Okines: Thanks very much. Good afternoon. Two questions, please. The first is on China. How would you characterize the adidas positioning and brand heat in China at the moment? And secondly, on the U.S., how prepared is Adidas for potential tariffs in the U.S.? Perhaps you could give us a sense of how much that you sell in the U.S. comes from Chinese manufacturers. Thank you. Bjørn Gulden: Two good questions. I think you see that we're growing 9% in China in a market that has changed dramatically, I would say, in the last four years. You know that pre, what should I say, BSI and COVID, it was dominated by the Western brands. Now, the local brands have taken a lot of share and has installed business models that are more vertical, many of them are manufacturers that go then straight to retail with their own stores. So the speed they have and the price value have for that consumer was different than it was earlier. And we are trying to adjust to that. We have a very strong management that used to be at adidas than left and worked also for local brands that our now back again. They have, after a very difficult time, showed a lot of energy, a lot of initiatives to improve the business model. And we are going to a model that is more local for local, and it's based on less sell-in and much more, I would say, reaction during the season both in our own stores, of course, but also with our retail partners, which you have to remember are mono-branded stores, met adidas on the outside. So a lot of positive things happening in the market that, of course, is hold back a little bit of the Chinese general economy, but growing 9% and taking share I think is a respectable result when you compare it to all the Western brands, and we are all very excited about what we know about the future and the energy that the team shows. When it gets to the U.S. and tariffs, we have basically tried not to source any products anymore from China into the US. So all what should I say, supply chains plans for the US is not involved in China. So I think we are in good shape, should that come. And I think the team has done a lot of work already, which are not based on a possible tariffs, but in general, given the attention we have kind of steered away from Chinese production into the US market. Operator: The next question comes from the line of Eduard Aubin, Morgan Stanley. Please go ahead. Eduard Aubin: Yes. Good afternoon, guys. So two for me as well. Apparel, Bjørn, you said it was difficult for us to strip out the impact of jersey sales given timing. So I'm not going to ask for an exact figure, but could you please confirm that you were up in Q2 ex jersey. And also, what are you expecting anticipating in terms of the second half, as you mentioned, that the sell-in and sell-out, there must be a timing issue given the excess inventory in the trade. So that's question number And then, sorry, in running, interestingly, so you turned positive in Q2, which I think is a bit earlier than anticipated. Do you feel that you have now the right product architecture, product launch in place to continue to grow the category? Or -- and how do you see the competitive landscape there? Because again, it's very highly competitive in that specific categories. So how optimistic are you about running? Thank you. Bjørn Gulden: I think I can count that was three questions, not two. You do it in a smart way. The apparel thing, to be honest with you, we haven't expected growth in apparel yet because we saw the market still being crowded, and we had negative order books in apparel for a long, long period of time. I think what has happened is that given the success we have with the consumer on footwear, especially she has turned to our brand also in apparel. And despite that we had little supply on the best-selling apparel because we didn't – because the retailers hadn't ordered it, we saw a great growth in our own channels and that sparked and the retailers also to try to get merchandise, and that's why you saw the growth already in Q2. Of course, the soccer jerseys and the reason we say you can't put it together mathematically. I said, remember, we're selling into a tournament six months upfront as to you're selling pre-Christmas and is selling pre-Easter and you're selling into the tournament and after the tournament. So you can't take those numbers as just add on the top line, which would have been there if we didn't have the events So a little bit difficult to put the pieces together. But I think I can tell you that the interest in apparel from our retail partners and from the consumers is now also growing and that we're starting to see an order book that is growing also in apparel, and that's the first time that I see since I have been there. When it gets to the running business, it is, of course, a place where we need to grow over time. But it's also the -- what should I say, the segment where you need to give it time, very few running brands that come from nothing to something, especially when you have, what should I say, left the special distribution like we did. So we have to be patient. We have over-invested in products that are for people that wants to run fast. So the Evo and the adidas zero range is in my opinion, the best in the market. The whole comfort running and every day running where now what I say brands like Hakan, Oma done a great job We didn't have the right product for a while. I think in the architecture now when you look at both Adistar, you look at Supernova and you even look at Ultraboost 5, I do actually believe that we have the right product, but of course, we don't have the right distribution. And there, you need to give us some time to build the relations and actually place product in front of the consumer with the support from the retailers. So I think we will start and continue to grow slowly, but I think we also have to be careful that we don't expect too much too quick, because then we can actually destroy the business. So clear commitment to growing running globally, a clear commitment to continue to invest in both product marketing and events and activations. But also in our plants, we are giving it some, what should I say, patients to not push it to then get what should I say, backless I think that's how I would describe it. Eduard Aubin: Thank you. Operator: The next question comes from the line of Geoff Lowery, Redburn Atlantic. Please go ahead. Geoff Lowery: Yes. Good afternoon team. Just one question, please. Can you help us understand what's going on in North America in terms of the behavior of wholesale partners? Is your sense they're trying to run with permanently better inventory to? Or is this caution in the face of consumer that's temporary? What's really changed or otherwise there from your perspective? Bjørn Gulden: Well, you know during the supply chain problems when everybody had too little inventory retailers and brands were doing great, because then we were running on fresh inventory. I think what happened after that was that everybody, including brands and retail order too much. So we were over inventoried. And when that happens, you have over discounting. And that's what we've been through in the last 18 months. I think I should only speak for deals because I don't want to take the words out of other brands. But for us, we work through a lot of inventory that didn't do well. I mean, we were sitting on inventory in the trade that we're not selling rate. And of course, when you're not selling rate, they won't buy a lot, and they also discount you, which is not good for your brand image. I think we've worked through that very, very good. We have reduced our inventory in the U.S., both in the retail and in our own inventory. That's why the new inventory that is going out in the market is selling through much, much better than it used to do. And I think also our relationship with American retailers with a new management who are Americans are improving every week we speak. And that's why I think you will see America continuing to grow in the next quarters. And of course, that's also what we need to do. You have to be more American to be successful in America. You have to be in the American sports. They are baseball, basketball, football, and to a certain degree golf. You need to showcase that you are in high school and college sports. And that is, of course, easier when you have an American President in Adidas than having a foreigner. There is a clear, clear, clear plan how to -- what was the be more American in America and our product pipeline and our marketing activities is lined up to do that. And that's why I feel that we're on a good way. And the goal for all the retailers, which you speak to is, of course, to work with less inventory and have, what should I say, partners that can be more flexible on supply, and that's what we're trying to do so. I think we are in a good shape to improve. But of course, you all know we haven't done a great job before. So, maybe people say it's easy. But again, we have tough competition in the U.S. from American brands, and we have to be better than what we have been before to be successful, and I'm pretty sure we will. Geoff Lowery: Thank you. Operator: The next question comes from the line of Jürgen Kolb, Kepler Cheuvreux. Please go ahead. Jürgen Kolb: Yes. Thank you very much. Two questions and indeed great additions in terms of teams and clubs, what you just mentioned, Bjørn, congrats to that. Two questions. One,-- Bjørn Gulden: The only think you don't know yet is that we change in the color or an tract away from luck [ph]. No, we're not. I'm just kidding. Jürgen Kolb: Good that you're kidding. First one on the order book, how shall I look at it the wholesale orders, which are up 17%? Are retailers ordering less Terrace? I mean if we just stay within the originals and the leisure lifestyle category, are they ordering less Terrace products and now replace that with the SL? Or is the SL really an add-on for, let's say, the summer period when the SL is probably better placed than a Campus or whatever? And the second one on basketball. Obviously, you mentioned how important and relevant it is to be in the American sports. I was missing a little bit maybe a comment on Jerry Lorenzo when the Fear of God cooperation and how that is performing? Maybe a quick word on how happy you are with that part of the business? Thank you. Bjørn Gulden: Well, first of all, the 17% is not the order book. The 17% is what we achieved with our retail partners, meaning wholesale in Q2. So, that's the current growth. The order book that we have with our retail partner has been growing each quarter and it is a very strong order book for the next two quarters as well. The question is, are we going to deliver that whole order book or not? And there are many factors that -- what should I say, affect that decision. The order book on Terrace, you have to remember that, that's been growing all the time. We would never have had the sales numbers on Terrace if we just fulfill the order book. We have had much more demand than what people ordered 12, nine, and six months ago because it's increasing all the time. And people are placing orders on Terrace way more than the timeline. So, we're hunting demand on tariffs fills, but when you look at what they are offering on the space, it's not that they're replacing tariffs with SL72. It's clearly in addition. The tariff look and the campus and the SL72, which in all of the brands will be a retro running look, is complementary to each other. That means that you're getting more retail space. So we don't see any cannibalization yet on the demand when it gets to what is hot in the marketplace yet. And of course, as soon as we see that, we will then start to manage supply in a different way. But right now, we're still chasing demand. Basketball, I didn't mention, Jerry, because I'm so happy with what you see on, I would say, the NBA franchise signature molds Tony Mitchell, Anthony Edwards and Harden. And that is, for us, I would say, a real what should I say, connection between NBA and what you see in the store and the sell-through. The Jerry Lorenzo something you know has been complicated because it's taken a long, long time to get the products in the marketplace. It's a combination of lifestyle and lifestyle performance. It did extremely well when we launched it on the, I would say, Japan, China and parts of the US, but you know the collection was two years delayed. So right now, we have shrunk it to make sure that supply is not bigger than demand. And we manage it now on a much, what should I say, narrower distribution than I think the plants were three, four, years ago. The good thing is that we don't need to do it wider right now. And by doing it more narrow and higher price points, I think you will actually help us tremendously on brand heat, because we don't need to push it commercially. So it's a change that has happened over time given the circumstances. And that's the reason why we don't talk a lot about it, because we want to deliver and not talk. I think that's a fair quote. Jürgen Kolb: Good quote. Thank you very much. Operator: The next question comes from the line of Aneesha Sherman, Bernstein. Please go ahead. Aneesha Sherman: Thank you. So I want to dig a little bit into gross margin, please. You've seen some structural improvements in price mix and margin mix this quarter. Q4 is typically a very promotional quarter. Are you expecting some of these structural improvements to change what Q4 looks like this year given the current momentum. And then as you go into 2025, if you're ramping up wholesale order books and you're ramping up takedown versions of tariffs and both of those are gross margin headwinds your medium-term guidance implies about flattish gross margin. Can you talk through some of the puts and takes, some of the headwinds and tailwinds into that flattish margin guidance? Thank you so much. Bjørn Gulden: Well, I can start and Harm, you can adjust me if I say something wrong. First of all, the goal is not to get gross margin to 55%, 56%. It's not like we're trying to maximize this. I think when we say we are between 50% and 52% it's because when we look at the distribution we have in the categories we think that's a safe place to be. And then there's some upside to it as soon as currencies goes in a different direction. I think that's fair to say. When you look at the wholesale retail mix, you have to remember that when we want to be the best partner of the retailers, we also have to make sure that we give them conditions and sell-throughs that makes them happy. And we do not prioritize our own B2C just because we could have a higher margin. What we're doing now is that we make sure that our retail partner gets the product at the same time. And in this quarter, we even gave them more of the good stuff to please them. If not, we would not have been able to grow them 17%. When it gets to the takedowns of tariffs and tariffs, yes, they both have high margins. There's no doubt about it. But I think any take down that we do also on the retro running will have the same issue, because I think we're pretty good at engineering takedowns of what is not up there. So I don't think that has any negative impact to be honest. It is true that when we start to grow certain performance categories over proportionally, that could have a negative impact on margin. But right now, and I'm looking at Harm, I don't really see any reason why we should have big negative variances on gross margin going into next year, unless there are things happening in the markets whether it gets to inflation and FX that Harm is a better expert to talk about than me. Harm Ohlmeyer: Yes, the good news is I can confirm what Bjørn said. He didn't say anything wrong. So we have good margins also on the takedown version. There is no reason to structurally have any changes going to next year as well. But you're absolutely right, Aneesha. In the fourth quarter, we have commercial moments. We have Singles Day, Double Day, we have Black Friday and all these events have been extended in the past. So it's not just one day. It's actually a week or two weeks now. We want to participate in that. That's why the margin is always slightly lower in the fourth quarter, but that's factored into our guidance. What we need to be aware of is that we need to differentiate between year-over-year improvements versus quarter-over-quarter improvements. And I think the year-over-year improvements will get smaller as we get better every quarter. And, of course, quarter-over-quarter, we want to stabilize where we are, and of course, build on that margin over time, but not too worried about quarter-by-quarter, but we are getting prepared for what we're going to do in 2025 and 2026. But you are right, on Q4, it will be slightly lower. But overall, it's going in the right direction. And structurally, nothing is really fundamentally changing and also where the main currencies are going, and how we are hedged going into 2025, at least on the dollar, we don't see a headwind going into 25%. That's also an important news. Operator: Thank you. The next question comes from the line of Piral Dadhania, RBC. Please go ahead Piral Dadhania: Okay. Thank you. Good afternoon everybody. So two from me as well, please. The first is, could you just comment on current trading, if possible, in July and whether you've seen any negative impact from the SL72 marketing campaign where, as you alluded to, a few mistakes were made in terms of brand momentum or sell-through rates? And secondly, just in terms of the channel dynamics, you have touched on it already, but could you just help us understand whether we should expect wholesale and DTC growth rates to maintain a similar trajectory as we've seen in Q2, just given the way that you're allocating product to both channels. And perhaps within the second quarter, just any comment on the DTC growth rate and whether full price was outperforming outlet? Thank you. Bjørn Gulden: I think that was three questions. The easy one, the first one, current trading is good. The mistake we did on SL72 has had no impact on current trading neither in general, nor on the model itself. When it gets to the channel dynamics going forward between wholesale and retail, you need to know, and I'm sure you do, is that, so when you have an order book that are orders and you can deliver, that's a fixed number that you can deliver in and as long as it sells through, there is no cancellations and take back. And I feel very comfortable that we will fulfill the order book, and we will have, I'd say, a solid development on our wholesale business. When it gets to the retail business, that depends on your like-for-like development. And the like-for-like development that we've had the first six months has been unbelievable. I don't think I've seen such like-for-like numbers in our concept stores at any time. They've been very, very high. And of course, you can never promise our plan for that. You supply the products into the store, you hope they sell and then depending on how good or bad it is you replenish or you adjust your inventory. So I'm certain about the wholesale business and then on the retail business, it depends on how the consumer and our supply continues. When it gets to the D2C business in the second quarter, our concept stores were much, much higher than our factory outlets. And that is very, very logic. We have new and fresh merchandise going into our concept stores. And the factory outlets, we have basically cleared all the inventory. I have not made any buys for the outlet. So a much, much higher performance on concept stores than on outlets, which is a great place to be in. There has been times, where it's been different, but very happy with that. Aneesha Sherman: Thank you. Operator: The next question comes from the line of Monique Pollard, Citi. Please go ahead. Monique Pollard: Hi. Good morning, everyone. Two questions for me, if I can. The first one, Bjørn, was just -- I feel like some people will be incoming I'm getting to you, some people misunderstood potentially your comment on the growth rates for the rest of the year. And they're not sure whether the double-digit in growth in the second half was supposed -- that was supposed to come in the second half if you were saying that some of it actually came in the first half. So if you could just confirm that you're still confident in the double-digit growth rate for the second half if you are, that would be helpful. And the second question I had was just whether you can give any understanding or insight into whether you had to put on extra shipments presumably in the second quarter, given that surprising strength in the wholesale performance and the impact that had on your gross margin would be having to pay potentially spot rates rather than contracted rates? Bjørn Gulden: Yes. So there shouldn't be any misunderstanding, I'm confident on double-digit growth in the second half as we promised you. What I said that some of the orders that we meant for Q3 was actually delivered in Q2 because our retail partner was screaming for product. That's what I tried to say. But the demand will be double-digit in the second half, 100%. And I think also that we will fulfill it. When it gets to the shipment cost, yes, of course, there has been extra cost and extra work to fulfill the supply – to fulfill the demand with our supply. So that is correct. But the impact on the margin is -- I don't think we should start to calculate it because when you grow, there is always higher, I would say, supply costs, and we've had them. You know we have them also because of the Red Sea issue and there are currently a combination of contractual rates and spot rates, just that's a normal part of our life. So we also calculated that way. I hope we will one day be in a supply chain situation that we will only use contractual rates. But let's face it, we haven't been there for the last four years. So I don't know when that will happen. But yes, there has been some extra costs given high demand and given the situation in the Red Sea, that is correct. Monique Pollard: Perfect. Thank you. Sebastian Steffen: Alex, we have time for two more questions. Operator: Thanks. The next question comes from the line of Jonathan Komp, Baird. Please go ahead. Jonathan Komp: Yes. Hi. Thank you. Two questions for me. First, could you talk a little bit more about your expectations for growth in North America even better than the second half? And how we should think about the key drivers in the North America market? And then separately, just given the discussion about faster top line acceleration, could you comment on whether you're thinking about the achievement of your midterm EBIT margin target if the time line for that has changed at all? Or how you're thinking about the rate of reinvestment given the strong top line performance? Thank you. Bjørn Gulden: I think what we have said and what we feel comfortable is to grow 10% and have a controlled growth because that's easier than suddenly growing 16% or 20% and lose the control. So think about 10% is what we're going to grow and what should I say, midterm because that's what we are planning to do. And then we will have to see if certain categories are taking off. We shouldn't willing to take the extra sales by actually taking the risk of oversupplying at the end. But we're shooting for 10%. That also means that the midterm, what should I say, goal is the same. We haven't changed what should I say that? Should it come earlier or should it be a quarter later? I don't think it's really important. Important is that you believe that we are a 10% EBIT brand over time and that we will stay there, not that we reach it for one year and then what happens afterwards, no one cares about. So I think adidas with the business model and the brand and the strength we have should always be a double-digit EBIT company and we have all the tools to do that. But important is that when we do it, we stay on that level and not over-inventory our self or whatever, so that we're falling down again. When it gets to North America, important is to stop the downfall. Important is to clear the inventory important is to build a relationship with the retailers, important to be visible in American sports. And that's all the things we are doing. When the growth is then coming at double digit, I think it would be wrong to tell you, and I don't want to put our organization into the pressure of hitting a growth target at a certain week or month because I think same thing is irrelevant. Important is that we're changing all the things that brought us into that problem. And that means, again, showing up in American sports. It means working very closely with American retailers as a partner. That means that having a pipeline of product that is meant to sell in the US and not product that was decided in Germany that you should sell and all these things are strong enough that I'm very, very confident that we can take market share with our brand in the American market to short term and especially of mid- and long term, and that must be the goal. It's obvious that we have a history in America, both sports and sports culture, but also street culture, when you go back, that is very strong. And if we play to that both of the lifestyle, the comfort and the performance side, I think we can be a very, very strong brand in the American market, knowing that, of course, our strongest competitor has a market position that is very, very strong and full respect to what they have done. But we are confident that we have tools to be much stronger in the U.S. than we currently are. Operator: We'll take the next question coming from the line of Cédric Lecasble with Stifel. Please go ahead. Cédric Lecasble: Thank you for fitting me in this Q&A. I just have one as most of the questions have been answered, so in the interest of time also. It is on Europe. We've kept being quite price on the strong rates in Europe, and you've had another very strong quarter. I'd be interested in any color in how you improve penetration with key accounts. What's your road map in Europe and how you see the region growing even after the football event? Thank you very much. Bjørn Gulden: Well, I think what we did 18 months ago was to invite all the key retailers on Campus. They hadn't been there for a long period of time and we committed to them that we will be, what should I say, supporter of their business and not the competitor and that the D2C focus, we're not there anymore. I think there was a lot of skepticism among many of them. And of course, they didn't what they jumped the first weeks and ordered. But then what happened -- and this is what I mean by luck and timing is that certainly the brand with everything that has happened started to be hot in certain categories. And you know a retail partner that, A, is skeptical to you, but C, that you are, what should I say, in certain categories, very, very hot all start to move towards you. And I think we utilized that brand heat and the hotness of certain products to build the relationship again, and now they trust us. Same retailers are almost here now monthly. We have them at the Euro. We have the at Olympics. We work very, very closely on looking at their inventory and sell-throughs, they're part of discussing the longevity of the franchises. We are very, very, very conscious about talking Samba and Terrace in general and are measuring traffic sell-through conversion, social search on their channels to see when we should slow down supply. They support us currently on the introduction of new franchises like the Campus, like the SL and even building plans for low profile. They have seen all our, what should I say, investment in innovation in running lifestyle. So, they have full visibility over the next 18 months. And we all know that we are having the Superstar in the back pocket. On the lifestyle side, I would say fantastic. All retailers that I can name in Europe, a very good relationship. When it gets to the performance side, which we know takes a longer time on soccer, I mean football, I mean, it's on fire, same thing. On running, of course, a slower development in the sense that they have had success with other brands, and we have to accept that we are a little bit further down in queue. But same thing here, they work with our product team. We are very, very close in monitoring the success or non-success. We are giving them exclusivity, and we are building SMUs. So, it's the same partnerships that is happening. I think training the same thing, especially on her when the brand is hot, she also wants to buy you for her sports. We see a positive trend. Outdoor, I would say, a lot of adjustments in the way we go to market. Fit was strong, but a lot of work to do in apparel, but same thing, working closer with the retailer. Basketball, I mean, they basically follow what happens in the U.S. If we're successful franchises in the U.S., they will buy and sell the same. So it's a one-to-one relationship. And then on everything that is takedowns, and I would call it, non-originals which we do in sportswear, it's been a negative trend for a long time as we try to sell it at this own label. And the interest in that now is very, very strong. On apparel, we're launching the set as we speak. Of course, the weather for a fleet range is far too high, but interest, and we will have great visibility when we get to September. And all the takedowns we're doing, I don't need to tell you that they are in the same demand right now as what the originals are. So I would say in Europe, relationship, the way we go to market and the current results both from a sell-in and sell-out and the way we look in retail, I have never seen such a quick change, and that's what I mean by luck. That's not something that you can plan and believe in. You can plan it, but I hope it happens, but I think the success for them and for us has been higher than what we could hope for. Cédric Lecasble: Thank you very much, Bjørn Bjørn Gulden: Also in your country. I hope you see it. Sebastian Steffen: All right. Thanks very much, Cedric. Thanks very much, Alex. Thanks very much, Bjørn and Harm and also thanks very much to all of you for participating in our call today. This concludes our call for the Q2 2024 results. As always, if there's any open questions, please feel free to reach out to Adrian, Philippe, myself or any other member of the of the IR team. And with that, thanks very much again. Enjoy the summer sports. Enjoy Olympics. If you happen to be in Paris. You heard it from Bjørn first stop should be our new Chantelle store. And of course, we're also happy to invite you to our adidas house if you happen to have some time. And now enjoy your well-deserved summer break. All the best. Bye-bye. Take care.

Operator: Ladies and gentlemen, welcome to the adidas AG Q1 2024 Conference Call and Live Webcast. I am Alice the chorus call operator. [Operator Instructions]. The conference will be recorded for publication or webcast. At this time it is my pleasure to hand over to Sebastian Steffen, Head of Investor Relations. Please go ahead, sir. Sebastian Steffen: Thanks very much, Alice. Hello, everyone, from sunny Herzogenaurach. Welcome to our Q1 2024 Results Conference Call. Our presenters today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. Before Bjorn and Harm will take you through the puts and takes of the quarter and explain our expectations for the rest of the year, [Operator Instructions]. And now, without any further ado, over to you, Bjorn. Bjorn Gulden: Thanks, and hello, everybody. I hope you're all in good shape and good mood. I think the picture on the screen is an important one. It shows both the men and the female team of Real Madrid, playing in the Y-3 Yamamoto design, and I think that mirrors a little bit of what we are trying to do to merge lifestyle and sport [indiscernible] And of course, tonight is a special night with Bayern playing Real and I hope you'll all cheer for the Bayern because that's where we are a shareholder as you know. You saw all the numbers already a couple of weeks ago, where we went out to [indiscernible] and you know we went out to [indiscernible] because the year has actually started better than we had expected and we'll try to take you through the story why and then get a little bit more into the details for now. Our same store for currency neutral, up 8%. We should take the Yeezy business out which was €150 million, it's around 5% up. And that is stronger than what we had expected given the order book where we were at the beginning of the year. That was positive, but what was even more positive was that the gross margin reached 51.2%, up 640 basis points. And again, I think everything that we had an impact of was positive. And the only negative thing was, of course, the currency, which is still pulling off in the wrong direction. The Yeezy effect on the gross margin is about 70 basis points. So that tells you that the underlying adidas gross margin is already above 50%. And as you know, that is very important for us to get to the profitability that we want midterm. If you put that all together, we then had an operating profit of €336 million. That's up from €60 million a year ago. And the same thing here, the contribution from Yeezy on the profit line was a little bit less than €50 million. So it shows you that the underlying adidas contribution is then around €290 million. What is very important for us, and you know it was one of the major targets when we met the first time a year ago was to get our inventories down and as you can see, it is now at €4.4 billion, which is a reduction of €1.2 billion. And of course, this is the underlying thing that can, what should I say, support both our growth with fresh inventory where we can have good sell-through. And of course, it was extremely important for our gross margin. And again, I am actually very proud about and the sales team and what my friend here has done on the financial team to actually have a discipline to get this executed in the different markets. If you put it all together, we then also said we increased our guidance on the top line from mid-single digit to mid- to high single digit. And the operating profit, EBIT from around €500 million to €700 million. When you then say why have we had this improvement, it's obvious that our franchises in footwear lifestyle is continuing to do very, very well. We started talking about the Terrace side, because they had the Samba and Spezial a year ago and what has been added afterwards is the Campus, which are now all selling the Samba in certain markets. and lately also the SL72, which you remember is also Terrace side, but on the running, midsole and it's picture from Munich in 72. So this is what I've turned the brand around on the lifestyle side. But it's not only the old franchises, it's also the new product. We've had the most successful soccer launch, I think, ever with the Predator. We are very happy with the jersey sales and the launch for both the EURO and the COPA. We have successfully launched the Supernova Rise, which is our answer to running specialty on top of the very successful adizero range. We have launched the most innovative trail running shoes, the Agravic Speed. And we've had certain successes with our 2 franchises Anthony Edwards and Harden in the basketball arena. And then we have started doing collabs with a superstar. Here you see [indiscernible] collab that we have done. So many new things that is adding to the lifestyle area that has helped us getting the numbers as positive as they are. If you then look geographically, we start with the only negative number, that is North America down 4%. And again, we have said all the time that we believe North America is lagging 6 to 9 months behind. We believe that America will turn into positive in the second half and one of the reasons we are optimistic is that the inventory in the U.S. is now down 41% compared to a year ago. So a much cleaner, and we also start to see that our retailers are getting cleaner with our inventory. If you then look at our home market in Europe of 14% and very, very happy with the development in Europe. And I think it's fair to say that our sell-through is even higher than our sell-in. So the growth currently with the consumer is even higher than the 14% you see, but a tremendous success in Europe in the turnaround. If you then look into Greater China, plus 8%, I think we've spoken about China many times, and we have said that we think we can grow double digit already this year. 8% is a little bit shy of double digit, but not a lot. There is a lot of energy in the market. We are doing a lot of activities, both in performance and lifestyle. We are very happy with the performance of the team, and we feel confident that we will end the year up double digit despite, I would say, an economy that is maybe not as hot as many people would have hoped for. If we then look into Japan and South Korea, 2 markets that are very dependent on trends. South Korea is the market that is leading trends currently, we are up 7%, and here we start to see that demand is higher than supply and we are very optimistic about the midterm development of those important markets. Remember, these markets were earlier into the market and is now separately managed with local people reporting straight into headquarter. LatAm, still a very strong quarter, plus 18% and that is despite all the issues we have with Argentina and also in Brazil, a difficult economy, high inflation, the team doing a great job. And then, finally, Emerging Markets, where our entrepreneurs running the smaller and new markets are doing a great job and where we are making the progress that we had planned. That gives you the 8% growth, and as I said, excluding Yeezy, which was around €150 million, has done 5%. Why do we have this growth? i think one reason is that we continue to invest heavily in marketing. In September last year, we launched original campaign, and during first quarter this year we have launched a You Got This campaign which is replacing Impossible is Nothing as our tagline. And I do think, as you see how we look around the world, we have a global frame that [indiscernible] the local content, both on the lifestyle area and on the performance area and we are very, very happy with the way the new adidas actually looks. In that line being globally -- having global credibility but be locally relevant is very important and that means that we are working with local brands for collaborations. We are localizing global product lines, like you see in Korea, and we are doing a lot of big activations in markets like China. You see here on page here our regional apparel activation which is a huge activation and also very, very successful. In general, localizing our go-to-market process is very important. You see here examples of Stan Smith in Mexico and actually doing activations there. You see Pharrell together with Edison Chen, actually doing an activation in Japan for the collab around Superstar and then also in America and LatAm, very, very active, what should I say, what is relevant for the consumer in our approach to be very relevant in the local market, but within the global frame of the brand. We do not only invest in marketing, but also in infrastructure. Here, you see the new distribution center in Saudi Arabia. And you see our new distribution center in Europe. We call it Campus South, which is actually in the Northern Italy. And I think it's one of the most automatic distribution centers in the market. And then maybe more emotional, but I think is extremely important for the brand, we do have our shoe factory in Scheinfeld, 40 minutes from here. We are using that to produce our original soccer shoes, the World Cup and the but are now also doing lifestyle products on the high end of the market. And I think because it's so important, I would like to show you a little bit video that we for 1-hour collabs because it is really something special for us and it shows the importance of footwear and the manufacturing process. I think it's very cool and again, this is the center of what they're all about and making it and very important for us that we keep this factory and we all continue to invest in it to make product, but also to use it as a place to show people how we make footwear and educate the next generation in showmaking. If you look at the channels, our wholesale business, remember this is what we sell into the retail, grew by 2%, might not be so impressive but you have to remember we're coming from order books being down 20% and I can assure you the order book now is positive and you will start to see the wholesale business continue to grow. If you look at our own retail, these are the physical stores you see up 11%, fantastic like-for-like in our concept stores, many of them about 20%, 30%, 40%, 50%. And doing extremely well because, of course, these stores have only adidas product. And of course, we clearly see that the consumer when she or he can get a full adidas assortment, they're buying a lot more than they did last year. Factory outlets also growing, but at a smaller rate. And that is, of course, that we still have our factory outlets full of clearance, it's going to be less and less clearance and you will start to see the freshness also coming through in our factory outlet. Our e-com growing at 34%, of course, some of this is Yeezy, but even if you take Yeezy out, we have double-digit growth in our e-com. And the good thing is that we're discounting less and less and our full price share is growing double digit, which is the same we reported last quarter because we clearly see that the combination of having our e-commerce brand and then commercial is, of course, what helps us, and it's not about optimizing the top line. That gives you the following split, 62% wholesale, 38% D2C where on retail, the stores are 21% and e-com being 17%. I can't tell you what the optimal mix is, but we think this 65-35, 60-40 is currently with the business, we see a healthy mix. And then, of course, we will optimize distribution market by market as we go. But currently, we are very happy with this split. We are investing in new stores. Here you see examples from markets like in India, but also in Colombia. And you also see a new store in Ukraine, and I have to take the chance to thank our team in Ukraine, the job that they're doing and the energy and the most difficult circumstance is unbelievable. And believe it or not, the business in Ukraine is also actually doing very well. The other store you see here is the new store in Champs Elysees, that's opening in the next 4 weeks in the middle of [indiscernible] and it will open before the Olympics, and it's going to be one of our most important stores, and I hope you all will have the chance to stop by. On the right side, you see it's not only about new stores. It's also about elevating and rejuvenating the old stores. And here, you see some examples, especially from Korea and Japan, where we are investing in elevating the brand. But as I said many times, we can only be successful if we look good next to the other brands. And here you see examples of how we have been elevated in SNIPES and DICK'S and JD and also in a Turkish retailer called Boyner. I could have shown you the same examples out of Footlocker, because the Footlocker stores lately have looked as good as anybody else with our product. And I think we have done huge steps with the way we look in all the high suite stores. If you then look at the divisions, footwear growing at 13%, apparel only growing at 2% and we have said all the time that apparel is more highly inventoried in general and that there has been more difficult to get growth. Happy to report that our soccer or football jerseys for both the COPA and the Euro is doing very well, higher than what we expected, so we are supplying more. But also that the regional line is starting to grow. So I think we will start to see also a bigger growth in apparel going forward. Accessory mainly following the growth rate of apparel, and that's why it is basically flattish. That leads to the mix, 60% almost being footwear, 35% apparel and 6% being accessories, which again, I think we will have to agree is a healthy mix. If you look at the split between performance and lifestyle, it is fair to say that the business now is driven by Lifestyle. And I have to repeat that we couldn't have asked for a better, what should I say, distribution. The original growth is driving the heat of the brand. It opens the brand up for the younger consumer. The younger consumer tends to go towards 3-stripes, first on footwear and then on apparel, and that is, of course, helping us tremendously also on the performance side. The performance side is already growing in the high end and running in soccer, in basketball and in outdoor. And the next step is, of course, also to open that up for the more commercial area. And I would say, the more everyday runners area or I would say, the more comfort area. But again, very positive development for us to have this development. We continue to invest in partners. The guy on the left side is Yamal, the 16-year kid playing for both Barcelona and the Spanish national team, extremely proud that our sports marketing people were able to sign him long term, many people say he is the new Messi. Let's see, but at least playing both on the national team and in Barcelona at the age of 16, it's very, very special. This is just a mix of different signatures. You see on the right side, baseball players both in Japan and the U.S. You see female basketball players, you see actors and you do see that we signed the best soccer club or football club in Saudi. There are many, many, many more, but I just want to see or show you the risk of what you're investing in. And I hope you clearly also see the focus on local partnerships to help the business in the different markets. Where we have invested a lot, and I've seen the success is, of course, in the high-end running. Our running team are basically winning all the major marathons, and you see it here, like in London Marathon, where we took 5 out of 6 podiums. That means both on the men and the female side. And also in Boston, Lemma won the men's class, and we had more of the women in the top 10. And in general, I have to say that the Evo that you see is probably the most innovative sports shoe that has ever been made and at 137 grams with a carbon plate, it is setting records everywhere. Talking about records. We had our Road to Records run on campus in the weekend. And as you can see, we had one world record on the mile, we have 2 under 20 world records, and we have 9 national records here on campus, fantastic performance. And then of the employees also joined and we run 5k, and we have more than 1,000 of employees being part of it and a unique event where you're all invited next year to both run and watch because it's something very, very, very special. If you then try to summarize where we are. You clearly see, we have the hottest shoes on the street, and we are maintaining them in a healthy way. It's not only , but it's also the Campus. And not only do we maintain it, but we continue to invest in the campaign to support them. And when you ask, are they running out of steam? The answer is definitely no. these are social search in Europe where you see the Campus, Samba, Gazelle are all going upwards. And you see that Campus is now more searched than Samba and you clearly see that we have 3 of the hottest shoes in the market before any competitor is coming. The social search is an important indicator for us market by market to see at what point in time do we need to manage the flow in a different way. If you then go into the future, the SL72, we started talking about a quarter ago. That's now being also scale. So many retailers are now asking for more , the sale through both men and women is good. And this will then also be assured that you'll do several million pairs going forward. We have the lo profile trend that we have talked about for a while. We saw a trending in the market on the carpet. We saw it be used by the coolest people, I personally think it's an extension of the Terrace trend. And with our history, both in martial arts, in boxing and in motorsport, we will have volumes of lo profile coming to the market already at the back end of the summer. Then we have spoken about lifestyle running. We have been criticized for not having innovation on lifestyle running. We are having 5, 6 projects that are going to market as we speak and the rest of the '24 year. Some of them in very small quantities, some of them scalable. And as I said many times, you cannot program what shoe in this area will be successful. That's why we have more than one. We are, for example, reintroducing the old equipment line that we were very, very successful doing in the '90s, that's best of adidas, and you will start to see that being seeded into the trendsetters and into the fashion influencers. So a lot of excitement coming when it gets to new silhouettes and new materials and new concept of lifestyle running. And then as you know, Superstar is the hottest and biggest shoe that adidas has ever had. We are starting to heat that up again. We are cleaning the market, meaning taking seasonal colors out of the market. We will focus on white/black, black/white, super black and super white. But given the success now of Terrace and Campus we don't see the necessity of scaling it quickly. So we will take it slow and make sure that we're not overheating the market on our range. And with that, blah, blah, I hand over to my friend, Harm, who will take you through the real numbers. Harm Ohlmeyer: Yes. Thanks, Bjorn, for all the -- I wouldn't call it blah, blah, good content that we do on the marketing and sales side. And I just want to shed some light on what it really means for our financial performance and starting with the net sales, as always. I think everything has almost been said already. So 8% currency-neutral growth in the first quarter. Of course, when we exclude the €150 million that we did with Yeezy, it's 5% currency-neutral. But what's even more important, what we said early in the year that we have a 400 basis point headwind on the currency. You can see it exactly here, the 8% currency neutral is actually 4% nominal reported. So exactly what we said at the beginning of the year from the headwind, but of course, the performance is slightly better than we expected. What's even more important is the gross profit, and that's where we see the improvement, and I want to fast forward to the next chart right away, you see the improvement from gross margin in Q1 2023 was 44.8%, significant improvement of 640 basis points to 51.2%, but as all of you interested in as well, what does it really mean underlying without Yeezy? And you see very clearly Yeezy didn't have a huge effect, only 70 basis points. So underlying, we had 50.5%. And again, with some gives and takes, we can confidently say we are above the 50% mark on the gross margin again, and that is really a great achievement in Q1. And as Bjorn said, very much linked to the inventory as well. That shows you some more details on the next slide as well, where we always said we have tremendous FX headwinds, especially in the first half, but also for the full year. And you see the benefits now of high freight rates last year, where we get the benefits on trade, product mix, market mix, of course, less discounting, better product cost as well. And of course, especially in Q1, we have the benefit of huge inventory provision that we built last year in the first quarter, we didn't do this year, we actually had some releases as well as we have such healthy inventory. And of course, that is not being repeated for the remainder of the year. So it's definitely a special event in Q1 as well, but most importantly, it's a comparison to last year. So again, very healthy margin in Q1 and very optimistic for the remainder of the year. There are 2 things, before you get carried away on the gross margin, there are 2 effects probably for the second half that I want to mention right away. I'm pretty sure a question will come as well. As we are growing faster than expected and normally hedging 80% of our product purchases. Of course, we got to buy some of the product at spot rate. So given where the U.S. dollar is right now and the other currencies as well, of course, that is something that we saw would develop better in the second half. So that's one thing you should know. And the second thing is, as Bjorn indicated, the growth in wholesale was 2%, and we want to accelerate that one for the remainder of the year. And also there, I don't want to make a big story out of it, but of course, the channel mix will be something to watch for the next quarter as well. But again, all positive given where we started the year, just be aware of it, that you don't get too excited about it immediately. When we talk about marketing and operating overheads, very clearly, we keep investing to marketing also something we said very clearly, so €56 million more than last year. That is linked to the campaigns and you got this campaign that we launched starting at the Super Bowl, but many more events afterwards as well. And also on the operating overhead, I don't even want to talk about leverage. So we keep investing into sales. And as Bjorn said, we want to have a cautious approach, how we want to make sure that we start growing the top line and having healthy inventory and great gross margins before we talk about restructuring that other brands are doing. So we are focusing on getting the product to the consumer that is more important, but you see leverage starts and it will continue. That all leads to an operating profit of €336 million, significantly up from last year. And also here, only €50 million from the Yeezy contribution. So all in all, a solid without Yeezy underlying business, it's around €290 million. Nothing really new on this one, as Bjorn already talked about it. And, if we go to the next level, and I think there was quite some interest of many of you when we launched the numbers. Of course, we gained some interest as we have more cash on the balance sheet, and we earn some interest around the world. So we are somewhat better on the financial income, but also on the financial expenses. I want to shed some light in here because it went up significantly. There are pretty much 2 effects that I would like to explain that account for the majority of that increase, and that is, one, inflation accounting in Turkey and Argentina that has a significant impact on this one, which run through the financial results. And the second one is we did some repatriation of cash from Argentina that is very pronounced in the first quarter. So rest assured and don't quadruple that number for the remainder of the year. It was more pronounced in Q1 and will normalize over the next quarters to come. So again, it doesn't look good in the first quarter, but these are the 2 effects, hyperinflation in Turkey and Argentina and repatriation of cash from these countries. Now when we come to the income before tax and also the tax rate. And of course, in the short term, we don't want to optimize the tax rate, and we won't be able to do so because the IBT is still pretty, pretty small relative to the past. Again, as we are becoming a better company this year, a good company next year and a healthy company in '26. Of course, the tax rate will improve as well. But compared to last year, you see already that we are getting to a normalized rate of around 30%. And as we improve over the years to come, we will get to a tax rate that we used to have a couple of years ago. But everything is very much linked to the operating profit that we need to run into operational business first. That, of course, leads to a much better net income from a negative €24 million in Q1 '23 to now a positive €171 million in Q1 2024. We talked a lot about inventories. We can't repeat it often enough. We brought it down significantly, even 20% currency neutral. And this is when I look at the details coming from €5.7 billion by the end of Q1 '23, including €500 million of Yeezy inventory that at that point, we didn't know how to clear, what to do with it and you see confidently we cleared now €300 million of Yeezy inventory, now ending up with €4.4 million at the end of March '24, including the €4.4 billion, it's €200 million Yeezy inventory in. And I can probably clearly say today, that's probably the lowest inventory you will see for the years to come because we believe it's very healthy, not just from the size of inventory, but also from the aging of inventory that we believe that is a great base. And as we want to grow over the next couple of quarters and beyond, assume that is a low point that we have achieved now. Total receivables, as we indicated, wholesale, given the order books that we had is just a slight growth with 2% in Q1. That's why you still see receivables being down compared to last year, but that is also something you should expect going forward that receivables are growing as we grow our wholesale business, so really no surprise here. The same is on the accounts payable, we start sourcing more products through the growth that we are envisioning for the quarters and the years to come. So also that is a low point. And of course, we diligently manage both lines, receivables and also payables, but assume that is also going up in the quarters to come and it's only slightly going up as you get -- when you're prepared for accelerated growth in Q2 and in the second half. Overall, that leads to an operating working capital that has improved significantly as well. It's a combination of all the 3 above. Not a surprise. If you add up these numbers that we made tremendous progress on the operating working capital. If you compare that in percentages over the last quarters, of course, we had some low lines in Q1 '23 and Q2 '23, but you see the progress that we did not just on the inventories, but there was a main contributor to this one. And as we go to the road of being a better company than a good company and a healthy company, you can measure us if you get -- if you become a healthy company in '26, that is probably something we'd like to see below 20% again. But again, tremendous progress has been made on the average operating working capital development. That comes to cash, also improved from €778 million to now more than €1 billion, 40% up. And if you can call me on this one, I always said, I feel comfortable if you get to €1.5 billion in cash, that's probably, with no further signs, a good number that we would like to have on the balance sheet, living in a volatile world. And not only, when we get there, we talk about other measures for to do with the cash, but for now we want to make sure that we are investing into the operation of business, especially with some of the numbers that we have shown earlier that we get out of our concept stores, we want to make sure we keep investing in the brand and the D2C and wholesale business as we did since last year. Now if we improve our cash, which will further improve for the quarters to come. And of course, as we are not planning to refinance our bond that it becomes due in September, October this year, we also believe that the overall adjusted net borrowings over EBITDA ratio will improve significantly this year, which is important not just for us and the health of our balance sheet and company, but also for the rating agencies. So we are committed for the next couple of years to also get a healthy adjusted net borrowings EBITDA ratio of below 2% again and that shows again not just the P&L, but also the balance sheet is at very healthy levels, and the liquidity is also fine. So that's where we are. More questions later. With that, I would like to hand over to Bjorn again. Bjorn Gulden: Well, then we just have the outlook. No surprise for you. We told you this only a couple of weeks ago, but just to repeat it, we are now expecting the net sales growth to grow from mid-single digits to mid- to high single digit increase and our operating profit, our EBIT to grow from around €500 million to around €700 million. The assumption in this is that we will sell off the remaining Yeezy inventory, the €200 million, at cost, which means no profit, but selling it at cost. We still expect significant FX headwind. And as we said many times, we will continue to kind of overinvest in marketing and sales to build the momentum then to get the leverage as we grow. The Yeezy business, I would like just to explain again, so we're sure we all have it the right way. In Q1, we sold €150 million. The next 3 quarters we expect to sell off all the inventory, which is another €200 million. And that gives you then the total revenue of Yeezy of €350 million. If you remember, last year, we sold €750 million, so it's then €400 million less. And again, compared to the guidance we had at the beginning of the year, we only promised to sell €250 million, so that's then an increase of €100 million. On the EBIT level, we made €50 million ballpark in Q1. We do not expect to do any EBIT on the €200 million we're selling off. So the total impact on the guidance is done, the €50 million. If you then look at the top line on the underlying business, you see we started the year with mid-single-digit increase. We have then added €100 million more on the Yeezy, the €250 million, or the €350 million, minus the €250 million. And then the underlying business, the adidas business, we see an increase of €300 million, that sums up to €400 million and the €400 million gives you then the change from mid-single digit to mid- to high single digit. And then finally, on the EBIT, we started with the €500 million. We add the €50 million from Yeezy and then an underlying €150 million from the adidas business, that is a total of €200 million, and that gives you the €700 million. I also want to get back to one thing that we talked about at the beginning of the year, we said that the year will start flattish and then accelerate. Now of course, the flattish was better in the first half or the first quarter. We expect still the second half to be up double digit. So you will see an acceleration. And why do we say that? Well, it is because we think we will maintain the franchisees in a good way. And then we will have quite some interesting product launches. Some of them you see here, we will reintroduce f50 as a second silo in soccer. Next to the Predator, we have a new Drop Step, which is the best selling training shoe that we have. We will relaunch the Z.N.E., which is the sportswear [indiscernible]. We have a lot of, what should I say, interesting stuff coming on the originals apparel, especially for her and adicolor. We will have a new adizero Adios Pro, this time Pro 4 shoe, which, in my opinion, is the best running shoe we ever launched. We will have a new UltraBOOST, which is combining running with comfort and everyday, what should I say, leisure. We have decided to launch more colors of the successful Anthony Edwards and as I said, we're starting to scale SL72. So we feel very comfortable with the pipeline of product for the rest of the year. And then as a year of sport 2 weeks ago, we launched our Olympic packages in Paris. We are making shoes for 41 different sports, that is 49 different shoe models. We have launched separate uniform for all the federations you see here and although I would have wished to have even more federations and they will come in the future, I think we'll have a great presence both in apparel and in footwear during Olympics, and you will see adidas from a very, very good side. And again, remember, we have the Euro here, we have the Copa America in the U.S., both tournaments very, very much dominated by 3-stripes, both on footwear and on apparel. You have the Olympic Games, which should be a great, great happening for everybody. And then it follows up with the Paralympic Games, which again will be as exciting. And when you put that all in context, we strongly believe that we predict on the right track in '23. We believe that everything that you have seen, we will be a better company in '24, that will continue in '25 to put both top line and some growth to the bottom line. And then in 2026, we think we will be a good and healthy adidas again. And I just want to remind you that, if we do the math, we think we believe double-digit growth, we believe that we need 50% to 52% margin that we can get leverage to have 30% operating overhead that we will continue to invest 12% in marketing, and that will then give you the famous 10% EBIT. I'm very happy with the way things have developed in the last 3 months. It shows the strength of the brand and the strength of this company. And again, we think if we do our job, we are on a very, very good track to deliver you what we have promised. So with that, I hand back again to you, Seb. Sebastian Steffen: Yes. Thanks, Bjorn, and I'm going to hand over to Alice, who is going to moderate our Q&A session. Operator: [Operator Instructions]. Our first question comes from the line of Piral Dadhania, RBC. Piral Dadhania: My first one relates to the 2024 guidance for EBIT. I think there's -- trying to just reconcile why the EBIT guide is still quite conservative. I think if I back out the Yeezy contribution and the revenues in the EBIT in Q1, the underlying margin was about 5.5%, on €5 billion of revenues, €5.2 billion actually. And then for the remaining 3 quarters of the year, based on the guidance you've given, you expect to do something like €17 billion of revenues, but the implied margin on that to get to the €700 million is only a 2% implied underlying adidas margin. So why do you think the underlying adidas margin will more than half for the remainder of the year as you give the EBIT guidance? Any help there would help us understand the starting point as we build to '26. And my second question just relates to the cadence of revenue growth through the balance of the year as well. Thank you for confirming that double-digit growth is more than expected in the back half again. But if we think that the starting point in Q1 on an ex Yeezy basis is already fairly strong at 5%. Is it fair to say that there is a scenario in which you may actually get to double digit in the second quarter based on all the momentum you're seeing in the business? Bjorn Gulden: Well, of course, everything you're saying could happen, but I do think that we also have to be realistic in saying, we are in the turnaround phase, where there is some uncertainty in everything we do. The Yeezy thing we have been working on for, I would say, 18 months trying to do the best out of it. We still have €200 million in inventory. And of course, we have no assurance that everything will work. So we're very conservative when it gets to any contribution of that and also to be very honest, making sure that we can get rid of all the inventory. So there is some uncertainty there. And then I hope you see that we have taken down our inventory by €1.2 billion and we've not tried to run after every sale we can because the most important thing for us was actually to clean inventory. So we have been extremely disciplined in not buying everything we would like to buy. Because if you do that, the risk is, again, that you will be overinventoried. And as I think you can imagine, is that trying to push the higher end of soccer, the higher end of running, the higher end of, I would say, outdoor, the higher end of basketball, we have, of course, shifted away from some of the commercial chances that we had because we couldn't do everything. And that's why we think that this year is about building a solid growth, building a quality growth, making sure that we and our retail partners don't need to discount and then I think we can be more, what should I say, optimistic about what are resource and are in 2025 and beyond. So yes, it's conservative, but it's also to avoid that we're starting to hunt things that could go wrong. So I think both your questions, both on, what should I say, the top line also for Q2, yes, if the retail success continue the way it is, then we could be double digits. That is true. We are pretty certain when we look at, for the order book, that we'll be double digit in the second half. And when it gets to the margin, again, just -- I hope you understand that we do not want to promise you something that we don't deliver. And that's why it is conservative, but there's also some risk to it on external factors that we, what should I say, have hanging over us. And I just need to remind you that in the last 3 years, we had China going down. We have a war in Russia. We have a Middle East crisis, we had had a supply chain issue. So I think we need to be, what should I say, a little bit conservative in the way we guide you knowing that your spreadsheet doesn't say what we say, but I think that's a more, what should I say, fair way of doing it so that we can do the right things to get to double-digit EBIT again in '26 and beyond. So that's the only answer I can give you. Operator: The next question comes from the line of Zuzanna Pusz, UBS. Zuzanna Pusz: Just two. So maybe question on performance and lifestyle. I mean you flagged helpfully that lifestyle is growing very strong double digit. Is there any chance you could tell us if performance business was at least up or was it really flattish? And related to that, maybe if you could tell us what the order book looks like for lifestyle versus performance. Have you already seen that effect spread into the performance business? And then secondly, on the gross margin drivers, you have provided a very useful table outlining the various drivers of the gross margin. But any chance you could maybe give us a little bit more color for Q1 in terms of at least 1/3, 2/3? What was exactly the impact of the product mix? The lifestyle business growing faster, full price sales, just like a rough idea, so it helps us a little bit when it comes to model for the remainder of the year. Bjorn Gulden: I think I couldn't ask for a better mix when it gets to what is growing and not growing, and you shouldn't be too concerned or make any thoughts about performance against lifestyle because I have to grow the heat of the brand, and I'm doing that by actually connecting to her and him through originals. And the original sales in footwear is driving the heat of the brand and actually later pushing 3-stripes into apparel. And we know when the brand is hotter, it's much easier also to sell your performance product. And in the performance product, we're growing all the high end. So in running, we are growing the adizero, which is the highest end of the line, and of course, the Evo. in soccer, we are having the best launch ever that we have had through Predator. In basketball, we are selling both Anthony Edwards and Harden in the performance side. And on the trail running side, the 'has been a big success. So if you measure performance as performance, then we would be up. The problem, of course, is that the way we call things is that it doesn't show up in the numbers because if you look at basketball, the big part of the basketball is Classics in the basketball side. So I've any negativity into that Originals is growing faster than performance. What we also haven't done is that we haven't, what should I say, commercialized all the successes in Originals to the extent that we could have done. And again, that has been because we've been extremely disciplined in our buying because there's no way we could have reduced our inventory about €1.2 billion if we haven't been conservative. So I really, really think without talking ourselves up, we could not hope for a better sequence, lifestyle growing, sell-through being higher than sell-in, mostly with her than with him, high end of performance growing and then we have the chance both to accelerate the [indiscernible] and the commercial side. So right now, -- to be very honest with you, the timing of this, I think, is luck and probably that we've done a decent job, but I'm very happy with that development. I'm looking at Harm, if you want to say something about the split of gross margin. Do you? Harm Ohlmeyer: Yes, I'm not sure I like to, but I'll give you some more flavor to the gross margin, Zuzanna. I mean the key topic is FX is weighing on our gross margin, right? There's no question, and we obviously to differentiate the progress we made compared to the last quarter, which, of course, is Q1 '23 when compared to this one, which was a bad quarter. So don't look too much on the 640 basis points, rather look at where we are right now. And again, there are benefits on trade. And of course, when I look at -- there's always a mix-mix effect, right? I mean when you sell and we all know this Originals footwear is driving a better gross margin because these products have a high gross margin. So all I can say without going into too much detail, the combination of product mix and market mix is probably 1/3 of the benefits that we are seeing. A significant part of that is, of course, less discounting because we have healthier inventories. Let's call it another 1/3. And then the combination of product cost and inventory provision is probably 1/4 of that, and I talked about freight, right? That's roughly where we are. But if you get in the game on what is exactly from Originals footwear, I assume you're getting on a slippery slope because there are so many combined effects across markets, across categories. And what you should have in mind going forward, we believe there is 3-stripes trending again through all the Terrace products and Campus and everything we're seeing, apparel will come as well. And it's our job also to have a healthy gross margin apparel as that starts to grow will that be in the second half or going into '25, we will see, but that's where we are. So what's important today is that around 50% is a good underlying gross margin that we've achieved, and we achieved that faster than we would have expected in Q1. Bjorn Gulden: And if I just add to that the discounting that we had to do in the past, both on e-com and concept stores is, of course, not happening and the discipline we have on how we go to market has, of course, also improved. So there's a lot of underlying processes that has been done to avoid discounting or buy that is helping gross margin. And I think the only thing you can read out is also that the underlying margin for the adidas business, if we do it right, it's about 50% also without Yeezy, which I think most people didn't believe. Operator: The next question comes from the line of Edouard Aubin, Morgan Stanley. Edouard Aubin: John, I think in the past, you had mentioned that, if I'm not mistaken, that Terrace in 2022 was around €200 million of sales, more or less. So I think everyone is trying to figure out what percentage of the growth in Q1 is driven by Terrace plus Campus. I don't know what you're willing to share with us, but what was roughly the contribution maybe last year if you look at these 2, again, Terrace plus Campus so we can have a sense of, again, what percentage of the growth is driven by that? And then if you look at -- you showed some helpful charts regarding the brand heat for Campus, Terrace and it's still on the way up as you showed. But if you look at more specifically the North America and Asian market, it looks obviously like Terrace took up later than in Europe. How many months behind you think you are in these big markets and therefore, runway you could have? That would be helpful. Bjorn Gulden: I always hate to say that people are not right. But I don't think I ever talked about Terrace in 2022 being €200 million. I mean, first of all, I was in a year in 2022, and it was definitely not €200 million. I think what we can say, and I'll repeat it, I think adidas did a great job heating up Terrace with the Gucci collab and all the collabs and that happened mainly in 2022. And then we scaled it from a couple of hundred thousand pairs in the beginning of '23 to be millions of pairs every month and the scaling is still going on. We use the measures of sell-through and of course, the order book and then combination of different measures that we can do in social media and in customer groups to then manage the flow. And so far, there is no, what should I say, indication that Terrace are certainly slowing down. In addition to that, you have to remember that Campus is a much, much, much, what should I say, more bulk issue and doesn't really, what should I say, come out of the Terrace thing because it's the most looking shoe, it's also more of a main shoe and we were very surprised to see how that catched on fire during this, I would say, end of first half last year. And we have scaled that, too. And as in many markets with many retailers now the Campus is actually bigger than our Samba. All these things on the wall shows you the strength of the Originals business that have on the court side but we're also very, very conscious that we need to find other legs to stand on. That's why the running lifestyle is so important for us, and that's why we are doing so many innovative projects on that to find those, what should I say, legs. The lo profile thing is something that has happened over the last, I would say, 12 months from a fashion point of view that we think we can scale because we've been part of it before. We don't believe we can own the trend, but we think we can capitalize on it. That's why we've been very, very quick on bringing it out to market. And then the Superstar, as I said many times, is something that only we can do. It's a shoe that you can't copy. It's a trend that stands by itself. And we think in 3-stripes is now, what should I say, scaling again and trending again, we can start to phase in Superstar again, the biggest adidas shoe in the history, but we don't have any urgencies on it. When you look at the different markets, it's obvious that Terrace was led by her. So the female consumer, I think, again, because of the Gucci collab led into it at the beginning. And then it's different from market to market how much he has bought into it. It looks to me like in Europe, he is buying into it and is also buying into Campus. It's the same in Asia. And then I think we need to agree that in the U.S., it's less of a buying from him than from her. But again, we haven't scaled Campus, for example, yet in the U.S. So it might be that in the U.S., we need Superstar before we need it in other markets. And that's the beauty now the way we're tracking these things, it's that we can play things locally in a global framework. And I think we are very, very close to the market to know what we're going to launch when. To give you the exact month or on things are delayed is difficult to say. And again, the most friendly market that leads the trend so far has actually been Korea. So we're reading a lot of what's happening in Korea and trying them to exploit from that. And then you can also imagine that our relationship with the retailers is, of course, improved a lot and we're having a lot of discussions or getting input from them when it gets to facing of different franchises. So I think we are in a very, very much better shape than we were 12 months ago to reading the market and when it gets to, what should I say, discussing and deciding on the flow of the different franchises in the different markets. And then the success right now in our concept stores where we are really, really doing well is, of course, is a good read. Because we can read both modes and colors in a different way than we could a year ago. So I feel for the next 3 quarters, I think we have a very good, what should I say, transparency on what we need to do. And as we move forward, we probably get more insights and agree more upon what we should do beyond that. But -- but for now, I think we're very confident for the next 3 quarters. Edouard Aubin: Okay, Fantastic. Sorry, just one very small follow-up for Harm. What was the amount of the inventory release in Q1? Harm Ohlmeyer: Well, it was a small amount. So it's marginal on gross margin overall. I mean, the comparison to last -- Q1 '23 was significant. And that's what you see in the 640 basis points because there's been a headwind on FX as well, so a significant part of the 640 basis points was the comparable. But just from an underlying, what we achieved in Q1, it was not meaningful. But make sure that in the next quarters, you don't count for the comparison again because you don't have every quarter the same comparison. That's why I said it's more important what we have achieved in Q1 '24, that's what we're building on. Operator: Our next question comes from the line of Cedric Lecasble, Stifel. Cedric Lecasble: Yes. Two questions also. The first one is on China. There seems to be for many companies, some uncertainty and some volatility in the trends reported. What's your maybe last update on the country, on the market, on competition, what can you say on China? And what can we expect for the year? You said double digit, probably a little lower Q1. Your latest thoughts would be interesting. And the second one is on apparel. You had a strong focus on relaunching the franchises. Apparel was also more in the excess inventory, but the excess inventory is coming to an end. So what are your plans in apparel? And what can we expect -- what are you seeing from the order book? Should we expect footwear to continue to outgrow apparel for a long time with a different split between the two? Or do you think apparel can pick up and capture? Bjorn Gulden: Well, I think if I knew the future of China and I had, what should I say, the crystal ball, I would be a very rich person. I think my read on China is that the economy is, of course, not great. There is uncertainty. But in our industry, and that's what I'm saying, I don't think it matters for us so much because we need to grow anyway. We have lost market share in China through the BIS. We had a difficult time during the COVID period. And we have now a very energetic team that we've given the tools of both local design, local sourcing and quite some resources on marketing. So we expect them to continue to grow. And I think we said double digit. We ended Q1 with 8%. 8% is not so far away from 10%. I think so far, we have delivered what we said. But it is, of course, always an uncertainty with China with the political uncertainty and the situation in general. But again, I am a fan of the Chinese market because of the population and because of the energy. And again, I have a great feeling that we will take your market share back and every week, when we develop new products, and we learn what price points we should do in, what should I say, categories, I think we improve. So I'm optimistic I still think that we will grow double-digit in China this year despite these uncertainties. But of course, I will also hope that the Chinese economy then will be more positive, but that's way out of my reach. When it gets to apparel, it's a little bit complicated to answer because to be very honest, really, I'm extremely happy that we're growing in footwear and not in apparel. I think it must be -- if it had been opposite, it would have been much more risky. So our focus, rightly so, has been clearly on footwear. And then given the situation in apparel in the market in general, we have been more cautious on pushing apparel. But as you now speak, we are relaunching a lot the lifestyle apparel. So you will see in sportswear, we have a totally new , which will hit the U.S. market this summer and then the Europe and the other markets in the second half. We've redesigned all the essentials. So they will come up with fresh executions, both on material, cut, colors and of course, also logos. I think we have new ranges in all performance categories going into '25. So then units on apparel for '25 is going to be huge. Are we going to push apparel for the sake of pushing it? No. But I do think we will start to see growth in apparel as the 3-stripes trend is continuing. So I think it's a little bit our own, what should I say, I wouldn't say a mistake, but our own strategy that I've said be careful in apparel. And then I do think that we have the vehicles to see growth again in apparel in '25. And maybe also, when I look at the order book also in the second half of '24, but it's not strategically important to grow apparel heavily in '24 to be honest, because I do think we need to lead with footwear also short term going forward. Operator: Our next question comes from the line of Aurélie Husson-Dumoutier, HSBC. Aurélie Husson-Dumoutier: Yes. Two questions for me, please. The first one is on the guidance for '26. Some people say that guiding prudently could be kind of a double-edged sword as consensus systematically places itself far above the guidance. So what do you say to those who feel that the 10% margin in '26 is a prudent guidance from you and that like every guidance you give, it can be exceeded? That's my first question. The second one is on the Yeezy drop. The last one, could you come back on why the profitability was lower than the 2 previous drops from '23? When I think these products have been sold on your online DTC channel only. Thank you very much. Bjorn Gulden: Well, I think on the Yeezy thing I said all the time that we started out with €500 million in inventory. And as we were selling off the bestseller, the quality of that inventory, a, from a styling, from an aging and where it's located, would get worse and worse. So we always said that the profitability in the beginning would not be the profitability at the end. And as you can imagine, as you're selling down on good inventory, you have broken size fronts. You sold out of the best colors, the best styles. And that's why I think the development of that is exactly as we said all the time. And so I think we have, what should I say, executed it exactly as you promised to. Then it gets to my 10% EBIT. I think what I've said all the time since we started is that when we looked at the company beginning of '23, it was actually Harm and myself, we said, do you think we can get to 10% EBIT as an operating model given where we are? And we both agreed, yes, we can. And that's based on the math that we show you, the 50%, 52% margin, 12%, marketing, 30% other and gives a 10% EBIT. And if it's 9.8% or 10.2%, I don't think that's important. I think it's important that -- we see it and sell it with what should I say, the execution we currently are doing. If there is more room after that, maybe but I think when we're coming from a company who lost €800 million in Q4 '22, then to promise you 14% or 15% will be the absolute wrong thing. So we stick to the 10% as an operating margin in a business model that you all understand. And then when we get closer to it, I think we can start to discuss if there are other options getting a higher profitability. But I think it's the wrong place to speculate on it when we are where we are. We are very happy with the development of the last 6 months. We are very happy with the resources we have at adidas. We think the timing for us is good, although we are in a very volatile, what should I say, economy or political situation. But the brand is strong. The resources we have is strong, and we feel we have done a decent job over the last 6 months. So I think we should to that. And then as we get closer to '26, we can discuss if there is an upside. Operator: The next question comes from the line of Jonathan Komp with Baird. Jonathan Komp: Yes. Bjorn, I wanted to ask a bit of historical context as you manage the current lifestyle and Terrace footwear trend. If I look back to 2013 and 2014, the adidas business produced about 250 million pairs of footwear each year. That net grew to more than in just a span of 3 or 4 years. And I'm wondering, could you give a little more context as you think about the history, the upside potential for the trend you're driving and whether or not that's an appropriate framework to think about how you scale this business for the next few years looking forward? Bjorn Gulden: I think talking Terrace 10 years ago or 15 years ago, putting that into context is difficult. I'll try to do it another way. I believe that in the last 10 years, the market has gone more casual. I think the market has become more performance-oriented. And the 2 biggest economies in the world when it gets to population, the India and China is growing the interest in our sector. If I then look at adi in that context. We have the biggest archive when it gets to things that can go faster. We have a presence in all the big sports, and we clearly have the attitude of being visible in local sports. If you put that all together, I think it's our task to say that we can grow 10% knowing the, what should I say, a lack of performance in the last 3, 4 years. And we feel very comfortable that we have the vehicles to grow our footwear business double digit in the midterm future. And I think we all need to leave it to that because it's very complicated when you start to kind of break it down and you go deeper down because we don't even think like that. If we look into certain market shares to certain categories, we have single-digit market share. And I haven't met one retailer that couldn't do, what should I say, double the business that we did last year. So the room to grow is great. But then we also have competition. And of course, we need to do our job. So we will not double our business. But I think when we say we think we can grow double-digit every year, I think we should. And that's why for us at and to grow double digit every year is . And you can translate it into pairs or pieces. And of course, we're doing that. But -- but I don't know how, what should I say, relevant that is to be very honest with you. You also have to admit that the supply chain is going to be more local. I mean you clearly see that China is going to be China for China. You clearly see now that India is going to be more produced in India. America cannot really buy from China. So we are ending up having a supply chain that we were broken up in more local supply chains which, again, can bring more speed and agility into our pipeline. And we don't need to push everything to one big item. So many things that we can improve, but I hope you have seen that with the change of attitude, with the change of, I would say, agility and speed, we have turned the heat of the brand and the commercial visibility of the brand around pretty quickly, and that shows again what the normal strength the 3-stripes of adidas brand has and it's up to us then to maintain that. And then, of course, also manage the life cycle of these franchises in a way that we can sustain it because that is going to be the test that we can. Jonathan Komp: That's very helpful context. Bjorn, one follow-up, if I can, on gross margin. Clearly, you're signaling maybe upside to the prior guidance of 48.5% for the year. Are there scenarios where you could be already at 50% or above for the year? And are there quarters going forward that we should think more closely about the factors you mentioned that would make you be above or below that level? Bjorn Gulden: I think on the underlying business, I think we will try to keep our inventories clean. So whatever we have at end of quarters or end of season or end of life cycle, we will take the markdowns as we need them. So we might be more aggressive on markdowns than we have done before on a lower inventory, that's one thing. I also think that the Yeezy inventory, to be honest with you, of course, that's going towards 0 when it gets to the value of the inventory at the end. And that's why we will also there being, what should I say, a situation that we might have to write off part of the inventory. And that's an uncertainty. So there are still, of course, an upside on the 48.5%. That's obvious. But again, there is not a goal for us to optimize our gross margin in 2024. You see it's like we need to create the momentum, make the underlying business be more stable and improve the way we go to market also for '25 and '26. So I don't think any of us is trying to impress you with a substantially higher margin that we promise you. But it might be a result of the sell-through and everything is going as it today. That is correct. Operator: The next question coming from the line of Jurgen Kolb, Kepler Cheuvreux. Jurgen Kolb: Two questions from my side. First of all, I noticed that you terminated or not renewed the contract with Parley. Maybe some comments on why you decided to not continue that franchise, which I think at least I thought was quite successful at least at a certain stage. And at the end, what sales contribution was coming through from that cooperation? And secondly, maybe for Harm, or Bjorn, you also mentioned it, we've seen a little bit of leverage in the operating overhead in Q1. I think in one of the previous calls, you said that right now, Bjorn, you don't want to think about efficiency improvements, that's rather something for the second half or 2025 or so. Just maybe some comments as to where you think you are currently from that perspective. Is OpEx seeing or going to see a significant ramp-up of this leverage in this year in the coming quarters? Or is that something we should rather be looking at in 2025? Bjorn Gulden: Well, the Parley decision was made in '22. So it was my decision. But I think the decision is made on the following is that ocean plastic, the way that was set up is not scalable to, what should I say, take care of all the plastic that you need to produce, what should I say, all the polyester product. So we have gone for, I would call, the recycled polyester in general and not only go for one niche. So that's the reason for the decision that was taken back in '22. So I can't give you the number that Parley was, but you know we are basically going towards 100% recycled polyester. So that comes from many, many, many different resources. I think that's the reason for it. On the gross margin, I can only say that we said we would like to have momentum on the top line with the retail and the consumer before we start to kind of really look for leverage, but I'm looking at Harm, and he seems ready to answer. Harm Ohlmeyer: Yes. No, very clear. It's similar to what the question was earlier on the gross margin. I mean, we clearly -- and you have seen that start of the year with confidence and Q1 allows us now to do the right things for the future. And we are laser-sharp on what we want to deliver and what we shared some more details on in 2016 from a top line acceleration from a gross margin that we need and also leverage on the operating overheads. But again, Q1 gave us the confidence both on the gross margin and also what we need to invest into the brand. And yes, I could now target a leverage every quarter, what will be the size of that, but we also might decide that we need to focus on the line and get more leverage than in next year. So rest assured, we are laser-sharp on what we want to deliver in '26. If you are not here to optimize every quarter. That's why it's not a target in itself, but the target overall is that what you've seen in the formula, we got to get leverage over the next couple of years. And of course, we got to start somewhere. But again, it's not quarter-by-quarter. Operator: The next question comes from the line of Monique Pollard with Citi. Monique Pollard: A couple of questions from me on China, please. The first one is, obviously, you constant currency sales growth in China at plus 8% in the quarter, and you've mentioned e-commerce and wholesale, both up double digit. So just wondered if you could give some sense of the growth rate in stores in China and what you've got planned there in terms of improving that performance. The second question is just on the China EBIT margin, which was up really strongly in the first quarter, up 10 percentage points year-on-year driven by the 6 percentage points of gross margin expansion and some cost control. So we're now at a 30% China EBIT margin. Just trying to understand whether that's a reasonable level to expect for the rest of the year as well. Bjorn Gulden: What I can tell you from the China retail is that our own and operating stores were doing better than our franchise stores, which is again, a little bit the same with that we have talked about in other markets is that owner and operator did extremely well because there were forward-fresh new merchandise. And I think also in China, our franchise partners. Remember, that's mono-branded stores, but they're driven by external partners didn't have the same presence in our inventory. So we feel again that the proven our own and operated stores doing so well shows that the brand is on the very right track. And if we fill the stores with the right merchandise, you will also get the same performance, but our wholesale partner or retail partners is then getting, what should I say, the success delayed because of limited and depth in their supply. So it's the same in China as we see it everywhere else. Having said that, for us to plan a bit more than 8% growth is kind of risky. So when we say 10%, it is 8%. I think that's in the ballpark where we're actually happy with the performance, but it gets to the EBIT margin of 29%, that's on the high end, if you look at the full year. We had a very, what should I say, clean inventory again in China. We had high sell-throughs and there's many moving parts to give you that number, but I would be careful thinking that we will deliver up to 30% EBIT for the full year. I think we have said that China will be probably our most profitable market that we're looking midterm, more at mid-20s the high 20s. Operator: The next question comes from the line of Geoff Lowery, Redburn . Geoff Lowery: Just one question. Marketing, do you think, given the need to localize more and given some of -- in China and given more globally, some of your competitors prepare to be more locally willing to bid up for marketing assets that you will actually be able to hold the marketing budget at 12% or so of revenues over time? Or do you think there's upside risk to that? Bjorn Gulden: No, I don't think so. I think that 12% is where you should model it, and I think that's where we are modeling it. You know if some of the competitors are bidding up the prices on certain, what should I say, partners, that doesn't necessarily say that the whole market is following. So I think we have done the math and you clearly see that we did not bid as high on certain assets because we don't believe that's the right thing to do, and I doubt other people will do it. So I think 12% is still a solid number on our side and plan to be at that and don't necessarily or I don't see a risk of us going higher than that. And should we, I would tell you because that would be a change in strategy. Operator: Our next question comes from the line of Warwick Okines, BNP Paribas Exane. Warwick Okines: Two quick ones, please. Could you talk a bit more about the process of taking down high-end running into more commercial lines, where are you with that? I know you mentioned some upcoming launches. You've also talked a while back about investing in sales reps, but just wondering if you've got -- are getting any traction in that respect. And then the second question is on LatAm, up 18% in the first quarter. You referenced inflation there. Could you just give us an indication of what sort of volume growth you saw in the quarter there? Bjorn Gulden: Yes. I think that when it gets to the sales reps, we did over the last 3 years, reduce our sales force in many areas by moving to the digital strategy. So there was a belief that you, for example, in running specialty but also in other specialty didn't need a sales force because those consumers and also retailers could buy the product digital. And of course, the proof that, that didn't work, we have. And that's why we're back again in many sectors to hire specialists, the trainers, experts, sales reps, for example, in running, but also in America, also in sports like skateboard, where we hire people from the community to be part of the community. I do think that we clearly see that physical communities around different sports, especially running is so important that you cannot replace that with digital. So that has started and is continuing, and we are much, much more active again in those communities than we have been before, and we clearly see that's a necessity also going forward. When it gets to the running, you have to remember that you're competing against brands that have been in the running community for the last years and been very focused on it. And you also have seen that there are running what should I say, brands and has focused very much on what I call comfort running and everyday running, which also goes into to the lifestyle side of it. And we didn't have a good offer on that. We have clearly focused in the beginning on racing. So we have done the best shoes to run the fastest from A to B, which is the most difficult and we've been very successful with our adizero and with the Evo range. We have then built, I would say, a secondary line around Supernova, which is then going against, I would call, the running specialty brands like Brooks to compete there over time. And that's very, what should I say, promising in the beginning. And then don't forget, we had with UltraBOOST, with all the BOOST models, maybe the most comfortable running shoes that existed in the market. that also went lifestyle. And we are now reintroducing UltraBOOST 5, which is, what I would say, our comfort running play. And you will see more new launches going forward that is clearly target that consumer who doesn't want to run the fastest from A to B, but have the most comfortable shoe to A to B and at the same time, assign the shoes in materials and colors that they can also be worn with jeans. And that is always, I would say, the combination. So many, what should I say, initiatives on the running side both on the top end, which I feel very comfortable and then also competing against where the trend is currently, and I think we are on a good way of having the right product, and then we need to be a little bit patient to build that business. When it gets to LatAm, I'm looking at Harm because he's the master of inflation. So he will answer on that. Harm Ohlmeyer: Yes, there are 2 factors. I mean one is quite some piece of the 18% inflation-based price increases in Argentina. First and foremost, there are other markets as well, but it's very pronounced in Argentina. And I think we get used to that as well. So part of the 18% is actually inflation in Argentina. But rest assured, there's also volume growth overall in Latin America. So we believe we're making good progress in many markets, and we're gaining market share there, and this is definitely through volume growth. So I'm not going to give you now percentages of dissecting the 18% but there is volume growth. There's a significant part, pricing and inflation in Argentina. But overall, we are making good progress in a very difficult market with a lot of volatility. Sebastian Steffen: Alice, we have time for one last question now. Operator: Today's last question comes from the line of Aneesha Sherman with Bernstein. Aneesha Sherman: So I have two, please. The first one is, this year, you've had a very successful franchise at the peak of brand heat. You've had a big increase in wholesale distribution. You've had some big -- or you will have some big sporting events and some Yeezy sales. And next year, you're going to be lapping all of this. And so as you think about next year's growth, do you model Terrace growing at the same pace next year as well? Or do you think maybe the new launches that are coming out this year will have ramped quickly enough to make up for a slowdown in Terrace? Like how are you thinking about that algo versus what looks like a very strong year? My second question is on China. I think a couple of quarters ago, you talked about broadening the assortment and broadening the distribution to more mass price points where you see opportunities for share gain. Is that already happening? Or is that more of a 2025 opportunity? Bjorn Gulden: When we model our lifestyle what should I say, franchises, we do that based on many factors. What is, of course, what the retailer wants to buy from us. The other one is the algorithm on what we're selling out. And then it's a combination of consumer groups and also, of course, social search. And when we look at it now, there is none of the franchises that we have talked about are slowing down and none of them are actually down when I get to demand going into '25 from the retailers. That doesn't necessarily mean that we will release those quantities. And this is what I'm saying is that behind Terrace, you have Campus. Behind Campus, you have SL72. Behind SL72, you have lo profile. Behind that, you've running lifestyle, and behind that, again, you have Superstar. The work that we are doing is market-by-market trying then to see what is the right flow of that. And as I said, I think in the beginning, I feel we have a very thorough process in, what should I say, modeling and playing plan A, B, C, D within the time frame of what we can react on. And this is a new situation for us because we haven't had 5 franchises working at any point in time the way it looks right now. So we will have to show you that we can do that. What we are modeling is continuous growth in the lifestyle area. But the mix of it when it gets to the different franchises in the different markets, as I said, have different scenarios. And all those scenarios are built in a way that we can react changing the production line in the factories from one model to the other model because, remember, we run these franchises on court in all the same factory groups. So it's a pretty, what should I say, easy way of changing. When it gets to China question, we especially said that on the performance side, we saw that the local brands have gained a lot of share in performance by building products in the price point €100 and below, where we didn't really have a good global offer. So what we have done is that we build products both on the real performance side, but also on the, I would say, for example, running lifestyle on around 100, then we see -- start to see traction on that. But Rome is not built in one day. So of course, the -- what should I say, the visibility of these models will be much bigger in '25 than in '24 because we started this just 6 months ago. So we feel that we have given our Chinese team the resources and the tools, design, development, sourcing and marketing money to kind of cater for local demand, which partly is different than what it is in other parts of the world. So they have a lot of creative freedom to utilize these resources to connect to the consumer. Again, I think when you look at the performance being up 8% and having a much cleaner inventory and having one of your colleagues had a huge improvement on the EBIT line in Q1, but things are starting to work in a way that we're very proud of what the local team has done, knowing that we will have to continue to take share and knowing that the business in China can still be uncertain and volatile given all the external factors. But I think we feel a lot better today than we did 12 months ago. Sebastian Steffen: All right. Thanks very much, Aneesha. Thanks very much, Alice, and thanks very much also to Bjorn and Harm. And of course, also thanks to all of you for participating in our call today. This concludes our Q1 results call. As always, if there's any questions left, please free to reach out to Adrian, Philip, myself or any other member of the IR team. We were very much looking forward to chatting with you over the next couple of days and weeks. And with that, as Bjorn said, let's all enjoy the summer of sports starting with an all adidas Champions League, semi-final tonight. All the best. Bye-bye. Take care.

Sebastian Steffen: Hello, and good evening. Thank you very much, Francie, and also from my end, welcome to the Conference Call and our Preliminary Full Year 2023 Results. We very much appreciate your flexibility in joining our call on such short notice, knowing that this means getting up very early or in some cases even in the middle of the night for you. The participants in today's call are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. The purpose of this call is twofold. First, Bjorn will provide you with a brief overview of our preliminary full year 2023 results and afterwards, Bjorn will share context around our published full year 2024 outlook and its underlying assumptions. And lastly, of course, Bjorn and Harm will be happy to take your questions. Please understand that, during today's call, we will not be able to comment on our Q4 performance beyond what has been published yesterday. We will be more than happy to discuss these elements during our regular conference call on March 13th. As always, I would also like to ask you to limit your initial questions to two during our Q&A session in order to allow as many people as possible to ask questions. Thanks very much in advance for sticking to those rules. And now without any further ado, over to you, Bjorn. Bjorn Gulden: Thanks, Sebastian, and good morning, everybody. We start the presentation with a beautiful picture of our new Predator, which is launched in the last couple of weeks, doing extremely well on the pitch and also in sell through. So one of the future successes for us. The purpose of this call is to take you through the announcement and we have five, six slides to explain the different components and we start with the top-line and you basically see that, we have a flat sales, currency neutral and reported a minus about 5%. If you then do the math, you see that only on currency translation, we lost almost EUR1 billion in sales. If you then exclude Yeezy from the numbers, you will see that we were up around 2%. And then you shouldn't take the Argentina devaluation. You will see that's another percent. If you put those two together, that had an impact of about 3% on our top-line. If you remember, our latest guidance was low-single-digit decline currency neutral and when we then ended flat, we all understand that Q4 was stronger than what we had expected. If you then look at the gross margin, I do actually believe, given the inventory we started with during the year, that we have done a very, very good job actually getting through that. And as you can see, we are ending with a 47.5% gross margin, which is then 20 basis points better than what we actually had a year ago. I think we have been very good at actually managing our inventories. And when we publish our numbers, you will see that we are very, very happy with our inventory, actually ended in the year. On the profit side, you see that we reached EUR268 million which, of course, is much less than we had in 2022, but we flagged that a long, long time ago. And at least, you should I look at the extraordinary impact, we had another EUR100 million negative in Q4 because of the devaluation of the Argentina peso. And if you remember, our latest guidance, we said that, we will lose EUR100 million so as you can see, there is a positive swing from that guidance to the year end of EUR368 million. We will try to explain that as we go through the slides. If you then look at the different guidance that we had during the year, this is my first year with the company and I would like to take that through because that explains how we are guiding and why we did what we did. We started out in the beginning of the year saying that we expected a high-single-digit decline, that our underlying business, taking Yeezy out, should be breakeven. And again, we were coming from a Q4 the year before with a loss making. And then we said, we will have a reported loss because of the Yeezy inventory of a possible EUR700 million. Then in the second guidance, we then said now we only expect a mid-single-digit decline. The underlying business is still breakeven. But because of the sell-off of Yeezy, we are now looking at a possible loss of EUR450 million, if you write-off the leftover on the inventory. And then the latest guidance were then from mid now to low-single-digit decline. We had an improvement in our underlying business to EUR100 million profit. And then, again, because of the Yeezy development, that would then give a reported EBITDA around minus EUR100 million. And when you then look at the actuals, the low-single-digit has then gone to a flattish. With the operating profit, the underlying business has improved by another EUR100 million up to EUR200 million and when we then tell you that we're not going to write-off EUR268 million on inventory. That then turns into be a EUR268 million profit. So that has been the improvement during the quarters. If you take that into a slide to try to explain it, then again, we started with a minus EUR700 million then we sold off Yeezy. That generated a profit of EUR150 million, and because we sold inventory, we didn't have to write-off EUR100 million inventory. So we then had a guidance of EUR450 million. The same thing happened in the next phase, but here we also had an improvement of the underlying business of EUR100 million. That's where we ended at the guidance of minus EUR100 million. And now on the actual, we have a EUR268 million decision not to write-off the left of inventory plus an improvement of the business of EUR100 million and that gives you then the EUR268 million. To sum that all up any around, then you would see that that's an improvement from the beginning of the year till the end of the year of about EUR1 billion in our bottom-line. Again, not saying that this is great. The only thing I'm saying that 12-months ago, we had a Yeezy problem that could have caused us to write-off all inventory. We sorted out half of that. We still have EUR268 million left of inventory, which we will now sell at least at cost. There's an upside to that. And I think the underlying business returned from being on a negative down four on the top-line to actually now having a positive momentum towards the consumer and the retailer. So I think a lot of positive things have happened over the last 12-months. If we then look into the sales going forward, it's a little bit complicated. We tried to explain it. We ended the year with EUR21.4 billion in sales. All that EUR750 million was Yeezy. That means that you have an underlying sales of adidas product of about EUR20.6 billion. If you then say that, that business should grow high-single-digit, remember we said that it will start flattish and be double-digit at the end. Then you will end, but if you say the sales line is between 7% and 9%, you will end between EUR22 billion and EUR22.5 billion top-line. If we then add the Yeezy at cost, that's another EUR250 million, then you do the math, you're at EUR22.25 billion or EUR22.75 billion as a currency neutral sales, and that would be for the whole company, including Yeezy land, the mid-single-digit growth, currency neutral. Although the leader's underlying business is high-single-digit, just so you understand the math. And then unfortunately, we have very, very negative FX impacts around the world currently. Of course, I can't name them because even I don't know them. But that's, of course, what is then going to give the pressure on the top-line during the year. And we will get back to that and explain it more in detail. And then I'm sure also Harm can explain it even more to you. But that is the picture we're looking at now. And now you have to remember that our goal in the last 12-months was to get rid of bad inventory both in the trade and in our own books. It was to solve the Yeezy problem. It was to build the relationship with our retail partners and to get momentum towards the consumer. And 12-months ago, we did not have the tariffs. We did not have at Campus. We did not have the Predator. We did not have to Anthony Edwards shoe. So I'm actually very happy with what we now see in the market. And that's why I think we're on the good way of actually reaching the things that we have promised you mid-term meaning 2026. When you then look at the quarters, and of course, this is just a visual indication, we say that Q1 will be flattish. There might be some upside to that. And then we should have continuous improvement quarter-by-quarter. Why is it like this? Well, it's especially because the American market is lagging, I would say, six to nine months behind the rest of the world. And that has to do with, of course, our performance when it gets to our inventories that are in the trade and also, of course, deliver the fresh product into the trade and get the buy in of that at the same speed as we've gotten in all other markets. And therefore, we say and we promised you that we will start flattish, improve every quarter and then when we get to the end of the year, we should have a double-digit growth. And of course, as always, it could happen also quicker, but this is where we are currently. If you then look at the gross margin, then FX, I think, and again Harm will talk more about this, that just in the gross margin, there is about 200 basis point pressure on the gross margin because of currencies. If you look at freight, that looked very positive, I would say, until the red ocean -- the red what is it, Red Sea problem came up, and currently, there is a negative effect of that. But that negative effect will be smaller than the positive effect, but you should be aware of it that currently the spot rates are actually exploding again. So, if you don't have a long-term contract or you ship more than your contract. There is an increased cost because of that. And there is a delay currently of about three weeks, which of course causes some delivery issues again, especially to the European market. All other areas are actually positive than it gets to the gross margin. And I think it's fair to say that we are planning and pretty certain about that we will have a very positive development in our gross margin despite the 200 basis point negativity that we're getting because of the FX. When you take the second half and the picture is ballpark the same, and remember, now we are comparing to H2 2023, but the picture is ballpark the same. If you then look at our guidance, and then we are currently then, currency neutral, saying that we will have a mid-single-digit increase in our total company. That includes Yeezy. But you have to remember that we're currently planning with substantially less sales because we only planning in this guidance to sell the EUR268 million inventory at cost. There is an upside to that. If you take Yeezy and you look at adidas business, we should have high-single-digit increase for the full year and we should have double-digit increase at the back end of the year. The operating profit that this gives you it's around EUR500 million, of course, with an upside. But as you know, it is our clear goal to always start with what we can promise you and then build from that. The assumption that we have in this is, again, to repeat it, to sell the Yeezy at cost, that's around the EUR250 million and currently without no operating profit contribution from that inventory. We talked about FX headwind that has, of course, a transactional effect when you convert sales in countries back again to euro, and then it has a direct impact on the gross margin, which we already talked about around 200 basis points. And then important, we have not started any programs to optimize our cost structure. We have said that, the most important thing for us is to be positive towards the consumer and positive towards the retailer. That means that, we continue to over invest in both marketing and sales. And as soon as we have a solid growth in that area, which we think we will have in the second half, we will, of course, then also start to optimize and leverage on our cost base. But I hope you understand that, we first focus on the front side to turn what you said was negative 12-months ago into positive, and then we optimize the back end of it. I think if you do it the other way around, you could be in danger of actually killing something that is going to be very, very good. So that was, what should I say, simplified explanation of where we are. And then the second beautiful picture, this is the Anthony Edwards shoe, which is selling very well. I think it's the best-selling basketball shoe that we had for 10 years. Then I think we are ready Harm, me, and Sebastian to take any questions that you have. Seb? Sebastian Steffen: Yes, thanks very much, Bjorn and Francie, we're happy to take the questions now. Operator: [Operator Instructions] Our first question today is from Piral Dadhania from RBC. Piral Dadhania: So I have two. The first is on the mid-term EBIT margin target of 10%, which I think you stated in your prepared remarks still expect to deliver by 2026. Just based on what this year's 2024 guidance implies, that leaves a lot to do in the next two years. Could you just help us to understand what your expectations are in terms of the shape of or the acceleration in the margin progression in '25 and '26 and how confident you are that you can get there? And the second question, I guess related to that is, just on cost optimization. One of your -- I appreciate the comments you just made around investing for growth in the near-term and then perhaps optimizing in the future. Could you just clarify whether that means that, you would in the next two years or so undergo a program of cost optimization like your nearest competitor has done? Do you view the overhead cost base as being too large in absolute terms and you would look to reduce that to deliver that 10% margin? Bjorn Gulden: I mean, first of all, I think we are full in line with our midterm target of getting to 10% EBIT. You have to remember that to get there, the most important thing is actually to connect with the consumer and the retailer. And to be very honest with you, I think we are after 12-months actually ahead of what I expected on that. Part of that, I think, is luck. Part of that is that we worked very, very hard. And on the lifestyle side, on the soccer side, I would say on the running side, partly beginning of the basketball side, I feel very comfortable that we have the right tools to actually achieve that. I think also marketing with our originals campaign that we started last year and on the performance side, where you see the weekend of Super Bowl and afterwards with our so-called backyard campaign, you will see the new phase of adidas as a total, both in lifestyle originals and then also in performance. So, I think on that side, we are even ahead of schedule. When it gets to optimizing the cost side, this is a difficult one, because we think in total that we have the structure to leverage on. But then you know that when you start changing from a negative to a positive, we need to be careful that we don't start restructuring in the middle of that and then causing a negativity again. So, we have chosen an overinvestment in the front end in sales and marketing and then working with existing infrastructure currently. We know that's too big for the current sale. But as we then are getting the double-digit growth, which I'm 100% sure we will get, we will then start to optimize. I do not expect anywhere near the restructuring that you are mentioning from our competitor, but of course, we will optimize and improve things. So, that's obvious. But you can or you should not expect us to come with those kind of numbers for restructuring. Operator: The next question is from David Roux from Bank of America. David Roux: On the just, I've got one question on the margin and one on FX, with the puts and takes of the gross margin for the forthcoming year that you highlighted. Do you still expect to achieve the 48.5%, which I think was flagged last year has been a good indication for this year. And then my second question is just on FX, I understand it's volatile, but as it stands today, do you expect a similar translational impact as we saw in 2023? Bjorn Gulden: I'll leave the FX thing to Harm. On the margins, yes, I'm convinced that you will see a 48% plus margin and then I think, I hand over to you Harm. Harm Ohlmeyer: Yes, Dave, real quick. Just on the margin, I know I indicated I got quoted many, many times on the 48.5% as an early indication last year, but I can confirm today that this is not a wrong number. So, it's a good starting point, put it that way, without giving a guidance in detail, yes, but it's still a good indicator. When it comes to the -- and I probably want to add, when it comes to the first half and the second half, as Bjorn indicated on the slide, there's definitely when we talk about 200 basis points FX in the margin. That is not all in the first half. It's a combination of first half, second half, but it always depends on how you utilize the Fall-Winter '24 products and some of that you sell already in June. So, from a season point of view, it's different, but from a reporting point of view, it could be the 200 basis points, could be 70%, 80% of that is probably in the first half a little bit in the second half, but as the chart indicated, it will be much more positive on the gross margin second half than the first half. When it comes to the FX overall, you asked whether it's the same significance as in '23. It's probably less than that, but still significant. So, you saw on the chart, it was roughly 5 percentage points in '23, and we believe but we go on the forward rates for the end of June that we're using right now. It could be 3 to 4 percentage points in '24. That's what we're assuming. And of course, it could be better, it could be worse, but we are using the forward rate that we're looking at right now. And of course, it could be in some markets where we have inflation measures that we work with slight price increases to mitigate some of this, and of course, that's what we are watching. We are not forecasting ourselves, but it's take it from the 5% in '23 to 3% to 4% in '24. Operator: Next question is from Warwick Okines from BNP. Warwick Okines: Actually could I just start with a follow-up on to clarify and make sure I understood your comments on the currency on gross margin, Harm? You said that some of the negative EUR200 million could actually fall in the second half. So are you saying that the year-on-year movement in currency through the gross margin could be negative in both halves? Harm Ohlmeyer: Well, it depends on when you send the product really, right? And we should understand it's not just the U.S. dollar. I mean, it's an RMB, it's a yen. If you look at all these currencies, we always follow the U.S. dollar. That is predominantly in the first half. It will turn positive into second half, but there are some smaller currencies as well that impacts the second half. But again, you should first and foremost assume that the vast majority of that FX impact is in the first half and it's to a minor degree in the second half. And also depends of course, we're hedging only roughly 80% depending on the currency. Some currencies, we only hedge around 50% when it's outside of the U.S. dollar. And we believe the second half is accelerating. And if you keep accelerating in the second half, then of course the FX impact, depending on where we are on spot rates, could be also positive, right? So, everything that we are saying right now is conservative. And also what I said on the FX on the translational impact, when I say 3% to 4%, we watch all the banks and all the forecasts. They haven't been perfect, in the last six months. So, we believe what we are having in there is a worst case scenario, so that's really where we are. Warwick Okines: And then second question is just on operating costs, and you talked about sort of overinvesting at the start of the turnaround. Could you just give us an indication of what you think the marketing cost as a percent of sales it will be in the year ahead, please? Bjorn Gulden: Yes. I think in this business, I think between 11% and 12% marketing cost is what you're looking at. And then there might be overinvestment when there are events or big things that are happening. I mean, for us, I mean, we can live with the 12% marketing. I don't think we need to increase that. I think what's important is also the sales line because we need to make sure that the good product pipeline we have on performance. For example, in running also have specialty distribution, and we took a clear decision that we need again to be in front of the retailers and the consumer and not believing that they will all buy digital. So, there is quite some investment in the markets when it gets to actually doing that, tech reps, especially in sales force and a little bit I call it the old fashioned way of again connecting with the consumer. So, we are overinvesting in that front-end compared to the growth currently. And are not, as I think I have said many times, trying to optimize things for a short-term profit, but laying the base so that we can reach the 10% EBIT mid-term that we have promised you. And I think this is important that everybody understands that in 12-months, you cannot turn the company around when it gets to getting heat with the consumer, getting, what should I say, credibility with the retailers, then optimizing margin and cost, that's an impossible task. So the priority again is to put adidas where it deserves to be, that is being a good performance brand in the categories we choose, also be more local relevant in local sports. It is to have brand heat in our classic original line and then capitalize on that into commercial line. And all those things, I think, we have improved on. At the same time, we have reduced the inventory substantially. We now have gone from a very negative order book to a positive order book. And I also think that the atmosphere in the company and the agility and the speed in our organization have improved. We have done that without putting in any optimizing or saving programs, because those two things works against each other. So right now, we have been talking to the consumer and the retailer, not so much to you as investor. That comes later, when we have the base that we can optimize to be more profitable. But again, we promised you a 10% EBIT margin in '26 and that's like running a marathon. Now we have run 10k and I think we're actually a little bit ahead of, what should I say, our form. But of course, in the numbers, you then need to trust and believe us that these components then gets there. I understand that. But I also hope you understand that, for us to try to maximize our profitability, which I would say quarter-by-quarter or being very domestic in our outlook to impress you would be the wrong strategy. So I hear you that, your maybe negative with the outlook. But don't forget, we started last year with EUR750 million showing you the worst case. And I think you just have to accept that, that's the way we are and then we want to deliver what we promised you and not put us under pressure to start to use adverbs and adjectives to be nice in a quarter, because I really don't think that that's what we need so. Operator: The next question comes from Aneesha Sherman from Bernstein. Aneesha Sherman: So Bjorn, a couple of quarters ago, you talked about retailer order books being soft for H1, in some cases, potentially creating stock outs. Can you give us an update on, where you feel the demand supply balance is for the first half? And then in the second half, are the order books at the level that you want them to be and are you expecting to hit your target ratio of about 65%, 35% wholesale to DTC this year? Bjorn Gulden: I would say that, the supply and the order book for H1 even looks a little bit better than what I said a couple of months ago. I was afraid going into the beginning of the year that, it might be negative, but it's actually already positive. Harm, and the people has almost been too good when it gets to taking the inventory down with the delays. We are having some delivery issues because of the Red Sea, which again, it's not a huge problem, but it is a problem because as you will see that the inventory is very healthy. The order book are increasing everywhere with the exception in the U.S., where we know and you've probably seen also that we changed management there two weeks ago that we need another six to nine months to clean up stuff. In all of the markets, I would say that we are a little bit ahead of the curve. And when it gets to the second half, of course, the order book is only full for Q1, Q2 and the order book for Q3 is filling, that's the time line. So there is no order book currently for Q4. But the indication and the reaction of the retailers. And of course, the current sell-through indicates that we should be in good shape also for the second half. When it gets to the split between, what should I say, wholesale and retail, I mean, the 65%, 35% is not the target by itself. That's the result of what's happening. And if it's 37% or 38% or 39%. To be honest with you, I don't really care. What is important is that what we try to use the channels for e-com for us is, A, to build the brand; and B, I would say optimize the margin, not necessarily maximizing sales because that causes a lot of discount and a lot of performance marketing. In the concept stores, it's brand first and then commercial. And in the factory outlet, it should be to clear product and then do as much profit as we can. And that's what we're working on the retail side. On wholesale, it's, of course, to look good next to our competitors, make sure that our packages, both from a financial point of view and from a product point of view, makes all retailers make good money with us, because if they make money with us, they will grow with us. So that's what we're working towards. And of course, many of the retailers did not have that feeling a year or two years ago, but we feel that that's changing. And I do think if you hear with the retailers, you will hear that our sales and product organizations are very eager to build relationships and solve problems. And if you look at all the programs we had to solve all the bad inventory and replace with better inventory and how we chase the business where possible. I'm very, very proud of the way our sales and marketing and product team have done that. But again, of course, things take time. And we started this process 12-months ago. We should not forget that. But everything we said, I think, a quarter ago, I feel very confident about. Operator: Next question is from Adam Cochrane from Deutsche Bank. Adam Cochrane : A couple of questions on pricing, if I can. Firstly, on Yeezy, just to clarify, you're talking about selling it at cost, which is the EUR268 million. How if you're selling it at cost, is there any implied costs associated with selling it to get to the flat EBIT impact? I would have thought that if you're selling it at cost, that just covers the cost of goods sold and there might be some selling costs associated with it. So just a source of verification on how the math works on that Yeezy part. And then secondly, in terms of pricing discussions with your own brands or retail partners, how is the price environment looking? How are you thinking about average selling prices for 2024? Bjorn Gulden: Well, on the Yeezy, what we have told you is that we had two successful drops. We then stopped at third drop last year because of the situation in Middle East and a lot of uncertainty. We now have done a review of the inventory, very, very thorough. And we have also checked with wholesalers and traders. If we could sell it that wholesale way, and the answer was yes, so we could get rid of the inventory in a big bulk, we have felt that the best thing would be to try one more drop, which we are now currently working on, and then we will see how that works and then we will make the easiest decisions as we go. There is always cost in selling. That is correct. And also, forget that when we talk about the profitability of Yeezy that we report, that's the margin on it. There's a lot of costs hidden in our business, in IT, in digital, in sales, in logistics by doing it. But we don't report on that because the cost is hidden in the business. I wouldn't add any, what should I say, additional sales cost of this because it is in our, what should I say, cost line anyway. Again, there's clearly an upside on the Yeezy thing, but I think also that you have to appreciate that we've gone from writing it off to now accepting that deselling it. And we have written-off, I think it was EUR12 million already, where we had damaged goods and broken sizes. We are conservative on the way we look at it. And again, we will report on this. Every time we do something with Yeezy, we will tell you so you can see that the upside. But the most conservative view now is just to cover the cost, which is then the EUR268 million. When it gets to pricing, I think right now, our line is priced correctly when it gets to the retail price. You have to remember that the market has been very, very discounted. We see currently that many of our product is selling at full price. I mean, every success we have on the lifestyle side is taken out of discount, so that's very positive. We also have very good sell-through now, for example, on the Predator or the Anthony Edwards shoe in basketball. So we have performance leading products that are actually being sold without discount, which is great in this environment. And then, I think the feeling is in the market that our pricing is actually priced now locally okay. And there's not a lot of discussion on pricing. Again, I think we all know at the end right now, the most decisive factor on price is the discount. And that as very different from product-to-product and market-to-market. And I think it's fair to say there is still the total trade, not necessarily our product, but there's still a lot of inventory out there. And I would still say more in the U.S. than what you have in Europe, where at least our customers seems to be very clean on our inventories, which is very, very positive. Operator: Next question is from Geoff Lowery from Redburn. Geoff Lowery: Two questions, please. Firstly, given things like FX and presumably freight are shaping up to be worse, at least near-term than you'd originally envisaged. What's going better that still allows you to think the 10% margin is the right one? In other words, what's filling that gap in your medium-term plan? And then the second question is, in terms of the relationship with wholesalers, are you having to give them any sort of improved terms some more marketing support or similar to help, sort of lubricate that improved relationship? Or are you managing to do it on broadly existing terms, but with better products and better relationships? Bjorn Gulden: Well, the second is clearly that when it gets to the, what should I say, basic terms that we have in our relationship, we don't do anything. There's no necessity. What we have done over the last 12-months is, of course, to help where we have inventory. So when it gets to support for take backs or support for discount. We have been more flexible than before. And we have tried to act as a very good partner. And of course, that's been helpful. I think going forward, we will not have to give more terms or be more service minded. I think we always maxed that. I think where the improvement is and will be is, how do we work with the big retailers when it gets to go to market, both product and chase business and activations. And that is, again, accepting that the retailers around the world are sitting on a lot of competence that we can utilize and together we are stronger than if we act individually. So I think it's more of an attitude. The danger of saying D2C is, of course, you get very introvert because you are saying that, we go direct to the consumers, therefore, we know everything better and then you don't listen to the retailer. And I think we are now trying to do the opposite, that say, okay, let's use the retailers to gain more competence locally in the different markets under different categories, make sure that we look very good, compared to our competitors in that environment and let's utilize then D2C to maximize the things that we can do in D2C. And it's all bits from a brand side of view. We should in e-com look fantastic. We should show up as a sports and lifestyle brand at the best, but we should not try to optimize sales because optimizing sales in e-com has two drugs, as I said, that's the discount and performance marketing, and that's what we need to avoid. And then on concept stores, if we have a Fifth Avenue store or we have [indiscernible] that should represents the brand the best possible way and it's more of a marketing tool than it is a commercial tool. And then as soon as we say a store is commercial, being a factory outlet or a normal store, we need to make sure that, we do that like a real retailer, maximizing the contribution of that store. And that's a culture that maybe has been lagging a little bit that we are now trying to wake up again. When it gets to the FX and the freighting, I just want to clarify that, I just indicated to you that, there is a shorter pickup on the freight, and that is because of the Red Sea. This is not something that we think will belong for a long time. You should just be aware of it that there are currently three weeks delays on shipments because of that, because the ships cannot go through the shortest route. And of course, as always, the transportation companies are utilizing things to take up the rights. We have contracts that go through the summer. But if we need to ship more than the contract says, or we need to accelerate something, that has now a pretty high premium. This is not something that will have a huge impact on our margin. We just flagged it that you should be aware of it. And all other things, in my opinion, are currently positive. And you know what the currency will also meet turn one day. So negative thing will turn positive again, and we are 100% sure that with all the tools that we have, with the current setup we have, we can get to the 10% EBIT. You have to remember that, we have an organization that has had a negative, what shows a development on the top-line and we have not leveraged that organization. And we have had a lot of discount and clearance in the last couple of years. So we see as an ongoing normal business, we see the 10% clearly there as our target, if we deliver on what we already have. And I don't know if you want to add Harm, but I think that you can also add some pace to that. Harm Ohlmeyer: Yes, Geoff, probably one more argument, what's going better and of course, your follow-up in detail, the last couple of years, we have not been able to grow the lifestyle business and that has changed fundamentally in 2023 that we now started growing the lifestyle business and very well that the lifestyle business carries a higher margin and that is definitely an opportunity, that we captured already, but we'll continue to capture. So, what you should follow is the growth of the lifestyle business. And as the brand is picking up, we can easily say all boats are rising, but apparel business is something that is coming it's the next step as well. So, lifestyle business growing again, growing significantly with a better margin and then the apparel business should come as well. These are things that are definitely going positive, but definitely more positive than originally expected as a lifestyle business. And then you look at the market mix where we always talk about the challenges in North America that is probably six months behind, but also making good progress in China in making tremendous progress in our home market in Europe. So, these are things that are definitely going better than we originally expected. Operator: Next question is from Edouard Aubin from Morgan Stanley. Edouard Aubin: So, just two questions for me. The first one is the shortfall in terms of your guidance versus market expectation and the analysis is different. If I listen to you this morning, essentially because of FX and kind of Yeezy being sold at cost. So, it's not really a function of higher potential supply chain costs or even market dynamics given that a number of your peers or retailers you talked about a more difficult start to the year in terms of discounting. So, that's question number one. And then beyond question number two. So, you talked about kind of top-line first, kind of profits maybe later in terms of the focus. On your progress with wholesale, when we do channel checks, we know the feedback from retailers is that they are obviously more happy to work with you because you are giving them better terms. Is that one of the reasons why the cost might be a bit under slightly more elevated than anticipated? And again to break it down in terms of your progress with wholesale, to what extent is it a function of just a better relationship you have with these guys or the product pipeline. I know, I am sure it's difficult to break it down, but just your some color would be helpful. Bjorn Gulden: Well, just to clarify, a relationship itself doesn't bring any business. The relationship opens the door to get better product on the shelf. And of course, a better relationship is also, what should I say, positive for us in the sense that we're building products and activations that actually works. And I'm actually convinced that the retailers around the world has competence that sometimes are better enough. So if you put the two competences together, we build better packages. But this is not having dinner with people and being friends, and that's why we do more business. The business is far too, what should I say, serious for that. So, I think the attitude of having retail partners in-house working with our product and marketing people before we actually make decisions, have them have full overview of our innovation pipeline. And being a very, very good and consumer oriented organization is the goal. And we do that both direct, but also working through the retailers. That is what relations is about. It's not about increasing terms. When you say they are happy because we increased terms, we haven't increased any terms. What we have done is that we have short-term solved problems. So if a retailer has taken programs for us that hasn't solved, we have given them help either in markdown money or taking it back and getting it to our own, what should I say, network. So it's more of an attitude and helping each other, but that goes both ways. So I really feel that the relationship thing is a little bit more common sense accepting the role of retail around the world and then finding ways on how we can build better programs together and also give them full visibility of what we have. You'll be amazed how many retailers have been surprised when we actually show them the whole range and show them the pipeline instead of just showing them a little bit. So, again, this is a wider thing than just being nice to each other. When it gets to the guidance being lower than your expectation, I think that has to do with many things. The FX, I'm not sure if you have that really in your models. Secondly, I mean, guiding on a profit of Yeezy under these days, I don't know if you would have done that if you're sitting in my chair. And thirdly, I think it is very, very important that when we guide something, we can also deliver it with a good, what should I say, feeling. And that's why I'm saying that we're trying to be humble and down to earth and then rather, what should I say, surprise you, positive than negative. The consumer sentiment around the world is, of course, not great. It's not like people are lining up everywhere to buy a product. But for us, it's almost like that doesn't matter because we feel that the share we have with the retailers and the way we have exploited opportunities that, Ed, hasn't been good. That's why we think we need to grow also when the sentiment is not positive. And then, yes, there has been terrible weather in the U.S. the last two weeks. And of course, if there's snowstorm, we can't sell product. But these are all short-term things. I'm convinced that the potential of adidas as an organization, as a brand, as a history and everything we have will deserve a higher market share with the retailers and also in the different categories in the different markets, and that's our goal to then bring. If that goes from month to month to month and it's measured in quarterly profits, I'm not sure if that's the right priority. I think I said 12-months ago, you should check, are we actually delivering top-line growth with our retail partners? Do you see activations that is actually, what should I say, confirming what we say? Do the retail partners agree that sell-through is higher, and that's the indication that we're building the base for growing, not necessarily if we probably see EUR100 million more profit or not. We could easily have done a quick restructuring and put costs below and we could look good very short, but I'm not sure that would have built the right attitude that we need for the next 24-months. So it's a more step-by-step approach. But again, I think all of us, if we were sitting 12-months ago knowing that now, we have some of the hottest shoes in the market, we have the best soccer shoe that has ever been launched, we even have a basketball shoe that is doing well, I think we will all be saying, wow, we will take that. So, we don't have the attitude that we are negative even if our EBIT guidance is below what you have as your model. We think that with the consumer and retail, we're actually a little bit ahead of what we thought 12-months ago. Operator: The next one is from Jurgen Kolb. Jurgen Kolb: Actually just one question all the others have already been asked. It's a little bit of nitty-gritty, but probably, Harm, could you share with us the hedge rate where you hedged throughout 2023 and then also in 2024 and how much of that exposure is already hedged? Harm Ohlmeyer: Yes. As you would expect, I don't give you the details on how we are being hedged, but I can give you some hint. We hedged very early in '22 for '23 when dollar was still very attractive, so we had a good hedge rate in spring summer '23. That's why we have a significant impact spring summer 2024, but that's the one thing. But the second thing is, we normally hedge around 80% of the U.S. dollar for every season. And for other currencies, it's rather around 50% depending on the market. But you should and that's probably the opportunity in the P&L as well as we accelerate our growth, the 80% could become 75% or 70% and then we are more to the spot rates how we buy products, right? But that's why it's not easy to predict the gross margin, and that's why I will repeat again, despite all the elements that we have on freight and what we hadn't discounted in the FX, we are very optimistic to grow the gross margin in the first half and even more so in the second half. That's why I repeat my indication of 48.5% is not completely wrong, and you will hear more details then on March 13th. But that's pretty much where we are. Jurgen Kolb: And maybe one quick follow-up. I understand the conflict in the Red Sea is not a major impact, but the EUR500 million you are guiding for the full year, that obviously includes some assumption on this development of these freight rates, I assume. So you probably also have here a rather conservative and cautious view. Again understood it's you're saying it's rather a smaller issue, but it's already baked into that EUR500 million thing? Harm Ohlmeyer: Yes. It's definitely baked into that EUR500 million thing. Of course, we don't know if this is now continuing for a year and it depends on what the logistics companies are doing. Do they deploy their vessels? Do they deploy all their containers? We believe they are able to do that, then it will be solved in a couple of months. I mean, if it gets worse from here and stays for two years, then it's a different picture, right? But right now, we believe you can handle it and what we have been there is from what we know today rather worst case scenario and it's baked into the EUR500 million. So there would not be reason this year that we come out and say, ''We can't do the EUR500 million because of the Red Sea''. That's not an option. Bjorn Gulden: The only thing, if I may add, is that a three weeks delay wasn't planned. When we certainly have product lines that is high in demand and higher than the supply and you get a three weeks delay that is a hiccup. And of course, that is, in my opinion, actually worse than the higher rate right now, because there are shortage in certain of our lines. And of course, when you then get them three weeks delayed, that has an impact. The good thing though, I don't tell anybody, we all have delays. It's not that we are worse than anybody else, but the irony is that we actually have products right now that the sell-through is so good with certain retailers that we can't deliver and of course, that is the biggest impact currently on the Red Sea. And surprise, if you don't want to air. Air rates are currently up by, I think, 700%. It's like you're being hit on all those kind of, what should I say, extra things and I think that has a more impact right now than what you said the freight rate. But I'm sure all the people will tell you the same. Operator: Our last question for today is from Monique Pollard from Citi. Monique Pollard: Just a couple for me. I just wondered if you were able to provide any regional color on Q4, maybe particularly China, NAM and obviously you mentioned Europe doing very well. And then secondly, obviously you talked about doing double-digit million sales of the tariff shoes in 2024, just wondered if you could give us a sense of what the number was of the tariffs you sold in 2023 and whether you can give any more indication beyond the double-digit millions of where that could get to in 2024 and any indications on margin of that product? Obviously, Harm, you mentioned that lifestyle obviously carries a higher margin and that the tariffs is selling very much at full price. Or any indications there would be useful? Sebastian Steffen: Maybe quickly on your first question, I want to refer to what I said at the beginning that unfortunately, we're not able to comment anything beyond what has been published yesterday. So, all the details around our inventory and particularly the segmental development in the region will be something that we will be able to discuss in our call on March 13th. Bjorn Gulden: I was supposed to answer you and he saw that, so he stopped me. I'm not legally always compliant. The only thing I can tell you is that currently on the tariffing, which is mainly Samba, Spezial and Gazelle, it is still in a higher demand and supply. So, that's still building. What is new is that Compass in certain retailers and certain markets are actually outselling Samba. And as you know, Compass is a wider, more skate looking shoes, so it also then dries more also to the male consumer, which is good for us. And then we have extended the tariffs thing with the SL72, which is running tariffs, so it's a running upper key toe construction from 1972 that we are now playing as the fashion thing, and that is now in limited distribution doing very well. So, that will be extended. There is no signs currently that the [indiscernible] thing is slowing down. But the good thing is that it's extending into the more skate look, which is again the territory for us. The test for us is going to be can we then extend this hype into the running lifestyle where we used to be very strong with the NMDs and also the Yeezy product. And there we're using the SL72, Terra's running look, the classic look tend to in to a more progressive, what should I say, running lifestyle thing, where you will start to see seedings and limited lines during '24 with the idea of scaling in '25. And so, there is a plan A, B and C when it gets to the lifestyle side. In my opinion, a very, very strong what should I say development and with many avenues that we can go and that's where again back to the issue how do we work with the trade, where we have given full what should I say transparency and be using them and also our own chance to test. So, I think on the lifestyle side, I think we feel very comfortable on the footwear side that we have the right, what should I say, product for the next 18 to 24-months. Harm Ohlmeyer: Yes, I just want to add on the tariffs margin. I don't give you the details of course of the margin, but as a starting point, if you compare it to other categories, it's a much more simpler product to begin with, because these are products that existed for 30, 40 years. So, we know how to build them, we know how we optimize it to build them, so to better go in margin to begin with. And then secondly, it's a sales growth grade, what it is right now, you have less discounting in your own channels and that's where you get an even better margin. So, that's why I indicated the growth in lifestyle, especially in the tariff products, there's a positive mix in the overall gross margin picture. Sebastian Steffen: Thanks very much, Monique. Thanks very much, Bjorn and Harm. And thanks very much, Francie and of course, thanks very much to all of you. Ladies and gentlemen, this concludes our conference call today. If you have any open questions, as always, please feel free to reach out to Philippe or myself. We're happy to answer any questions that have been discussed today. As I mentioned before, also in these discussions, we will not be able to comment on any other details around our 2023 numbers or the current trading before we're going to do the full release on March 13th, which we're looking forward to connecting with you again. And with that, I want to wish you a good remainder of the day or in some cases, good night. All the best. Bye, bye. Take care.

Sebastian Steffen : Hello, everyone. Good evening, good afternoon, good morning, wherever you're joining us today, and welcome to our Q3 2023 results conference call. We know it's a pretty busy reporting today, so we definitely appreciate you joining our call today. Our presenters on the call will be our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. As always, I would like to ask you that during the Q&A session you limit your initial questions to two to allow as many people as possible to ask their questions. And with that and without any further ado, over to you, Bjorn. Bjorn Gulden : Yes, thanks. And hello also to everybody from me. As always, we will take you through a lot of pictures and some numbers, both Harm and myself, to tell you what we are working on and what is going on. I'll start with some good news. There has been a lot of critique and negativity around adidas that we are not a good company and a lot of critique on different things. Therefore, I'm actually very proud to see the Forbes research that says that we are one of the 12 best companies to work for and actually the best one in the sports industry. And I think that I've always said that adidas is a great company. And being on the inside of it, I can confirm it. And it's also cool to see that external people say the same thing. We have talked a lot about the soft values. And also a couple of weeks ago, we had what we call a global week of inclusion, where all minority groups and all groups in general were able to present their views, and we discussed on how we should behave with each other. And in a global company, this is extremely important and is actually very interesting to be part of it. I'm proud of the outcome. Also extremely proud to look at what our team in Ukraine is doing under very difficult circumstances. The stores are open, they run the business, and they're also now starting again the running club. And as you know, sports is always important. And the spirit of our people in Ukraine is just a fantastic. Unfortunately, over the last month, we have another conflict in our world, which will impact us, I think, for a while. We have about 620 people in Israel in the offices and the stores. Good is that no one of them are hurt, but many of them are now being called into the army. What we have done is, of course, to assure all the safety of all our people, and then we have started donating for our people and also in the Gaza area through SOS-Kinderdorfer. And we will continue to do that, of course, to help the civilians in the area in this terrible conflict. When you then look at the business, I think it's fair to say that we are trending in the right direction and a little bit better than what we have told you the last 9 months. And by that, the financial performance -- I think both top and bottom line is a little bit better than expected. I think the energy in the team and especially in the decision-making has improved. So we are becoming faster, and therefore, in my opinion, better. We are getting extremely good feedback from the retailers for Fall/Winter '24. And you have to remember that Fall/Winter '24 is the first go-to-market process. That is the way we would like it to be. And the first time we have gotten together as a team, treating the retail partners the way we want with full set of samples, showrooms and also, I will say, with a service agreement that gets the [SBUs] and everything. And I'm pretty certain that we will have a very good order book building for the second half of '24. The sell-through of new product is improving. I'm sure you see that also in the stores that you are. And of course, for us, it's about getting enough of the new good inventory through the slow-moving inventory. And as you probably have seen already, the great thing is that our inventory is heavily down 23% and we feel that our inventory at the year-end will be under control with the exception of the U.S. I also think I said in my quote that retail inventory is improving. And therefore, it should be during the first half an improvement in the total sellout, and, of course, then also building then the order book for the second half. Inventory level in the U.S. in general is still an issue. I think it lags about 6 months for the rest of the world, but very proud of what Harm and the team in finance and also what the operational team has done. And you will see the details of that later. If we then get to the top line, North America was down 9%, 15% for the year. So you see that at least the quarter has improved. We still have issues in our American business that we have to work through. We had a management change. Rupert, who's been the President for about 2 years and 11 years with the company, resigned and ended his great career with adi end of October. As an interim solution, our Board member, Arthur, has taken over. And then the idea is that during Q1, we will announce a new permanent President. And it should not be a surprise that they're looking for an American citizen. The issues in the market hasn't really changed. There are still elevated inventory, both in the trade and also in our own books. And especially, the successful outlet business is then almost only clearance business, which has a drag on both sales and on margin. The good thing is that our full price concept stores are all comping like-for-like open with a higher margin. So you clearly see that the D2C business is improving, where we have the right merchandise. We do continue to see high discounts, and we will, of course, continue to be very conservative in the way we sell product in for the next 6 months. I told you about this before, but we need to be more American. That's why the office that we opened in L.A. in Q1 is so important. It will focus on the American street culture, also connected to basketball. And all of American partnerships when it gets to collab and street culture relevant, collabs will then be managed out of L.A. And I think this is a game-changing thing for us. There is no results of this yet because this was open in Q1. So you will not see the impact of this in product until, I would say, Q2, Q3 next year. Stores. I mean I've been in New York every month and very happy to see the development of all of our stores in New York. Here you see some of them. And as the good inventory has floated in, the like-for-like has continued to improve. And in the stores you see here, they're all up double-digit like-for-like. And it clearly shows that the consumer is reacting very positively even in the U.S. to our new merchandise. Messi's entrance to the U.S., we talked about many times. What he has done in Miami is unbelievable. They didn't qualify for the playoffs, but they won the League Cup. And when you see his pink jersey is the most sold jersey in the U.S., I think, ever, and, of course, it has had an impact on what we call also soccer street culture in the U.S. And extremely happy that he went there instead of going somewhere else. Also calling the U.S., we were part of the biggest women event ever, 93,000 people or 92,000 people watching our Nebraska-Lincoln women's team in volleyball playing. And again, one of the small pieces in the focus on women's sports that I think is going to be very important also going forward. American football, extremely important for the U.S. market. Patrick Mahomes probably being the -- what should I say? -- not only the best, but the coolest player in NFL. He was also in Frankfurt last week. We just launched his collection, his training shoe, and we will do more products with him, branded with him. And I'm very, very, very sure that we can market him as a superstar and also get much more commercial success of him especially in the U.S. We have also started to sign college athletes legally with the NIL agreement. That's now allowed. And also here in American football, we started to invest in that. And it's clear to say that both college and high school sports for us connecting to the sports youth culture in the U.S. is going to be important. And here, you see a couple of examples of players that we have just signed. Changing into EMEA, Europe, Middle East and Africa, plus 2%, same in the quarter as for the year. So basically the same business. Also here, investing in things a little bit different. We extended the Kings League. If you follow it, a very cool league for the Gen C coming out of Spain. They will expand this concept into other markets. And it's soccer done in a different way. And the same thing with the battle of the socials. We do try to connect with our traditional sports also into the new generation and into the social media, and are doing quite some stuff outside sponsoring the big teams and the big players, and these are 2 examples of it. We talked about India and cricket. We signed at the beginning of the year. We have sold more than 0.5 million jerseys of the national team, very, very unique, I think, for the sport and also very cool for us. The team won the Asia Cup and is currently playing the World Cup. I think the final is on the 19th. And that will give another boost to a business that -- I've said many times, I think India will be the fastest-growing market for us. And that's why it's cool to see that, that investment has worked very well. Another market that people talk a lot about, Saudi Arabia. We just opened the office. Harm stayed to open it. And it's clearly that Saudi Arabia will play sports -- or play a bigger role in sports. We know that they are trying to get events. We know that the league is attracting players. And I'll be very surprised if we don't see Saudi Arabia investing even more into sports. And that is for us natural also to open our office there, which we now have. If you then move into a big, big, big important market, Greater China, we were up 6% for the quarter, 3% for the year. You remember we started the year being down double digit. Then the business has improved. All of us, all Board members have been to China not only one time, but more times. We have talked to the trade. We have talked to the political, to the government. We have talked to the different sports federations. I have been very active to understand what we can do and not do. And I'm happy to report that the local focus, the energy of the team is starting to improve the business. You see the growth numbers are not that great. But if you take the Yeezy business out, it's already double digit. And all the D2C business, where we really have the best of the best, are up double digit. And as I said many, many times, I'm a big believer of the market, and I'm really, really, what should I say, proud of the energy of the team and feel that we are on a very, very good way. We also took our basketball stars to China. We started our grass root program again, and we know that basketball still is the sport that has the most street relevant culture, so we will continue to do that. And we will also start to bill basketball products for a price level that will compete with the local brands. Because we clearly see that there is 2 different markets. It's the market at the top where we compete now, but there is also a commercial market where especially the local brands have established price points that we also need to enter, for example, in basketball, but also in running. Talking to running and other sports, for the first time, I think, in a long time, we have invested then in many, many sports, from track and field to volleyball to tennis. And the team is signing more and more athletes. So that even if the market is small now, we will be a real sports brand in China because we think that's very important for the future. And we will overinvest in this in the next couple of months and also in years to come. Quoting the breakdance thing, which is also going to be an Olympic sports. That's where we already have a big, what should I say, impact. And needless to say, when you see 3 stripes, when you see -- here I think it's Superstar -- you clearly see that we fit into that and have already, I would say, a good connection to that generation in that market. To service the growth that we foresee in China, we just opened also the most modern and the biggest distribution center. Harm was there. And again, it's a commitment to the market with the best technology and the most automated wares that we have. And yes, I'm sure Harm will say something about that later. Going into LatAm, 13% for the quarter, 29% for the year. So the growth was slower in this quarter. As you probably know, LatAm, many of the markets are in a political, what should I say, situation with elections. There's a lot of inflation and uncertainty. So maybe a little bit more careful growth. But as you can see, still double digit. And we have the feeling that the team with the investments in sport, but also the energy they have on the activations are doing a great job. Here, you see we sponsoring running events in all the markets. And we are opening new and modern stores in all the major cities. And the D2C business there has developed very, very good. And again, I'm sure that LatAm will still be a growing market for us. Very excited about Asia Pacific, up 7% for the quarter, 10% for the year. You know that both Korea and Japan are very trendsetting markets, of course, very lifestyle driven. And here, we also clearly see that the success of our lifestyle business is having a big impact. I mean, you see the reaction to both the regional campaign that we started in September, but also to the [Terra] trend and other trends that we have generated. Our stores are doing extremely well, especially -- actually in Korea and Japan. So when you look at all that, you see that the Q3 growth was then 1%, and we are flattish for the year. If we then take a quick look how it looks compared to the non-Yeezy business, you see that North America was 9% up in total. If you take Yeezy out, 9% down for the quarter. If you take Yeezy out, then with minus 10%, so a small impact. EMEA, actually no impact, plus 2%, plus 2%. Greater China, plus 6% with the Yeezy, plus 10% without. So you clearly see that the impact of Yeezy was less and the underlying business is stronger. LatAm, almost flattish. And then Asia Pacific, a little bit the other way, where actually the business was then helped by the Yeezy business with plus 7% to plus 5%. All in all, as I said, our growth at 1%. If you exclude Yeezy, the underlying business was then up 2%. If you look at the channels, wholesale business down 2%. You have to remember that we started the quarter with an order book that was down more than 20%. I've always said that the second half order book was very, very weak because of all the inventory and because the way the retailer was reacting to adi a year ago. So you can see we've been able to chase the business and then deliver into the trade much more product that was not on order from the preorders, but actually then products that we accelerated and scaled, especially on the lifestyle area, where they may able then to sell-through and, of course, then also make money with us. Own retail, brick-and-mortar, up 10%. Number of stores, if you take China, Russia out, flattish. That means that most of this is like-for-like growth. Very happy to see that our concept stores, meaning the full price stores, are actually up between 10% and 15% everywhere. And then the factory outlets are, of course, weaker because, as we know, they are currently selling almost only clearance. But the most important thing is that our own retail full-price concept stores are up double digit. E-com up 1%. Same thing here. We have said that it's not to optimize or maximize top line. It is now to balance the brand side of it together with commercial success. So the share of full price here has increased substantially. We're protecting our franchises. And the new management of digital clearly has the view of being more branded and value creation than maximizing top line. That's why we're actually very happy with that number under the current circumstances. That gives to the current split, 63% wholesale, 37% D2C. And as you can see, brick-and-mortar and e-com is basically 50/50. Talking about digital, we had a change in the management. So Scott left us as the Chief Digital Officer, and we welcome Tobias again. He has a big history with us, but also with other digital companies and was the natural replacement when Scott decided to go. I think Tobias has been here for a month and has already had a big impact on looking at the strategy, making sure that we build plans based on the new adi and the new environment in digital. And then, of course, make sure that we really are pushing the brand side and not only the commercial side. If you look at divisions, very important for us that footwear is still growing here at 6%. Apparel we said we're going to be down with all the inventory in the market, down 6%. And then accessories for the quarter a little bit worse than flattening. Remember, last quarter, it was up because of all the football accessories. So I would say in line with our expectations. Footwear being almost 60% of the business, apparel 36% and accessories only 6%. I think a very healthy split. You could argue that accessories, which should be high margin, could be bigger. But as long as footwear is above 50%, I'm very happy. Performance, basically a flattish business. Football being up slightly; running, flat; training, down very, very slightly; outdoor, strongly up. Golf actually down now. We clearly see a stagnating side on the golf side after a series of quarters with the positive number. Specialist sports down, but that has more to do with deliveries into the market. And then U.S. sports, up. Especially, a very healthy business in American football, which is kind of cool for us that in America 3 stripes can actually have high market share in America, triple. That tells us that if we build the right product for America, we can actually also be good in the U.S. sports. On the performance side, I don't need to talk a lot about it, but very proud of Women's World Cup. Not only winning with Spain the whole tournament, but also taking 3 of the 4 individual prizes with our players. And again, a clear commitment from us to women's football. And I think the tournament was a great, great win for women's football in general and look forward to that investment to continue. Some cool takes we're doing on women football, not only building now shoes for her with specific models, but also starting to use collab partners. Here you see that one of the jerseys that Arsenal is playing is actually a collab with Stella McCartney. And you will continue to see us actually doing different branding on certain teams to make it more street relevant and build brand heat also through the combination of, I would say, partners, originals and performance. Cool collab on the soccer/football side. Here an example of what we just did with Bugatti. And again, same thing here on footwear. We will do more collab product to create heat with the more limited edition and create excitement in football. And we have all the vehicles to do that. Welcome home to Newcastle. After a while, they are coming back to 3 stripes. When new ownership and very, very high ambition, this is a great fit. So look forward to that. Ballon d'Or, almost as usual, Messi won his 8th. And then I think the future Jude won the Kopa Trophy, which is the young player's award. And again, needless to say he's probably the Superstar of the future and, of course, playing in our product. A lot of critique on us that we are not having enough innovation. I think that is not true. And I think the Pro Evo you hear from Adizero is a good example, the lightest shoe in the market, the best performing shoe in the market, setting also the world record with Tigist here in Berlin, almost 2 minutes better than the previous one. But also in other, what should I say, records, if it's records on track or it's records in markets, this shoe has been unbelievable, and it shows that we can bring innovation very, very quickly to the market if necessary. I'm very proud of that. Then in general, in running, we are investing a lot of money into events and to athletes to build credibility. We know we still have a long way to go to actually be back again by adidas belong, but we have the credibility now by winning races, arranging races and having the best performances. So now the job is, of course, to build credibility also into the commercial area, and that's what we're going to do in the future. Same thing on track and field, very important for us to be in the most, what should I say, credible sport. In Budapest, a lot of our athletes did a great job, and we're very visible with the footwear. Going forward, you will see a shine again more federation to also be visible on the apparel side. And again, as I said many times, we will invest more and more money also into the smaller sports. Same thing on outdoor. I think with the Agravic Speed Ultra, we have the most innovative train running shoe. And here the same thing, winning a lot of events, taking part in many events and showing innovation as a big part of investment of what we're doing in TERREX. Very proud also what happened in the Rugby World Cup. Siya Kolisi, the captain of the South African team 9 months after he pulled his ACL. He kept them to the championship, a great ambassador for our brand, fantastic guy. And even if he beat the All Blacks, which is our team, he's a great, great part of the family. And the same thing with the All Blacks, probably the team with the best spirit in the world in any sport, doing their training camp here in our campus very proud to work with them. And I'm very, very happy that they extended that contract, and we will extend that cooperation into also other product categories also into the lifestyle area. If we then look at the lifestyle side, the business is up for the first time in a long time, good growth in the higher area with originals. Basketball also growing double digits. So we clearly see that the higher end of the market is accepting our new product. Sportswear, the more commercial side is still down a little bit. But again, with the pipeline of more commercial products for '24, we will also turn that in to be a positive number. And needless to say, the left side is more important in the beginning to create brand heat again, and that's what we have actually been able to do. Couple of things that we have done in the basketball area. We have signed a new multiyear contract with Overtime Elite, which is a professional league, both in American football and in basketball, linking the college athletes into the professional leagues, the MBA and NFL. We will do a lot of collabs and partnerships with them to be more connected to that youth culture in American sports. Then Anthony Edwards, the new superstar in NBA launched his first signature shoe, as you see here. We launched it on the field of play in September and is now being rolled out in the different markets. And needless to say, he captain also the American national team, and we expect actually a lot of good stuff coming out of that cooperation. Mostly proud of probably is the original campaign that we launched in September, the first campaign, I think adidas has done for original since 2015 or '16, very well received campaign between €50 million and €100 million in media money, very well executed all over the world, both with global stars, but also connected into local celebrities. And it's a message that we will continue to use also going in to '24. The collab with Moncler launched in their fashion show a couple of months ago now in the stores. And the same thing here, Moncler for me, the only luxury brand that has connected into the winter culture for us being together with them with fantastic product, very, very thankful for their CEO that they did that and the product also selling very, very well. A couple of other things. We did the call up with Korn, sold out very quickly, collab that is also connecting to the young consumer. Then we did in China with Edison Chen a collab both on the global, as you see here, but also local. And here, you see people lining up in front of the stores. So, one of the very, very high impact collabs that we've done shortly. And this is the replacement that we have to do to replace the Yeezy business. We need many smaller collabs that can create the heat and that we then can commercialize. Not surprising probably Samba has being named the Shoe of the Year in the U.S., so we will receive that award I think end of the month. And then I've said many, many times, what has turned the brand lately is, of course, the Terrace trend with the Samba, Gazelle and Spezial. We have then lately seen Campus outselling Samba in certain markets already, especially, I would say, in the men's area in the kids area. So then we have something outside Terrace that is working well. And then those who follow fashion has seen that Superstar, especially in Black White and Triple Black is picking up, and that's a shoe that we will heat up for the future. Extending the Terrace trend into running, we are into the 70s running here with SL72, which is then a natural evolution for us, again, getting into running lifestyle, and you will see these products starting to seed in in Q1 and then be scaled into the second half of next year. We are also working on 4, 5 very interesting silhouettes on the running lifestyle side of new silhouettes to replace the successful shoes that we had, for example, the [NMG]. Needless to say, next year will be full of 3 stripes and color. This is in line with what you see on the footwear side. And we have, I think, 16 color combinations coming in different silhouettes and you will see a lot of this in the market, and this is being very well received currently of the retailers. Couple of words about Yeezy. You know we have had 2 very successful launches, 1 in Q2 and 1 in Q3 we are still sitting on about €300 million of the inventory, and we have decided not to have any more launches during Q4 and will then spend the rest of the year then to evaluate what we should do next year. And I think with that bla-bla, I'm ready to hand over to Harm, who will take you through the real reason why you're listening, the numbers. Harm Ohlmeyer : Thank you, Bjorn, and he gets a deserved a break for a couple of minutes now as I guide you through the financial update. Well, unfortunately, there will be not a lot of news, which is probably fortunate as well because we did the press release already a couple of weeks ago. So what you see in the P&L should not be a lot of news for you. Again, €6 billion on the top line in Q3, leading to a 49.3% gross profit and then to an operating profit of €409 million. Of course, all of you are interested, what is the relevance of Yeezy in these numbers and then the €6 billion net sales, which is roughly 1 percentage point currency will increase €350 million Yeezy in there, as Bjorn alluded earlier, if you would do a like-for-like without Yeezy actually 2% up currency neutral. And also on the gross profit, if we exclude the Yeezy part, the underlying business at 48% gross profit, and I'll come back to that in a second. What's also important, looking at our infrastructure, because we always said we need to have healthy top line, and we need to continue to grow the top line, to grow into our infrastructure, while we also rightsized the infrastructure through the onetime costs. So we have €1.9 billion operating overheads, which is around 32.1%. But in there was €110 million extraordinary costs. So €80 million one-offs, which is a combination of severance, DC closures or retail closures and impairment and €30 million linked to the Yeezy business. So if I would deduct that one, we are getting closer to the 30% line, which again would contribute also to the bottom line in a healthier way. And on the bottom line, it's €150 million Yeezy is included there. So as gross margin is a very important KPI for us. I want to decompose that a little bit when it comes to Q3 compared to prior year. As you would expect, freight is a significant benefit in that gross margin bridge, but also the underlying business mix is positive compared to prior year. What is the business mix? Of course, it's a combination of category mix, market mix, channel mix, but also what kind of products we are selling when it comes to footwear versus apparel. So all of that is in, and that's what I want to say, I call it business mix or underlying business, which is healthier compared to last year. Inventory allowance, given the progress that we made on the inventory also contributed positively. And then we have a significant negative impact on the currencies on the FX because, as you know, we're hedging early on going into that season, and that has significant negative impact on our gross margin. And compared to prior year as we continue to clear some products, especially on the wholesale side and in our factory outlets and primarily in North America, it had also a negative impact compared to prior year. If I compare that quarter-to-quarter, you see the similar impact on the freight. It's very positive and will continue to be positive for the next couple of quarters. Discounts here is already positive because we made so much progress on the inventory. So that is also something you should expect going forward. And the business mix is slightly negative. That is the reason as we're expanding our wholesale business as a higher share of business, and that has an impact there. And of course, when you come to the market mix, it's a similar impact there. FX, it's also negative because we are going into a season of negative impact, and therefore it continue to go into early next year as well. And here, like-for-like from Q2 to Q3 Yeezy also had a negative impact because we had, on the one hand, a smaller business in Q3 versus the second quarter. And of course, it was a mix of our own D2C business and a combination of our hotel partners as well. So that hopefully share some light into our gross margin bridge. What probably was new today is our balance sheet information in more detail. The highlight is probably the first number. The inventories of €4.8 billion, again, 23% down reported or 90% currency neutral. And I give you one more detail on that on the next page, but that is definitely a significant progress that we have achieved over the last couple of quarters. Accounts receivables are somewhat down given our declines all on the wholesale side and the accounts payable are significantly down as we bought less given our trajectory of the business overall. So don't be surprised that was required to bring the inventory down as well linked to a conservative sell-in and making sure that their sell-through in the market. One more number on this page you see cash on the balance sheet. It's roughly €1 billion on the balance sheet. Also that is a healthy level compared to 12 months ago. I am as a CFO, very happy to see that development on the overall balance sheet, very healthy situation on the balance sheet. When it comes to the inventories, we all remember Q3 was the peak on inventory last year with €6.3 billion. If you compare it to today, it's €1.5 billion down. That is significant progress and also look at year-end, €6 billion, made significant progress. We always said it will improve quarter-by-quarter. But now being at €4.8 billion, €300 million of that Yeezy and still having higher product costs in 12 months. To go over from an inventory point of view, we're now at a point where we're happy with that inventory. We're happy with what we have on our side. And of course, by the year-end, we are also happy with what we have around the world, but North America when it comes to our retail partner, still North America, slightly too high, especially with our retail partners facility to work a couple of months to get to a deepen level of inventory. But tremendous progress and happy where we are and do expect this coming further down going forward. Now of course, we gave a complicated guidance at the beginning of the year, and we changed it a couple of times. So I want to explain that a little bit in more detail. Going from net sales through operating profit underlying and operating profit reported. We started the year with a high single-digit decline on the net sales as a guidance. We changed that to mid-single-digit decline on July '24. And when it comes to the guidance a couple of weeks ago and today, it's now only low single-digit decline. So significant improvement on the top line over the course of the last couple of quarters. We have not changed in the last update on the underlying business, which was reported as a breakeven. Now we said even that one is improving, not just on the top line trajectory, but also on operating profit point of view. Now we believe €100 million is now the guidance for the underlying business, excluding any one-offs for Yeezy business. And of course, what we're going to report is yet another number. We started with €700 million decline or loss as a starting point, moving to €450 million. And now we believe, as we had a second drop in Yeezy, we can report a loss of €100 million. How does that relate to probably simpler bridge? How do we get from the €700 million to the €450 million that was linked to the first drop of Yeezy, where we generated a net €150 million in profit and €100 million less potential write-off of the Yeezy inventory. A similar thing happened now in the third quarter, another €150 million net profit from the Yeezy drop from the second drop. Of course, with that, less risk of writing off the Yeezy inventory because we sold it. And then what's new now is also that the underlying business has improved by €100 million to now lead to a guidance of €100 million negative. I know this is not where we want to be, but we show significant progress. But now I want to hand over to Bjorn again, where we head from here. Bjorn Gulden : As Harm said, we are not where we would like to be, but we have asked you for some patients. We feel that we are making progress and actually a little bit faster than we thought. There was a lot of critique from you that we're not creating brand heat. We are not having what should I say, innovation. I do actually believe that that's not true at all. The pipeline is full of innovative products. I think also on the lifestyle side, we've been able now to activate 4, 5 of the franchises. That will also move into a high-low effect on the apparel side. In the next couple of weeks, we will finally have the Fear of God product that we talked about for a couple of years in the market. They are now in the markets and will soon be in the stores. We will in the next week -- actually, next week, launch the ball for the European Championship here in Germany that will be done in Berlin. And for the Indian market, we will probably win the World Cup final with India. And again, it's been a huge investment for us that has paid off. And we actually do believe that if you give us the time, we will show you that we can again be the best sports brand. I ask you, when you say your long term to think long term. Q4, when you do the math, you will say you're too conservative. It's obvious that we will not do something to look good in Q4. We will build the base for a better '24 and a successful '25 and '26. That is important. And then you will ask about the Yeezy inventory. You know in that outlook it's currently that we write off old inventory. If we will do that or not depends on many factors. And if we don't do it, of course, you can add that back again to your P&L. And I think with that, I've already answered some of the questions you will have, but I hand back again to Head of IR. Sebastian Steffen : Thanks very much, Bjorn. And I'm sure there's going to be more questions. So Andrea, we're happy to take the questions now. Operator: [Operator Instructions] The first question comes from the line of Aneesha Sherman with Bernstein. Aneesha Sherman : I have two questions for you, please. The first one is, your Q4 guide implies a pretty big deceleration in revenue trajectory, double-digit revenue declines at the midpoint. Can you talk about what's driving the deceleration in your performance? And does your current performance align with that Q4 guidance so far in the quarter? And then my second question is, Bjorn, you talked about your ability to sell-in product this quarter and the past that wasn't part of the preorders originally. Given that response, are you seeing retailers change and have more appetite for higher preorders in H1 or H2 2024? Bjorn Gulden : Well, your second question definitely is yes. As I tried to say is that 9 months ago, we started to look up on how we would like to treat the trade in the future. And that has to do with what we offer them, how we offer it, how we treat them, blah, blah, blah and that actually our retail partner is more important for us than D2C. And of course, to set that up, take some time. And the first, what should I say, go-to-market process that is in line with that it's fall into '24, which is happening right now. So we clearly see a big increase in the interest of the retail partners and therefore, expect a much higher order book for the second half of '24. You have to remember that we've been working on a negative order book as long as I've been here in the sense that the sell-through of the product, the inventory has not been good, therefore, the preorders for all the quarters in '23 was negative and that will improve all the quarters in '24. I think I said to you that the order book we were working against for Q3 this year was over 20% minus. We ended at minus 2%. So the difference is what we then have chased. And I think I also said you on the lifestyle side, when we began the year, the whole Terrace thing was not on the calendar to be scaled this year, but next year. And of course, you have seen that the visibility of that has turned around, I think, the image of the brand very quickly, and that is based on actually chasing the business and then put good product on the shelf and therefore, increasing the sell-through. But what you also have to understand that we cannot do that with everything. So hopefully, when we get to Q1, Q2 next year, we can actually fulfill preorders, which are then increased in these areas, and we can have a more planable business. The reason why Q4 looks the way it is, is, of course, we are not going to chase any business in the sense that we will pull anything forward to look good in Q4 because it makes no sense because then we will actually put even more pressure on the pipeline. So Q4 for us will be to lay the foundation for a better first half next year and a very good second half next year. And that's why the guidance is the way it is. I'm sure when you do your math, you think it is conservative and maybe it is. But you also have to understand that for us, the performance in those 3 months is not relevant for the long-term story of adidas. So that's the way we deal with it. Same with Yeezy. We could easily have sold Yeezy in Q4 to look good, but it doesn't make any sense where we're sitting. And I hope you agree with us that what we're trying to do is to build a business now with brand heat, the performance and lifestyle products that we can extend for a longer period of time. We have gotten the inventories down. Of course, we need them to improve the quality of the inventory, both in our own inventory, but also in the trade and all those things are not done in 12 months. So you need to be a little bit patient and believe in us and then we will actually convince you that the strategy is correct. But your math is, of course, correct. And then we will see if it's a little bit better or if we will end exactly on the guidance. Operator: The next question comes from the line of Graham Renwick with Berenberg. Graham Renwick : Just firstly on full price sales. You made quite a few comments there of making good progress on full price sales mix. Just to put a bit more context to that. Are you able to tell us where full price sales were as a percentage of that brand sales ex Yeezy pre-pandemic, where that mix is today and what your ambition is the full price sales mix in the midterm? And on running, it was flat overall in Q3. We've seen the headlines of athletes breaking records in Adizero shoes. You mentioned the Adizero family is up strong double digit. I presume that's from a low base. I just wondered how long it takes to build that credibility and better distribution in the commercial segment. So when will we see Adizero success. As the athlete level starts to cascade down to stronger growth across the broader running business, should we be expecting a big impact as soon as next year? Are you already seeing that stronger demand in order books? Or is this something that needs to be developed over a longer timeframe? Bjorn Gulden : Well, I take your first question. I mean, what we clearly see is that the new product that we have been chasing where demand is selling at full price everywhere in actually all markets and all channels. And then, of course, not all the products we're selling is that new product, and this is what should I say, difficult that we are in is that there isn't enough good product to kind of replace the bad product, and that's why the numbers are now better than they are. If we only have the right product now, we would already promise you probably 10% EBIT next year. So it takes some time to get through all the issues that we have had because you have to remember that we had an order book being down 20% because the retailers are full of product that didn't sell. And we have been able to take the inventory down partly in our own, as you saw, down 23%, but also with many retailers, we've been able to clear a lot of products. So we are cleaner than we've been before. That's why the full price sales of new product is much, much higher. On our e-com, we have protected our franchises. So we are not allowed to discount them ourselves, which should also help our retail partners. And the full price share is then going up and margin is going up. But of course, when you look globally and especially in the U.S., all our outlets are selling at a high discount because it's only clearance. So we are not there yet. And a lot of the retailers still have too much of the inventory that was not selling is now being sold at a discount. So the picture is, of course, not as clean as we would like it to be, but the trend is right. And I think with the fact that we now have in the way we work with the retailers and especially the reaction for the preorders for fall '24 is, of course, that now they can buy a brand that is selling well with new products, there's the trust on how we go to market. And of course, we're then starting to build our business on facts and not only believe. So it's a better situation to be in. In the running area, we have chosen or what should I say, the business unit have chosen to build credibility at the top. So there, the sell range is probably, I think, even competitors will say the best technical product in the market, and it's selling and performing very well. But as you rightly say, it's a small part of the segment. And of course, our challenge then is to take that, what should I say, credibility, having the right athlete, the right technology and the right product and then cascade it down to more commercial product. And of course, the speed of that, I can't promise you, but it's better to do it that way than the other way around. You know that there are other brands currently that has played the Comfort game. I mean both HOKA and OMs had success with their story, and you should not be surprised to see also in our line, you will have more running shoe that is built on the Comfort story. I can't promise you any numbers. The only thing I can promise you that the visibility in running will be increased. So you will see us at more events, you will see us with more athletes and you will see a bit more, what should I say, products out there, and then we will be patient. On running specialty, it's also fair to say that adidas is less running specialty in many markets, so we didn't have a sales force anymore. The idea was that the runner will buy it in our D2C, and that doesn't work. So we are again building our sales force and I would say, technical experts to support running specialty to also build a real relationship to running community, which you have to do physical and not digital. So there is quite some investment going on there. And of course, the payback of that will take some time, but it's the only right thing to do for a brand like adi. So you also have to be a little bit patient, but the product is there. Operator: The next question comes from the line of Erwan Rambourg with HSBC. Erwan Rambourg : I had one for Bjorn and one for Harm. So Bjorn, one on China. I just came back from China about 3 weeks ago. And there's a lot of talks of Western brands taking back share from local Chinese brands after pretty much 2.5 years of misery. I'm wondering if you could comment on that. How easy is it now to operate in terms of brand ambassadors in terms of events? Is there a role post the neo-restructuring? Can you comment on inventory levels, specifically in China? And last year, you were down 50% in Q4. So what can we expect both short term and long term for that market? So that's for you, Bjorn. For Harm, I was just wondering on the gross margin levers, you talked about freight input costs, promotional activity, FX. I'm just wondering if you can comment on timing of when some of those start to turn. The FX pressure, how long will that last for? The promotional activity, it seems that leaving aside the U.S. that's going to temper somewhat, but can you help us understand the building blocks to think about gross margin in, again, the short and the longer term from here? Bjorn Gulden : I'll start. On the China situation, I think we need to divide the lifestyle business and the performance business. When it gets to the performance business, it's obvious that the local brands has built a price point for running shoes, basketball shoes and all the performance shoes that is below what, for example, we are offering. That means we have been competing in running, I would say, also in basketball in a smaller part of the market because our price points has been high. And if you want to have real volume, I think you need to go down and also do re-performance shoes at sub-$100 price points. That's what we are going to do to compete for a bigger part of the consumer. The rest, I mean, the higher end is starting to grow again, but that market is smaller than you might expect. On the lifestyle area, we've been lagging the, what should I say, the opportunity to actually work with celebrities coming out of music or out of art or out or whatever. And that has changed in the sense that we now are starting to activate again, actresses, actors, musicians, I would say, street culture relevant people, for example, in breakdance. So far, all these activations has been working without any shitstorm for any what should I say, communities. How long that will last? And is it forever, we don't know, but the team is very energized by actually starting to compete again on a fair level compared to local brands. You saw that our underlying business was up 10% for the quarter. And again, our own concept stores, where we actually have the best of the best is actually much higher than that. So there is clearly, what should I say, a consumer that goes back again to Adi on a higher level than it was a year ago. I think when you look at Q4 in China, you have to be very careful because there's many movements in the wholesale business there with takebacks of inventory and how do you actually push in products for Q1 and not so I'm not going to give a number, but the Chinese number will at least be up double digit, regardless how high it's going to be. And it's the same thing there. We will see how 11/11 goes, which you know we are in the preselling right now. And then we will adjust all our wholesale business according to what we see. We will not push anything into the market in Q4. I can promise you that. And then, of course, we will hope that the market will continue to develop the way it should. We will overinvest in marketing and then continue to see a growth in the Chinese market, but not to try to get it very, very quickly up to the previous levels because the risk then again is, of course, that it crushes. We have moved 75% of our volumes to local sourcing, and we are doing 30% of our product at what we call quick response replenishment. So the preorders that we're taking with all our partners is going down substantially because we don't want to push it in and take back. We want to deliver in and then replenish both with new products and with all products. So the business model is changing. And I think if you ask our local team, they're very, very happy with the way we're developing when it gets to the business model. And with that, I hand over to Harm. Harm Ohlmeyer : Yes, Erwan, on the gross margin, very good question. And of course, I'm not going to give you any guidance for next year, but you can assume that FX is probably the only drag going into next year. And that FX is probably more negative in the first half and then it's during neutral and maybe even positive in the second half. That's where we are from an FX point of view. When it comes to all the other elements, freight will be positive for the full year, probably more positive in the first half, as it then more neutral in the second half as well. And then, of course, as Bjorn alluded to, we have more trajectory with our Terrance products and lifestyle overall, lifestyle presents ourselves an attractive margin. So the overall business mix will turn positive as well. And this is where we look into next year. So the combination freight positive, given the scaling of some of the products that we have, we hope for normalizing or benefits on the production cost as well. So simple terms, FX is a negative next year for the full year, more in the first half than the second half, everything else return slightly positive. That is also something where we will live in the midterm. We always said we want to get to a 50% or plus margin, and that's required. If you look at our Q3, again, if you get to 50% margin with some of the drags going away over time, we would plot the 50% margin already and then having a normalized infrastructure given the growth that we have on the top line, we have shown in Q3 what's possible, and we can build on this one. So that's roughly where we are. Operator: The next question comes from the line of Zuzanna Pusz with UBS. Zuzanna Pusz : I will stick to two. So first of all, maybe to follow up on gross margins. Thank you Harm, that was very helpful to understand the drivers for next year. But I also wanted to follow up and see how we should think about the gross margin in Q4 because, obviously, we are coming from an extremely low base, which had many one-off items last year. So I mean, I think it was 39% last year. So I was just wondering whether the Q3 at Yeezy is the right way to sort of think about the gross margin or what are sort of the puts and takes we should consider when we look at the Q4 gross margin? And then a question maybe just for Bjorn on the performance in Q4. And I think it's very clear, and I understand that you say you don't want to pull forward any business into Q4 because that's not the point of your strategy. But if I'm not wrong, I think the business in Q4 tends to be a little bit more retail driven, at least has been in the last 2, 3 years. So I was just wondering if you could maybe comment on the current trends you're seeing. I think some of your peers have mentioned that actually weather had a negative impact on at least for them on Q3 and October was seeing an improvement. So any comment you could make on how sort of retail is developing so far, if that sort of double-digit growth you're seeing in your own stores is something that could continue into Q4? That would be very helpful. Bjorn Gulden : Q4, I think historically with adi, and it was the same with Puma, was almost never a profitable quarter because there's so many movements. And where we're sitting right now, we will have improved business in our D2C when it gets to the sell-through of the product on full price. I'm 100% sure because we see that trend already. But you know that 2/3 of our business is the wholesale business. And for us to get into a more structured business and not what should I say, hunt the business that is in demand, we would rather have the preorders for Q1, Q2 be fulfilled in a way that we can plan the business they're now trying to stress Q4. And that's why, to be very honest with you, for the story of Adi going forward, how we perform in Q4 doesn't really matter. I hope you agree and that's why we're very relaxed on what numbers we're showing. And again, we can talk about it at the end of the quarter how our sellout and how our new franchises is working. And I'm very convinced they will do well because they're doing well also in October. But in the big scheme of things, then what do we do? We take back from retailers. And how do we, what should I say, deliver maybe demand that is there out of the order book of Q1 I think we'll be very careful. And then the -- what should I say -- the easy thing is also that we could easily have said, "Let's make a drop in Q4, so we look good," but we're not doing that because we have to really build stone by stone and do the things that are right for the business into '24 and '25 and people do that also in Q4. The demand for the new product is actually very good. So the sell-through thermometer on what is hot is good. And we also clearly see a demand for 3 stripes now also going into apparel, which the high low effect of what's happening on the footwear side. And again, the order book for Q1, Q2, which wasn't that great either is now building the order book for Q3. Q4 will be very good. And then the question is how much stress are we putting into this to short term, try to impress you? Or are we now trying them to do what is right for the business also going into '25. And you know me that we're now trying to promise you think that we can deliver and making sure that we build stone-by-stone. And that's why Q4 looks the way it does, so. And then I hand over to Harm for the margin. Harm Ohlmeyer : Yes. Zuzanna when it comes to the Q4 margin, unfortunately, I'm not going to give you a lot of more details than what you heard before, but the key drag in Q4 will be, again, there's no easy business plan. And then secondly, there's significant FX headwind that is coming towards us. But you also need to understand, given where we are after 9 months and having made some progress also in the underlying business and made tremendous progress on the inventory side on the total level of inventory. Now looking into '24, we want to make sure that we do the utmost in Q4 to have a higher share of good product where the bad product in the inventory, and that's why we take advantage of it and then get better prepared for 2024. That's the plan. And I will leave it there. Operator: The next question comes from the line of Jurgen Kolb with Kepler Cheuvreux. Jurgen Kolb : Bjorn, first question for you, again, around the order book. Thanks for mentioning also Q1 and Q2 order book. When you last time talked about the order book for the H1 next year, it sounded at least as if that's a negative one that was down because of especially very reluctant retailers, specifically coming from North America. And I was wondering, as you said, this is building, are we in positive territory, especially also maybe with a little bit more optimism coming from North America? Moving on to the second half, very strong, as you pointed out. Maybe one indication on price and volume. Is there a price component included in this order book? Or is it more like-for-like? And again, also here on North America, if you could give us an indication if you're seeing good demand from North America also in the second half? And the second part of the question, Fear of God, a good news, it's coming to the market. I was wondering if you could share with us some thoughts as to why that took a little bit longer. And if maybe any of the plans related to that category has changed or if that still is as initially planned, but just a little bit of delay here and there? Bjorn Gulden : Well, the Fear of God thing, I think it's a good example for working with a partner and not having a clear setup what is expected. I wasn't part of the first 2 years of this, but I've been part of the last year. And I think it's wrong expectations. And again, not having the layoff is up and actually a lot of misunderstandings of what it means to work on a performance product and then on a lifestyle product with a guy like Jerry Lorenzo. That's now fine. I mean, as I said, there's about 42 articles that has landed in the warehouses. This performance product ready to go on the pitch or on the floor. There's lifestyle product bought in parallel and footwear ready to go. So I think those, what should I say, problems are over. And now it's for us to, what should I say, get the heat going and then commercialize it. And from the feedback from retail and also from the fashion show in L.A., it's been actually very, very positive. When it gets to the order book, I think it's fair to say that the order book for Adi has been negative and heavily negative for a long time, especially for the second half of this year when we started, there was a terrible order book. And we have been able then to replace that with replenished business and then, of course, also pushing the lifestyle things that has worked and chase the business. Remember, I said we need to fight and we found the things that we could fight with, and I think the team has done a great job. The order book initially for the first half, as I told you '24 was also negative. That's now starting to build to a positive order book. And I expect the order book for the second half of '24 to be very good, positive. I'm very careful with the order book in the U.S. because the order book there doesn't really mean anything other than we need to go by account and look at what inventory do they have? And if we give them a positive order book, then we need to make sure that we either have clearance plants or that we take inventory back because it doesn't help to have a high order book and then deliver into a store that is full of old merchandise. So U.S. is lagging, I would say, 6 months behind the development that we see all over the world, not from a heat on the product, but from an inventory level in general and the amount of discount also on adidas product, but not only adidas. So again, if I should build a scenario, I think when we end the year, we will have a positive order book globally for Q1, Q2, and we will have a very good positive order book for Q3 and Q4. And then we will see how much we then have to chase on top of that order book. The growth numbers on the 5 shoes I showed you in the presentation is, of course, much, much higher currently than the trend that we have in the order book, and we are actually not taking orders on many of the franchises because we want to manage it. So this is now a course also for us to show that we can be disciplined and not overheat some of the franchises. But again, I'm extremely proud of the team, what they have done for go-to-market for autumn/winter24. The way we have treated the customers, the way we have now done all the pre-lines, the quality of the samples, the amount of samples. And I think all retailers worldwide will say, wow, the service we feel now from Adi is great. And I think they want to do more business with us, and that was the goal 9 months ago to get there. And then we will have to show that the product we are doing is also selling and knowing that our D2C business in the full price stores is up already like-for-like double digit that gives us a good, what should I say, indication that the right product in the right location with the 3 stripes on our logo works. Jurgen Kolb : Just a quick one on pricing in the order book. Is there a component of price increase? Or is it rather flat? Bjorn Gulden : Well, it's obvious that if you -- I think I showed you that the growth in our lifestyle business is in original higher than on sportswear, then it's obvious that right now, the order book is on a higher price. But that also has to do that we haven't chased the order book yet on the more commercial side the way we should probably. So right now, I would say that there is a higher demand on the higher product, but that's not necessarily because the demand is like that from the retail, it's more the way we have been able to sell it. Any trend we do upstairs, like all the Terrance which also have takedowns we are in this crazy situation that the higher end has much higher orders now than the lower end. And of course, in a normal franchise, that's not the way it is. This has more to do with where we are in the cycle. And as you go through next year, I think you will also see that the lower end and the sportswear side will start to grow as we scale up the same silhouettes. So this is more just a view if you look at it right now. But we don't see average price increasing as much as it currently looks in the order book. Jurgen Kolb : It's a nice problem to have the higher price and higher demands. Bjorn Gulden : Yes. But you would like to do both, right? So there's a good thing and a bad thing. So it's like in a perfect world, you would do both and then we will be closer to our 10% EBIT, right? You have to remember where we're coming from. So it is good right now that all categories have higher demand on the higher price. I agree with you because that's the same as we have in running. But of course, you need to commercialize it. So there is a job to do to get where we want to go. But Rome was not built in 9 months. So we need a little bit more time. Operator: The next question comes from the line of Geoff Lowery with Redburn. Geoff Lowery : Two questions, please. Firstly, can you give us some feel for how many units associated for Terrace, you will have sold in 2023, do you think? And the second one is a slightly bigger picture question. How far are you in getting the wider management team where you want it to be? I don't know whether you think in terms of top 50, 80, 100 leaders in the business. But how deep and full is the bench right now? Bjorn Gulden : The Terrace is a millions of pairs. I think I have to be careful with mentioning the exact number because there's also uncertainty what is Terrace and not Terrace. But the court side will be tens of millions of pairs when you get through 2024. It's a big, big category. If you look at the team, also a difficult question. I mean you've seen that we have changed most of the Board. So that is a check. Then when it gets to the rest of the team, there are changes. You've seen a couple of them today. And of course, there will continue to be changes but most of those changes is actually elevating internal talent. I think what we have seen is that we have a lot of good people in the second, third and fourth string internally. And the goal is clearly to recruit less outside. But then to give our, what should I say, talent that is hold back the chance to get into a higher position. And I'm very, very impressed actually from what I've seen in the 9 months, how much talent we have. And again, give us some time and then we will look at structure again during 2024. You have to remember that this year was about attitude and what should I say, take away a lot of hiddenness and breaking rules to get quicker and go to market quicker. We still have a lot of work to do when it gets to actually formalizing that into processes and structure. But attitude and results first and then you can make it more professional afterwards. Operator: The next question comes from the line of Edouard Aubin with Morgan Stanley. Edouard Aubin : So one question on China, one question on sales next year. So on China, Bjorn, sorry, just some clarification on the back of what you just mentioned earlier. The neo line, are you looking at completely you're downsizing the business? Are you looking at completely kind of discontinue this line in China? And also related to what you have said in the past in terms of designing product in China for China, I think you gave the target of about 30% kind of if you could give us an update in terms of that objective and kind of come back on why the need to design product locally in China? And then just lastly, related to that, is the push kind of designed to compete more with the Chinese brand in lower-tier cities? Or would you rather compete more with making higher tier cities? Are you basically want to compete with everyone in China? So that's that for China. And then just on next year, so you kindly commented on the order book. If I look at your total company sales next year, I think consensus is looking for about 8%. You're going to lose the benefit of Yeezy, which is adding, I think, 3% or 4%. So basically, consensus is assuming kind of a very low type of double-digit type of growth next year underlying. Do you think that's kind of -- I know it's a bit premature. You're not going to give us any exact figure, but is it in the realm of possibility, low double-digit organic growth, given what you've printed this year or not? Bjorn Gulden : First of all, China, all products in China are different than the product you have in a different market on the apparel side because they have Chinese specs. So the sizing and the spec are different even if the product looks the same. So you have to think about it. The product is different anyway. And what we have said is that if it's different anyway, why don't we let the Chinese decide also more on the design? So we have now 50 designers sitting in Shanghai, which has the freedom to add supplement or create something that we haven't done before in apparel from older collections. If that is 30% or 40% or 20%, I don't really care. It is all the Chinese organization that is deciding on that. On footwear it's a little bit different. But on footwear, we can produce locally all styles also in China, which is an enormous advantage. And that's why also there, we give the Chinese the possibility then to add SMUs material components due changes to the collection and produce it locally, which on a landed cost could be cheaper in our duty. And of course, from the lead time when it gets to both transportation and production gives them advantage. That's why we're stopping this selling in as much as we can and take back what we cannot sell to a plant business where we say that we only sell in 70% and then the rest, we actually will replenish or put new product into the store during the season of the quarter. So this is a new kind of way of working. When it gets to the market, I think on the performance side, we have been competing, I would say, only against the Western brands and then you're right, especially Nike. But the local brands, the Li Nings, the Anta stuff have created, I would say, performance segments underneath €100, which still people are running marathons and playing basketball with them. I think that's a market that we strategically now are looking at to build, I would say, high-technology product, but at the price point also below what we normally would do for the Chinese market to make sure we're competing for a bigger piece of the pie. When it gets to the cities, we are obviously competing in the major cities. That's where we lifestyle wise, I think, for a long time, a market leader. And that's something we want to grab back again. And there we are competing both against Nike but also other brands. And in the lower tier cities, the distribution is thinner. We have closed, I think, about 3,000 stores with our partners to kind of clean up a lot of bad distribution, and that's where neo played a big role. So currently, neo will be reduced to a very, very small part of the business. The brand neo itself will then disappear and then we will have partners that will then attack the smaller cities with a special, what should I say, offering, but in a much more narrow what should I say, process than what we used to do. So it is a little bit what should I say, more details than what you asked. But in general, you will say, yes, neo will disappear. We will find or have found retail partners that will attack the smaller cities with a specific range. And then we will focus with our major partners and on the bigger cities and D2C, don't forget that our D2C business in China is pretty low. And then we will try to balance and optimize the offering as good as we can. You have a tendency to try to get a top line guidance, and that's the way you set up the question. And of course, your math is correct, but it's very difficult now to say are we shooting for 7%, 8%, 10% or 12%. As I said, in the first half, and again, we haven't even decided what to do with Yeezy. The first half will have a lower growth than the second half, just naturally. And that's because the order book, of course, is building as we go from quarter-to-quarter. The U.S. market is lagging behind and will probably not grow at all in the first half. I think we can look at some growth in the second half. And then, of course, it depends on what we do with Yeezy. But underlying, we will have growth, for sure. But I think we should prove to you that, again, the growth that we are having is a profitable growth, and it's a growth that we can build on instead of trying again then to convince you with some numbers and then run into overheating the market again. Right now, I think the demand for the second half is going to be very strong. And then the question is how do you face the first half and how do we make sure that we don't overheat franchises, but that we manage them properly. And I hope you saw that Terrace, then into Campus, then into Superstar, then into 70s running. And then we have a new lifestyle running products behind that. And then all these trends rolled in, what should I say, copy down to other price points. So we have all the ingredients that we actually need to improve during '24. But remember, the goal is to be really profitable in '25 and '26 and not try to overheat in '24. Sebastian Steffen : Andrea, we have time for 2 more questions, please. Operator: The next question comes from the line of Andreas Riemann with ODDO BHF. Andreas Riemann : First question on fall/winter24. You said this is the first collection from you and the team, Bjorn. And we know you want a more local product. You want a bit more wholesale, you want to cover more niche categories. So what strategic aspects are already reflected in this fall/winter24 product? This would be the first question. And somewhat linked to that, my second question, other than China, what are the countries where you see the biggest need for a more local adidas product? Bjorn Gulden : Well, I think what I tried to say is that the '24 autumn range is the first, what should I say, range that we go to market in a way that I think is right. Remember, I've been here for 9 months. So actually setting that up with what products are we showing what customers, how do we show it? How do we sample it, what kind of dialogue have we had with the retailers before we make the collection, how do we go with SMUs and how do we go in in-line product, I feel that autumn/winter24 is closer to what I see as optimal and is the first what should I say, go-to-market process, where I can say, yes, this is the way Adi should be, and I feel good about it. The other quarters before that was chasing business to fill a gap because the order book was down heavily. So that's why I'm saying I feel comfortable sitting looking at autumn/winter24 because I've seen the reaction. I've been in many of the meetings. And with everything we see in the market, God forbid that the world goes into a crisis again, I feel good about that. When it gets to the markets where we need local products, I mean, you definitely need it in India. I don't know if you know, but the Indian government has put a new regulation that actually forces you to do a lot of local sourcing. And when you do local sourcing, why then also do local product? I mean there's no need to force designs on people when you have to source it there anyway, then you can also try to do the science that is committed to that market. So India will have a lot of local. China we already talked about. Then there are needs, especially in Japan and Korea to do trend stuff in a different way. And then I think the big difference and the biggest discussion many retailers have and I guess, brands is what is the difference between the U.S. and Europe? And we know that American street culture is different than the street culture in Germany, what should I say, the basketball and hip-hop influence in the U.S. is different than what it is in Europe. And the differences are bigger than you think. And that's why for us, we have set up this process and the office in L.A. to target very specifically at the street culture in the U.S. If that product then can go to Europe, fine. But if it doesn't, then we develop product also here. So in the future, the sum of, I would say, what we do in China, what we do in India, what we do in Korea and Japan and what we're doing then in Herzo together with L.A. is then the total of what we do. And then the balance, how much is then global, how much is local, doesn't really matter because we have the resources. It's mainly different factories. And again, I think that we can get closer to the consumer, and we can get quicker when we do it that way than trying to sell one collection to everybody. So I don't think there's a big disagreement on this, and I think the retailers in the different areas loves us for doing this approach. So I hope that answers your question. Operator: The last question comes from the line of Cristina Fernández with Telsey Group. Cristina Fernández : So following up on that comment around the U.S. market and consumer. I wanted to ask how do you feel about your wholesale distribution as far as the doors and the points where you are in. If you think about the strategy do you feel like you need to make changes to the partners where the product is showing off that? Bjorn Gulden : Well, again, all good retailers should have more adidas products. That's number one. I think that the share we have with some of the retailers is far too low, and that is a consequence of us focusing on D2C. And also, I don't think during the last couple of years, focused enough to work with them. That's changed dramatically. Most retailers that you know in the world are interested in a strong adi. And that's why I feel that the feedback we have with them and the process we've had with them over the last 9 months has developed more and more positive. But again, the real result of that is first visible in autumn/winter24 because that's the time lines that you're working to, and that's why I'm very optimistic about the order book. I think we will see growth in the wholesale business also in the first half, but then less than what you've seen in the second half. There are segments of retail that we have totally, what should I say, gone out of. I mean running specialty is one of them where we divested from physically servicing them, and we thought we could do it only digital. We're changing that. The good thing is now we have the product. As I said, I think we have the best running product in the high-end market, but we lack distribution. So that is one area that we need to win back again. There are areas in special sports, tennis, for example, where we need better distribution where we have the product, but it's almost not visible. And then in the U.S., all the U.S. sports, if you do American football or you do basketball, you do baseball, it's obvious that on the performance side, both distribution wise and what should I say, partner-wise have a lot to do. When it gets to all other general sports distribution or sports fashion, I think we're working with all the partners. It's just that they haven't felt that we service them properly. And that's why the share of the wall is not what it used to be. With many of these retailers, we have half of the SKUs on the wall now than we had 10 years ago. But the good thing is I haven't met one retailer yet who doesn't say that they want to grow fast with us, and it's now up to us and to show that we can give them the product and the marketing and the heat they need so they can make real money with us because remember, the only reason for a retailer to buy a brand is that they can make money with us, and that's what we're trying to do. And over time, I'm very, very convinced that, that will happen. Cristina Fernández : And one other question I had was on the inventory, you're not going to have Yeezy drop in the fourth quarter. Do you still expect improvement in the terms of year-over-year decline in inventory? Or from here, it's really more about the composition of the inventory until you decide what to do with Yeezy? Bjorn Gulden : If you take Yeezy out, you have €4.5 billion in inventory, I think that's a healthy level. There is, of course, some more inventory still in the U.S., but that's -- I would say, if we can keep this inventory level but have a high quality of the inventory, I think we'll be in good shape. And then remember, in our guidance, it is then the assumption that the Yeezy inventory is going to be written off in the current status, right? And we will make all the necessary analysis to see how we will treat that inventory. And should we decide that we will sell it, then, of course, we will not write it off. So that you also have to have in your mind when you look at the value of the inventory. Sebastian Steffen : All right. Thanks very much, Cristina. Thanks very much, Andrea. Thanks very much, Bjorn and Harm. And also thanks very much to all of you for joining the call on this very busy day and for mostly sticking to the 2-question rule. This concludes our Q3 2023 conference call. If you have any open questions, be it today, tomorrow or over the next couple of weeks, as always, please feel free to reach out to Philip or myself. We will be happy to connect with you. And with that, thanks very much again. Have a good remainder of the day. All the best. Bye-bye, and take care.

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the adidas AG Q2 2023 Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] It is my pleasure, and I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead, sir. Sebastian Steffen: Thanks very much, Franzi, and hello, everyone. Good afternoon, good evening, good morning, wherever you're joining us today for our Q2 2023 results conference call. Our presenters today are our CEO, Bjorn Gulden; and Harm Ohlmeyer, our CFO. As always, Bjorn will kick it off in a second with our prepared remarks, and we'll walk you through our Q2 results and our outlook, together with Harm. As always, also, I would like to ask you that during the Q&A session, you limit your initial questions to two in order to allow as many people as possible to ask the questions. Thanks very much in advance for sticking to that rule. And now without any further ado, over to you, Bjorn. Bjorn Gulden: Thanks. We all know that they will not stick to the two questions, but we will try. As you can see on the screen, we start with the Women's World Cup. I hope you all follow it. It's been a great tournament so far. Unfortunately, for us and for most people in the room, Germany lost. That means that we will only have five teams going to the next round. But still, I think starting with 10 and the way we look extremely proud of how the brand has showed up. As you can see, we had 10 out of the 30 teams starting in three stripes, and we had more than 120 players contracted and of course, many, many more playing in our shoes. And I think it's fair to say with all the reports that I've seen, 1.6 million spectators in the stadium, and television rating is very high everywhere, this is the real breakthrough for women's football. And of course, that's what they deserve and also very, very important for us in the future. What is also new is that not only do we participate, but we also made different campaigns with different players and put the media money. Here, you see Oberdorf, Fowler, Russo, English, Australian and German players that we have used in campaigns together and also individual and then again, in our strategy to be more local in the U.S. Our U.S. subsidiary has done a campaign with Trinity Rodman, one of the American players, who also happened to be the daughter of the famous Dennis Rodman, who used to play in the Chicago Bulls basketball team and was one of the great personalities. So again, just to sum up, women's soccer is coming. We play a major part. Let's see how the tournament ends, and very, very excited to see the development. Going over to business. I think you have probably seen all the numbers already, but we'll repeat it quickly. It was a quarter where I said or we said we think we were happy with the development. We're starting with the biggest problem, and that's North America. As you can see, minus 16 in the quarter, minus 18 for the first half. Needless to say, you know this. There is still a lot of inventory in the market, not only ours, but also ours. And the problem is, of course, some of that inventory is not great. That means that the sell-through is slow, and we have to work through that for a while and that because of that, also the discounts are high in general and also of our products. The good thing is that the team in America has reacted and has had what we call a conservative selling strategy, not pushing in more merchandise, but trying to do it very dedicated. And of course, we had some very, very good bestsellers that is, we are now starting to scale up, which means that we hope we can turn it around to be something positive. And of course, that will create more brand heat, and we can get into 2024 looking better. We'll get back to that in a second. What is very positive in the U.S. is, of course, this. I mean, Messi deciding to go to Miami, helped by David Beckham, who is one of our, what should I say, very, very close friends has been fantastic. He scored now five goals in three games. And there's a real boom after Miami products and especially then, of course, Messi product. When you look at the screen, you see also quite some, I would say, very innovative marketing that our team turned around in a very, very short time. I'm very, very proud of what they have done. Some critique that all the products are sold out, but I think you understand that the explosion in the demand, you cannot source 10,000 U.S.’s other products within days. So that will be, what should I say, higher demand and supply for a while. But sometimes that's good, and I'm sure we were pleased the demand as the next weeks and months passes. This has also caused us to review the contract with Leo. There was a question where he would go and it took a little bit of time after the work up to get into the table. But as you can see here, we have signed with him. And of course, he will be part of our family for a long, long time. What is also important in the U.S. is women's basketball. As you can see in the middle, the Exhibit Select is a dedicated shoe only for her. Using that shoe with all our, what should I say, star players, as you can see on the left side, and we are continuing to invest in more players because we really believe in the women's NBA. And as a part of more focus on women's sports, this is extremely important for us in the American market. Changing to men's basketball. We know we have not performed the way you would expect and also the way we should. But when you look at the roster, we have four signature players, Harden, Mitchell, Young and Edwards, which we know we can do and have to do a better job with. We have added [indiscernible] as two Young Guns. And then when we take that together with the launch of Fear of God, which you see both on the performance side and on the lifestyle side, which we talked about a couple of weeks ago. These products starting to flow into the market in the second half being scaled in 2024. We feel we are in a better shape in this business than we've been for a long time. And remember, the opening of the L.A. office, which happened in February, that is not a productive office yet because the results of their work is, of course, not going to be visible until 2024. So a lot of activities going on between global and North American business to strengthen our business because, as you know, it's a very important market for us and the industry. And when you look at the numbers, of course, we're not happy with the performance, but again, in a very, very difficult market, where many are struggling. If you then go to Europe – EMEA, Europe, Middle East and Africa, flattish, down one in Q1, plus two second half. Again, here, numbers that we're not happy with. We should be stronger in the home market, many reasons for this. But I think you will see next year that we will start to build market share again by chasing more of the commercial business than we've done. A couple of important investments. We announced together with Man U that we have extended their contract long-term, very, very important for us to secure that right now. Manchester is in talks also of changing owners. We and the Club felt it has very important to get this assured. Many numbers floating around, I can only say like I always say, the more we pay, the better it is. The contract has a retailer, which is fixed. It has royalties for how much we sell and bonuses for how they perform. So that means the more we pay, the better they have performed and the more we have sold. So let's hope that, that will get a high, high sum. A couple of news in Europe in soccer, we signed AS Rome, one of the most traditional and of course, with the most unique color in the league. Very proud of that. We have gotten the traditional club Nottingham Forest back again in the Premier League. And then we have, again, signed Maccabi Haifa, which is the best club in that country. So we continue to invest in football, and it is, of course, one of our most important sports going forward. We talked also about Indian cricket. Again, India being probably the fastest-growing market in our industry going forward and as cricket being the major vehicle, it was then clear for us, although it was not part of the global strategy that when we got the chance, we would invest in the national team. And as you can see, they're already starting playing with our performance logo on three-stripes. And of course, they won and the whole market very excited and we think this will be a game changer in the Indian market. Continuing into a very important market that we talked a lot about, Greater China, plus 16. Remember, we said last quarter that our sell-in was down, but sellout was double-digit up. Now both sell-in and sellout is double-digit up, and that's why the plus 16 was in the quarter, but only plus one for the first half. And we see the energy in China starting to pay out. And as I said, double-digit sell-throughs now two quarters in a row confirms that. What is also new? We, for a long time, for many reasons, have not been able to activate any major celebrities. We did last week, activate Ma Sichun, which is one of the most famous actors in China. She's one of the winners of the so-called Golden Horse Award, which is the same as the Oscar. And she's been now both in social media and other media, promoting our product and it's worked very well. So hopefully, a breakthrough that we can get back again and use the ambassadors the way we can do optimal and not be so afraid of the impact. Quoting yesterday morning on the film set of a new movie before they started shooting, she showed up, of course, in the Samba, as you can see in black and white and an adidas track jacket. So she's also using our product in the spare time and very, very positive development for us. We also sent our world champions, the Argentina national team and Messi to China. Unbelievable interest, crazy amount of people showing up, good for the brand, good for Argentina, good for Messi. So football also global symbols, very important in China. We are investing more and more in sports, even in athletics here in an event that were actually done on the Street, 20,000 people watching Chinese athletes doing different jump competition. And it shows that the interest in sports in China is growing and that China is going back again to more normal times. And for us, we clearly need to invest even more in sports than we have done before. Another activity, mobile skatepark, our sales and marketing teams traveling around in China, doing different activities for the young generation to connect with the Street culture and skate is one of the things that we see growing. Skate and music together makes great atmosphere. And as you can see a lot of people and a lot of I would say positive energy around these kind of events. On the totally other side, outdoor, we have talked about the outdoor boom globally. This also happening in China. Terrace actually started a series of ultra trail runs, I think 11 of them. And as you can see, 10,000 of Chinese then doing this kind of events. And again confirming the dedication to sports and also to outdoor activities and good to see that we can play that in China on many categories. What is also extremely positive is that the first time in three years there was a trade meeting again, our sales organization had more than 2,000 customers at an event showing the collections for 2024. And again, I think its three years ago that was done physically last time, it was almost digital. And as you can see, a great atmosphere. And again, things starting to normalize and the way we used to do our business. Very important for us, the investment in the new distribution center that we open in Suzhou, highly technical, automated and of course, a major vehicle for us to do the growth that we plan and hope to have in the Chinese market. So to summarize, difficult time in China, we see the improvements now two quarters in a row. And again, very proud of what the local team is doing because again China is more local than it’s been for a long, long, long time. If you then go to LatAm strong growth again plus 30 – plus 39 for the first half, same here a lot of activities, of course around Argentina team, the Argentinian market has been very strong for us and of course, helped by the success of the national team, and of course, also Messi. But also on the women’s football side, we had four of the teams from the region actually in the World Cup. And again, I don’t need to say that I think the Dussán team did a great job on so on this design and the Colombian team in my opinion, looked the best. Also qualified for the next round, I think they play Jamaica. So we have two our coolest team playing each other the next round, and at least one of them will then go through. And again, women’s football slow start in LatAm, but also they’re growing and as football crazy, the region is, this is very, very good for us. Another small thing, a lot of local events and local products, on the left side, you see some of the SMUs that has been made locally for the market. And then on the right side, you see some of the, what should I say, artists both from the rap side and dance and music side that the local team are using. And again, I’ve said it many, many times we need to be more local in our marketing. And I think the team in LatAm you see also in numbers have done a terrific job on that. Even on retail trying out new concepts, here you see actually a women’s only shopping shop concept that they have developed. She being a major focus for us globally, but especially now in LatAm. And of course, as flexible we – as we are, we let some of the markets take the lead on that in the first indication very positive. Moving to the last region Asia-Pacific or APAC 7% up for the quarter, 11% for the first half. We are going to do some changes here. Today, this region is run out of a headquarter in Singapore. It basically has three independent markets, Japan, South Korea, Thailand, and then it has two clusters of markets, Southeast Asia, as you can see. And then Pacific, which is New Zealand and Australia. Going forward, we are going to have Japan and South Korea as standalone markets going straight into headquarter. Why? Because both of these markets are very, very special. They’re big markets. They’re very trendy markets. And they’re markets that set trends. And that’s why we feel that having them in a region together with, I would say other markets with different direction doesn’t make any sense. So they will be tied into the global machine and be handled and separately as a region. The other countries clusters will then go to the emerging markets, very successful leadership that will then bundle them and find synergies. And they are sitting in headquarter now in Dubai, but I’m sure they will have some kind of hub going forward also in Singapore. So a change that is strategic, and we think that both Korea and Japan will see an immediate impact of that when they can be more independent and be quicker to market with what they actually need. We will also have our development center, the creative center in Japan, working then very specifically for the Japanese market. So to sum it up both the second quarter and first half were basically flat and this in our opinion quite better than what we had expected a while ago. You would immediately ask, so what would the impact be excluding GC? And as you can see on the bottom, not big, because the growth was flattish with Yeezy and excluding GC we were down minus one. And if you look at the markets, no big differences between with and without, except for North America, which then excluding GC was down minus 20 instead of 16. The rest of the impact between 1% and 2%, so not that big of a different to be honest that you might have expected. If you then look at the channels wholesale minus 10 and remember we had an order book that was even worse than this. So of course, we have picked up some, but we have said that we need to put a lot more effort on wholesale. But of course, for a while, the numbers will be negative because that’s what the results of what we did last year is or was. Own retail very strong up 19%. We have only closed net 12 stores since last year, which means that we have double-digit like-for-like growth all over the world and actually a very strong development in our brick and mortar stores. E-Comm up 14%, of course, this is impacted by Yeezy. Remember Yeezy was only sold in e-comm in the quarter. And you will see later what impact that had. So reported wholesale at 56%, D2C as 44%, and the difference between e-comm and on retail only 2% by 23% and 21%. If you then look at the business without GC wholesale, then down only seven on retail, the same of course, because we didn’t have any sales in on retail of Yeezy. And then e-comm goes from plus to minus one. And that is then the impact that GC had, which gives you 61% wholesale, 39% D2C. And again, I think this mix is also similar to what we will have going forward after Yeezy. As you can see on retail 22% and e-comm at 17%. The positive thing of e-comm is that also without Yeezy, we have been much better in selling full price and not discounted. And I think we have a gross margin improvement of around 2% also on the e-comm business without Yeezy. So there is an improvement by taking out discount and using it also as a full price brand building channel, which is going to be very important in the future. If you then look at the new stores, although we talk a lot about wholesale, we will of course continue our retail. We are experimenting with new retail concepts. And as you can see here, open a flagship in Sydney and also what we would call a big home of sports store in South Africa here in Durban. We currently have around 1,940 stores in the company divided between what you say concept stores and factory outlet value stores. And as I said, the change in number of stores only minus 12 in the last 12 months. So basically the same amount of stores and the same size in square meters. And again, very impressed what the retail teams have done. And I think when you look at the numbers when we fill the stores with the right merchandise, you also see good numbers, which is a good indicator of what could happen if we get better distribution. So then to the division footwear, up one apparel minus three that the apparel market is I would say highly inventoried in general. And you see that also here. And then maybe a positive surprise that accessories is up 8%. This code is mainly from the football business, BOOST and other accessories, so a positive development and that gives you them 58% footwear, 34% apparel, and 8% accessories. And again, always say that footwear in a company like ours must be at least 50% and 58% is very, very healthy. If you then look at the different categories and performance, performance in generally was up. And you see here, football, especially sports, which includes the smallest sport, for example, Tennis and U.S. sports, which is what we do for the American market all up. And then running training, outdoor and golf slightly down, all in the low-single digits explanation is easy. If you take North America out, you will see that everything is up except for outdoor, which is slightly down by 1% or 2% globally in a business that of course was growing very quickly before. So the only difference is the general downturn in the American market and take some of the performance categories down, but in the rest of the world very positive. Soccer, of course, the DNA of the brand, many of our teams doing well. You probably know this, very proud that Mexico won the gold cup and that Italy, which is new in our portfolio, actually won the Under-19 European Championship, which shows that they have a talented generation coming up. We have launched the home jerseys for our four major teams in Europe. Very traditional as you would expect, but then we've been much, much more innovative and I would say much more creative on the way jersey. And this going forward is going to be important. We will be more, what should I say, local in our designs, and we will be more tied to the club and not try to do the same design for all the clubs. And as you can see here, it's pretty different than what we have done before and the reaction has been very, very good. Football boots, again, very good reaction to both Crazyfast and Crazylight. We have very, very good product. And as I've said the product for 24 will be even better. So very happy with that. Running, you know, the development the last two years on the real racing site very good, new launches of both a Adizero Boston and Adios. And again, the issues are winning marathons every week. I’ll back our running guy has built a product and a sports market, the portfolio that works, but now we need to work on distribution and we will start to hire people again to go out in running specialty, the brand left that part for a while and wanted to serve that digitally. But you will now start to see us be much more active in running communities again, and also have sales reps servicing, running specialty. Track and field, very, very important as the core in the Olympics and the core of all sports. We, of course, have to invest more again to get back to more athletes and more federation. That takes some time. But the pipeline is already starting to fill up many, many good athletes, especially on the female side. Also in what do you call new markets like India. And we will look good in Paris and we will continue then to pick up both athletes and federation as we go forward, because this is a place where adi should dominate. A new launch in the quarter was, adidas Switch, probably the most comfortable running shoe in the market just out there. So if you want a comfortable shoe then please try it, at least for me, it's the best comfortable shoe I've had. Maybe not the running shoe for the racer, but for those who also are normal this is the shoe. So try it. Training, a category that is very interesting and where we are starting to invest again. We partnered with Les Mills and had globally had a series of events. The last one in the right corner was last week in Los Angeles, where I think more than 10,000 people were doing activities with us and Les Mills. Again, we have the product – a lot of innovative product both for her and him. But we've not been good in distribution and we believe that this is one of the avenues where we can get growth with the normal sports stores all around the world. Outdoor, talked a lot about it, as you could so only flattish development. But of course, we had great growth last year. TERREX as an innovation outdoor brand won for ISPO awards. So very proud of that. That means that the product is right and now we need to also there work on distribution and get it placed more in the right wholesale environment. Talking about outdoor and TERREX, our female ambassador, Mikaela Shiffrin won the ESPY award for the best female athlete. This is the award that the American ESPN is giving out. And we also won with Patrick Mahomes, the Men's Awards. So both the best female and the best male athlete was adidas award. So very, very, very, very, very proud of that. Talked about golf, important boom during COVID, slowed down stagnated a little bit afterwards. We have Rose Zhang who went straight from being an amateur to win her first professional tournament. And as I said, many times, golf is, especially in the U.S. a very important category for us. And we will continue to invest both on the female and male side. As sport, we don't talk a lot about volleyball, but a big sport, especially in the U.S. Here you can see that the Nations League, which is kind of the World Cup for national teams, we were in the final with both teams, China and Turkey. And Turkey actually won. But that means again, here, both on apparel and on footwear, a category that we will also invest more in, together with investment in more smaller sports to be the leaders that we used to be. Quickly over to lifestyle, for the first time, I think in many quarters, the original side was positive. And also when you take Yeezy out, it was kind of flattish, I think, down only 1% or 2%. So a positive development on that side. The sportswear side, which is then mainly the product that is a little bit lower priced in price still down, but the minus becoming less and less. Activities here was, for example, in the Paris Fashion Week, where we both had a collab fashion show with Wales Bonner. We had with our friend Pharrell Samba Café with product that he had called designed with us. And then we used actually our marathon runners, as you see on the right side. And also long distance runners as models and a very cool, I would say, atmosphere that we created at the Paris Fashion Week. And you will see us more in this environment going forward. Needless to save it Pharrell actually working out of Paris, we hope we can do a lot of cool stuff with him going forward. Quickly, Yeezy. We had a very successful first drop. Harm will get more into it, but we sold around 400 million in Q2, which is basically the same as we did a year ago. The whole launch worked very well. We are currently, as we speak, in a second drop you see the 10 all that we have offered this week. And we will have smaller drops going forward too. But as we said from the beginning, we will not report this or take any of this revenue into account until we have it in the box. We've been very careful with this and we'll continue with that. And I hope you agree with that strategy because six months ago people said we should burn, destroy the product and now we have found ways of selling it and we can use part of that revenue to actually do something good in society. And instead of writing off the inventory, we can actually create cash. I'm very proud how the team has worked on that so far. Quick look on the product side, I've said this many times, the Terrace trend is continuing and we scaling it up. The number of pair in the market is still small, but the consumer who buys it is absolutely the right trendsetter. So we're scaling that up with bigger volumes every month. And then we also have the campus that is being highly in demand and that is also picking up. When you combine that with what we call Adicolor, which is our three stripe original apparel, very colorful, very clearly three foil and three stripe branded. We think this is going to trend very, very heavily going forward. And then going into next year, you will see that we will add the 70s running, which are the running silhouettes that mirrors what we're doing on Terrace and with our archive and the models we have there, we think that this is spot on to create brand heat again for both our logos, which is the performance logo on the left side, and then of course the three foil on the right side. So again, a quarter that developed as we had hoped, the Yeezy thing was something we were nervous about that worked, and we've seen our inventories go in the right direction and we feel that the business is slowly moving in the right direction in a very difficult and of course very volatile and uncertain environment. So with that, I hand over to Harm to take you to the details of the financials. Harm Ohlmeyer: Alright, thank you Bjorn, and warm welcome and good morning and good afternoon from my side. So I would like to go to the financial update and decompose the P&L and some working capital balance sheet items to give you some more clarity on probably some of you would say a more complicated guidance that we had out there. So I want to shed some light into this one. So I want to start with the net sales, and of course, we want to grow the net sales fast in the future, but I think there's three things that I want to focus on today. One is gross profit percentage and what is the health of this one, then of course our cost development and cost control initiatives that we have, and then the health of our inventory. And these are the three things that I want to focus on, and I'm pretty sure this is what you are interested in as well. So I want to start with the gross – marginal gross profit. The most important number here is the 50.9% in that quarter 60 basis points up. And what's important here, and I come to that on the next chart is, what is the impact of Yeezy in that gross margin. If I start on the left hand side, we still had a headwind on FOB to increases headwind on [indiscernible] based on the hedging that we have done many, many quarters ago heavily discounting still first in the first quarter, but definitely partially in the second quarter as well. It was neutral from an inventory provisioning point of view, because we did a lot of that in the first quarter, and I come back to that on the next chart. But positive mix and pricing effects, especially in markets where we have high inflationary scenarios, we did a lot of pricing increases, when we talk about your Argentina, Turkey or some of the more volatile markets, the mix is definitely benefited also by full price sell through where we've been very disciplined on our D2C channels. So overall positive development. And then importantly, if you take out the Yeezy effect, because you're interested in what is the underlying gross margin without the Yeezy because that's an indication for the future. So it roughly has been 2 basis points. So the 50.9% would've been a 48.9%. If you have some puts and takes on the margin on one loss, I would say, it's a fair 48.5% margin – underlying margin that we have is out Yeezy and some puts and takes, which is a good indication for the future. If I compare that with Q1 to Q2 also there, Yeezy had an impact, but you also see that discounts have improved. We have been less promotional, as I just mentioned, an inventory allowance was not built further in the second quarter, because we covered in the first quarter and we had positive mix effect, even excluding Yeezy that is also important, excluding Yeezy, a positive mix. So if I just combine these four elements, it explains 5 percentage points out of the 600 basis points of improvement. So overall, again, very disciplined in our D2C channels, not just in retail, but most importantly also in e-commerce, which is a clear signal to our wholesale account. We want to grow and accelerate the growth going forward that we are disciplined in our own channels, so definitely on the first KPI a positive development. If you then continue on the cost side slightly down on the marketing, but more importantly when we look at the operating overheads even so reported we are 7% up. But I also want to be clear, that’s an extraordinary item of €160 million in there. €50 million of that would be classical one-offs that would be accounted against the €200 million in our guidance. And then it would leave €110 million, which is actually donations that we have paid already in the second quarter, but also an accrual of €100 million of donations, which will be paid over the next couple of quarters or even years into the right communities for the right purpose. So €110 million of donations built into the Q2 P&L. So if I would take that out and there haven’t been any significant one-time costs last year, we actually would be below the prior year on a quarterly level. This all results in an operating profit of €176 million. Of course, Yeezy had an impact of net of donations of €150 million, but again, underlying slightly better than we originally had guided. And we are making progress on a small bottom line, but we at least making progress. When we come to the inventories, only 1% up reported, 6% currency neutral also there good progress and you see more clearly the progress on the next page. On the left hand side, you see the development by quarter compared to prior year. We always said we peaked in Q3 last year. You see 63% up compared to the comparable quarter than only 49% up and 27% up and now only 6% up currency neutral. When we look at the absolute amounts €6.3 billion was the peak at the end of September last year. Now we are – we have been down at €6 billion at the end, €5.7 billion, €300 million better by the end of Q1 and now only €5.5 billion. And in the €5.5 billion as you know, still €400 million of Yeezy inventory, which is higher than the comparable quarter in 2022. So really, if you would take the Yeezy out, we actually would be below prior year quarter already. So very clearly today I say inventory is not from a size point of view our biggest issue. Of course, as Bjorn said in North America, it’s still in the market. But we are definitely making good, good progress on the inventory. When we then go further on the inventories, of course, the accounts receivable are slightly down linked to the 10% decline in the wholesale business. And most importantly on the accounts payable significantly down by more than €1 billion. That’s an indication that the inventory will come further down in the third quarter based on how we finish it right now because the payables are a good indication of what you will see in the next couple of months, which not just will impact the inventories, but also our cash situation. Talking about cash. We have finished the quarter with €1 billion on cash on the balance sheet down compared to last year, but significantly improved to where we have been six months ago. Also that is something we are very happy how we are progressing and that will continue to improve in the third quarter. All of this led to an updated guidance. I want to decompose that guidance again because I said earlier it was somewhat complicated this year. Starting with the currency neutral net sales. We originally said it’s a high-single-digit decline, assuming we don’t sell any Yeezy inventory, now we started to sell some Yeezy inventory. So the new guidance mid-single-digit decline only. And that is reflecting the €400 million, first drop of the Yeezy and a slightly better underlying new business on the other side as well, so that to the change. On the top line underlying, we always said we are a breakeven company. If we wouldn’t account for any Yeezy’s and we will continue to be a breakeven company. Even so, we are slightly better on the top line and on the bottom line. But this is where we are and the guidance is unchanged. Now, from an operating loss point of view, we said the guidance is minus €700 million. This would’ve been €500 million potential write-off of the Yeezy inventory and €200 million one-off cost. So if you’re a breakeven company adding these two things up, we would be reported minus €700 million. That was the old guidance. Now the new guidance as we have today roughly €100 million of the inventory, so the maximum write-off could only be €400 million. The one-off costs are the same. And we said it’s already €50 million in the second quarter and €70 million in the first half. So we are on track to move towards the €200 million. And Yeezy had a positive impact in the second quarter of €150 million. So if you add it all up, you’re moving from minus €700 million to a new guidance of minus €450 million. This is only accounting for the first drop. And of course if you would be successful with a second drop, we would look at that guidance again. But that’s where we are. I hope it’s clear, but I’m pretty sure we’ll get some questions on that later on. But I want to hand over to Bjorn again to make some more comments. Bjorn Gulden: Yes. Great explanation Harm. I’m sure you’re all saying this is conservative and yes it is, but I think we all agree that we have promised you that we will only report on things that are happening and with the uncertainty around Yeezy, we will not account or tell anything about Yeezy until we sold it. And we have things in our pocket and I hope you understand that. Of course, we all hope that we will continue to sell and things will go smooth. And we also hope of course, that there is some more improvement in the underlying adidas business. But I think you all agree that we take step by step and again, that 2023 is just about what should I say, lay the ground for a better 2024, and then for a good 2025 and 2026, as we said all the time. Couple of more infos that is important for you to understand us as a company. You know that we have the purpose of through sport change people’s life. And we’re doing a lot of activities outside of what you normally see. The one on the bottom the Special Olympics in Berlin was a highlight for me personally, I think for many of us. First we had a lot of the athletes here on campus and then we saw them compete in Berlin, which was great. And with small investments, you can help a lot of people. We continue to work hard on helping the planet on the sustainability side. Different activities where we collect money and give it to people that we work on that side in addition to all the things we do ourself. And then a thing we did in China, Run in the Dark where blind people are also being taken for runs and can participate in sports through things that we are investing in and we are helping. And there’s only a few of the activities, but important that we as a sports company think about inclusion also on the things for the people that doesn’t have it as easy as we have. We talked about the donations. We have in the second quarter paid around €10 million in donations and in addition to that Harm has accrued for another €100 million. This €100 million are proceeds out of the business – the Yeezy business that we will use, especially for those organizations that works against hate and discrimination. And of course, also for communities that has been hurt by the things that happened. And then in addition, we will continue to donate for sustainability projects. In that context, I would like to mention that we are working with ADL. We are working with Keeta Floyd Institute. We are working with the European Jewish Association, and of course with many others around the world. I would also mention that we now work with Robert Kraft and his foundation to combat antisemitism. Robert is a very, very knowledgeable guy in the industry coming from sports and he is investing a lot of time and resources to work against hate. And we will do quite some projects with him because we are very impressed by what he’s doing. And we think we can do a lot of good things together. So you will see more of that going forward. And then just a couple of slides. We have a fantastic facility here in Herzo. We build home ground, which is a hotel for the German National Team when they were here during the last Championship. We are now using that for other teams. So in the last couple of months, we have had German Ski Federation of the athletes here. We’ve had the Women’s National team here preparing for the tournament. We had the Arsenal here for a week. We had AJAX here for a week, and we had a lot of the Special Olympics athletes training here. I think we also had the German referees here. And we will go forward almost every week have teams or individual athletes living on campus and training because we have the best gym, I think in Germany and the best facilities in general. And this is the way our campus should be taking a mixture of employees, world stars and other athletes living on campus is very, very special. And I’m very proud of that. We have also tried to bring the old adidas energy back on campus. A lot of town halls, we’ve had a lot of athletes, coaches, you see some of them here. We have wrote to the records where world class athletes are trying to set world records on the campus. We’ve had soccer tournaments, we have had world stars talking to us. We had fan fest now during the Women’s World Cup and all these things is again, to bring back what at least I know ADI used to be a place for sports, fanatics and people that has a big adidas heart, and not only in Herzo, but all over the world. This is how we would like adidas to be seen and we feel we are on the way of getting that spirit back again. Final thing. As you probably have seen from our announcement, we had a change in the Board. Michelle has taken Amanda’s place. She’s now in charge of all HR. She’s legally not in our Board yet. We have said it’s interim on the legal side, but she has all the duties and all the tools that Amanda had. And then at the end of the year, we will then sit down with Michelle and here if she wants to continue with it forever or long-term. And I’m sure that we have a very, very, very strong HR leader that has the DNA both from adidas and the industry. So with that again, for us, a quarter that confirms we’re on the right direction. We still have a lot of work to do. But I think we all feel more comfortable than we did a quarter ago. And in a volatile world, we feel that we have a good basis to work from to get where we all need to be. So with that, I hope you have some questions not as difficult as the sport you see on the screen, because that’s at least my most difficult sport. But I hope we can handle your questions better than I handled my swing. So with that over to you. Sebastian Steffen: Yes, thanks very much, Bjorn, thanks very much, Harm. Yes, we’re going to move to the Q&A session, and you’ve heard it from Bjorn that he was questioning your ability to stick to the two question rules. So now it’s up to you to prove that this is a well-behaving crowd. Let’s see how that develops. And with that over to you, Franzi. Operator: Thank you very much. [Operator Instructions] Our first question is from Warwick Okines from BNP. Please go ahead with your question. Warwick Okines: Thanks very much. I’ve got two, I’ll stick to that. The first question is around distribution. This quarter you’ve talked about sort of stable number of retail doors and last quarter you talked about reducing the Chinese number of doors and that work had taken place. When you look at your distribution broadly and globally, where do you think you want to get to? Do you want to increase the number of wholesale doors in particular, and is retail stable? And then the second question is around product. Last quarter, Bjorn, you said that you were starting to smell the comeback of Superstar. Can you just update us on the brand heat of that product please? Bjorn Gulden: Well, it’s two questions, but there’s long answers. The distribution around the world is of course not optimal. I think what you referred to China is that we said we reduced, I would say 2,000 plus partner stores. We are working – the wholesale market in China is that our retail partners are opening adidas stores. And they have had during COVID reduced the number of doors. And the direction also goes to open bigger stores. So even if you reduce the number of stores the space you have available could be the same. But it’s also been a clean-up on the Chinese side. Our number of owned and operated stores, that means those who are adidas branded and we run and own are stable around, I think it’s 1,940 and the change is only around I think 12 stores in 12 months. And that’s stable. I don’t see any huge difference in that going forward. We will open concept stores in those cities and markets where we feel that it’s a good investment, we will open commercial doors in those markets who doesn’t have a good multi-branded or shall I say, retail market like India. And then we will open value stores in those markets where that is what should I say underpenetrated. But I don’t see a huge difference in the number of our own stores in the next 12 months. When it gets to distribution with our retail partners, I think it’s fair to say that first we need better distribution in their stores. There’s many retailers today, I think because we went D2C and we didn’t service that well, who doesn’t look as good as they could if they had the right products on the wall. If you go to our showroom and you see our lifestyle collection and our commercial collection, and I would also say running and other categories if that had been in the stores, our performance and the retailers performance would’ve been much better than it is today. So this is back again to servicing the wholesalers and retail partners in a way that they get the best adidas product on the world that they can have. And it’s not necessarily the number of doors, although there are also in certain markets bigger opportunity to have more doors, but it’s mainly about looking better with the retailers that we already in. But where the amount of adidas product compared to what it was five years, of course is, in my opinion, much, much too small. And then the other question was Superstar. Well, this is a difficult one. As you can see, Terrace is now very hot and it’s being scaled to be commercial. Hopefully, that will go on for the next 12 to 18 months. The campus that you saw is not a Terrace shoe, but it’s a suede shoe that is kind of in between Terrace and Superstar. And currently now we are cleaning up Superstar, so we see that Superstar in black, white, white, black is trending very well in the fashion area. And in those markets that has had the bigger volumes of Superstar, we are trying to get that out of the market. So the market will be clean. And then there is a natural development that you go from Terrace, you go to campus, then you go to 70s running, which we think will be scalable second half of next year. And then going into 2025, you should not be surprised if Superstar will be a hot shoe again. So we will start to heat that shoe up in the higher end of the market and do collabs with it to kind of have that in the pocket to be behind the Terrace and then 70s running. So I hope that answer your question. The timing of these things is not always plannable, right? So you build kind of a sequence and then depending on what happens you will then scale it at the time when it’s ready to be scaled. Warwick Okines: Got it. Thanks, Bjorn. Operator: The next question comes from Zuzanna Pusz from UBS. Please go ahead. Zuzanna Pusz: Thank you for taking my questions. So I’ll try to stick to two, but I have also one clarification, so it shouldn’t hopefully count. So first of all, on retail. So thank you for sharing all the figures ex Yeezy that’s very helpful. So just to understand, so I presume you said only retail was plus 21% ex Yeezy, e-commerce I think was slightly down. But if we just look sequentially, total retail ex Yeezy in Q2 versus Q1, again ex Yeezy, so just adidas brand. Can you share with us what’s been the sequential improvement? I don’t know if I get to the – let’s say right estimate that it improved broadly mid-single-digit versus Q1. So it would be very helpful if you could share a little bit about that. And then secondly, that’s a question more for Harm. I think Harm, you mentioned that 48.5% margin, excluding Yeezy is a good indication and I think you mentioned for the future. How should we read it? Is this how we should think about it for the full year? Or any clarification around that would be helpful because I presume in the midterm you could get to a higher number. And then thirdly, that’s not a question, but just a follow-up. I think you mentioned the reorganization of APAC, so I just wanted to clarify if it’s just kind of reorganization of the business, or are you going to actually restate that the regional figures going forward? Sorry, I’m asking, but there’s been quite a few restatements in the past, so I just want to know what we should be ready for. Thank you. Harm Ohlmeyer: Well, let me start, Zuzanna, on the margin, and I can also talk about the APAC reorganization to clarify that. So first on the margin, again, I indeed said 48.5% is a good underlying margin that is clean for the second quarter. That is not necessarily the margin for the full year 2023 or for the second half because we have some headwind on the strong U.S. dollar that we have seen six to 12 months ago. But it’s an indication for 2024 where we say with the dollar normalizing at around $1.10 or $1.12 in that ballpark if that is stable and the world is stable and we have cleaned the inventory, which is our plan. So it’s not an indication for 2023, but it is neither a guidance or anything, but it’s an indication for 2024 and not for the midterm. We always said for the midterm, which is 2025, 2026, we want to be north of 50%, right? So that’s on the gross margin. And on APAC the question was whether there’s any additional cost I believe you asked. Again, we want to focus on Japan and Korea, which gets dedicated support from the headquarter to have the right products into these markets. And the rest of the markets will be integrated in emerging markets. So if there are some additional costs through that restructure, it would be part of the €200 million one-time cost. Zuzanna Pusz: No. Sorry, just to follow-up, I didn’t mean cost. I meant if you’re going to actually restate the way you present the region? Harm Ohlmeyer: We don’t know yet. It’s too early to say because we want to see how we cluster the region. So not decided yet, going into 2024. For 2023, we remain as is. Zuzanna Pusz: Okay. Operator: The next question comes from Graham… Bjorn Gulden: No, no, no, no, no. We didn’t answer the retail one. I think you asked about the retail growth Q1, Q2. Q1 one was plus 11% and Q2 was plus 19%. So you see an acceleration in the performance in basically the same amount of stores. I think that was the question. Zuzanna Pusz: Excellent. Thank you. Bjorn Gulden: Okay. Perfect. Sebastian Steffen: Now, Franzi, we can go to the next question, please. Operator: Okay, which is from Graham Renwick from Berenberg. Please go ahead with your question. Graham Renwick: Hello. Good afternoon. Thanks for taking my question. Just firstly on DTC. What was the growth specifically in DTC sales in the U.S., EMEA and China and how did that compare versus Q1? And just to confirm, a small part B to the question. DTC was about 40% of sales in Q2, I think you mentioned earlier that is the right mix now for the business. So going forward into 2024 and beyond, should we expect that 60-40 mix and for retail and wholesale growth to be more balanced. And just on the Terrace shoes, you’ve obviously talked about the extraordinary demand for Samba, also Gazelle campus, although relatively small volumes at the moment. How quickly should we be expecting Samba and the Terrace shoes to be ramping up in second half and into 2024? I think previously you said that Samba, perhaps started the year a few hundred thousands of units, maybe going to 1 million this year. But what could it look like next year? Could it be in the order of 15 million, 20 million units that we saw for Superstar back in 2016? So any sort of numbers or help there would be very useful. Thank you. Bjorn Gulden: I think you can basically say that the DTC numbers have double-digit growth in all markets. I mean I think that's the simplest way of looking at it. The sell-through has been, I would say, at that level everywhere I think that's the easiest way of saying it. And when I look at the proportion, I said to you that the DTC business, if you excluded Yeezy was 39%. So wholesale was 61%. And if I had it in, it was 44% and 56%. And I think having DTC between 40% and 35% is where we're going to have it if we have an optimal sell-in to the retailers. But this is, of course, now in Q2 skewed because of GC came in again as though Yeezy was only DTC. And of course, that skewed the numbers. But I would say between 35% and 40% is where D2C should be. When it gets to the scalability of the different products, it is true that I think the original plan for adidas not to scale Samba almost this year at all. But then when we saw the heat in January, February, we decided to scale it, and it has been scaled every month, but the real volumes that has any impact on the business is coming as you speak. So you will start to see Sambas also on the shelf so you can actually buy it because I think in most markets, they have always been sold out, and it's only been broken sizes in the different stores. How big Terrace can be? Yes, it can be in bigger than 10 million, 15 million pairs. Of course, it can. And I think that when you add then the 70s running, which I think is the silhouette that is missing in the market, which then is the same kind of trend, but a second pair for you or it's another customer, I think we will have two, what should I say, silos that we, as a brand can own and then you have the Superstar. And again, when the cycle is full, it will be back again to Stan Smith at a while and then we can start to turn it. And the test for us is, of course, that we can manage these franchises in a better way, both the way we scale it and the way we distribute it and that we keep it out of discount in our own channels. I'm very proud to see that in e-com in Europe has been able to be clean now on discounts on these franchises since beginning of the year. U.S. has been a little bit different. China has also been a little bit different because of the retail events. But we clearly, clearly see that the discipline to actually scale up in e-com for us has started to work. Same, of course, in the concept stores and that we feel we're starting to get control on the way we manage this, which is going to be crucial through 2024 and going into 2025 and further to be profitable, good adidas that you want it to be. So first steps taken. Also, as Harm said, very, what should I say, happy and impressed that the discipline and other buying has worked. You can see it in the inventory. You can see it in the payables that people have not been overbuying, and we have a process now that people follow, actually to a degree that we now need to make sure that we have enough good inventory to grow from next year, but that's a good problem to have compared to being over-inventoried and then have a lot of discount also in our own channels. So things are improving slowly, and we're starting to get a little bit more handle on how we can hand it in the future. Graham Renwick: That’s great, thank you very much. Operator: The next question is from Jurgen Kolb [Kepler Cheuvreux]. Please go ahead with your question. Jurgen Kolb: Thanks very much. Trying to behave and limit myself to two questions. First one on running. Bjorn, you indicated that running overall was down. And if we would take out the U.S., it was up nevertheless, However, I'm a bit surprised to see the whole category to be down and apparently, it must have been down quite a bit in the U.S. because you obviously had a lot of new products coming to the market. So has there been any specific adjustments that you had to do with the – on the distribution side? Or was that broadly expected for the second quarter in this specific category? And then secondly, you talked a lot about product innovations and product introductions. Do you think you've changed something in the overall product life cycle management within the company that is coming through as of now for the future? Or is it basically still the same, just doing a little bit more or a better execution? Thank you. Bjorn Gulden: I think when you look at the running market, there is no doubt that the running collections, in my opinion and I think also the market are good enough, both from the top and also into the commercial, although the investment has been on the higher end, and that's why we have signed a lot of runners. We have signed a lot of events, and we have designed a lot of high-end products. And of course, that investment has not filtered down in the commercial area yet. But I think this is the right sequence, make sure you have a product that works, they can set records, that can win marathons and 5Ks and 10Ks, then put them on the best athletes, both female and male and then show that it works and then you start to scale your distribution. That we're down because of North America is not really what should I say, a surprise because America is the most difficult market for us to sell into currently because the market is full, and that's why was partly expected, to be honest with you. I think the key now is to invest in running specialty. That means, again, servicing the smaller accounts, invest in the running communities and then actually have salespeople on the road again, that is servicing these accounts because that was taken away. And I think that is the key and the game changers to get volume again. And then we can scale and actually do I say, running shoes to walk in at price points in a much, much bigger scale. And we start to see that, that demand is coming on, and you know that issues that never people run in, but they come out of the running category, and it's being sold in the family channel. We haven't chased that business yet, but are starting to do that now. And that's why I think you will see the running category next year being in green. When it gets to the whole innovation pipeline, I think it's fair to say the following, and this is a kind of a joke, but the innovation department here has actually a task to bring things to the market as long as I'm here. That means that ideas that I think will be after my time, they don't need to work on. So it's like the pressure is to bring things to market. And we are going through the innovation pipeline every month together with the business units. And there is a lot of innovations that are now ready to be launched or ready to go into the market. But the test is then how much can the market take. And that is in materials, it's in silhouette, it's in plates, it's in loss. It's in construction. And the innovation team is now led by our Creative Director, so Alistair, who has been over a year, heads up design and innovation, and that's why part of innovation is now also design. I mean, let's face it, that innovation. It's not always a new material or a new technology, but also the way you design things and the way it looks. So I'm actually very happy with that. And as I said to you before, the pipeline in performance was good before I came in. It was just that the product was not necessary in the market. So I feel that Adi in the major categories has the product, a little bit question mark in basketball if we have all the ingredients yet, but in the rest of the categories, I think the product is there. And then, of course, it's about distribution and how we market it. And then we need to add all the smaller sports again, so that we will have best weightlifting shoe and the best wrestling shoe and all the best special shoes in the Olympics because we have the facilities. We even have our own factory in Seinfeld, who can do it. And designers and developers loves to work on these kind of products, and they have again an effect on the rest of the collection. So I think you will start to see that we're working the way Adi used to do it, make the best product for the best athletes and then commercialize it. And I think that's just – I'm the – what should I say, opening the door again to work the way Adi should work and has worked in the past. I think that's the difference. Jurgen Kolb: Very good. Understood. Best of luck. Thanks guys. Bjorn Gulden: Are you depressed about Germany? Jurgen Kolb: Indeed, indeed. There is a picture, unfortunately. Bjorn Gulden: Well, we need a meeting with David Bear. We are calling them tonight. Take care. Operator: The next question is from Edouard Aubin from Morgan Stanley. Please go ahead with your question. Edouard Aubin: Yes, good afternoon, guys. Thank you for taking my questions. So two for me as well. The first one is on the cost to compete on, Bjorn. So I think if I'm not mistaken, your A&P is around 11.5% of sales in Q2. And I think that in the past, you've said, at the level you tend to keep broadly stable. I mean, recently, the market leader was kind of indicated that they wanted to step up in terms of this area of A&P, and I know it's not completely comparable in terms of how things get measured. But to what extent are you seeing an impact or expected to see an impact? I think you guys just signed Manchester United a few days ago for $1.2 billion deal, if I'm not mistaken. So be curious to have your views on that on the cost to compete. And then, sorry, just to come back on the performance. So I think in the recent years, you've lost share in some of the big sports like soccer and running, and we just talked about running. But can you just help us understand or quantify roughly kind of the magnitude of the share change and how big this franchise are within the footwear market? Because you guys have some estimates, obviously, and – but for investors and analysts, we kind of sometimes struggle to size how big these opportunities could be if you went back to the previous market share you had in some of these categories. Thank you. Bjorn Gulden: I'll start with the first one. I think the cost to compete, I don't really see any rising prices right now. I think there's a big question mark where professional sport is going when it gets to the price level. But at least what I feel is that the most expensive ones are always getting more expensive, but the other ones are basically on the same price level. So I haven't seen any – what should I say, the impact of what you just said, not also from competitors, to be honest. The Manchester United and the club deals and the big federations of course, always had an increase, but you have to remember that they are tied to performance. And it's easy to sign contracts that says, if you're Bellander, you get a lot of money because there's only one who can win Bellander or you say Champions League has a huge bonus because only one can win it. So there is some tricks in the basket that can blow up the values of certain contracts because it tells about the possibility that people can get, but not everybody can get it. I feel that between 10% and 12% and between 11% and 12% is where a branch should be. Of course, I haven’t been here so long, so I can’t just justify all the investments or say how efficient is, but I have the feeling we have enough money to be what adidas should be when I look at the budgets, but again, maybe I know more in half a year. When it gets to the categories and market shares, it’s a little bit different because the way people classify products is very, very different. I mean, the running category is a blown up category. Most running shoes are not being used for running. I think in the U.S. MPD says that every American has 4.3 pairs of running shoes. I mean, not – all Americans doesn’t run the same with basketball. I mean, it’s Superstar basketball shoe or is Air Force 1 a basketball shoes. So I’m very careful with market shares in the different categories because the way people classify shoes are very different. What we know is that when you’re successful in basketball performance, it has an impact on your classic court business. So we need to be on court in basketball to be strong in our classic business. We need to be in performance running to be a sports fan, and they also sell a lot of take down shoes in the family channel. So we need to take market share on the performance side. And then we need to what should I say, capitalize on that in the leisure market. And that’s the strategy and the weight of this is different from market to market. I think that adi left the special distribution for a while for different reasons. And especially in running, you need to be there to activate your products in the running community. And I think in hindsight, maybe we should have done that. In Soccer, adi has always been in the specialty side and done a good job. I think the product now is better than it’s been before. And as I said, 2024 is very, very good. Outdoor, I think we can scale distribution because it’s getting more mainstream and we be working on that. And then I think in basketball is like, the difference between the classic side, which are going on the Street, and then the performance side is of course very, very big when it gets to the product. But the connection is there. We need to connect to the 15-year old kid in the U.S. on court or NBA to actually sell our classic shoes. And I think that’s where we have to do a better job. And that’s why both the classic side and the performance side is sitting in LA now with new designers, with new people, some of them makes Yeezy people working on that. And again, if you put the right people from the right culture to do the product then the chances are that they will do it better than if you do it from another place. So we feel we have all the tools to crack these things and we just need a little bit of time to actually make it happen. It’s easy in PowerPoint, but it’s more difficult to actually get it done, and it takes time and you need to have a little bit patience with us. Edouard Aubin: Okay. Thank you. Operator: Next question is from Aneesha Sherman from Bernstein. Please go ahead. Aneesha Sherman: Thank you. I have two questions, please. My first one is about the China business. Last quarter, you noted that there’s still a channel inventory issue in China, and it’s going to take a couple of quarters to normalize. We’re now seeing you grow your sell in and you’ve had strong gross margins. So does that mean that you’re in better position on channel inventory? And do you have an update on when you expect it to normalize? Bjorn Gulden: Wow, that, that was only one question. Good. Yes, it’s true. I mean… Aneesha Sherman: I do have another one, I’ll come back. Bjorn Gulden: Okay. Well, we said in Q1 that we were reporting negative numbers because the selling was less than the sellout, but we already in Q1 had double-digit sellout. And then I think I said in Q1 that this will change in Q2 because you will see actually we are posting positive numbers and that has happened. The inventory level in China is almost normalized in the sense that it’s what it used to be. And again, we have had double-digit sellout now sequentially through this year. So the demand of course, and the size of the business hasn’t normalized because remember, you have 2.5 years to catch up since the BCI, but when you look at what is in the store, the aging of what is in the store and what is needed to be taken back, I would say it’s all more normalized. Now, I have to tell you that we will take less and less orders in China when it gets to pre-orders because we’re putting more and more on replenishment. That means that we are going to instead of taking orders for 100% of the demand, we might take only for 70% and then actually replenish the 30% or change it to something else. So going forward, our supply chain in China is going to be much quicker and more flexible. And therefore, we expect less take backs and less clearance in the outlets. That’s kind of the strategy, and that’s why it’s good that we don’t report the order book because you’d really need to understand the order book and the sequence of what we’re doing to understand the business. But again, we feel that China after a lot of negativity is turning into something positive from a demand side. And again, very proud of what our team has done during a difficult time. And as you saw in the presentation, even now using celebrities for the first time in three years is also for the local team, of course, a lot more fun. So open up a lot more avenues on what we hopefully can continue to do so, so a positive development, yes. Aneesha Sherman: Okay. Thank you. And my second question is actually about pre-orders. So you’re relief this morning mentioned that you’re seeing some caution in pre-ordering amongst retailers. Is that referring to H2 and are you seeing some of that caution spreading into spring summer 2024 ordering as well? Bjorn Gulden: Well, especially the second half, you have to remember that the order book that you took last year was done in a time where the market was screaming for products, so the order books were inflated and never converted. So it’s difficult to kind of measure, but the second half this year is definitely having a negative order book. But that doesn’t mean that the end will be negative, it just means that the ordering less and especially in the U.S., you see that most retailers are planning to chase business. So they don’t want to commit, they want to have you take the risk, which in a way is a little bit dangerous because as I tell them on the hot sellers like the Terrace, if you gamble on actually chasing, there might not be anything. And also I think this unbalance between pre-orders and chasing business will normalize again when we get into next year. It’s too early to talk about the order book for 2024 because as you know, Q1 is not even done yet. So it’s too early to tell, but very cautious, especially in the U.S. for the second half this year. That’s correct. Aneesha Sherman: Okay. Thank you. Operator: Next question comes from Simon Irwin from Credit Suisse. Please go ahead with your question. Simon Irwin: Hi everyone, couple of questions for you. Firstly, just going back to your comments about Yeezy, Campus, Terrace , et cetera, is kind of sounds as though there’s quite a big bet going on in which we call classics or retro or whatever. I mean, how confident are you that the market will go that way or do you have products if the market kind of goes in a different direction? And the second is, has the sell through of Yeezy changed your mind about what you could do with these designs, which obviously you do own in the medium-term? I mean, could you potentially sell them through as added as products in the future? And kind of related to that is the absence of Yeezy for next year, one of the reasons behind you are slightly more cautious kind of view about 2024? Bjorn Gulden: I’ll start with the Yeezy, no plans of taking Yeezy designs and transfer them to adi. Yes, legally we could, but I think that would be the wrong timing. Remember, we inherited quite some inventory and we were choosing between destroying and writing off the inventory against selling and doing something good with inventory and then also for self of course creating cash to pay the inventory. And I think we landed on something that has worked. We spent a lot of time talking to the different organizations and felt that we had support to do it. As you see, we have accrued or paid $110 million in donations, and now we are at the phase of launching the second drop. And of course, there’s uncertainty. We never know what will happen. So that’s why we are very, very careful. And that’s also why I think any speculation of using any designs for something else would be absolutely wrong priorities on getting this inventory out of our books and end the story, I wouldn’t say as quickly as possible, but as healthy as possible. That’s the goal. The cautiousness next year is based on we are in a situation where we’ve said that we had a lot of bad inventory sitting in industry in general. We had a lot of slow selling inventory on our side and we did not want to continue in that situation. So very disciplined buying and very, what I say, structured way of going to market and not try to short-term impress anybody by taking risk and that’s why this is about building one step at a time. And that’s why we are also cautious for 2024 because we need time to change the things that we need to change. When it gets to the trend that classics will be in, I’m not worried at all. I mean, classics has always been and the question is what kind of classics? And I think the good thing now is that coming out of what I would call the Air Force 1 trend, White Sneakers that Nike has dominated I think the Samba trend is something that is unique to adi. And we are now exploiting that A, by having done a lot of collabs, I think the collab for example, Gucci was brilliant. I think the work that they did with Pharrell was brilliant and that has created the heat. And now we are at a time where we can scale it and we see that the shoes are lining on the right feet and there’s a lot of potential on this whole direction. We are then launching the campus with also potential that’s picking up. We have in our backyard superstar again in white black and black white. And then personally, I think for us to come back in running lifestyle, where we were strong with both the Yeezy issues, but also with an NMD direction. We think that the seventh is running, which is kind of the partner to the tariff look, but on the running construction is the next wave. And again, we are starting to see that, we starting to do collabs on that. And hopefully, we don’t have a second leg coming out of the archive next year. So you can never be certain, but all indicators that we have and what we can measure, I think we have two very good tools in our closet. And then in addition to that, you have to remember that our whole innovation team is also working on more than silhouettes on the running area, that can go lifestyle. And you have the performance shoes, the Adizero, for example, or now the Switch that also had lifestyle appeal when we put them in different materials. So a lot of options and we just need to work with the trade to get the right ones on the shelf and also do quite some testing and – but it's not like you're sitting here not having a lot of options. I think we have plenty of options to play on in the next 18 months. So positive on that, but of course, we need to do it together with the retail partners and be disciplined. Simon Irwin: Brilliant. Thank you very much. Bjorn Gulden: Thank you, Sebastian Steffen: Franzi, we have time for two more questions. Operator: Okay. Then the next one is from Thomas Chauvet from Citi. Please go ahead. Thomas Chauvet: Good afternoon. Thank you. Two questions. One on gross margin and one on Yeezy. On your gross margin drivers, so discounting had a negative impact on two gross margin, but you said rightly that from Q1 to Q2, there's a tailwind with reduced discounting. Could you comment on which regions are seeing this trend? Is it more on performance or lifestyle? And then pricing was a tailwind in Q2. Is it mainly the pricing effect of the second half last year or was there more pricing in Q2 2023? That's my first question. Harm Ohlmeyer: Okay. Let me answer that first before you very likely shoot out your second question. First on the gross margin, you're absolutely right. I mean, discounting has been less in the second quarter compared to the first quarter. And we first see it in our own channels, as I said, in e-commerce and retail, where we have been very disciplined, especially on the key franchises that Bjorn talked about, whether the Terrace or the Superstar, the Stan Smith. It continues in North America, so not a lot of benefits in North America. It's still very promotional, but in Europe we have made good progress on the promotional environment. They'd be much more full price, especially in our own channels. Secondly, in China, also better, because the inventory situation improved much better there over the last couple of quarters and everything that we did in 2022 already. So also there the promotional environment got better. So it's primarily accounted to China and Europe and it takes some time in North America given the inventory situation our side, but also in the market. When it comes to pricing, yes, of course, we're benefiting from the price increases that we did last year, but it's always a tricky part. You got to look at the pricing and the discounting and combination, right? So you always need to go down to article level to have the right picture. But yes, some benefit from last year. We do not intend to increase prices in the future, given where we are inflation is at least stabilizing on a high level. What you see in the second quarter is more inflationary environment. When we talk about Argentina, Latin America overall, when we talk about some of the emerging markets, where we are more flexible with the pricing and react partly even on a weekly basis when it comes to Argentina or Turkey, and then some emerging market on a monthly basis. So it's not as seasonal or quarterly based as in Europe and North America. But in the more mature markets, Europe and North America as the pricing is rather stable and don't expect prices to go up going forward. Thomas Chauvet: Thank you, Harm. And my second question may be for Bjorn, on Yeezy and what you will do with the incremental profit this year after donation, obviously. Is it fair to assume the majority of that incremental profit after donation will be reinvested in incremental marketing or sponsorship initiatives as early as this year? Obviously, the don’t know if the timing of the Manchester United renewal is related perhaps to that. Anything you want to highlight that you could reinvest this year. And just does this significant one of profit change your view on capital location? I mean, dividend consensus is close to zero this year, you said there would be no buybacks in 2023 and 2024. Does that profit pull from Yeezy could change a little bit your view on the dividend in particular? Thank you. Bjorn Gulden: Well, first of all, we need to generate profit, right? And you're talking about the Yeezy profit like it is in the bank. I think we need to agree that every launch we are doing with that product has certain risk to it. And that's why we're so careful, we got into this situation, because it's a very tricky situation A, with him, his management, the legal side with the trade, with the Jewish organizations, with the black community. So to maneuver here is a day-to-day, week-to-week. And that's why we're so careful. And that's why we don't promise any profit. The profit that we have generated you have seen, we decided to donate €110 million of it. The rest of the gross margin we have showed you in the €176 million EBIT line, which is mainly coming from that. ,: And our task is then going to see what can we transfer into other operations, so that we will, what should I say, contribute to other product lines or do we have then to write them off or do we then have to expense them in a different way? So there's many moving parts in this and that's why I think 2023 is not necessarily about generating a lot of profit. It's about cleaning up the issues we have, hopefully, get rid of the Yeezy inventory. So we clean, maybe we have to carry some of it into 2024. And then I think we should talk about, what should I say, profit allocation or capital allocation at a later point in time. Buybacks is currently not a topic, so should we do anything? We talk about dividends, but right now I feel we should get the business under control, the way we are promising you and that we should grow again and generate more and more profit. And then I think the topic is more relevant. And believe me, this company will be a good company, again, I promise you. But give us a little bit of time. Thomas Chauvet: Thank you, Bjorn and best of luck. Operator: Next question is from Piral Dadhania from RBC. Please go ahead. Piral Dadhania: Thank you for taking my question. Firstly, just on the revised guidance, negative mid-single digit revenue growth for this full year, the implied second half, given what you've already done in the first is kind of almost negative 10%. Appreciate that the North American markets under some pressure, but could you just help us understand what your expectations may be by major region or even by channel, obviously, wholesale under pressure. It just feels like that's a sequential slowdown given where you've come from in the first half, which has actually been better than expected on an underlying ex-Yeezy basis. And then secondly, just on business improvement plan, perhaps, I know that you've talked about it indirectly, Bjorn, but maybe you could just help us understand what progress you've made in the last few months around changes to the business and whether the €50 million one-off cost is directly attributable to that. Thank you. Bjorn Gulden: Well, the guidance you talk about is of course, conservative because it implies selling no more Yeezy and of course having problems in the adidas business in certain markets, that's what it implies. So that would then, as you rightly say, mathematically be almost 10% negative sales in the second half. Hopefully, that doesn't happen, but that's what the math says. And then when we gave out this, we promised you that we will not be – what should I say, positive in our outlook, but we will kind of play the worst case scenario and that's what it is. And hopefully, as we go through now the second drop of Yeezy and we go through the quarter, we can actually improve those, because we have facts. But you're absolutely right. That is what it is. When it gets to the business improvement plans, there's a lot of projects going on and there will be more projects, because of course we haven't fixed everything that we need to fix. I think we are getting a good overview on where the issues are, and then there will be many work streams necessary to kind of simplify and make the issues better. There is still a lot of work to do, and I think we should report on that when we get to the end of the year. The idea is to take all the findings and all the issues that we discussed and put them into a new strategy that then hopefully can tell you how we see the adidas business and the way we do it will develop over the next three to five years. But that will take another, I would say, half a year, nine months before we are ready with. I think you need to understand, we have a new team and taking over quite some difficult areas and we need to have some time before we issue a new strategy. And that has quite some work streams globally that we need to work through. So I think that's the only way we can say it. I don't know if you want to add anything, Harm. Harm Ohlmeyer: Yes. Let me add a little bit. I mean, if I look at the first half of the €70 million of one-time cost just to give some light and some transparency, I mean, most of that and Bjorn talked about a little bit, we built an infrastructure for our Yeezy or even more importantly for our e-commerce business that was meant to be €8 billion to €9 billion in on the game, of course, in 25 will be a different size. So in the €70 million you have some right sizing of some infrastructure already that we have closed or reduced. We have looked at some retail stores that do not perform to the way that we expected to perform. So we did some impairments or made some decisions on closures and roughly €20 million of that is already in some of the rightsizing of the organization in some markets. And again, we had some severances to be paid in the first half already that you're probably aware of. So that's pretty much what it is. So I would say, 30% in severance, 30% in infrastructure and 30% in retail closures and impairment. And again, we keep looking for the remainder of the year, what else needs to be done as we keep reviewing our strategy and make some decisions. So – but that's where we are right now. Piral Dadhania: Thank you. Sebastian Steffen: All right, thanks very much, Franzi. Thanks very much to Bjorn and Harm. And also thanks very much to all of you, first of all, for participating in our call today. And then of course for sticking to that two question rule. I think that actually worked quite well today. So this concludes our Q2 2023 conference call. As always, if there's any open questions, please feel free to reach out either to Philipp or myself. We're actually very much looking forward to seeing many of you over the next couple of days and weeks as part of our roadshows and conference attendances. With that, thanks very much again for your participation. Have a good remainder of the day, and for those of you who didn't have it yet, have a nice summer break. All the best. Bye-Bye. Take care. Operator: Ladies and gentlemen. The conference is now concluded and you may disconnect your telephone. Thank you very much for joining and have a pleasant day. Goodbye.

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the adidas AG Q1 2023 Conference Call. [Operator Instructions]. It's my pleasure, and I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead. Sebastian Steffen: Thanks very much, Francie, and good evening, good afternoon, good morning, everyone, wherever you're joining us today, and welcome to our Q1 2023 conference call. With me here today in beautiful Herzogenaurach, our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. Bjorn will kick it off in a second with his prepared remarks, and then both Harm and Bjorn will be available for your questions. During the Q&A session, as always, I would like to ask you to limit your initial questions to two and that's, of course, not because the fewer questions you ask, the sooner we will be able to head into our well-deserved weekend, no. That's, of course, because we want to allow as many people as possible to ask their questions. So please stick to the two question rule. And with that being said and without any further ado, over to you, Bjorn. Bjorn Gulden: Thanks, Sebastian, and hello, everybody. I will take you through the numbers, but also take you through some visuals to explain a little bit where we are and what we're doing. And I think it starts with actually the front page where here, you see the jerseys that we have made for all the teams that will play in the World Cup for women in New Zealand and Australia this summer. And these are jerseys developed only for the female teams, and I'm actually very proud of it. You have 8 teams here, actually have 10 when we go to the tournament. And as you remember from the European Cup in U.K., women's football is incoming, and as you see here, having 10 teams in that tournament shows you that we are heavily investing in women's soccer. If you look at the numbers, I'm sure you had a look at it so I'll go quickly through them. €5.3 billion in sales, which is basically flat, currency-neutral. And if you then -- as we have to do these days, look at the missing Yeezy, then we are actually up 7% without that. If you look at gross profit, losing 510 basis points is, of course, not good, mainly because of discounts and also write-offs of inventory. Of course, there are all the moving parts, which I'm sure you will ask about later, but that's the major reason. I think that down the road, our gross margin should again go towards 50. But of course, the gross margin will be the biggest problem for the rest of the year. If you look at OpEx, again, an increase, as you see here, around €110 million. And this is, of course, that part of our OpEx was planned and based on a higher sales. And of course, there's no leverage now when we are so far behind the plan that was originally set. But again, Harm and the team has been very disciplined in OpEx, and that's also then the reason why we actually are then having a small profit of €60 million despite, I would say, all the troubles. And it's actually better than what I had expected because I told you we'll have a small loss in Q1. And again, if you remember, the €724 million loss we had in Q4 then is, of course, a big swing. If you then look at the top line, minus 20% in North America seems dramatic, and it is, but it's also what we actually planned. If you take the Yeezy business into account and the rest of the business, it's down 5%. And of course, these are not strong numbers, and of course there's a big challenge to turn this around in the U.S. But also here, I do think we have a lot of, what should I say, initiatives in place, and I will take you through a few of them. Important for us, being the home of football or soccer, we extended the MLS contract during Q1 and that is strategic for us very, very, very important because I do think we have to own soccer around the world. And again, as you will see later, we are trying also to create much more soccer culture for the street. And to do that, of course, we need to play bolt on where we are today but also play on our heritage, and that's why it's important to protect our #1 position in soccer in the big markets. You see up in the left corner, where we tried some of the things that has to do with street. The designer, Daniel Patrick, worked together with the Red Bull team of New York and also took part in the fashion shows. Again, one of these initiatives to bring fashion, music and soccer together in a similar way that we're actually doing in basketball. Then we had Patrick Mahomes, the best football player currently, and of course, him being the MVP, we have also started to use him more in our marketing. Very, very important in America is the festivals. And as you probably know, during the last 3 years because of COVID, there was little activity. Now the Coachella was on the road again, and we decided to overinvest. We had a lot of presence there. And I think for the first time, there was also an Asian, our top group from Korea, Blackpink, our major stage and did a great job for us. We also had a great lineup of other artists and a lot of our athletes was there, and I think it's fair to say that our, what I should say, investment there was the most visible on the Coachella. I think Coachella then also was topped by our collab with Bad Bunny. You see here him on stage, but you also see our, what should I say, pavilion or launch or whatever you call it. And then the collab shoe, the Campus, that he has developed with us that you later will see is now also a best seller in the high end of the distribution. So this recipe works. The basketball investment goes on. I have said many times that I think to connect to the street in the U.S., we need to be credible in basketball in the court and then take that credibility on the street through our Classics or through new developed silhouettes. For the first time in the history, adi, I think, had 2 teams in the semi-final or the final 4 of the college tournament. Both Miami and Florida were playing in adidas. We also extended the Grambling State University that plays a big role in the street culture, and of course, we are continuing the signature shoes because it's part of this culture, and here, you see the examples of the Harden Volume 7. Maybe even more important that we finally were able to launch Fear of God. We did that in L.A. a couple of weeks ago, a great shop with Jerry Lorenzo. We had invited all our hyped customers there and it's fair to say that the reaction was great. You see some of the items on that slide. And here, you see the lifestyle direction on the footwear side. And the second picture is actually the first performance shoe, which is called Basketball 1. There will be a Basketball 2 and there will be a Basketball 3, so you actually see quite some performance shoes coming out of the Jerry Lorenzo's Fear of God. That is also going to be played in the NBA. I think personally that this is a game changer. You will start to see this product visible during the second half. We will have some commercial launches also at the back end of the second half, and then of course, this should be a major part of our basketball initiatives for 2024 and beyond. If you then look at EMEA, also here is slightly better than what I thought with a small plus. If you take Russia out, which you kind of have to, at least do for a while in the way you compare it, then we were actually up 9%. And the changes we've done there, remember, we announced or promoted Arthur, who was running the region to now be the Board member for global sales, and he has then decided to divide the European setup in this way that he will have 2 reporting lines. One is Mathieu, who has now been running, for example, the French business. He will be in charge of Europe. And then Dave Thomas, who's doing emerging markets, will not report into Europe anymore, but actually straight into Arthur. So that will be a change going forward. Two very good leaders that I think will help us get more growth in both regions. If you then go into China, still a negative number of minus 9%. If you take Yeezy out, it's flattish. But what is actually very positive is that the sellout in China is up in all our channels, meaning that our own retail is up double digit, and also, our retail partners are having positive numbers on the sellout. That means that we're currently selling in less than we're selling out, which is, of course, is the healthy way of doing it. And I think it's the first time in a long, long time that, that's happening. In general, a lot of energy in China when it gets to doing new things and the fact that they're not in any, what should I say, restrictions and that people are working freely and not sitting at home. Here, you see an example of that. They took one of our technical shoes from the '90s, the Climacool and did a tech launch only for China. Very successful, created a lot of buzz, and this technical look that adi used to do in the '90s is very popular, and the Chinese team did a great launch we did back in February. Also positive is that we have started using celebrities again coming out of, I would say, dance, skateboard and a little bit of music. It's not the way it used to be, but it's starting in the direction. And we see that has an impact both on the traffic online and also on the conversion. I think more importantly down the road is that we see that the Chinese are back again in sports. All the marathons, 5Ks, 10Ks, half marathons are sold out, which means that people are moving again after 3 years of little sports activity. And therefore, we have, of course, as adidas started signing a lot more athletes and also doing more events. And here you, for example, see the Shanghai Half Marathon which was sold out and we are sponsoring. So more sports interest, which is of course, plays in our direction. The 2 large regions, both Latin America and Asia Pacific, doing very well. Latin America growing, again, almost 50%. I think it's fair to say that we have a very energetic team that has the tools to grow. Flavia, our female leader there, is doing a great job. And I think we've given them more freedom in both doing local programs and also doing the assortments the way they want to do it, so a lot of momentum. And also in Asia Pacific, you see the positive numbers, so that's a positive thing. And that gives you then the flattish year-on-year sales, and again, the 9% compared to non-Yeezy. If you look at the channels, wholesale, where we sell into the retailers, and they sell to the consumer, plus 3%, own retail brick-and-mortar plus 11, I think we have 47 less stores now than we had a year ago. That means that the like-for-like number is a little bit higher and it's about 13%, both in our concept stores and in our outlets. And that shows you a positive, what should I say, development for, of course, selling out is more important than selling in. E-com, of course, different. Reported minus 23% and if you take Yeezy out, it's actually plus 12%. And here you see, of course, that the Yeezy business for our e-com business was very, very important, and we have not been able currently to replace that. And of course, that is then, what should I say, a challenge for the future. You should also know that we're trying to take the promotions down in e-com are trying to protect our franchises. So top line maximization is not the goal of e-com, but it's to make it profitable, protect the brand, and then of course, clear product where that's needed, but not to be promotional on in-line important franchise. That gives you the split in our channel of 66% wholesale, 34% D2C, which I think is now a healthy balance. And over the D2C, then you see the split between own retail and e-com is the 19%, 15%, which again, I think under the current conditions where we are, it's a pretty healthy mix. Look at the divisions. Footwear at €3 billion being up 1%, and again, you have to remember despite not having Yeezy. Apparel at minus 3% at almost €2 billion. I think it's fair to say that there's more apparel inventory around in the market than footwear, and I think we expected this, so not a big. Positive surprise is that the accessory business is growing and currently at 8%. And that gives you then the split, footwear being 57%, apparel 37% and accessory 6%. And again, I have always said in other companies that 50% footwear is a good ratio and here, even close to 60%. And I think we all know that this industry is led by footwear, and that's why I said also here for the future, we have a good starting point. What I'm very proud of, although I have -- cannot take the honor for it is that I've said all the time that I think the performance pipeline at adi is good. And you see also here, same thing as we talked about end of Q4, all performance categories up, all of them double digit, except for training, which is flattish. And I think that, again, is a healthy starting point because it would have been worse if we now are up in Lifestyle, but down in performance because we all know that, that is more difficult to turn. Football, the X, the Predator and the Copa, 3 fantastic franchises here in one of our packs. And again, since I'm new, I can promise you that all the franchises going into '24 is even better. And all the interaction we had with the distribution tell us that we look very, very good for '24 in football. Women's football gained importance. And I already showed you on the left side, the jerseys for the World Cup and also in line with taking this business series. We launched the women's ball, and it's ironic, but now many of the men's tournaments are actually playing with the women's ball because that's the way it is now in the pipeline, a great ball, which is also selling decently around the world. I talked about trying to bring Soccer more to the streets. One of the things we're doing there is to take all iconic jerseys from the '80s and the '90s and then launched them as streetwear. Here you see some of examples. And you will going forward, also see original product combined with football. And we did, for example, for some of the teams do some bus branded together with the teams and they sold out within hours. So a new way, I think, of using the heritage of the brand in a way that only we can do. Sustainability, as is important, as always, that's why we continued doing projects. And here is the Predator with Parley, and we will continue to do projects like this. What is new? We did extend the contract with Union Berlin, probably the biggest surprise in the bonus league, great personality, great people, fits our brand, so we extended that. We started our cooperation with the Kings League, something that maybe many of you don't know, it's a 7 against 7 league in Spain, especially in the Barcelona area. Very, very popular on Twitch. And I say YouTube, and youth channels, something you should have a look upon because it's a different way of actually being in the soccer game, and we are the major sponsor. And then I already said that we extended the MLS contract. We have 2 running campaigns. One, the Running Needs Nothing But You, where we used runners and other athletes. So you see Salah showcasing the mood of running and also, of course, the product. And then very important, we did The Ridiculous Run campaign where we talk about women being afraid or running alone outside a very important message and again, very important in our communication. Very proud again of our products. The adizero franchise, in my opinion, probably the best running shoes out there from a design point of view, but also from a construction, from a weight and from a last. And the reason I'm saying that is that these shoes are winning almost half of the races around the world. And of course, Boston was the most impressive one, we're number 1, 2, 3 and 4 in the Men's class was wearing adizero, and the #2 woman also. And you know when you have the 3 -- the 4 best ones, then it's definitely a credible thing for the products. Same thing here, proud. Adi, for the third time, had wrote records where they invite 140 of the best athletes in the world to run 5K, 10K and half marathon around our campus. We also had a run for our own employees, more than 1,000 people showed up, and it was a tremendous event for us and I think it's something that only adi can do. We had also other celebrities from other sports. You see Kaká here, if you remember him from Milan and Brazil. And this -- the live of our campus with athletes and our own employees and all the stars is a tremendous thing. And I get goosebumps when I think about it because this is the way I remember adi from the earlier days. Sustainability, of course, communication-wise and product-wise, very important. We used to do the run for the oceans. We have now widened this into Move for the Planet. The concept is that when you log on to our running app and you do sports for more than 10 minutes, we will donate €1. And the hope is, of course, that as many as our members does that, so we can actually collect as much money as possible to put into the different programs in sustainability, and the campaign starts on June 1. We also signed with Les Mills as a partnership in training, training being a huge category, especially on the women's side, and our partnership there very important, a lot of activities going on. And one of the activities also our partnership with RHEON where we have taken materials that has been developed actually in the space program with NASA and put that into our leggings and our bras. And again, a highly technical product to build image in the training side and especially on the women's side. More women. We had a celebration of Mikaela Shiffrin winning 88 World Cups, 2 more than Ingemar Stenamark. And of course, she being part of our family, we're very proud. She also spent the last week here on campus and was an integral part of many things that we did, and a fantastic athlete and a fantastic person. Outdoor in general, you know there is an Outdoor boom. We have TERREX connected to it. Also here, focus on women. You see here the women hiker. We did collab with the National Geographic, both in footwear, apparel. And here also inspired by the Japanese market. We did a collab with And Wander, which is a Japanese outdoor label. And again, a lot of activities going on both in the true performance, but also in the lifestyle area. And again, Outdoor being now under the TERREX label doing well. For those who are interested in golf, we finally launched UltraBOOST also in golf. I think it's fair to say that BOOST is the most comfortable form in the industry, and there's no other sport where you spend so many hours in the shoes as in golf, so it was very logic than to put UltraBOOST into golf. And needless to say, the most comfortable shoe in the market, and I can only suggest that you try it because it's the best golf shoe that you can have. We continued also with more aggressive design on the apparel side. Here, the floral design that we did together with Rose Zhag. She is the best amateur in the world of golf, been that for 3 years. And here, you can see she looks great, and I'm sure she will be pro in a very short period of time. I'm a sports romantic, many people here are. Adi has always been very visible in many sports, and that's what we're trying again to nurture. We have, since we talked last time, resigned All Blacks. All Blacks being maybe one of the most symbolic teams in the world. They will also be here on campus preparing, I think, 10 days in the preparation for the World Cup in France. And we will launch a spectacular jersey for them during that time, and we will extend the offer into lifestyle because their logo is carrying a lot of lifestyle appeal. So you can see -- or expect to see a lot of interesting things on that. In special sport, proud that we have 2 female boxers from India who both won the World Title. So again, focus on smaller sports on the female side. And then a special thing in Germany, you will have the Special Olympics in Berlin in June. We outfitted more than 400 athletes of the German delegation the other day. Again, our commitment to sports and very, very important for our DNA. That was Performance. We have talked about having issues in Lifestyle. You see both Sportswear and Originals still being negative. But we also see some highlights. The TERREX, the range still doing fantastically well. I think the energy in certain markets around these models are great. And you have to remember, we haven't scaled it yet in a way that you see it in the numbers. There are periods coming in as we speak in much bigger numbers, and this will start to have an impact on our business going forward. New is that we have another winner. That's the campus that you see on the foot of this model. Not a TERREX style, not a Tiro style, but again, one of our classics. And I think that the way we have done collabs, you see it here together with Bad Bunny and you also see the Samba that we did with Ronnie Fieg, is causing a lot of energy. And as you can see outside the Kith store in Tokyo, people are lining up in hundreds to actually buy this product. And of course, that's creating a later high-low effect for our brand. In general, a lot of activities in lifestyle going on, a lot of positive feedback. Of course, with many things that's still not as scaled, but you know you need to do small things first to get heat back again and then scale them. And I think it's fair to say that when we work through our archive, we are in a very good situation if we can manage this properly. I would not be surprised if you also see shoes like Superstar coming back heavily, as you see in white, black and black-white, because we already start to smell it. The trend magazines and in the, what should I say, fashion areas, and then we will have another winner. Great job of Adidas with Gucci. I think the Samba boom that we see is coming out of this cooperation, and here, you see some examples of it. And again, I think both the Gucci team and adidas team has done a great job on these lines. And I guess that at least I have very, very many so-called friends who wants to get their hands on this collection, and of course, I will try to help them. Pharrell talked about it last time, now being the LVHM head lead on the Men's side. Here is his take on the Samba thing where he will launch many, many fashionable colors together with us in the second half of the year. Very cool, I would say, development. Sportswear also starting to turn around. We now have a positive order book. Here you see the Jenna Ortega and the AVRYN shoe. And again, the things are starting to go in a direction where we also get the right volumes on this. That was the physical product. We're also dealing with the Metaverse. There was a fashion week end of March, where all the brands were showcasing in that space. I'm very proud that we also here are very active and that actually, our launch was the most visited also in this space. Probably not my world but the world for the younger generation, and we are actually investing quite some time and energy with talent also in this space. That was sales and products. Very quick on the balance sheet. Inventories, as you can see up here, 25% are reported. That's 27% in neutral currencies. I'll get back to that in a second. Accounts receivable flat, of course, because our wholesale business is flattish. Accounts payable, down €600 million. Same thing again. This is also proof that we're sourcing less, buying less, which is in the strategy of getting our inventories down. And inventories up, accounts receivable flat and payable being down causes then working capital to go up. And of course, this will start to normalize as we get a better balance on these short-term activities. That means cash and equivalents at around €800 million. I think Harm's goal is to be around €1 billion, so we are in the ballpark of the number that he wants to have. Inventory, just a quick one on that. As you can see, €5.7 billion. The Yeezy part of that is €500 million. If you remember, back in Q4, it was €400 million, so that tells you that there's another €100 million that came in. And this is what we told you that when the contract was broken, we had things in production that we continued with to not what should I say, have people in the factory lose their jobs. And as you can see, then €100 million has been delivered into our inventories also on the books during Q1. I have the feeling that if you take the Yeezy out, we are at €5.2 billion, which is less than we had in Q2 last year. And I think with the plans that we have that we should have, our inventory in control, both from an amount and also from a mix at the back end of this year. When it gets to the relationship to the trade, we are leaving the on the game and feel that we now have to earn the game. We have invested over the last 3 months' time, energy and, of course, resources in really showing our retailers what kind of partner we can be. A couple of weeks ago, we had the owners and the CEOs and the most important people or most important retailers here on campus for 2.5 days where we showcased everything we have. We showed them the pipeline and innovation. We showed them the Campus. We showed them the resources. Of course, we showed them the product. And we also showed them the new creative direction of the brand. And if they have a nice wrist wear, they could also play, for example, paddle with, [indiscernible] and take part in other activities. For me, a great, great event with a lot of good feedback. We did the same specifically for football. We invited again all the football specialists to be here for 2 days, went through all the product and concepts for '24 and also the innovation pipeline beyond. Had players like Del Piero, Alonso and also our long-term partner, Beckham, here, and again, in a great atmosphere. And again, as being new to the brand again, the feedback on the '24 line is fantastic because I think it's the best line both for footwear and Apparel, including Lifestyle for Original that I have seen. Running. I told you already that we have the products, we have the technologies. Of course, we don't have the market share yet for A, winning the races and B, having the products. So again, we did the same thing. We invited the specialists to be here for 3 days. They were also here during the Road to Records. And I'm very, very sure that Alberto and his team will get better distribution because now we have the product and look forward, A, to only not get credibility, but also get commercial business in the running area going into '24. At the other spectrum of our business not in sales, but in sourcing, we did the same. We invited all our suppliers for a 3-day summit in Jakarta where we again presented where we are, both positive and negative, and had a very honest discussion about what we need to improve. Topics like speed to market, topics like local sourcing, and of course, trying to share resources was the major topics. And I have the feeling that was very, very welcome. And again, I love these suppliers because they have experience making products for many, many, many years. And I think we need to use the technology even more than what we have done. So that was what we have done. A quick look at the outlook. It shouldn't be surprise for you, a big, big focus on the core of the business. Design, development, sourcing, which is the creation of the product. Then marketing and sales and then, of course, delivering it as good as we can. And neither -- or if it's wholesale or DTC, doesn't really matter, we need to do both better than we're doing. And of course, in the middle of all that is the consumer and everything we do need to reach the consumer because if not, it's a waste. That also means that in '23, we will continue to focus on things that are important to build the base for '24, which would be a better year. And that should again then lay the groundwork for '25 and beyond which should be, I would say, good, good years. Most importantly, that is our people. It's obvious that the people have had a tough time during COVID, not being on campus. And of course, when the results are not good, the atmosphere is not great. So important that we create that adidas spirit again, which adidas was known for. Product is king. Without the right product, we will never win, so product is hero. Everything we do should hit the consumer. Retailers is our partners, and I really mean partner. We need to share all ups and downs with them, and they need to feel that we are the best servicing partner in the industry. And then, of course, we are there for the athletes and not the other way around. And that's an attitude that adi has always been known for, and that's what we're trying to wake up again. You know better than me that there are still some challenges in the environment. The geopolitical tensions and the situations is still not good. There are macroeconomic challenges although, at least what I can see, there are some positives. Inflation is coming down. The raw material prices have come down. Freight has started to normalize, so at least there are some external factors that help us. And then the high inventory levels that you have seen or we have seen are still there, but my feeling is that when we get to the back end of the year, I think the whole trade and the brand should be in a better shape which will, of course, help all of us. You put that all together, and we confirm our guidance for '23, which we have said from the beginning is a transition year. Net sales with a high single-digit decline and an operating model that is now basically a breakeven. The assumption for that is that we don't sell any of the Yeezy inventory which then translates into a €1.2 billion lower sales and a loss of operating profit hypothetically of €500 million. In addition to that, we said that we could see an operating loss of €700 million if we have to write off the existing inventory, which would then be the €500 million of the balance sheet. And then on, of course, based on all the strategic changes we need to do of around €200 million. This is in line with everything we told you last time we spoke. So again, we have all the ingredients for success. I am -- so very positively, I wouldn't say surprised, but confirmed what I've seen. But in the short term, we're not performing the way we should. And I hope you have some patience with us because for us to short term, try to show numbers would not make any sense. We need to manage through the year in the best way. And then, of course, using all the energy to do the right thing also for the future. So with that, I hand over again to you, Sebastian. Sebastian Steffen: Yes. Thanks very much, Bjorn. And Francie, we would be ready to take the questions now. Operator: [Operator Instructions]. And we have the first question from Erwan Rambourg from HSBC. Erwan Rambourg: Congratulations and good to hear you're alive and kicking, Bjorn, after your recent accident. So I'll keep it to 2 as planned. Just on China, I'm wondering if you can comment on your vision of Western brands relative to local Chinese brands in terms of market share? Do you think we could see a situation later this year of stabilization of market share? And maybe just related to your business, you said that you were down 9%, and at the same time, sell-through is up double digits. So should we expect a snapback, a rebound in Q2 for sales? Or is that still a bit premature? And then maybe secondly, I think you made a few comments around the fact that you were hopefully a bit closer to determining exit options for Yeezy. I'm just wondering if you could take us through what the latest thinking is on the possibilities there? Bjorn Gulden: Yes, I'm doing fine after my ski accident. I never look pretty and I don't look pretty and also enough so small damage, so -- but I'm okay. In China, we need to be careful because the positive thing is the following. We have so in less to the trade that they have sold out. So that means, for the first time, inventories in the trade of adidas product is going down, and there is a demand that the retailers haven't seen for a long, long time. It's the first time I see this in many, many quarters. And that makes all of us, of course, positive. We also had our 2 big retail partners from China here in headquarters, and it's the first time again that they see, I would say, not on the light of the tunnel, but see some normal developments coming. That gives our team, which you remember has been almost in 2.5 years kind of quarantine or under heavy restriction of course, have a lot of energy, and there's a lot of activities now going on in China that is consumer fronted. We talked about athletes, we talked about culturally-relevant events. We talk about in-store activities. And also in the social media side, starting to build campaign again to generate traffic and conversion. So that's very positive. The reason why I'm hesitating to say, okay, that would mean that Q2 and Q3 will be up in sales, of course is again, if I say that and it doesn't happen, you get mad at me so I'm careful. But the indication is, of course, that if this continues, that will happen. It's obvious. And I do think you will see an increased top line coming in China. But don't arrest me on quarter-to-quarter because it's impossible to kind of be certain about that. My personal feeling when it gets to market share is that, of course, all the Chinese brands have exploited the last 2.5 years and in a very smart way. But I do also -- and again, from everything I can see, feel that is being saturated so that the growth that they got almost for free is starting to slow down, and that you will see Western brands, again, starting to take back some market share. And I, of course, hope that we will take most of it back again. I do not think that China will be 1-to-1 the way it was because competition is, of course, now harder. But I am counting on China being one of our fastest-growing market and also one of our most profitable markets, if not the most profitable. So I am or we are, I think, realistic, optimistic mid-term about China. When it gets to the Yeezy, there is nothing else to say than what we said last time. We are working on different options. The new thing is now that all the inventory is now on our books. Most of the inventory are in the right warehouses and that we could theoretically sell product if and when and how is still in the evaluation. But of course, the decisions are getting closer and closer because that's the way it is. And we have spoken to all interesting parties many times, and there are 3, 4 scenarios that are now building. And as soon as we have, what should I say, all their evaluation done in a way that we and then, to be honest, even our Supervisory Board feel comfortable, we will then go out with the decision. And that could happen in the, I would say, mid-term, in the future. Erwan Rambourg: Best of luck. Operator: The next question comes from Simon Irwin from Crédit Suisse. Simon Irwin: Can I firstly just come back to you on China, particularly since you've had the partners in town. How many points of distribution have you now got in China? And has that bottomed out? Or do you think there's kind of a further decline to come? And secondly, when you talk about the route to margin, you talked about gross margins of up to 50%. So to get to the 10%, you mentioned -- 10% EBIT, you mentioned on the last call, implies at least 500 basis points of operating leverage. I mean, do you -- is it leverage or do you see an opportunity to cut costs? I mean, how do you think you cross that gap and how long do you think it will take? Bjorn Gulden: The number of sales points in China, if you combine our own, our partners is around 8,000. Now you have to remember that only points of sales is not relevant because it's also the size of them. And what you have seen during COVID -- actually, before COVID that they were starting to open bigger stores. So instead of the numbers, it's also the total amount of square foot. But we have reduced, I would say, the number of sales about 2,000 stores and it's now around 8,000. But it doesn't mean that we have reduced 20% of the square footage because some of the stores are bigger. I think that right now, that is good, but then I do expect again as the business stabilizes in the growth mode that we can open stores again in the third and fourth and fifth tier cities again, that you will actually see store base is going up again. But again, that's too early to do right now. When it gets to the gross margin, then 45% is, of course, not acceptable. Even with a 65-35 split between Wholesale and Retail, the margins should be close to 50%, if not 50%. And again, it's not only leverage. It is -- you have to remember that we are running at a very high discount. We have, because of the high inventory, written off high values. And then again, a lot of the inventory that we now are selling have a very high freight because it's been bought at container rates about 10,000 and has also, from the sourcing cost, has the highest price. So I would be surprised. I'm looking at Harm, but I hope that this is the lowest gross margin that we will have. This and the next quarter are kind of the type of product that has the lowest margin, and then it should start to improve in the second half. To get to the 10% EBIT, the math is pretty easy. I mean, you need 50%, 51% gross margin. You're running marketing at 11%, and you can have an operating expense of 30%, then you are at the 10%. And this is where we should be, to be honest with you. And that is not impossible with what we have as a business. We just need to get into a normal stage where we're not all inventories, and we're focusing on our Wholesale and Retail business in a more, what should I say, realistic way. I clearly see the 10%, but I'm not saying to you it's '25, '26 or '27 because then you will be disappointed if we do something wrong. I hope you give us '23 to show that we know what we're doing, that you see some improvement in '24. And then the acceleration of our EBIT then depends on all these factors. But I think we all -- and I'm looking at Harm, we should have 10% as a target, and that should be realistic. Harm Ohlmeyer: Yes. Definitely, Simon, no doubt on the 10% in the midterm, but I want to echo what Bjorn said on the gross margin. We have reached the lowest points. Q2 already, we'll see some progress given the progress we make in China with the inventory situation, the better sell-out with our customers, largely normalized inventory situation in the next quarter in Europe. And again, North America takes a little longer, but it should sequentially improve. And then to your question on the leverage on the operating overhead, of course, we are not happy with those 33%, 34% that we have reported recently. But the key thing is to get growth into the company. But secondly, that's what the €200 million onetime cost in this year is also for that we -- if we look strategically at the right elements to put in this €200 million to have a better base for next year. But that is something where we want to be carefully review the right actions. And clearly, the operating overhead needs to get closer to 30%, if not below 30% over time. But this is not something that we will see in the next quarter, so it will take time. Operator: The next question comes from Adam Cochrane from Deutsche Bank. Adam Cochrane: A couple of questions on, firstly, on the wholesale order book. Can you give us any or shed any light on what the order book position looks like for 2Q and 3Q and maybe even early signs for the fourth quarter? And then secondly, you talked about sourcing more inventory for some of your bestsellers. Can you just talk through how important that could be, how much of the demand you can fill on a reasonably short time scale for those products, which are selling well? Bjorn Gulden: When I said we're scaling the things that are trending, then you have to remember that many of these shoes, especially the Terrace [indiscernible] were meant to be in what we call incubation. So they started in collabs on high end of the distribution in the second half of '22, like the Gazelle did with Gucci. And then the plan was still to incubate it and built heat during '23. But when I came in, the demand was so big that we said, hey, we need to scale it now. And that's why we went from some 100,000 pairs to now actually looking at million pairs and we have done that pretty quickly, to be honest. We put brand sourcing, finance and the supplies together with the commercial team and changed all that plan already the third week of January. And it's easier now because the capacities in Asia and the factories are easy to get because you have to remember with all the inventory issues, there is less orders in the factories than there has been. So we could scale that pretty quickly, and the first time that you actually see some substantial volume hitting the big market is as we speak. It's now in May, and it will stay as a pretty high volume during the whole second half. The trick now is, of course, it's not only one shoe. It's -- if you look at it, it's actually 4 different styles. There might even be a 5th one coming, and we need to manage them now so that we still, even if we scale it, keep supply lower than demand so that there's still heat and that we continue to do both collabs and other marketing activities to keep these franchises hot, and I think that's a test for us. Can we do that disciplined? And very, very important that commercial and brand and the sourcing side works together, and I think that's how you should judge us if you do it in a good way. But I have a very, very good feeling. When it gets to the order book, we are not publishing the order book, and there's good reasons for that because if we had, you would see that the order book last year would not be relevant because of all the cancellations. You have to remember that last year, everybody ordered too much, and the order book at the second half of last year was inflated and it was never realized. That's why it's hard to judge now what is the order book. It is negative against the order book you had in the beginning, but that was inflated then it never happened. And we are trying now to manage the balance between clearing old inventory and then having enough new inventory that is selling through, not necessarily to take all the business. We're not chasing business in the second half because we think that will be too risky. So don't expect us to show growth in the second half, but expect us to see that we're following the plan of taking down the inventory and then having the basis to have decent margins going into '24. So we are not in change mood to, what should I say, surprised you positively on the top line because the risk of that would be too big. And again, we need to clear the old inventory. So that's the strategy. Adam Cochrane: So if we were to think about the inventory number that you published. Is there a big difference between what's at hand and in transit within that number? Bjorn Gulden: I mean the transit number here would normally be around, I would say, a quarter maybe, ballpark. And that transfer number is not necessarily a lot different than -- that's actually smaller than last year. It is actually, if I'm really honest with you, it's probably €400 million lower than last year. So -- and you can see that in the payables, right? So the reduction in payable is mostly the difference in transfer because you see we're buying less and also. Operator: The next question comes from Piral Dadhania from Royal Bank of Canada. Piral Dadhania: So could I maybe start with the gross margin? Are you able to share in a bit more detail on the moving parts in Q1? I think Bjorn mentioned that the 2 biggest factors were markdown and inventory write-downs, but just curious if you could share with us the quantification of the other factors, which are obviously FX, channel mix, regional mix and so forth? And then my second question is just on the U.S. Obviously, the well-flagged pressures in the U.S. market for various reasons. Could you maybe just share a little bit more in terms of detail around how your inventory clearance process is going there? How you see inventories at your -- some of your key distribution partners, whether those are full price or off-price? And how you expect the business to evolve for the remainder of the year and whether you believe you can get to a clean inventory position in the U.S. by the middle of the year as you're expecting for the other regions? Bjorn Gulden: I'll do the U.S. and then Harm can take you deeper into gross margin. The answer to U.S. inventory midyear, no. The inventory issues in U.S. is bigger than that we can have that normalized the midyear. And the reason being that the inventory level, we are now channeling most of the excess inventory through our D2C. That means that our factory outlets, for example, which normally should have fresh merchandise also coming directly out of factories is now being only serviced by clearance, which again takes your margin down. And there isn't any way right now to clear excess merchandise through channels that you normally do. The value channel with the TJ Maxx's and the Ross' and stuff are also full. So that's why our approach is to do this over 3, 4 quarters and not try to flush it in 1 quarter because it won't help because it will come back again. So I would say that all other areas the inventory should be, what should I say, normalized during Q3. I think the U.S. inventory will still be there for a while. And again, it will be there for a while in the sense that instead of buying new merchandise for outlets, we will actually fill them with excess inventory. So it will have an impact on the U.S. business for a longer period of time both on the top line and the gross margin line. I think that's the honest answer. Harm Ohlmeyer: Yes. Piral, on the gross margin, more details without giving you the decimal number because there's a lot of mix effect within the mix effect, right? So we can talk about channel mix, but then there's an Yeezy impact on the channel mix as well. So I just want to keep it simple. I assume there's not a big channel mix impact. There surprisingly is not a huge currency impact as well in the first quarter. The biggest impacts are actually FOBs and supply chain costs. Especially on the supply chain cost, that's the freight because the freight was peaking in October -- in September, October times last year. And of course, we are realizing the freight cost in the margin when we are selling the product. So Q1 is definitely the biggest impact from a freight point of view. Then, of course, significant was inventory allowance, given our calculation that we had the first impact of fall/winter '22 inventory being partly allowed for in Q1. And again, clearing the inventory discount. So the significant headwind is supply chain cost, especially freight, inventory allowance and discounts. And of course, to some degree, Yeezy. And then you have a positive, and that's the only positive is pricing that has been carried forward from last year as well. So the prices are still -- they're holding up for the fresh products that we have. That's the first quarter and largely the first half as well. What's going to change for the second half? First, freight is definitely almost normalized to where it used to be 2 years ago. That will be less negative in the second half. Inventory allowance will be neutral in the second half because that's the timing right now as we're moving through the fall/winter '22 inventory that will be normalized into the second half. And of course, as we move to the inventory first in China, second in Europe and then later in the year in North America as well, as Bjorn just mentioned, discounts are easing and should be more positive as well. And everything else is pretty much neutral. But that's how we should look at the second half. That's why I also repeat what I said, Q1 was the worst margin for the year, and we always see improvement in the second quarter and then more to come in the second half. Operator: The next question comes from Jurgen Kolb from Kepler. Jurgen Kolb: Two indeed. First one is really on your €200 million restructuring or business improvement plan. Have you any additional information for us on this front? Have you identified additional projects or something that you could share with us? And second one, thankfully, you detailed breakdown into wholesale, DTC, owned retail. At the same time, you talked about products, running, football, basketball, what have you. Could you also maybe give us an indication about the breakdown in the footwear category into the different categories, running, football, what have you? Or if not currently, then maybe what an ideal breakdown would be given that these individual categories obviously different in size from a global perspective? Bjorn Gulden: The second question, the breakdown in each channel by category, what we have and what will be optimal, I think you and I should sit down and discuss that when we have product in front of us because it's impossible to explain that on the phone. You know that as a brand, we need to have a certain performance business that carries the image of the brand. And in sports specialty, if you look at a running specialist, that should be 90% performance product. In a football retailer, it should be 100% performance. And then when you move into the family channel, I mean, is performance, right? So you have to, what should I say, be very detailed to look at that, and it's hard to find numbers on it. In our own distribution, it's obvious that if we have a concept store on Fifth Avenue, then we will try to showcase all the categories. So normally, the mix will mirror the mix that you have as a brand. If you have a small store, then depending if it is in a pedestrian area or it's in a strip center, it will be fashion and lifestyle in a pedestrian area and it will be more multi-category on a strip center. So it's a very difficult thing to explain because there's so many moving parts. A new trend that you might be interested in is that we see actually that the differences between performance and lifestyle is disappearing. If you look at brands like HOKA and ON, which you talk about as running specialty are now starting to sell even more products on the Comfort, and I would say, on the lifestyle area, and it's the same product. So again, the consumer in the end decides what the product is for. And I think you will start to see that distribution between fashion and performance is starting to be more loose, and that's why the old segmentation and the old way of distributing product is going to be a little bit more, I would say, loose, and that will change some of the classifications even on the product. So I think that's all I can say because it's very, very difficult to give you any numbers on that which would make sense. Harm Ohlmeyer: Yes. And during on the €200 million, there's no more detail that I can give you right now. But as I said previously, it will be a combination of potentially the one or the other retail store closure. We will also look at what we have built in the digital space. And as we know, without the Yeezy component and with a different trajectory in an e-commerce, we will look at some of the infrastructure that we have built there. Maybe the one or the other application or system need to be impaired, and we look at that overall structure. And of course, we will go through some selective rightsizing in the organization potentially here and there. But that's something we haven't decided yet. But also rest assured, we have not reported any onetime items in Q1 because it hasn't been meaningful yet. But probably going into Q2 and then more pronounced in the second half, and we are clear on how we want to move forward. Also going into '24, we will be more transparent what's in that €200 million bucket. That's how we look at it. Jurgen Kolb: Fantastic. All the best. Operator: The next question comes from Thomas Chauvet from Citi Research. Thomas Chauvet: The first one on lifestyle on Samba, Gazelle and Campus, Terrace shoes. You said, Bjorn, how quickly demand went from 100,000 to millions of pair, are all the lifestyle products that could experience the same kind of upside to your maybe internal forecast, initial forecast? You mentioned Fear of God. Anything else? And for Terrace, will you be willing to test some price increases once you lap the huge initial success especially if you keep supply low? And secondly, on Russia, there was a detailed article in Russian newspaper earlier this week about a potential agreement to sell the stores to a partner a bit, I guess, like what Inditex did recently. It was in Russian so I had to translate that. It wasn't so clear. Could you comment on that? Or on your, more broadly, your options in Russia? Would you want to follow that route or to contemplate a return to Russia? And if you could remind us what the size of the business was in 2019 -- sorry, in 2020 -- sorry, '21. Just before the -- well, yes, probably in 2020, '19 before COVID and before Ukraine and the wind down of the business? Bjorn Gulden: I mean on the -- what should I say, scaling of the product. If you think about our archive, we have many shoes that we can scale. And again, I think the good thing is that there is an energy being created right now which wasn't there a year ago, and it's now up to us to manage it properly. And it started with what we call Terrace with Samba, Gazelle and Spezial. Now there's another court-shoe, Campus, coming, and we start to see some movement also on the Superstar. All this being court-based and of course, the danger is that we need to manage this properly so we don't destroy any of them. So they need some discipline, but I think they're all scalable. What we desperately need in the next 18 months is also to find silhouettes on the running lifestyle. We had a huge success with some of the Yeezy shoes that were running-based. We had NMDs that were running based, and we had all the models. And right now, on the shelf of the lifestyle account, there is very little running that is coming from us. And that's one of the special projects that we're now working on with our new creative people is to develop new silhouettes together with also old classics from the '70s and '80s, which we have in the archive. So we need both. And again, I think all the shoes in that €90 to €120 price points coming out of the archive are scalable. And that's why I feel I'm sitting in a very good situation midterm because we have all these shoes, and you know they come and go. It's just a matter of managing them and also have enough resources on telling the story and heat them up so that we don't go up and then go down again, which has been the history of adi and where we have to admit that Nike has done a much better job. But it gets to the price increases, we need to be a little bit careful because you know that when cost and freight and everything go up, there was a lot of price increases in the market also from adi and not all of those worked. That's why in the in-line normal styles, I'm not looking at price increases, but then when we do collab like Bad Bunny or we do, what should I say, limited editions with different materials, there is much more air to then do higher prices, which is then creating the heat on the style. So this is a little bit a puzzle of making sure that you have stories, that you take prices up on special editions, that you do collabs, but that you keep the commercial price points, I would say, between €90 and €120 million. Above that, on the court side, it starts to get difficult. And I think that is not what we should do. At the same time, you can do takedowns. Also, what you do at €100 and €110 million as an Original, you can also do at €60 as a takedown in the family channel. And this is, of course where, for example, all the companies have done a better job than adi has done, and this is something we're working on to capitalize on the heat on 2 different price points in different distribution channels. So again, still a lot of work to do. But again, we have all, as I said, the ingredients. And if we get a little bit of time where we can manage this and do it in a proper way, I'm actually very optimistic that we can have more franchises at the same time play in more distribution channels, and that we can then have more consistency and when we are phasing things up and phasing down and do a better job on it, which is the task. When it gets to Russia, I'm looking at my friend. Harm Ohlmeyer: Yes. When it comes to Russia, first and foremost, nothing has changed. We're in the process of winding down the business. But as you all remember, we had a pretty significant operations in Russia. We have our own warehouse. We have a long-term lease with our office. We had many retail stores, and of course, we are in the process. We have already sublet most of our office space. We have transferred or notified some of the retail stores. We are in the process also to transfer some of these stores or sublease some of the stores. And of course, we are looking at opportunities and multiple options for our warehouse as well. But really clearly, nothing has changed in winding down the operations. Thomas Chauvet: So no plan to return to Russia anytime soon? Harm Ohlmeyer: No. I mean very clearly, there's not one store is open or e-commerce business, and the warehouse is still operating because we still have -- which is not a lot after 1 year, still some leftover inventory of Yeezy that's still being transferred and sold in Russia, but that is part of winding down the business and clearing the warehouse and then finding somebody who is subleasing it or who would take it over, which is not an easy process in Russia nowadays but that's what we're working through. But nothing else has changed and no operations in Russia. Operator: The next question comes from David Roux from Bank of America. David Roux: Just two questions from my side. Just to go back to the points around marketing. Could you perhaps give a bit more detail as to how you plan on getting down to 11% of revenue? And just remind me, has adidas achieved that before? And then the second point is just on the OpEx. In terms of the cost savings from the existing €700 million BIP program that was flagged for this year, I think it was in the back end of last year. How much of the €700 million was realized in Q1? Bjorn Gulden: The marketing, if you look at most successful companies in this industry, a marketing expense around 11%. It might be 10.5%, it might be 11.5%, it might even be 12%, have kind of been, at least what I have seen and what I manage my previous business, is that. And it is the same place where adi is. Of course, the percentage depends on what your top line is, and that means that it can vary a little bit. If I look at the activities that we have and the fact that we're spending €2.6 billion ballpark in marketing, that does include also performance marketing, which is what you're doing in your e-comm to drive traffic. Of course, that should be enough for us to kind of develop the business where we are. At the same time, there's always changes so if you look at the big teams, if you look at the big players, there is some inflation, contracts have to be renewed. So I have, at least in the brainstorming with Harm and the rest of the management, not even put in a target to save on marketing. We have said that let's see what we used in the last 3, 4 years. Let's go through all the assets we have. Of course, there's some assets we don't need, and then there's some visions we have. Of course, we would have liked to have Holland, we lost him, but there are other prospects. And I think that will mean that we will not save on marketing. But again, being at 11% or 11.2% or 10.9%, I think right now that is not really relevant, to be honest. It is to make sure that we have, in absolute terms, enough money to do what we need to create the heat that we need. And again, €50 million up or down doesn't make the difference. And the percentage is a little bit the result of what the end of the top line is. So I feel that we have a good base of assets. I feel that we have, I would say, decent marketing plan. I do think we need more media money to actually tell the stories, and that's just one of the challenges, how can we make sure that all the good stuff that we are going to bring in the next 12 months, how do we make that visible to the consumer both globally and locally. And I think that's one of the challenges. But I would view, if you're trying to model us, look at the marketing expense of 11%, 11.5% as a benchmark. And then if there are variance, let's talk about it. But it's not a goal to find leverage on the marketing right now. I think that will be the wrong signal. Harm Ohlmeyer: Yes. When it comes to the €700 million business improvement program, we do not want to track this now on a quarterly basis and be transparent about it. What we clearly said is it is a combination of cost mitigation where we wanted to keep the ratios. Like on marketing, we wanted to keep the ratio on a potentially lower sales. That is also mitigation. We, of course, renegotiated some of the freight contracts that we have. But if I now try to compare Q1 '23 with Q1 '22, it probably doesn't look that good. If I compare Q1 '23 with Q4 '22, of course, it looks better. And that's why we don't want to get into this one. But we clearly, and also in selective salary round, we are very careful on hiring and leverage the attrition that we have in the company. We look at all ends. But again, it's a combination of mitigating cost increases that we saw coming already last year and real savings. But rest assured that everything that we have communicated last year is built into our not just internal budget, but also into our guidance that we gave to all of you. So -- and we want to focus on the guidance that we have given that we deliver on this one. David Roux: Very clear. And I'm very happy to see UltraBOOST, now on golf shoes, so thanks for that. Harm Ohlmeyer: So are we. Now we have to go find the time for it. Bjorn Gulden: It doesn't help against your slides though. David Roux: Anything could help against that. Sebastian Steffen: Thanks, David. Operator: The next question comes from Cedric Lecasble from Stifel. Cedric Lecasble: I'll have two with follow-ups on the previous ones. Bjorn, maybe after few months within the company, what's your view down to vote for the kind of achievable targets for companies like adidas with the assets that you know very well? And especially versus initial targets before the problems jump in of like 8%, 10% organic growth, 12%, 14% margin, like long-term sustainable profitability. What's your view on the previous goals of your predecessor at some point in time? That would be the question number one. And question number two, in your ambition to recover the 10% profitability without -- with China at 15% of sales versus 25% and Yeezy out, would you need to -- what would be the main levels that create successful platforms such as Nike that you elaborated a little on being more efficient than before? Or do you need to go China to more than 15% of sales and to grow market share in China to reach this ambition? Bjorn Gulden: Well, Cedric, that's kind of 1 hour speech, if I should answer all those questions. And I hope that when we get to our new midterm strategy, that's what we're going to tell you. But to simplify it, I do think that we need to have a different business model than Nike. You have to remember again that Nike has a centralistic business model coming out of the U.S. where they generate what I call the American street culture and they export it. It's an efficient model as long as that works and then we will see down the road if it still works. I think we, sitting in Germany, doesn't have a German street culture to export so we need to do it in a different way. And that's why the strategy for us in the future is to have creation centers that works on Lifestyle products out of Herzo, out of L.A., out of Tokyo and out of Shanghai, and the sum of that is our offer. That is less efficient on the cost side but might be more efficient on the consumer side. So the -- what should I say, our strategy will be to be the best sports brand globally from a credibility point of view, but then execute more local which again then, of course, could be limiting your max profitability. That's why I talk about 10% and not 14%. And again, everything I have seen in the 4 months both from people, from structures, from innovations tells me that we have all the chances to do this in our way. I don't think I should comment on previous targets and strategies because I don't think that's my job. I look at the market and I look at this fantastic brand and I put the pieces together. I look around the table and we all say, yes, 10% is achievable. And yes, we agree we should be adi and not Nike. And if there is an upside to that, then there is an upside to it. I don't think we should now force ourselves into artificial numbers on e-com and say that China should be 18% or 14% or whatever. Let us fix the basics, let us set up the structure, let us clean up the inventory and then we can have a midterm discussion when we come with our strategy. But the 10% is achievable. And again, I really think that adi has a special DNA that should have a business model different than anybody else and we should be visible in more than the 5 big sports. We should be more, what should I say, retail friendly, and we should be what adidas once made it, the best company for the athlete and the consumer. And I think if we do that, instead of trying to impress you with artificial numbers, we will be successful. And then the irony of that is if we do that right, then the profitability can even be higher than we talk about, right? So expect us to work the way we said and then let us come back at the end of the year, beginning of the next year with a new strategy. I think that's the fairest way of doing it. Cedric Lecasble: That's very helpful, Bjorn. Maybe just to put a difference on China, do you think conditions are met for China to become again the profitable markets that it used to be for international... Bjorn Gulden: Well, if you think about that, they have 1.4 billion, 1.5 billion consumer. If you think about that, the retail structure is very homogeneous. There's basically 2 big partners, maybe 3, D2C that is a big e-com business and that the differences geographically in China is much smaller than what they are in other markets, then the answer is yes. All the ingredients for making that the most profitable market is there. And again, with 1.4 billion consumer, you would also think that the growth rate there should be one of the highest. My favorite to be the growth winner the next years after LatAm is going to be India, because you start to see a development in India also from a consumer point of view that they're buying more Western brands. They're doing more sports, and of course, I would hold them as a favorite percentage-wise in growth. But again, India is a more complex structure, so it might be less profitable. But for me, China is still the favorite to be the most profitable market in our portfolio. Operator: The next question comes from Aneesha Sherman from Bernstein. Aneesha Sherman: I want to ask a follow-up about your earlier comment about order books, but I want to ask about FY '24. So on the last earnings call, Bjorn, you talked about starting to meet with vendors to place spring/summer orders. So assuming that wholesale remains the majority of your business, is it fair to say that now, you have a pretty good idea of your H1 '24 sales makeup and sales growth? And can you remind us, you made the point about cancellations for 2023. Can you remind us of the timing here? I mean, to what extent is there flexibility for your partners to then ramp up or pull down those order books? And like at what point of time are those order books pretty much set in stone? Is it more like the second half or even Q4? And then I have one other follow-up on your previous comment about target inventory normalization by Q3, I assume that means on your own balance sheet. Can you talk about any expectations you have about inventory in the channel with your partners and when you expect that to normalize? Bjorn Gulden: A couple of clarifications. The cancellations on the order book was not '23, it was '22. So if you compare the order book in '23 against '22, it's not a fair comparison because the '22 order book never happened. It was huge cancellations, and in many brands had on order books that were very, very high, and then most of the retailers canceled with everybody because they didn't believe in the beginning that they will get all the products and then when they suddenly got deliveries, they started canceling. So that was in '22, not in '23. The visibility for H1 '24 is not there at all. We haven't started placing those orders. Normally, an order book is being built 6 to 8 months before deliveries, so we are currently in the process with our retailers to fill the Q4 order book. When it gets to building relationship and giving visibility, we have showed them Q1, Q2 in '24 and even further because for us, of course, it's important that they see there are plans for franchises. There's innovations going forward, even into '25, but there is no order book yet for '24 in the system. So I -- even if I would, I couldn't tell you the order book for '24. What I can tell you is that I think the fact that we are now saying that we are much more wholesale-oriented, and you see it's now 66% or 64% of our business. And the fact that we have opened up our campus again for all these retailers that we have partnership meetings in general. We had them on soccer and we had them on running. It's, of course, something new, and I think that's giving them the feeling that adi is again what adi used to be, and I think they really appreciate that. And then of course, it's up to us then to fill their pipeline with products that they sell because without the sell-through, relationship doesn't matter, so. But I think we all feel better now than we did 3 months ago when it gets to the relationship with our vendors. And then we all know that you can't be friends with everybody from the beginning, so of course, we still have a lot of work to do. But I feel that most vendors in the world, if not everybody, would like to have a strong adidas and are appreciating the direction we've taken. Aneesha Sherman: And then could you address the question about inventory normalization in the channel? And do you have any expectations for that versus on your own balance sheet? Bjorn Gulden: Ironically, they are kind of connected because I do believe that if you look at many retailers, they were over inventoried at the beginning of the year. They were really, really scared about the development in sales. I think most of them have seen a better sell than they expected, but of course, also at a higher discount. And ironically, I would bet that there are actually categories that might be under inventoried in the second half because the order book on certain categories is too low, and that people will start to chase certain products again at the back end of the year. If you look at Apparel, I think people will be over inventory until the end of the year and that you first will see a relief in '24. But it's pretty much the same picture, especially in the U.S., I think also for the trade as we are seeing. So they need the second half to get out of it and then maybe some other markets will recover quickly, but it kind of goes hand in hand. Sebastian Steffen: Francie, we have time for two more questions. Operator: Okay. Then the next one will come from Zuzanna Pusz from UBS. Zuzanna Pusz: I'll stick to the rule, so just two. The first question will be on some of the franchises you've been mentioning, Samba, Gazelle, Campus. Would you be able to tell us maybe -- I understand that most of these franchises would even when we look at Stan Smith, Superstar, they've been historically quite cyclical. But I mean, how big can some of these -- or have some of these franchises become in terms of sales in the past in terms of at the peak? So let's say, Stan Smith, Superstar, in the last cycle, I think between 2015 to '18 when they were very hot, how big were they actually getting, just so that we can get an idea of Samba, Gazelle, what is their potential? And then secondly, sorry, just a follow-up on marketing as a percentage of sales because it's quite an intriguing topic. But would you be able -- now, I understand you don't want to comment on anything that may have been done by management in the past. But if I look at my model, basically over the past 20 years, I think the lowest level of marketing spend as a percentage of sales was 12%. So clearly, I guess, if a more reasonable level is 11%, which to be fair, is the industry average and adidas was always above. Are there any specific buckets of marketing spend where you would say maybe the money wasn't ideally spent? I know you mentioned a couple of things, but maybe if you could say what will be the top 1 that you feel like maybe wasn't the best type of investment? So that's my second question. Bjorn Gulden: You know, Zuzanna, that marketing is very subjective and there's no formula that tells you where to invest because if there was one, we would all invest like it but then the formula will be destroyed again, right? So marketing is 50% rational and 50% emotional. And you also have to remember that the component that goes into marketing over the last 20 years have changed dramatically. Performance marketing, Google Search and all those things didn't exist only 10 years ago, and it's now hundreds of millions to actually generate traffic on your e-com. And of course, that didn't exist before. So it is a different, what should I say, buckets, and it's very hard now to sit and say that, okay, with 11% or 12%, these are the changes we should have been done. If you look at marketing in general, you need as a company as adidas to have certain global, I would say, assets that makes it a global brand. So Real Madrid, Manchester United, Bayern Munich, the German Federation, the Italian Federation and stuff is the basis to even be a soccer brand. And then you have the Messi and the Salah and whoever you address, individual stars, and you can always survive by reducing them short term. But the question is what happened in long term if you do it? Then I wouldn't be in a situation to criticize what adi has done because I think adi always kept the visibility in sports. To a degree, maybe that if I should criticize something, they have gone out of too many smaller sports lately to be efficient and are losing a little bit of this difference to Nike by being in the smaller sports, which we will go back into again. And again, I really have the feeling that we need to be adi visible across almost all sports, also those who are not commercially very important because they don't cost a lot. The creativity that we then have in design of making a wrestling shoe or a ski boot or whatever will have a positive impact on the creativity in the brand in general, and that's why you don't need to measure it only on the business, but actually measure it more on a creative spirit in the company. And that's what adi always used to be good. So if there's one thing to criticize, I do think that during COVID and the last years, it streamlined too much, so we lost a little bit of that edge which we're trying to find back again. The good thing is that we have the people, we have the competence and that we can start to invest again. The bad thing is that we can't get back again quickly enough in some of the sports because it takes time to sign federations and it takes time to get product on the people's feet, on uniforms again, so we will take a little bit longer time than I would like. But I hope when we get to the next Olympics after Paris, we will be wider again because in Paris, in my opinion, we will be too narrow. On the other hand, you asked about how big were these franchises. And this is a tricky question because certain franchises could be up to 20 million pairs. And then the amount that they bring compared to is D2C or is it wholesale, right? €100 shoe and 20 million pairs. You do the math, that's a €200 million business. If you do it -- no, that's a -- 20 million times €100 is €2 billion. If you do half of it or all of it in wholesale, it's then only €1 billion, right? So it's again, the split in the channels is as much worth as the pairage. And we have, compared to Nike, a lot more franchises. If you really look at Nike, you will see they have 5, 6 franchises, which I'm sure is doing more pairs but they kept them alive over a longer time, we have gone in and out of them. So if you just look now, Samba, Gazelle, Campus, if we then add for example, Superstar and Stan Smith to it, we would have 5 court big franchises. And of course, it's -- the question is, can you have 5 big ones at 1 time or do you then have to play 1 down and 1 up and manage them properly? And I think this is where we have not been as good as what our friends at Nike has been. At the same time, we had huge running franchises through the history and started with maybe the flux. We had the NMD, which was fantastic. We had the beginning of the UltraBOOST. And right now, that's where the shoe is not doing that well. And in general, there's very few running franchises out there that goes lifestyle. Ironically, it is brands like ON and HOKA coming in from the performance side and certainly those lifestyle. And I'm not sure that I'd be last long, but of course, we need to make sure that we very quickly are having an answer to that, and that's what we're working on. So again, we have all the ingredients to have franchises that we can scale up to 20 million pairs, but we need to make sure we do it in a proper way and then not oversupply so we start to discount again. And this is the test that we are now going through because now we have this energy in certain of them, and now, we need to scale, but scale it in a way that we can actually keep them for a long time. At the same time, exploit the look also in the down channel. We take down version that we can then sell in the family channel and that's how you make the franchise profitable, and that's what we're trying to do. Operator: Our last question for today comes from Warwick Okines from BNP. Warwick Okines: On the last call, you talked about the changes you've made to the Executive Board. And today, you talked about EMEA management. Could you give us an insight about how much change is taking place further down the organization? And secondly, could you give us some feeling of what you think the shape of revenue will be this year? Obviously, you're flat in Q1 and you're still guiding for high single-digit declines. Is Q2 the low point, do you think? Bjorn Gulden: We did the two changes in the Board that you know. We changed Roland after 33 years with Arthur and that was, of course, necessary to do the changes we need to do on the commercial side. And then I took the brand side away from Brian, again, necessary to get the speed of all the creative environments so they can go straight to me, which is important in the change. And then when you go down in the organization, of course, there's many changes in people that you don't see, and there's quite some changes in the way we are trying to go to market. We're trying to open up the campus, have more samples in the showrooms, have much more accounts coming to our headquarter. We are changing calendars to be quicker in the way we develop products, and we are trying to be more local. So we give more autonomy to the markets to also utilize the engines in the markets they sit. So there's quite some changes going on between beginning of January and now when it gets to the product cycle. Difficult to quantify when it gets to people, but there are rules being changed, and there will always be changes because that's the way our business is. When it gets to... Sebastian Steffen: Revenue development. Bjorn Gulden: Revenue development, we're still seeing high single-digit decline. And the reason for that is, of course, that we do not know if we will have enough good inventory in the second half to actually do higher sales. And remember, I said we will not chase any business because we think that will be the wrong strategy. So the priority is not to have growth on the top line, but it's to get out of the year with a cleaner inventory. And if we now are chasing sales, we could end up in the ironic situation that we could have a better top line, we will not get rid of the inventory that we're sitting. So that's why we kind of have a hybrid, what should I say, strategy for the second half. Of course, try to sell as much as we can on what we have, but maybe not chase everything we could by buying into it but have a better start to '24. That's why we keep currently the -- what should I say, the sales guidance the way we do. And then don't also forget that should we be able to start to sell off the Yeezy product in one way, shape or form that has a lot of work for us because that's a complicated thing right now. So that's why we have consciously not tried to impress you guys with any numbers in '23, but are trying to do everything right for midterm and are putting focus on that. That's why the guidance is the way it is. And that's also how we are trying to act every day. Sebastian Steffen: Thanks very much, Warwick, thanks very much, Francie, and thanks very much also to Bjorn and Harm. And of course, also thanks very much to all of you. Ladies and gentlemen, this concludes our Q1 call for today. If you have any further questions, please feel free to reach out to any member of the IR team. And of course, also myself. And with that, thanks very much again. Have a good remainder of the day and a great weekend ahead. All the best. Bye-bye. Harm Ohlmeyer: Thank you all. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you very much for joining, and have a great weekend. Goodbye.

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the adidas AG Full-Year 2022 Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] It's my pleasure, and I would now like to turn the conference over to Sebastian, Head of IR. Please go ahead, sir. Sebastian Steffen: Thanks very much, [Francie] (ph). And good evening, good afternoon, good morning, everyone, wherever you are joining us today virtually for our full-year 2022 results conference call. Our presenters today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. You can see the agenda here; Bjorn will kick it off in a second with his opening, followed by Harm who will recap our financial year 2022. Then Bjorn will be back to take stock, and ultimately share our outlook with you. Last but not least, we will have enough time for your questions during our Q&A session. Talking about the Q&A session, I would like to ask you, as always, to limit your initial questions to two in order to allow as many people as possible to ask their questions. Having said that, we are obviously looking forward to your creativity how to extend that limit and interpret the number two in your very own way. But that's for later. There's lots to discuss today. So, without any further ado, over to you, Bjorn. Bjorn Gulden: Yes, thanks, Sebastian, and hello, everybody. I guess this is strange listening to me on an adidas call, but that's how the world is. And I have to tell you that this has been seven or eight very busy weeks to understand where the business is and look upon what resources and possibilities we have. And I would like to say that I'm actually proud to be here. That might maybe sound strange after what I told you when I was on Puma. But I just quickly want to repeat to you that I was nine years there, I think I had a very good time. I have, I would say, very close friends left there. And I think it's fair to say, after nine years, fulfilling my contract, it was time to do something different. The plan was definitely not to do it with Adi, but the way things developed, and very quickly developed, that was then an option that I then had to say yes to. And having been here for eight weeks, I'm extremely happy that I did it, and as I said very, very proud. I will tell you, in 20 minutes or so, what I see, and tell you a little bit about the outlook. But I think before that, I'll give it over to the Adi expert, Harm, so you can tell us what happened in '22. Harm Ohlmeyer: Thank you, Bjorn, and thank you, Sebastian. A warm welcome from my side as well and good morning, good evening, good afternoon wherever you are dialing in from. And of course, there's the potential for me to talk about '22, and of course it was not just a disappointing year for me as a person, but definitely more important for adidas as well, and we clearly did not perform as we should have performed. And I will get you through some of the details. But of course, there have been a lot of bright spots as well. And after several years, sport took center stage again in '22, Real Madrid winning the Champions League, Benzema winning the Ballon d'Or, three stripes at the heart of UEFA Women's EURO. Germany, unfortunately, only coming in second but played very well, brought the female soccer to a different level. And ultimately, the FIFA World Cup, with Argentina winning, and also that privilege being part of it live in the stadium, it was a fantastic final. We also dominated running with Adizero. We won more marathons or major marathons than combined all other brands together, and we brought these athletes to our home turf, here in Herzo as well to the Road to Records, where we again had a lot of European and national records. And, of course, the Winter Olympics, just one example, Denise Herrmann-Wick bringing home gold. But also product highlights, whether it's the Y-3 kit with Real Madrid or the X Speedportal combined with Rick and Morty, also the ball with the World Cup, Al Rihla, or Al Hilm for the final. Again, Adizero Adios Pro 3 delivered what really matters most in running, one win after the other. Outdoor extended the sustainability offer with Spinnova hoodie, Agravic Flow 2 for the trails, and we launched Sportswear as well with a capsule collection focused on the Gen Z, and a lot of collaborations with great creators out there, whether it was Pharrell or the collaboration with Gucci just to name some. And basketball was growing nicely, also driven by the Forum that we brought back to the market. All of this is happening with great campaigns. Storytelling is what we need to work on and what we will continue going forward. We talked about it many, many times. But also our attitude, Impossible is Nothing, was visible. And also the commitment to gender equality with I'mPossible campaign definitely took a lot of hearts out there. We shook up the marketplace with the Bra Revolution, and there is more to come, but clearly focusing on a better offering around bras and tights to win the minds of the female athletes as well. And we continued the Run for the Oceans with almost seven million people joining around the headline of end plastic waste of our oceans. And the world's biggest football Family Reunion, dedicated campaign spotlighting the fun of the game around the FIFA World Cup, and again Rick and Morty X Speedportal excited the younger football enthusiasts out there. So, you can see a lot of things that have been excited to consumer, But of course, we had a lot of company and market-specific challenges as well. Of course, the war in Ukraine, a tragedy still and more than a year ongoing, the wind down of the Russian business, COVID-19 restrictions were still felt in many countries, specifically in China. But also Greater China was just not a market topic but also company-specific challenges that we talked about in the past, and of course, unfortunately the termination of the Yeezy partnership which definitely weighted on our top line and our bottom line. And again, you heard me saying that many times, if you lose three profit pools in one year it has at least its marks on the P&L, where we see it here. Net sale currency neutral growing 1%, the gross margin down by 3.4 percentage points to 47.3%, the operating margin down to 3%, and net income from continuing operations around €254 million according to the guidance that we set as well. So, clearly, we had planned for the different year. We originally had planned double-digit growth, we originally had planned double-digit margin, and very clearly after several profit warnings, this was not the year that we wanted to talk about, but very quickly we come back how we want to talk about '23 as well. When we talk about the markets, clearly still some stars on the map. We are growing 9% in Europe, it would have been 14% without Russia, double-digit increases on the performance side, while lifestyle was up single digits. And we look at North America, up 12%, strong sales from our product launches in football, running, and outdoor. Latin America, also double-digit growth, strong growth in both performance and lifestyle. And then, APAC, strong growth again in outdoor, football, and running, and lifestyle was down low single digits. Overall, the profitability still very good in EMEA and Asia-Pacific, and in Latin America, around or above 20%, but of course Greater China declining 36% was not what we were planning for, especially the profitability with only 10% as far away from what we used to see from Greater China. But also important that we are growing nicely in the performance categories, overall plus 19%, and again football growing significantly based on the products that we launched, but it was prepared to all the federation kits. We also, of course, utilized the FIFA World Cup with more than 50% growth in the fourth quarter, and achieving also our guidance that we gave around the football net sales, of the World Cup net sales. Running growing double-digit, and of course that's where we start utilizing commercializing the wins that we generated with the Adizero Pro, and building credibility and advocacy to commercialize the running category even further in '23 and '24. And outdoor was a very balance growth of footwear and apparel. And U.S. sports, definitely the highlight, with Patrick Mahomes being the MVP and bringing the Super Bowl home for the brand. He is probably the athlete in the U.S. right now, I'm very glad to have him with us. And there is more to come from him. And we shouldn't forget golf, after the COVID restrictions, definitely a category that was growing nicely also for us. All of these categories are growing double-digit, so a good foundation for what we need to do in the future. When it comes to lifestyle and Bjorn will come back to this in more detail, but clearly disappointing what we saw from a commercial offer in Sportswear. And there's definitely an opportunity for the future. We launched a capsule collection, but some of the offers could have been better there. And Originals, great collaborations with Gucci, Bad Bunny, Pharrell Williams driving hype, but again commercially we should have and we will do better in the future, that is something that Bjorn is going to talk about. When it comes to the channels, wholesale growing 1%, double-digit increases in EMEA and in North America and Latin America, D2C grew 2%, own retail was largely flat also impacted by the closure of the Russian business which almost entirely was own retail. E-comm grew 4%, still reflecting some higher comps from early last year as well as some online fatigue after markets were opening up again and consumers moved more to the physical space. Nevertheless, North America and LAM to see as a whole and ecomm was up double digit, but again, we shouldn't forget wholesale is still 61% of the overall business, and played significant role not just in '22 but also going forward. What's important to note is when you look at the quarterly split as you can expect from me a lot of numbers, but I would focus here on the fourth quarter review only. The net sales were down 1%. What has really happened there because originally once you grow around 20% in the fourth quarter; of course, there was around €600 million of Yeezy busy that did not happen. Originally, we said €500 million. But we also took some retails from our wholesale accounts. So, it actually rounded up to €600 million. And of course, there was something we decided significant inventory takebacks in China given the inventory situations that we had in some of the closedowns, and then, the opening of the zero COVID policy where actually consumers did not go out. So, that's where you see the -50% which again was not the original plan, but of course, these two effects weigh on our quarterly results. When we look at the P&L in more detail, again no surprises here, you will see that it's already twice on the 9th of February and this morning again. I don't want to spend too much time on it. Gross margin is down. I will give you some more details on the next chart. Operating margin down by 6.4 percentage points to 3% based on the gross margin decline, based on higher operating expenses reflecting additional investment into new campaigns, products, and consumer experiences, and of course, one-offs that will go into more details of around €300 million. The tax rate was up as well because some of the expenses were not tax deductible. There is something that we should read into the tax rate. But more importantly, the net income around the level where we guided was €254 million. And also there, there was one-off cost of €350 million in there. When I go to the one-off cost, something in more detail, €59 million on the gross profit. There was a decision to wind down the business in Russia and also higher provisions for customs-related risk. There were operating expenses around €253 million. Again most of it linked to the Russian write down, the settlement of legal dispute, and some restructuring cost as part of our business improvement programs that we booked in the fourth quarter. So, overall, operating profit impact of €312 million and then some puts and takes in between operating profit and net income. There was overall €350 million impact of one-times in '22. When you come to the gross margin, the biggest factor here was 400 basis points of supply chain cost, that was higher FOBs, higher freight cost. They were definitely peaking in the third quarter and coming down then slightly. And we definitely talk about that as we move into '23 as well what's happening on FOBs and also freight cost. But that was most meaningful factor. Then when it comes to the price channel and market mix, most pronounced was China there as it has been significant profit pool past, slightly dollar term on the FX that was originally planned to be positive as well, inventory comes to the situation that we have, and then you should look at pricing and discount as a combination. Of course, we priced up. But then as the consumer wasn't as sound anymore, there were some discounts required in promotional environments in the fourth quarter as well leading to a gross margin of 47.3%. Of course, all of it is linked to inventory where you see that the inventory peaked in the third quarter. It was down to a level of around €6 billion at the end of '22. And this already includes an inventory of Yeezy of around €400 million. There is an overall increase of 49%. Again that is the value. In volume, it will be less. And you should see that in relation to the Vietnam closures last '21 that impacted the year and inventory in '21, some FX as well. But also the cost per piece increased and the lead times were longer, so it's not one-to-one comparable, still too high very clearly. That's what we are working on. We are focused on first and foremost North America and to some degree Greater China. But we made good progress in greater China in '22 already and also in the first couple of months. Clearly, excess inventory where it's needed. We are focusing on apparels first and foremost because footwear is easier to carry forward into other quarters. We significantly decreased our buying volume going into not Spring/Summer '23 but also more importantly forward in '23. And we are technically repurposing some existing inventory again primarily on footwear but also where it makes sense moving it to market where the demand is higher. So, we believe overall depending on the market, we will be in a much better situation in summertime. But we still need to work with this one over the next couple of months. When you look at the working capital, I don't want to go through the details of receivables and payables. But again, it's a story of inventories again. And do you remember that we probably were best-in-class in the fourth quarter 2019. We dealt with during COVID in 2020. We know how to do that. It always takes some months and quarters. But we are very confident that we would do it again. And I mentioned what we are doing already. Buying less, carrying the inventory where it makes sense. And, this will definitely normalize again through the course of the year. Given the inventory is also linked to the adjusted net borrowings and what happened to our rating. Before I go to the rating, notch down on S&P and Moody's, I want to explain real quick in more detail the adjusted net borrowings because it was our plan to reduce the cash position that we had at the end of '21. That's why is accelerated the share buyback in the first quarter '22. We also returned the proceeds of Reebok back to shareholder of €1.5 billion also €2.5 billion share buyback, €600 million dividend. But quite honestly, that was not the plan to build up the inventory that significantly and reduce it to that level. So, clearly we overshot a little bit. But it wasn't the plan to reduce the cash position of the balance sheet because back then we had negative interest as well, also that has changed very quickly. But it gives you an idea how get from the €2 billion adjusted net borrowings at the end of '21 to the around €6 billion by the end of '22. Again when you look at the rating, KPIs is the most important one for us, as a leverage ratio, and we clearly have the goal again probably not in '23 with some ups and downs, but clearly in '24 again to get back to our financial policy to get the leverage ratio below 2. We are going in good direction already in '23. But I can't promise you right now that we get below 2. But clearly in '24, that is the goal to get there. All of this discussed with Moody's and with S&P. Moody's gave us two notches down. Now on A minus, and Moody's was A3. As you all know, this is still a strong investment grade with a negative outlook unfortunately, but this that we are committed to. And also me personally as a CFO to get that in the right direction again, but again, still a strong investment grade but not really what I had planned for again in '22. When we look at the dividend proposal, we are proposing €0.70 on the shares outstanding of €179 million. There will be a total payout of €125 million on the net income reported of €254 million. This would be at the higher end of the payout ratio that we always gave a range of 30% to 50% as we moved to the higher end. Of this was 49.2% I believe that is also the right measurement given where we are as a company and where our situation is. So, that is really where we are on financials. No surprises in this. Happy to take some questions later on. But I also want to close before I hand over to Bjorn. The World Cup has not been the turning point for the company yet. But believe me being there personally in more than 110 accounts and customer that we had there is lot of people of our company as well. There were a lot of tears in their eyes, lot of happiness bringing the trophy home. It was definitely pleasure and a turning point for me personally. And back then I was looking forward to January to hand over the baton the o Bjorn. And this is what I do now, again, I hand over to Bjorn to talk more about the future. Bjorn Gulden: Thanks, Harm. Let's hope for us that Messi doesn't have his best day today. You know he is playing for Paris against Bayern Munich. So, let's hope he has a bad day. It's more important for us that Bayern gets through. And so, I have been here for almost two months. And I thought it will be worthwhile giving you a short look back what I have seen and talk a little bit about what I think that means. And you know me as always to get you in the right mood, here is the detail. [Video Playing] Yes, I think there's no doubt that this company is rooted in sports history. Have said it many times, I mean, this small town created the sports industry and of course, Adi with a scale and when I look at the archive and I go through the museum, it is actually very emotional because it's very, very, what should I say, touchy to work for a company with that kind of history. Then when you look at the marks of the brands I think there are few companies in the world, regardless of what industry that has this kind of brown marks. I would also like to say that TERREX on the outdoor side has been a very, very good move. And you will see that later from a development. And I think the awareness and the consideration of actually buying product with these logos is very, very high all over the world. And of course, that is the best starting point that you can have. If you then look at the different businesses, there is no doubt that we have a huge credibility in sports. It's also, and especially over the last 20 years, clear that we have credibility in fashion. And then, when it gets to connecting to the street culture, which we all try to do, I wouldn't see many companies that has the opportunistic that that we have. And we'll get back to that in a second. What is very unique to Adi is of course the connection to what I say, the organizers of sports. That has been the DNA of the company always. I think Adi has been part of shaping professional sports. We can discuss if all of that has been good. But my feeling and opinion is that this has been very important because I think it has accelerated the way professional sports have developed. And I think it's much easier to complain about sports than it actually be being part of it, than when you see this kind of relationships that tells you how rooted we are in how sports are organized. When you then look at the teams, again the portfolio is very, very special. I think we all have to agree that they have signed very good teams. For me, it's a little bit special to get Italy and Arsenal back again. You know, I was part of divesting from them at Puma. Now I have them back again. Arsenal actually performing well, and let's hope that Italy will perform better than that last time. Although we also had a very good relationship with them in my previous company, but no doubt if you look at it, we have all the teams that we need to do to have a very, very good image and a very good business in both, I would say, professional sports and college sports and of course also in the license market. The same thing goes for the athletes. I mean, we have the role store athletes in all sports, that is incredible, in America, in team sport, in individual sport, even in winter sport with Mikaela. And I think I also would like to say that you will see us invest more again, also smaller sports and widen our portfolio. I think the DNA of Adi has always been to develop product for all kinds of sports. I think there was even in Olympics where we had shoes for all sports that you could participate in. I'm not sure we go that wide, but I do think from a creativity point of view and from a development point of view we cannot only do the big sports, but have to go wider again. And we have the resources here. I mean, we both have our own factories and our own sample shops and you will see us be more visible again, like Adi used to be in the smaller sports. And then, Adi has been criticized for not creating brand heat enough. And not doing enough. I think if you look at that slide, that's the Collab partners that Adi had over the last, I would say 18 to 24 months, Montclair, Prada, Gucci, and Balenciaga. It's impossible to have higher partners than this. I think what we can discuss maybe it's been too many for a short period of time. And I think that again is caused by the fact that many of these things were delayed. And that then happened to go-to-market almost at the same time. I don't think that had the impact that it might have had, but the fact that all these four brands came to so to go through our archive to work with us on different franchises has been a fantastic recognition of who Adi is. And when I see the list of brands who wants to work with us, I feel we are here in great, great shape. And if you then look at the famous word of street culture, I think Pharrell, Beyonce, Bad Bunny now also Jenna Ortega, again, the lineup to connect to that culture is unique. And again I think we have the resources and the scalability to really create brand heater again. And that is of course what we will do. Pharrell now also being the lead designer for LVHM on the men's side is of course probably the hottest designer out there or creative adult. And him moving to Paris and being closer to us with of course also be very, very important for us. And I think Jenna is probably the hottest, I would say, female connector that you can actually sign. And their impact after two weeks has been very, very, very strong. I also have to say that the state-of-the-art resources that you hear fine, meaning the infrastructure is unbelievable when I see the campus, we are now sitting at, but also our offices around the world Portland, Shanghai, and since a couple of weeks in LA, I mean it's unbelievable what we have here in Herschel, we have a science center for sports, which I never seen anything like it, we have a winter factory, we have stitching lines, we have 3D printing machines, we have all the resources that you need to do to do innovations. And the working environment that our people have around the world is, in my opinion, the best that you can have. And the groundwork for having talent working in accretive environment is great. Same thing on the tech side, Adi has spoken a lot about tech. And when you see they have six hubs where people are sitting, programming for us, different applications working on our tech side. Again, something that I'm not used to see but it's obvious that we have invested a lot on this side and also, of course for future growth because it's always that the payback on this investment has not been there yet because the growth is not there. But the pipeline we have when it gets to applications and it, when it gets to our analytics in our digital business is unique. And again, a pipeline that has been laid that will help us tremendously going forward. Same thing with the stores, we can discuss a lot about D2C and wholesale, but the Hilo stores that we have around the world. And on the left side is the new one we did in Seoul just a couple of weeks ago. Again, very, very good locations, great stores that represents the brand in a great way. And of course, as traffic continues to increase, we will also see that profitability in these stores will start to increase. What is very unique is that we have a shoe factory in Europe, in Germany, 40 minutes away from here, Seinfeld, where we have the capability to make very many different shoes here, you see, for example, Copa Mundial and I think that we will start to exploit this even more than we have done before. European production, European development, especially where you have collabs with artists and also where maybe Made in Germany and Made in Europe will make sense, I think is jewel that we haven't utilized. And me being a product freak, I think you will see us using this more than we ever done. And don't forget that shoe competence in Europe is not that easy to find and create. And we can use this as an education center and make sure that we never loses the focus on product, especially footwear. We talked a lot about distribution centers. Yes, it is a challenge for many companies. The fact that the multi-channel distribution creates a lot of what should I say, new task for our disease. It looks to me what I've seen that Adi has invested a lot that of course now we have an over capacity because we have built distribution centers for future growth. But again I think having them and be ready for the future is better than not having them. And to me, it looks also here that we are in a very good what should I say, state? We talk a lot about talent and diversity. Again, we have people from more than 100 nationalities, and as you see, we currently have more female people than male, should of course be 50:50. We have more than 90% of our employees being non-German. So, the time, and we were a German company, exporting is over. This is a true global company. And of course, having 39% women in leadership is not good enough because down the road it should be 50. But I think the development is definitely in the right direction, and I already seen a lot of female talent that is very visible in this organization. There has been a lot of negativity around Adi, at least from the outside about negative culture and people not liking to work here. I think if you look at the different research that has been done here, two examples. Then Adi scores very, very high in what I say in many research here, just two examples out of many, many, many 100 companies in all the industries, 16 in the Forbes, and number 5 in Stern, and as far as I could see actually way ahead of also our competitors. So, I think there is a perception that this is not a great place to work, which is very, very wrong. And as I said, all the ingredients to be a great place to work is there. And maybe we need to market it more down the road. For all of us in the industries sustainability and ESG is not a question about if, it's only about how, what I've seen so far, the investment here in that is immense. I think not only at Adi, but also at the other brands. I think we all want to be good citizens. And when you look at the ratings and the targets I would say that we are actually way ahead of the curve when it gets to actually doing what we are saying. And then, we all know that this will never stop and we'll have to continue to develop. But also here, I would say it's a big check. So, if you put that all together, I think it's obvious. As I said already when I started, it looks like Adi has all the ingredients for success. But as you saw from Harm's presentation, we are currently not performing the way we should. If we then go back to what we are or where we are performing, it's kind of ironic that I think he showed 19% growth in performance. And you know and all of you have discussed this with me many times, performance is more difficult to create than fashion. And there has always been criticism on this brand and also my previous brand, that it's only fashion or non-performance. Here you have strong growth in running, in football, in golf and U.S. sports, and lately also in outdoor. And I would say that the criticism on that we don't have innovation and performance product is not true. There is quite some innovation that has gone into the market. There is more innovation on the road, and I can tell you from the inside that both the running and the football line going into '24 is excellent, and I'm not worried about this at all. On the performance side, as I said, we added Italy, again a little bit strange but I have to say that the talent teams always look good. They did that with Puma, and now they look great also with us, and of course happy that they are with us. I think it was a fun thing that Adi did and has nothing to do with me, but I'm a Jamaica fan and signing the soccer team creates a lot of lifestyle opportunities. And it's a fun thing for street soccer where we already now have product in the market and have created a lot of buzz for example in the U.K. When it gets to footwear, I mean, the Predator that is currently being launched is beautiful. When I see Bellingham playing it, it is like what should I say? The shoe carries them around at the speed, which is incredible, and the way he plays and the branding and the technology is unique. I think also the way we have played with the trends in soccer by doing triple black and triple white shoes is working very well. And as I said, the market share that Adi has been taking lately in soccer and the way it looks going forward, it's a big check for the category that should be owned by Adi. When you look at running the Boost technology has been there now for 10 years, and we know it's the most comfortable technology never probably been as strong on the performance side. That's why the Adizero product that you see here has been doing unbelievable well, it's now a good big business for us. And you know it is the groundwork for everything we do in sports marketing. I think they say that they won more than half of the races around the world when it gets to Majors, never believe those numbers, but and they probably right when they say that. And here, just some examples from last weekend where I think we won almost all the races that were from the Marathon in Tokyo. We won in Rome, Paris, and I think we also won in Dubai. It's not on the picture, but sports marketing and the product people doing a great, great job in running. And I have seen also the '24 line where they will bring back the Supernova. And I think we will be super, super, super competitive in running, going into '24. Outdoor, I think the idea about putting all the outdoor product that they have on the one umbrella, the Terrex brand has worked very well. Those who you know me know why I'm in Mountain Freak both in the summer and the winter. I can tell you the product is excellent. And this is meantime a business, I think about half a billion. And we all know that outdoor activities is increasing and we have all the, what should I say, ingredients then also to be part of that both in the winter and in the summer and also in the sports marketing side, we are in the Winter Olympics. And me being Norwegian, you should not be surprised if you'll be more visible also in the winter, both and new to me without clubs, but you know the apparel and the footwear business is Golf makes us actually market leader in many markets. And again, Golf we talked about that before too, has had quite some momentum during COVID and coming out of COVID, the activities seems to keep high. And we have very smartly kept our Golf business outside of the normal Adidas business. It's run out of cost in the center of Golf and with very, very, I would say knowledgeable and passionate people. And it looks like it's a very what should I say, strong business unit with the great growth perspectives. So, the performance side, I would say is in check. And that is very, very good to see. And it's also good to see that our innovation pipeline and the resources to do innovation from technologies and applications is great. And for me, running around here in the basement and see all this is great because that's something that we of course did not have in my previous job. So, the issues that are negative and where my friend Harm has problems with the numbers is on the lifestyle side. And it's a little bit ironic because when you look at the original business, the sportswear business, and of course the GC business, when you combine those three, you have all the elements to be successful. But unfortunately, I think that during COVID and during the last couple of years, we have not probably utilized this in the best way. And currently we've had too many franchises into our inventory and too much discounting. On top of that, you'd have the GC business, which again in my opinion, yes is maybe the most creative I would say person that has ever been in our industry. The combination with an excellent go-to-market job done by Adi, both in the product, in the manufacturing, and not at least the way they went to market digitally with the different applications and the way they were actually utilizing the heat in my opinion, next to nothing. And or better than anything and of course losing that is a very, very tough thing, but anyway, now we have lost it. And we have to deal with that, and I'm sure we will talk about that in the Q&A. What is positive is that we currently have maybe the hottest shoe in the market in the segment we call Terrex. It is the Samba, the Gazelle and the Spezial, and you see on the right side, actually a mockup or what do you call it pop-up store that we made in Shanghai two days ago. Team put it up very, very quickly. One Shoe Mobile, and as you can see, people are lining up to buy only one product. And the product you can only buy in white or black. And to help you a little bit to be knowledgeable, you can call it Terrex, or you can call the shoes Tito because as you see, the design has a T on the Toebox and all the shoes in this, what should I say, design direction is doing extremely well. And for us, that's the Samba, Gazelle and the Spezial and you have seen it for a while coming in on, I would say fashion shows and also on celebrities that have actually bought the shoes themselves, and it's a very, very fast-growing franchise. And the good thing for me is that it's actually something I haven't seen for a long time, it's hot in Asia, China, Korea, and Japan, it's hot in LATAM, it's hot in Europe, and in America. And I can't remember last time I saw that. So, again, look for the Samba, look for the Gazelle, and ironically also the Spezial, which was actually a handball shoe that even I used when I was playing, which probably tell how old I'm getting. But again, an anchor into the fashion world, and I think something that if we manage it correctly can be millions of millions of pairs. And it's the first test if we can manage now a new franchise in the right way by keeping it alive; heating it up every quarter and without over-distributing it so we start to discount. So, you should have a look and judge how we're doing, but I'm very optimistic. When you look at the geography, and then Harm showed us that LATAM, a very, very fast-growing market, I think it was 44% that he showed. And it continues, strong growth in the emerging markets, which funny enough are those that are also growing the fastest. And it looks like we have a good, I would say; start in all those markets with subsidiaries and with good setups. And then, Asia-Pacific, again now starting to come back in a good speed. And knowing that also the Chinese tourists will start to come back, we see a very positive outlook for those regions. We have had, like I think everybody had difficulties in Greater China for three years. Remember, this used to be the most profitable region for Adi and also for other companies, and it was growing at a very, very high pace. And of course, going from growing 30% to being down 50% is part of the problems in our profitability. What has happened, I would say, over the last eight weeks, is that we see some positive signals. First of all, the Chinese people are out again, and they do sports from the first day. Here are some pictures of the marathon in Beijing that we sponsored. And, of course, as soon as they're out after all the COVID problems, they buy products, and they also now buy performance products. We all know that the market in China has been very life-stylish, but now seeing that they also are buying more and more performance, and we feel we're strong in performance is, of course, a very good sign. We also have invested more and more in Chinese athletes. The first Chinese players in know winning an ATP tournament in the U.S., Wu Yibing, he won Dallas Open two weeks ago. And I think he's ranked now top six in the world. And of course that meant a lot of attention in China. And he happened to be our player, and one of the big sports, I would say, events that actually happened in China this year. This is just one of the athletes that we have signed and are signing. We are accelerating to sign Chinese athletes in almost every sport. Not only in sports where we are currently globally in, but also local sports. And of course that is to try to exploit as quickly as we can the comeback of China as a market, but also the growth that we experience to see in performance. And to be very honest with you, it is of course a safer bet using celebrities from sports than it is to do it from fashion, music, and non-sports because we're still uncertain how the reaction is because the BCI issue is still kind of over us, and there's still no clarity if the celebrities from other areas are really going to go live on social media for brands like us. We will do the first tests and see, and it's starting a little bit with, I would call it, B-celebrities. But I think none of us have gone the full way, and it's still something that we are looking for with, and hopefully see a positive reaction on. As I said, people coming back to the stores, here's another one to buy, our [kito or tire] (ph) shoes. And again, I cannot remember having seen people lining up to buy Adi products for a long, long time, if it was GC, and here you see that it's happening also in China. When you get to Europe, it's clearly that there is too much inventory and not only from us or not only with us. But, I think in general many retailers have too much coverage that means too much inventory compared to their sales. And especially if you follow all the sector, you will see that a lot of online people are, of course, robot which makes it little bit difficult and high discounts. I think we are still uncertain about the macroeconomic inflation. I think it's also fair to say that we and I think many other brands maybe have overpriced the product a little bit, so, overpriced products in certain categories together with too much inventory causes, of course, even more discount which is not healthy for the business, and of course, not also for a brand hit. But one thing is for sure since Europe is our home ground, you should expect from us and we should prove to you that we should be the leader in our market. And that is, of course, one of our ambitions. If you look at North America, repeat myself again to be successful globally you need to be successful in the U.S. And, I think it's fair to say that it's the most difficult market for non-American brand. Inventory level in the industry even higher there, not only with the retailer but also with the brand, and you know that in the U.S. discount is a drug. I would say one-and-a- half year ago, we almost had no discounting. And both the brand and the retailers were making their best results ever. Now we are back to over inventory and here we go again. And of course, it's hurting both retailers and us. And again, this is something we need to work through in 2023. The combination of these two things is a very, I would say, challenging order book for the second-half. Retail is very careful committing to orders in the volumes that we would hope for. That's why, of course, we are now doing everything we can to convince the retailers that we are the brand of choice going into '24. And that we have changed or trying to change our attitude very very much to be a service-oriented brand also for the retailers and especially in the U.S. On the positive side, our partners in the U.S., I think Patrick winning the MVP at the Super Bowl probably being hottest male athlete in the U.S. right now is, of course, a positive for us. I think also in basketball with Chapter 01 and Chapter 02, which has been our launches, we have made huge progress. And you know again told you many times the reason why you invest in basketball on the court is, of course, to sell off-court. And again needless to say, the archive that we have in basketball is huge. And I think what you see in the next couple of months when we are launching Fear of God with Jerry Lorenzo, you will see take of this both on the performance side and on the suite side you have never seen before. And I am extremely optimistic about that because I think it's going to be a game changer. So, with all that what does that mean? What are we going to do in the near future? First of all, focus on our people and culture. Our business is 50% rational and 50% emotional. I still believe that there is no machines we take the emotions away from human beings, that's why this is our most important resource. Adidas used to have in my opinion a very unique culture which I was part of even many years ago. We need to find that culture again and strengthen it because I think it's something unique and unbeatable if we give all the people to a reason to have fun and be part of a successful adidas. The optimization of the business model going forward, surprise, surprise, of course, we will be more service oriented towards wholesale. You will see that our ratio will trend towards wholesale automatically because as we stop selling GC, you will see that the D2C share will go down. And then, I will not even give you a target what I think it will be because I think as work through the next 12 months, we will find a new ratio which is probably the more healthy one. And then, we can start to discuss what the differences are between the different markets and also what the profitability is. It is not true in the current environment with so much clearance on that wholesale is the least profitable channel. I think that is a big misunderstanding depending on how you are actually looking at the business; global, regional, and local, not a surprise to you. The world is not becoming more central or global. It's very, very hard to find products that are doing well in all the regions and all the markets. The business months are also different. And for us having creation centers in Tokyo, Shanghai, in the U.S., now also in India and Europe, we will go more local. And here we see some examples what we did in China for Chinese New Year. And it's obvious that you will look at different dimensions of the business model and that will be much more local than adi has been before. Speed and agility, our previous friends and sure more as you are listening to this call had the best what should I say? Year in '22. And that's because of the Speed and agility that Puma had, And I think that's something that we all have to get. There is big, big need in the market that is changing to be much faster than adi currently is. And then, brand hit. There are many ways to get brand hit. But unfortunately, there is not a phone number where you can call say I want more brand hit. It's the sum of everything we do. It's athletes; it's team's federations. It is, of course, celebrities. The suite culture, but also here it is very, very local. And we need to have people in the different markets as close as we can to the consumer to make sure that we invest where it really makes sense. And, of course, try to get as much brand hit as we can. And as you know, adi has always been able to come back again when the brand has been down. And I am convinced we will do it again. You know this slide, it's from 1993. The core of the business and it hasn't changed. Design, development, sourcing, marketing, sales, and distribution is the core. It is wholesale or D2C. And in the center of this is consumer. And everything we do in this company should be focused on this. And it's actually to support it. And a lot of the tech things are just to support this and make us better in doing it. And we should never forget that because this is and is going to say the core of the business and our income stream. So, in '23 we will build the base for the future by focus on our people. Product is king. And I think we have a lot of good stuff in the pipeline. But, we will have to do better and quicker. The consumer should be in the center of all our intention. The retailer should be our friends and partner. And then, of course, we are there for the athlete and not the other way around. And I think if we do this, over time we will again be the best sports brand in the world. And short-term, the geopolitical tensions are there. We, of course, hope that things will calm down. But, we don't have an impact on that. The challenges are still there. Although at least for the business when I look at prices of raw materials, when I look at freight cost, when I look at lot of the cost driver, that seems to ease. But, inflation and different what should I say? Developments are still uncertain. So, we have to have that into account. And then, of course, as an industry and also for us as a company, the inventory levels are too high. And we will then have to fight on the discount side to maintain and hopefully in the future build our margin. With all that in mind, we told you already a couple of weeks ago what our outlook is. We are looking at high single digit decline in our sales and breakeven profit on our ongoing operations. This is based not selling any existing GC inventory which stand like-for-like. We then take €1.2 million away from top-line and €500 million from our EBIT. On top of that or below of that, we are looking actually at a loss of €700 million which will happen if we write-off and not sell any of the inventory that we have of GC that is the €500 million. Amid all the things going on the business, we are at one-off of around €200 million, which then if you put it all together brings you to the €-700 million. Should any of this change then, of course, things will improve. They should not worsen. And we will, of course, report to you when things starts to move in a better direction. This morning just before or after we released the numbers, we also went out with a release about the changes in our executive board. First of all, Harm extended his contract by five years. So, he is now running parallel with me. We know each other since 30-ish years. And to be very honest with you, he was one of the conditions that I even took the job. Harm has all the experience, knowledge, and attitude that we need to turn this company around. And for me to have a very strong CFO that also understand the business, although he doesn't understand football, but he knows a lot about the other side, he will be my most important partner and make sure that we together do all the right things. Then we have a change on the commercial side. Roland Auschel, having been with us for 33 years, had decided to leave. Roland has done a lot of good stuff for this company. And I think many people would say Adi would not be where we are if it wasn't for him. And I have known him also for more than 30 years. And we have, over the last two months, have a lot of conversations. We have then decided that one of his, I would call, trainees, Arthur, which has worked with the company, I think, for 25 years, will take over his role. A very natural, I would say, evolution, he's an adidas guy up and down, he's run originals, he's been in different phase roles, he's worked in strategy, and he's one of, I think, the most three-striped branded persons on the globe. I'm very, very happy that these two guys can work in a transition. And I'm sure Roland will go in and out of this building, and be a friend of adidas for the rest of his life. And again a big thank you to him and a lot of expectations on Arthur. Then on the brand side, brand for us means creative marketing and the business units. Brian came in, I think, four weeks after COVID, has had a difficult time, of course, working almost not meeting his team, probably the worst timing that you could have in a role of that. Brian has spent a lot of time and energy of doing changes, but you know, when you have a new CEO coming in, like me, and you have so many things that you want to do on the brand side, very difficult. So, therefore, we decided that this guy would actually take over brand. That does not mean that I will decide everything we should do, but it means that all the business units, all the creatives will have a direct access to me, and this is to speed up. Probably sad for Brian because he's a really, really good guy, but I think in the interest of the company and the organization, this was a change that we then agreed upon. Same thing here, Brian will stay on for a while to help in the transition. He will stay and friend and I'm sure he will be three-stripe branded for a long time. And yes, that's the changes. That means that the brand or the company will be led by this. We talked about me, Arthur, and Harm. Amanda will stay on leading the Human Resources and the Culture, and Martin is running Global Operations and IP. And that's the team we are then going into the second-half of this game. We're currently down 0-2, but we think we can actually turn things around. So, with that, I think we've spoken enough. So, I'll hand over to Sebastian and he will tell you what to do. Sebastian Steffen: Exactly. So, Francie, we're now ready to move into the Q&A session. Operator: Thank you. Ladies and gentlemen, we will start the Q&A session now. [Operator Instructions] We have the first question from Zuzanna Pusz from UBS. Please go ahead, ma'am. Unidentified Analyst: Bjorn, Harm, and Sebastian, thanks for the presentation. This is [Chris Ham] (ph) from UBS, asking on behalf of Zuzanna Pusz. Thanks for taking my questions. I have two bigger picture questions for Bjorn, please. Firstly on the sports focus, in the annual report and the presentation just now, you mentioned the need to refocus on sports as that's the brand's DNA. This seems to be a clear change given that the brand has increased its exposure to the lifestyle business to almost 50% of sales in recent years. So, we're just wondering what's your view on the idea lifestyle and performance sales split? And is it right to assume that, given the technology involved, the sports performance business tends to carry a lower gross margin on average than the more fashion-driven products? So, that's my first question. And my second is about the 2024 margins. According to your outlook, you mentioned the plan to return to profitability in 2024. I appreciate that this is not the strategic update yet, so you won't be able to share much when it comes to your 2024 margin plans. But given the magnitude of profit drop in 2022 and also '23, would you be able to help us understand a little bit more about how we should think of the cadence of the margin recovery trajectory in the coming year. Is it fair to assume that, and it be more beneficial for the brand to maybe focus initially on sales growth instead, and slowly build up from breakeven to the long-term double-digit EBIT margin or is the underlying profitability of the business currently well higher with the brand being [well-invested] (ph), so the margin is just, at the moment, overshadowed by one-off costs. Any color on that would be super helpful. Thank you very much. Bjorn Gulden: First of all, you are right that we should have an even higher sport focus when it gets to what we do, and that includes not focusing only on the big sports, but also go into smaller sports because I think that makes us different than all the other brands. And I do think that Adi should keep their DNA of not being a copy of Nike, but we should stand on our own feet. You are also right that if you measure the [real-real] (ph) performance product and you compare them to lifestyle product, the margin on lifestyle is normally higher, but where you're not right is that it's a share of 50-50, because a lot of performance product also goes lifestyle. It means that the consumer, in the end, decides if a product is street or performance. So, I think there's many categories where up to 80% of the product goes on the streets. If you take football, it's not the case because no one is running around with football boots. But if you take running, most running shoes are never run in. If you take basketball shoes, most basketball shoes, especially if they're from classics or originals, is also not played in. So, I think the street business is much, much bigger than 50%. But I think for the brand, we need to make sure that we never, ever loses focus on performance. And when you see the development, I'm actually very relaxed when it gets to that because we are making progress in all the performance is very good. And I don't think that will be our issue. I think on the marketing side and the visibility, we have divested from certain sports, teams, federations that we need to get back again to get the visibility, to keep the credibility. And then, as we said earlier today, is that the lifestyle side, which ironically is where we have a bigger archive than anybody else and where the trend in the market has gone back to the 90s and the 80s, we have not exploited that the way that, for example, Nike has done. And this is where we need to do a much, much better job. When it gets to the margin targets for '24 and going forward, I think it would be very premature for me to give you that after seven weeks here in the office. But those who know me know that I always say that a good-running company, this industry should run at a double-digit EBIT. This is Adi has been, and with the scalability that we have, we should definitely be there. At what time we will be there and how we will combine a margin increase with a leverage on our operating cost and what that trajectory is, I think it's too early to say. But I'm very confident that we can get more leverage on our cost base. And, of course, the margin is now damaged by so many things, and especially inventory, that does not mirror any of the things that we see in the future. But '23 is to, what shall I say, clean up a lot of, I would call it, old mess, and actually be a clean company again, that the consumer, and the retailer, and ourselves see, what I call, a normal business. And I would appreciate if we can leave it by that instead of flying in a spreadsheet now to define what the different components are because I think it's too early. But I can promise you that I will deliver you 10% EBIT before I leave this company. Unidentified Analyst: Okay, that's super clear. Just a little small clarification from my side, if I may, is it fair to -- it sounds like double-digit margin in the long-term is quite confident. But in terms of your initial focus, is it fair to assume that maybe it's going to be more beneficial for the brand to focus initially on sales growth, and while margin slowly builds up or how should we think about that? Thanks. Bjorn Gulden: Well, first, you need to think about that I have a GC business that is disappearing, so I am actually losing sales. And then, I have inventories that I need to sell and clear. So, there's two negative impacts, both on my top line and my bottom line. That's why we, this year, have no sales growth, but we say high single-digit decline. And as we do that, of course, we will have growth again next year. But if that growth is 5%, 10%, or 15%, I think we will need to talk about when we see how quickly we are cleaning up the things we have today. That's why I'm very careful saying it. But going forward, and again not a surprise, I think that a company like ours should have double-digit and put some of that growth to the bottom line and some of that growth to investment in marketing. And that's always been the recipe, and I think it's the same here. I do hope though that the scalability that we have is that the recovery that we can have on the bottom line is quicker than what you've seen me working in other companies. But what speed, how quick, and when it turns, I -- again, let us get a little bit more time. Unidentified Analyst: Okay, thank you very much. Operator: The next question comes from Graham Renwick from Berenberg. Please go ahead. Graham Renwick: Hello. Good afternoon, Bjorn, Harm, Sebastian. Thanks for taking my questions. Just on the turnaround where you talk about 2023 as being a transition year, building that base for the '24 and '25. So, just wondered what's captured in the €200 million of strategic costs? And does that already include any organizational changes or any bigger investment into marketing and the commercial proposition? And do you think that level of investment is already sufficient to start to drive that turnaround and to drive market share gains from 2024, because you already appear pretty confident on the product pipeline heading into next year, which is going to be a big sports even year, of course? And then secondly, just on the business improvement plan. It was announced before your arrival, Bjorn, €700 million of net income benefits. I just wondered if you still feel that they're fully achievable this year or will any element of that plan be scaled back or possibly changed under your new strategy, particularly in context of having to reinvest more into the business? Thank you. Bjorn Gulden: Since these are things that happened before me, I think it's fair that actually Harm answers it so I don't do -- say something wrong. So, Harm, here, you take over. Harm Ohlmeyer: Yes, I'll probably start, Graham, with the €700 million business improvement plan. Of course, that is fully reflected in our guidance that we gave, whether it's underlying and breakeven company or if we would decide to write down the inventory of €500 million we get to the minus €700 million. So, it's fully baked in there. And as we said the last time, this is not all in comparison to '22. This is mitigation actions as well because we saw FOBs increasing, we negotiated some of the freight contracts as well to bring that one down. We kept our ratios and marketing going into '23 on a lower net sales base, so compensation follows this. So, all of that is reflected. There are puts and takes, but overall, we mitigated the cost increases that we have seen. We also had some one-time costs in Q4, whether it was the closure of one of the retail store, whether it was severance to right-size the organization that was reflected in Q4. And we will take the benefits of that going into '23. So, all of that has happened. And again, all of that is not a comparison to '22, but is mitigating actions. Some is actually a reduction compared to '22 as well. And then, of course, when it comes to additional €200 million in '23, this will be part of our strategic review. And again, bear in mind, Bjorn is only here for two months, so we have looked a lot of things. I expressed my opinion about what we should do and should not do. But we need to vet all these things with the new team in place now, and will come forward. But of course, it will be all elements, whether we need to invest more, whether we need to review some of the stores or review the organization. So, all of this, but again we don't want to be too detailed right now, too specific. But we believe €200 million would do a lot to get to profitable growth in '24, and that shouldn't take anything away from what we need to invest around the Olympics or the European Championship on home turf, in '24. So, we are well prepared for that. Graham Renwick: Okay, thank you very much. Operator: The next question comes from Erwan Rambourg from HSBC. Please go ahead. Erwan Rambourg: Yes, hi, thanks a lot. Erwan Rambourg from HSBC. Good to hear you, Bjorn. And good to hear you as well, Harm and Sebastian. Just wanted to follow up a bit on the long-term algorithm of growth, and again I'm not asking for a long-term guidance. But when we look at the fact that you were in a sort of duopoly 10-12 years ago with Nike, they have an algorithm of growth of high-single to low double-digit sales growth, and eventually mid-to-high teens EBIT margins. I'm wondering, with the exception of scale, notably in the U.S., if there's any structural reason for you not to go to those levels once we have the big hiccups behind us? And then just talking about the big hiccup of the day, looking at Yeezy, I was just a bit confused by a few press articles around the solutions to Yeezy because my understanding, but please correct me if I'm wrong, is that you cannot sell Yeezy for reputational risk reasons, and at the same time you can't destroy the product for the planet. So, I'm just wondering what options do you have to treat the Yeezy stock that you have today. Thank you so much. Bjorn Gulden: I ask you, so if you can't sell and you can't destroy, what's your option? Erwan Rambourg: Well, that's why I'm confused. I'm not running the brand. I am confused. Bjorn Gulden: Well, I just -- I tried to describe the situation that, depend on who you speak to, people will say you cannot destroy because it's a sustainability issue, right? So, please don't destroy. And then, those who are like, "Please don't sell because you have a reputation issue." So, if you say you're confused, I can just say that's the fact, and that's why we haven't made a decision on it because it's a very complicated issue. I think that from the one extreme, to selling the product normally, which we would have done before, booked €1.2 billion in sales, and €500 million in profit, that's one extreme, and that carries a lot of reputational risk. The other side is to say we burn it or we do whatever it takes then to destroy it, and it disappears, then you have another issue. And between that, of course there are different solutions. We could sell the product at cost, and it would be a zero thing. We could sell it with a small margin and give the margin away for different donations. We can sell them with more margin and give more donations. I think the goal that we have is to do what the probability is that it damages us the least and we do something good. And that's what we're talking to many interesting parties, people that have been hurt by, what should is say, this situation, and are discussing what they think is the best option. From a timing point of view, you should not forget that when all these things happened, a lot of products were still in production, meaning that we and the brand had to make the decision should we finish the product or should we just stop it. And in the interest of 10,000 people that were working in the factories, adidas decided to continue to produce all the components, and then ship them to different destination. And it's just these last weeks and days that this inventory has actually showed up in the places where they can be treated or can be sold. So, we couldn't really do anything before now. But now, at least from a logistic point of view, the product is there, and we can decide what to do. But there is still a lot of unclear conversations with different parties that is going on. And at the time, when we think we have all the facts, we and management will make a proposal. And then, of course, also discuss it with our supervisory board because, as you can imagine, this is a pretty sensible case, and not an easy one. So, that is, what should I say -- Erwan Rambourg: So, you could eventually end up making a big gesture to a charity or to --? Bjorn Gulden: Of course, yes, of course. But the people that are saying send the shoes to Turkey or somewhere that the people don't have shoes or there has been a tragedy happening, I think you agree that this is not normal shoes, so if you did that they will come back again because the value of the product is not the physical value of the ingredients, it is the premium because it's a brand and the merchandise that is sold at a high price. So, I can tell you since I started here, I probably got 500 different business proposals from people who would like to buy the inventory. But again, that will not necessarily be the right thing to do, so a very difficult, sensitive situation. And I can just repeat, if you look at that business, there is no doubt that Ye is one of the most creative people that have ever been on the planet. I think the way this was taken to market is probably the best I would say go-to-market job that any brand has done. And it's very sad that this is falling apart, so… Erwan Rambourg: Right, right. Okay. And then, maybe on the question of how would you compare to Nike on a very long-term approach? Bjorn Gulden: Yes, if I say, of course, we will beat them, then I'm in trouble. I do think that our business model should be different than Nike is. But I think going forward, there's no reasonable long-term that we should not be performing like Nike's doing. But will that happen tomorrow? No, but I mean, we have all the ingredients. We are global. We have the history, we have the archive, we have the resources, we should have the talent, so no, not really. Erwan Rambourg: Excellent. That's great to hear. Welcome and hope to speak soon. Thank you. Operator: The next question comes from Geoff Lowery from Redburn. Please go ahead. Geoff Lowery: Yes, good afternoon. And just one question really, can you help us understand what's really going right or wrong at the product creation level? I'm just struck by how adidas has been capable of getting something so right and yet missing so badly. Is this just a case of speed? Is it case of organization? What if you had to give us sort of one or two things that really sort of summarize it, would you attribute to that, that sort of hit and miss quality to? Thank you. Bjorn Gulden: Again, I have to be careful coming from the outside. I think COVID hurt adidas a lot because I think when other brands were trying to be very fast and flexible and actually chase the business wherever it was, I think Adi was very strategic and going for growth. And I think we're much too optimistic about what, where the market is. Don't forget that Adi was extremely successful before COVID. I mean, a tremendous growth in China, tremendous profitable in China. We talked about GC and had a momentum, and then COVID hits and then you have a strategy change that is going for more growth and more D2C. And I just think that the circumstances didn't fit that, so -- Geoff Lowery: Thank you. Bjorn Gulden: So, I do think that the circumstances was making it difficult to reach those targets, and that made things difficult. Geoff Lowery: Understood. Thank you. Operator: The next question comes from Warwick Okines from BNP. Please go ahead. Warwick Okines: Yes, hi. Thanks very much. Similar line of questioning, really your comments to me suggest you don't really think adidas has got a problem about product innovation, and it's more about how you go-to-market through marketing and channels. Is that a fair assessment and does it make a turnaround easier? And what do you need to do in order to do a better job in lifestyle? Bjorn Gulden: No, I think what I said is that the criticism that Adi hasn't brought innovation in performance is not true. Again, I always ask, what was the last innovation that Nike brought? Because you're always comparing it to that, and when I look here at the 3D printed shoes, so I look at the Adizero, I look at the Predator, or I look at the soccer shoes that I know, but you don't know about. I do think that the performance side is actually in good hands. I think the transition into lifestyle when it gets to creating trends, creating stories, using your archive, tweaking your archive has been too slow. And that might have to do with empowering people to be more creative. I think it has to do with being more executional and strategic. So, I think I'm disagreeing that Adi has all the resources to bring innovation both from a lifestyle point of view and a performance. But I do think that the lifestyle side has been hindered by putting too much more product on the market that hasn't worked, being too high inventory because of too optimistic sales plans, therefore being hurt again on the discount side. And that's why the lifestyle side and the brand heat has been missing. At the same time, doing product Montclair, Balenciaga and Gucci within 18 months is also too much. And again, that is probably because COVID and the timeline and supply made it all be delayed. And then, certainly, the delayed projects went into the on-time project and certainly was all at once and then I think some of the street culture relevant things, if it's Pharrell or Lorenzo or Beyonce, you have to remember that a lot of this artist and the people that use potential has not been out there for the last three years. There hasn't been any festivals, there hasn't been any tours, there hasn't been any releases. So, I think a lot of the places where we again, can create bright heat and a lot of excitement has kind of been hampered by many things. And at the scale that Adi is, it has done not been enough. So, speed, empowerment timing, discipline are probably the elements that that has made it difficult. But the ingredients are there, believe me. I mean, we have designers that are very talented. We have sample rooms, we have technologies. And that's why also I'm probably more optimistic than you guys are. Warwick Okines: Thanks very much, Bjorn. Operator: The next question comes from Jurgen Kolb from Kepler. Please go ahead. Jurgen Kolb: Yes, thank you very much. Welcome Bjorn to adidas on the other side of the street. Two parts of other question from my side, one is you mentioned Seinfeld, and it sounds as if you are thinking about maybe rolling out a little bit more on production. But correct me if I'm wrong, is that on your mind to maybe become or gain a greater control over your own production lines? And if so, is that going to be meaningful or is that just really for special makeups that you have on mind? And the second thing going into smaller sports I appreciate, I think this is where the brand stands. This is where the visibility is. At the same token, however I remember when adidas had the strategy to get out of these smaller brands because of the increased complexity. Now, what is the right approach here? Is it correct to be in the smaller sports for visibility? Or is the complexity a problem, from a productivity point of view? Thank you. Bjorn Gulden: First of all, Seinfeld is a factory 40 minutes away who has traditional making shoes for 50 years. And I think what I tried to signal is that shoe competence is not easy to find today, at least not in Europe. And I think we have something that we can utilize more, the scalability that of course not that you will do millions of pairs because you know, then the air shoring on shoe production back to Europe, I don't think will happen. But I do think that we have something unique that no one else has and that we can combine that to educate people to have creative people work there to do collabs there to make samples there. And I think even to make small series of European, German made product because I think it means something and when we work with luxury parties that we do, I think we can take part of that production maybe if we do it the right way. So, I look at that as a resource and not as a problem. The smaller sport again, I wasn't here when they should divest. It's obvious that if you go into a small sport that will increase complexity instead of increasing productivity. But then the question is what's the Hilo effect and I have always thought when I was at Adi in the 90s and also later, that some of the creativity coming out of Adi in design or development and technologies was coming from the fact that they were working on smaller sports. And again, if that is the result, then it's worth a lot more than adding a 100 SKUs to the line. So, I do think that we need to be careful and not being over analytical efficiencies and KPIs on productivity, I don't think is what, is not what is going to drive us. It is our creativity, speed, and agility. And that will bring much more margin than trying to find more efficiency efficiencies on the SKU count. So, again, I'm a sport romantic. I think adidas love us sport romantic. I think putting that DNA in again will make us different than any other brand. And that is for me, a small marketing cost compared to many other things we do. So, and I do think there's a big agreement about that when you talk to the designers and the product people and even to the financial people, they all say, yes, this is what we should do because it's our DNA and it makes us different. Next time you hear, you should go into our archive and see how many, what should I say, special product we have made through the years and what these special products again does have done for the inline product. Then the connection is there, and we need to do more of that. I think we have standardized too much and become too, or should I say almost boring in the way we brief and go to market on our what should I say inline product especially on the life science side. Jurgen Kolb: And maybe a small spoiler, any specific sports you're thinking of? Bjorn Gulden: Anything where you sweat and can win medals. Jurgen Kolb: Understood. Very good. Thanks so much. Operator: The next question comes from Cedric Lecasble from Stifel. Please go ahead. Cedric Lecasble: Hello gentlemen. Thank you for taking my questions. I have two also. So, first one on your distribution networks today. Could you comment maybe on the site organization, on your store network, on your e-com and digital ecosystem, what needs to be fixed and what are you happier on today? And the second one is on is on China, low base in '22, sometimes recovery already. When do you think China can definitely be back into the equation and do you think China can come back to the kind of old growth and profitability in maybe a more open competition, interested in having all sorts of things? Bjorn Gulden: I think that, we have a $3 billion business in China in a very difficult time without having been able to do real meaningful marketing and people being in lockdown. If you take the lockdown away, and you also say that we can start to do marketing again, it's obvious that we will have growth. Will the growth come for free and will it be as easy as it maybe was? No. But does China have a huge potential for us with their population and their growing population in sports? Yes, definitely. And again, I don't have a crystal ball, but my feeling is that China will again, turn into be a major growth vehicle for us, when it starts to grow. But I'm not saying that it will turn around this year, and you should count that in to be a huge contributor. I'm just saying that midterm, I'm counting on China coming back, and that's why we are investing in both creation centers and more sourcing in China again for local, for local. When it gets to your help me again, what was the first question? Cedric Lecasble: Distribution. Bjorn Gulden: Distribution, when you look upon what has happened already, then you see that the GC business disappearing which was mainly a D2C business. You will see that our D2C share will fall dramatic in the next quarters. Then the question is what is an optimal balance between D2C and wholesale? And I can't give you the number, but what I can tell you is that we need to be very service minded for the retail partners. We should be as visible as Nike with our retail partners. We should own part of the wall, and our retailers should make money with us, and we should make it very, very clear to the retail partners that is what we want. And that is a change of mind in the sense that we need to stop talking on the D2C. Does that mean that D2C is not important? No, it does not. We should have a very professional e-com platform. We should be continuing to invest in all the applications and the analytics we're doing, but we need to make sure that if we become much more full price on e-com today, there's much too much discount. And there's too much inventory sitting on that side. On brick-and-mortar, there are markets that needs full price normal stores, all those stores or all those markets who doesn't have a big multi-branded retail business, India, probably parts of China maybe some other markets like Turkey. Then we need some Hilo stores in our major cities like New York, like Paris, like now in Seoul. And then, of course, we need factory outlets, wherever factory outlets is a major part of it where I don't see that we need to have our own stores is in markets that has a lot of multi-branded retail and where we do normal stores just to have stores in a mall or in a shopping street where all our retail partners are, because that doesn't make sense. So, I think it would be a more targeted brick-and-mortar strategy and it will continue to be a strong e-com strategy. But I think the way we go-to-market, I think it'll be more wholesale first and then need to see afterwards. And then, we will see how long that takes us. Cedric Lecasble: Thank you so much. Operator: The next question comes from James Grzinic from Jefferies International. Please go ahead. James Grzinic: Thank you. Good afternoon everybody. Bjorn, just I guess a couple of clarification questions for me. The first one is I'm unclear on your thoughts on sportswear and generally the progress segmentation that we saw introduced last year. To what extent do you, can you work with that? To what extent do you think you need to change that? And secondly, did I get it right that you're saying your ambition is basically to compound double-digit growth for the business? That that's what you looking for? Bjorn Gulden: I mean, to take the first thing first, I think that when we get out of the clearance and we set the base, then I think double-digit growth should again be our target is. Again in a world where we don't have pandemic, war or anything happening, but the normal world, again I think that Adi should have the ambition of growing 10% again, yes. James Grzinic: Okay, perfect. Bjorn Gulden: When it gets to the segmentation, this is where we need to be very specific. I think when you saw the logos, we have the original logo, we have the performance logo, we have the sportswear logo, we have the Terrex logo. I think the balance of that is probably okay, but I think the sportswear side of it, we need to stretch more and make sure that we are more commercial and that the collections breed more. I think COVID, the fact that people haven't traveled that much, the inspiration of the creatives and maybe also the freedom haven't been big enough. I think there's more work to do there and that we are not at the end of that game. That is correct. And then, the question is the segmentation on this brand or these logos then to our retail partners. I think there's a lot of moving parts there, and I don't think we are at the end of that. So, we have I think all the brand marks we need but how we are using those brand marks and at what price points do they start and end, and where do we put the effort? There's a lot of work to do there. And I said speed and agility in the local markets to exploit; these brand marks where we can find business and where the consumer is. I don't think we are not even close to being good at that, to be honest. So, there might be changes also in the way we look at this but we don't need to create another logo, if that's what you're asking for. We have all the marks that we need, but I'm not convinced that we have the right mix between them. And I'm also not sure that the segmentation on how we use them towards the different segments and the different retail partners is the correct one. James Grzinic: Understood. And I guess as a follow-up on that, I guess my point was trying to understand how much you need to change the base and how much the product architecture is loaded into the channels up until when, so are you mostly to what extent you're committed as a business to what we saw last year and through to what point and trying to get a sense from that perspective? Bjorn Gulden: And this is again, I mean, if you look at it now, we are already now signing off the collection for Spring Summer 24 as we speak. We have the markets in today. And again in a normal world that would be locked in, I think today because of the changes. And one of the reasons why I put myself on top of the brand is, of course, speed up decisions where we need to do things different than the calendar. And I'm making myself available for the different business units so that they can actually be allowed to speed up things and challenge the calendar. So, you will see product that were meant to be in '24 being pulled forward to '23, you will see volumes of, for example, the Tito collection being increased dramatically in '23, even if the plan was different. You will see product that were meant to be innovation be pulled into the first-half of '24, so you will see us taking more risk and speed up things because that's what we need to do. We cannot just drive business as normal when we are not performing. So, there is a, there is I don't know what you can call it, but there is a wake up call to get speeding and to challenge a certain rules and regulations why things are slow. Yes, definitely. James Grzinic: Thank you. Operator: The next question comes from Edouard Aubin from Morgan Stanley. Your question, please? Edouard Aubin: Yes, and good afternoon guys. So, two questions for me, on China, sorry to come back on that, but Bjorn, could you please comment on kind of the sellout selling dynamic year-to-date and kind of what you expect to a certain extent to pan out in this year? Obviously, you don't have a crystal ball, but your sense and related to China, I mean, obviously you took back a lot of inventory, so I guess you're going to be some of it is going to be sold in outlets or discounted and to what extent, that could impact the brand desirability in the next two, three years. That's number one. And then, question number two on your balance sheet and what it implies in terms of buybacks and dividend and so on. So, adidas used to be net cash ex lease liabilities, you're now net debt. How do you see the net debt situation evolve throughout the years? And what about your share buyback program, I think you have 2 billion more to go. You've not talked about that in the release as far as I've seen and what it could imply. I mean, should your net debt increase this year, what it could imply for your dividend next year? Thank you. Bjorn Gulden: I'll start and then Harm will take the last one. I mean, the China model has been a push model. Remember that almost all the Adi stores in China are owned by retail partners. We sell into them eight, nine months before, they sell through in a quarter. And based on the sell-through, we take product back and we flush them in outlets and also online. We have reduced this, I would say almost dramatically. So, we are delivering a lot less into the stores and we are trying as we speak, it's not been done yet to go into reduce their amount even further by, for example, doing 30% of the volume in-season, meaning that you're producing local for local 30% of what you think is the need and not even take orders on it. That will partly take you from a push model to a pull model. Even before we have done that given the reduction of the buys and not pushing the way I think it has done before, you will see less takebacks and you will see less inventory. Having said that, the amount of inventory in the China market from everybody has been high for the last three years, this has not been only an Adi issue, but because of the size of Adi is that, it has of course had a bigger impact on Adi. But the China model needs to be more vertical. It needs to be more local for local and it needs to be run more by the local people that almost close supply chain. And we are working on that very, very, I would say focused as we speak to, to make it a more pull model than a push model. But that has had no impact on the business yet because it's not in place. But I think it could be in place at the back end of this year. So, it could be fully utilized in '24. Harm Ohlmeyer: Here on the balance sheet, you're absolutely right, the net debt is higher than we originally planned for by the end of '22. With the consequence also on the rating that I explained earlier, and of course it's our ambition now on '23 to cost correctors. The key enabler for that will be reducing inventories because we are buying significantly less and utilizing the inventory that we have to return into cash. But we should also keep in mind that we return $3.1 billion to shareholders in '22, 2.5 billion share buyback and $600 million in dividends. And of course our priority is probably not fully in '23, but starting to prepare for fully meeting our rating KPIs again in '24. Until then, we should not expect a share buyback in '23 unlikely also in '24. Because first we need to get to authorization at the Annual Shareholders Meeting in May, which we are proposing to get to authorization because we bought back almost 10% of our capital. And then again in '23 very unlikely, and then we'll take count again, you're going into '24 and I know that the $2 billion outstanding from originally announced share buyback program, but that is secondary right now. First, we want to make sure that we're generating cash again, secondly, want invest into the company because we want to get prepared for growth again. Secondly, it would be dividends first and only then we would look at share buyback again. So, be patient, stay tuned. But it's a focus right now to return to profitable growth first. Edouard Aubin: And Harm, I know you have many different moving parts this year and one of them being easy in terms of the cash, but how do you see your net debt trajectory this year roughly? Harm Ohlmeyer: Well, again, there's a lot of moving parts, right? I mean, when you look at our guidance and as you say, a lot depends on that, but whatever option we are choosing, it would probably preventing to write down the inventory if it would tell that cost, I mean, it's an easy, cash in as well from a calculation. But again, a lot of things depend on how quickly we clean the inventory. What are we buying at year-end, if you believe there's growth coming in '24 again, what is the reopening in China? So, really, even if I would have it, I don't even have it in, in detail because we plan for different scenarios and the most important thing is generating cash, but turning the company around to be prepared for proper growth in '24. So, '23 year is transition year. That's what we said. Edouard Aubin: Okay. Thank you. Harm Ohlmeyer: Sure. Operator: Thanks, Ed. And Francie, I'm afraid we're slowly running out of time. That's why we need to take the last question now please. Operator: Okay. That will be from Olivia Townsend from JPMorgan. Please go ahead, ma'am. Olivia Townsend: Hi, thanks for taking my questions. And I have two, the first one is on China. So, I'm just wondering, since you've been talking a bit about bringing some marketing back into that region, could you just talk about where that marketing level is versus where you would expect to get back to once you have a bit more of a recovery? And then the second is just a clarification question on the double-digit EBIT margin that you suggested could be achievable longer-term. I'm just wondering, are you able to commit to a certain year for this? I think when you mentioned earlier some people have taken that to me around 2028, so I'm just wondering, do you have a comment on that? Thank you. Bjorn Gulden: I'll take '28 if that, if you're happy with that. I think it's wrong after seven weeks to commit to a double-digit in a year. It could be quicker than '28, and it probably should be quicker than '28, to be honest with you. But I hope you can be patient and let us at least work through some months and show you that we are on the right track. And then, we can formalize I would say a new strategy and tell you where that will bring us from an EBIT level. But I think we all agree around this table and at least in our management, and I think also in the company, that if we don't deliver 10% EBIT with our scale and our brand, then we are not doing a good job. But we need to get there first. Before we need to turn it around first, before we promise you when. I think the China, what should I say, marketing thing. What I tried to say is that there is some positive things happening in China because people are out on the street doing sports again. People are not isolated the way they used to be, and they're starting to buy again, both performance and lifestyle. Of course not at the same speed they did before COVID and BCI, but they're doing it. The marketing that we have done is that because sports is getting more attention and there are athletes doing well, we have given the Chinese team the freedom to invest in more athletes that we can showcase. For example, what you saw in tennis, we are speaking to quite some of the so-called celebrities that used to do marketing before BCI and none of them have gone live yet, but at least there is now talks on a different level than it's been before. The hope is of course, that when one celebrity starts to do, pulse things that are more like marketing, that there's no sheet storm being generated and that suddenly we can be back again, where marketing that generates traffic and conversion, especially online is working. At that time, I can assure you that our marketing team in China will get budgets to do whatever is right to accelerate growth. So, there's no limitation on there, what should I say, creativity and investment level when things are possible again. But right now, this kind of a touch and go, you saw hopeful in the presentation that we are, for example, spending money on pop-up stores to actually attract consumers. We have celebrities then coming into these stores. So, without doing something which you call marketing, they are invisible in our business. And that's kind of sneaking, I would say, marketing into to our business again. And of course I cannot tell you at what point in time things are normal again, because if I knew I would be a billionaire by telling it to everybody, right? So, again we are really what should I say, touching the market in a way that our local people are leading. And then both Harm and myself are speaking to them at least twice a week. We currently have 30 Chinese people here in our building, working on products for 24, first time that it traveled to Europe in three years. And it's so nice to be hit back in the normal world again when it gets to what we used to do. And there's so much energy in the Chinese team, those who remember, they have basically been in and out of the isolation for the last two years. And I would say there is quite some optimism. But again, don't get carried away, and then, you know, put your Spreadsheet up at 100% growth, because that will not come, but I think there is some light at the end of the tunnel. All right. So, we just hit the telephone limitations to the support for the Chinese team, unfortunately there is some limitations to the time for this call, and that's why we need to wrap it up now. Thanks very much, Francie. Thanks very much Steffen and Harm, also thanks very much to all of you for joining our call today. I'm sure we could have gone on for hours. I know that there are still a lot of questions outstanding. You please reach out to any member of the IR team or myself if you have any questions. And we are all very much looking forward to seeing some of you over the next couple of weeks as we are traveling the world. And with that, thanks very much again for your participation. Have a good remainder of the day, all the best, and bye-bye. Stay healthy, and buy adidas products. Operator: Ladies and gentlemen, that conference is now concluded, and you may disconnect your telephone. Thank you very much for joining, and have a pleasant day. Goodbye.

Operator: Sebastian Steffen: Good evening, good afternoon, good morning, everyone, wherever you're joining us virtually today, and welcome to our Q3 2022 results conference call. As you know, it has been quite an intensive couple of days and weeks given all the recent announcements and of course, this call will definitely be somewhat special as well. In a second, our CEO Kasper Rorsted will kick things off with some personal words. Afterwards, our CFO Harm Ohlmeyer will walk you through our presentation, and take the time at the end to answer your questions. As usual, I would like to ask you that during the Q&A session, you limit your initial questions to two in order to allow as many people as possible to ask their questions. And now, I'll turn it over to you Kasper. Kasper Rorsted: Thank you very much Sebastian and also hello from my side. As you know, this is the last earnings conference call I'll open as CEO and after my opening remarks, I'll leave the rest of the presentation also question and answer to Harm to take over as interim CEO until the end of the year. But first of all, I like to thank you for following all developments here that is closely over the last few years and I enjoyed the professionalism and our personal encounters. Adidas is an iconic sports brand and I'm very happy that I had the opportunity to be part of this fantastic company for the last six years. As a company we made great strides since the years of our business. We have substantially advanced our digital capabilities and grew our online sales by more than five. In North America, the world's largest sporting goods market adidas has doubled its sale. We also strengthen our leadership position and sustainability and increased diversity inclusion throughout the company. We're divested in a successful way tailor made CCM hockey and Reebok so that the company is now able to fully focus its efforts solely on the adidas brand and I'm proud of this achievement and I am proud of our team. The past three years have been marked by several external factors that disrupted our business significantly. They were challenging as they were marked by the economic consequences of the pandemic and geopolitical tensions. It requires huge efforts to master these challenges. This is why enabling a restart now's the right thing to do, both for the company and for me personally. You might know that Bjørn and I know each other quite well. Bjørn has done a tremendous job at Puma and I'm wishing him and the entire adidas team, all the best of luck and success. And with this, I'd like to thank you again. And I'll hand over to Harm. And Harm have a good call. Thank you very much, everyone. Harm Ohlmeyer: Thank you Kasper. And before I start with the Q3 earnings, let me say thank you to you on behalf of the board, and all adidas employees for your leadership, achievements and passion for the future strives. I'm sure he will spend quite some time skiing in the coming weeks. But I hope that you will continue to cheer on from the sidelines. So we wish you all the very best for your future endeavors. With that being said. Let's move to the agenda of our call today. In a second, I will start with a recap of our business development and financial performance in the third quarter. Given that we had already pre-announced our high level quarterly results three weeks ago, I will keep this part relatively short. We can always discuss any detailed questions you might have during the Q&A part today or afterwards in the individual conversations between you, myself, Sebastian and the IR team. I want to spend the most of the time on a comprehensive operational update and our outlook for the remainder of this year and our high level view on 2023. So with that, let's kick it off. While we continue to operate in a very dynamic environment characterized by several external changes, the consumer remains at the heart of everything we do. As you can see, we delivered multiple consumer highlights across all of our key categories in the third quarter. In football, we launched the federation kits for the upcoming FIFA World Cup with impressive media feedback as excitement builds up for the event. In addition, the Rick and Morty X Speedportal performed strongly among our Gen Z consumers, driving an increase in our football footwear revenues of more than 20% during the quarter. In running, we scaled our offer for all types of athletes, our adizero track and field growth credibility in reigniting the super spike debate around the world's fastest sprinters, while the UB-22 won the leading T3 Award for Best woman's running shoe. In addition, 4D forward more than tripled its sales as we scaled the franchise with new iterations and colorways. Sustainability and performance continue to go hand in hand as we introduced a made to be remade and made this nature versions of the ultra boost driving excitement and growth in one of our most iconic franchises. In outdoor we leveraged our leading partnership with Parley for the free hiker explorer. While training saw the introduction of an HIIT collection and a dedicated Stella McCartney maternity line for a woman. Moving to lifestyle and our forum franchise, which is the best example that our hype to scale approach works. Not only did we see a Bad Bunny collaboration drop being oversubscribed 40 times, we saw the entire franchise growing by more than 50%. In addition, we scaled our NMD franchise with new drops of the NMD V3 and the hiking inspired Pharrell NMD S1 RYAT. In lifestyle apparel we continue to privatize our offer, with a new chapter of our successful Y3 partnership and the second drop of originals blue version. Let's now have a look on the progress made in our strategic focus areas. First, credibility. The three stripes took center stage at an incredible UEFA Woman's Euros this summer, as we leverage the tournament for dedicated activations On and Off the pitch, underlining that adidas is the number one football brand for all players. In addition, Karim Benzema took home his first ball on door. We celebrated his very own impossible is nothing moment and leverage through limited adidas signature footwear, and Jersey drops. Our most prominent technical running franchise Adizero Adios Pro continue to deliver win after win. While our latest outdoor campaign encourage all athletes to reach their personal summit. I also like to call out our world class athletes, such as Patrick Mahomes and Aaron Rodgers, driving performance credibility and sales growth of more than 30% in our U.S. sports category as the NFL kicked off. Second on experience. For the first time ever, we brought together more than 60 of our top partners including Leo Messi, Trae Young, Stefanos Tsitsipas and [Indiscernible] to offer Adi club members the opportunity of a lifetime to be sponsored by adidas. The strong proof point of what our brand has to offer for most valuable consumers. Exclusive access to our partners alongside money can't buy experiences, both online and offline. And third sustainability. In sustainability we show what's possible with the latest adidas by Stella McCartney viscose tracksuit and industry first piece, made in collaboration of this 12 pioneering partners, the statement of intent to demonstrate the potential of circular garment production and to move us closer to our goals to help end plastic waste. Now turning to the numbers. Let me discuss our strengths and weaknesses for the third quarter. On the strength side, we saw continued double digit increases in markets excluding Greater China with revenues up 12%. As growth accelerated in Latin America and Asia Pacific. In the performance category, strong product innovation is not only helping us to drive brand heat, but also double digit growth with football up 36% and running up 24%. The strong sales of our product also enabled double digit income growth in North America, EMEA and Latin America. On the weaknesses side, the war on Ukraine and inflationary pressures weighed on growth in EMEA despite the strong underlying performance in Europe and the emerging markets where revenues grew 9% and 43% respectively. The underlying improvement in Greater China was masked by inventory takebacks of more than €200 million in the quarter, while own retail revenues were up 7% reflecting robust sell out. Our profitability development was negatively impacted by several one offs in Q3. I will provide more details about these in a few minutes. Lastly, we see elevated inventory levels for the overall marketplace as well as for adidas. And while as a result of this, we expect promotional activity to intensify, it is definitely worth looking at the inventory increase in more detail. There are some important developments behind the large increase that are key to understand and I will get to that in a little later. Turning to our P&L at a glance. Revenues were up 4% currency neutral, while being up 11% in Euro terms. Gross margin was down to 49.1% as a significantly better pricing mix and federal currency movements were more than offset by increased supply chain costs, higher discounting and an inferior market mix. Our operating profit came in at €564 million reflecting an operating margin of 8.8% amid continued investment into the launch of new products as well as our physical and digital platforms. Final net income from continuing operations for the quarter came in at €66 million, somewhat below the preliminary numbers due to tax implications related to the termination of the Yeezy partnership. As you know, our P&L development in the quarter is significantly impacted by several one-off costs totaling amount almost €300 million on the net income level. Please bear with me as we'll give all the details shortly. Looking at our strategic growth markets. In Greater China, our top line development continues to be severely impacted by the challenges we face, which I will discuss in detail in the operational update of this presentation. While our own retail revenues increased 7% in the third quarter, reflecting a robust sell out, product takebacks in the amount of more than €200 million during the quarter reduced selling significantly, and contributed to the revenue decline of 27% for the market as a whole. Sales in North America were up 8% as we achieve double digit growth in D2C reflecting strong sell through of new product launches across both performance and lifestyle. From a category perspective growth in North America was driven by double digit growth in football, running, training and U.S. sports, while significant increases in basketball growth and originals. In EMEA revenues grew 7% despite the loss of revenue on Russia CES of more than €100 million, driven by strong double digit D2C growth in both Europe and almost 20% and emerging market with an increase of more than 50%. Moving on to our strategic growth channels. The elevated consumer experience across all touchpoints and successful sell through our new products drove D2C growth of 6% excluding Russia CIS, D2C revenues were up 13%. E-comm increased 8% reflecting strong double digit growth in EMEA, North America and Latin America. Our D2C first mindset is best represented through our membership program adiClub. We continue to roll out new value propositions as we speak, and have additional call lives excite our members. At the end of Q3 we had almost 290 million members in our program. From a category perspective, as mentioned before football continued with exceptional growth trajectory with an increase of 36% as we capitalize on the consumer excitement ahead of the FIFA World Cup. In addition, running achieve growth of 24% as latest iterations of our successful franchises resonate extremely well against the background of continued wins at the world's major races. We are driving credibility at the top of the running pyramid by scaling our offer for everyday runners. To give you an example, both Adizero and Supernova franchises grew more than 50% during the quarter. Basketball was up 16% in Q3, particularly reflecting the strong momentum of the foreign franchise. And as you know, this is just the beginning when it comes to adidas basketball. Before I move to the financial part, allow me one more comment on our category performance. When looking at these growth rates, performance being up 23% in the quarter, football increasing 36%, running 24%, basketball 16%, you need to keep in mind that all of these growth rates already include a significant drag from our China and Russia businesses. So if adjusted for these effects, growth in all of these categories would be even higher, which speaks to the strong momentum that we enjoyed. And with that, let's turn to the financials now. As always, let me start by discussing the development in our markets, where I want to focus on Latin America and Asia Pacific as we had already discussed the top line development in three larger markets before. Latin America continues its exceptional growth story, with revenue increasing 51% in Q3 driven by strong double digit increase in both performance 63% and lifestyle with 30%. At the same time, growth in Asia Pacific accelerate to 15% driven by double digit growth in both performance and lifestyle, particularly strong increase in football 60%, running 55 and basketball 29%. In terms of market profitability, I would like to call out Latin America and Asia-Pacific with strong operating margins of 26.2% and 23.2%, respectively. While North America and EMEA are just falling short of the 20% operating margin level. Our profitability in Greater China remains under pressure, reflecting continued investment into the market and to remain convinced about its potential for the years to come. If you take a closer look at the top line development during the quarter, you will see that we experience, robust momentum in all markets except Greater China during the first two months of Q3. This is reflected in the 7% growth or plus 13% growth excluding China in July and August. In contrast, deteriorating traffic trends in Greater China, as well as slowing consumer demand and major Western markets weighed on the revenue development in September leading to flat net sales for the month. Key markets like the UK, Germany and also U.S. were particularly affected by the slowdown. Let me now take a look at the full company P&L. As a result of the monthly trends just discussed revenues for the quarter increased 4% currency neutral or 11% in reported term to €6.4 billion, reflecting the significant positive translation effect in the quarter. As I had mentioned earlier, our P&L was negatively impacted by several one-offs in Q3, Russia, cash pooling, customs risk and the recently settled legal dispute. While we'll get to the details in a minute, I would like to highlight the underlying Q3 P&L excluding one-offs already at this point in time. While our record gross margin declined one percentage point to 49.1%, the underlying gross margin excluding one-offs would have come in at around 50%. Pretty much in line with the prior level. As usual, you will see the drivers of the gross margin development on the next chart. Other operating expenses grew 20% during the quarter, with the majority of the increase driven by the one-off costs and currency movements in addition to investment into the brand, the launch of new products, digital and D2C. Our report operating profit reached €564 million, reflecting an operating margin of 8.8% as we continued investing into D2C and the launch of new products. Excluding one-offs the operating profit would have been around €800 million and the operating margin around 12% respectively, so somewhat above the prior year level. Please note that the reported income tax figure of €345 million includes both one-offs registered Russia as well as indirect tax implications from Yeezy determination. As mentioned before, the tax implications related to the termination of the Yeezy partnership are also the reasons why the final figure for the net income from continuing operations at €66 million differs from the preliminary figures published on October 20. This negative tax effect will have no impact on the full year as it will be fully compensated by a related positive tax effect of similar size in Q4. Just for the sake of completeness, our net income from continuing operations, excluding one-offs would have been around €350 million. Turning to gross margin drivers for the third quarter. I would like to start with sourcing first. As mentioned in the past, we were already confronted with a strong increase in supply chain costs in the first half of 2022, which reflects a combination of significantly higher freight and product costs, in Q3 we saw a continuation of that trend. Second, our mix continued to be negatively impacted by the significant sales decline in Greater China, partly offset by a better channel mix amid our continued focus on D2C. Third, FX provide a somewhat stronger tailwind in the third quarter. While we had already benefited from slightly positive FX in the first half of the year. Fourth, on pricing. As previously discussed, we had implemented fierce price increases on D2C exclusive in the first half, and saw the consumer responding well to it. In Q3 our gross margin development profited from broad based price increases at the mid to high single digit rate on average. At the same time, we faced increased promotional activity both in China as part of our efforts to create excess inventory, and also major investor markets, which to some degree we had anticipated into some already, given that supply shortages of the past 12 months, which had led to unusually high share of full price sales had come to an end. However, given the slowdown in consumer demand, and the inventory buildup in the marketplace, the level of discounting that we have been experiencing since September was more significant than initially expected. Increased promotional activity given the high inventory in the marketplace will continue to weigh on our gross margin during the remainder of the year, and is one of the reasons for our adjusted gross margin guidance of around 47% for the full year. This implies a gross margin of around 40% in Q4 and as a result, a significant deterioration with the 49.7% achieved during the first nine months of the year. In addition to the aforementioned discounts, we expect a significant impact from unfavorable currency movements for two reasons. First of all, this relates to the unhedged portion which given the strong appreciation of the U.S. dollar as well as Euro and other currencies is having an increasingly large effect towards the end of the year. Second, also spring summer 23 products that we are shipping in December will already carries a significantly less favorable hedging rate for next year. Furthermore, the termination of the adidas Yeezy partnership will also leave its mark on our gross margin, as this represents a very high price product, which is to a large degree sold through our own channels, and a very limited discount. On the positive side, these headwinds will be partly compensated by a more favorable channel mix in Q4 as wholesale restocking has come to an end. Let me now provide you with additional detail on the several one-off costs that are impacting the company's bottom line in the second half of 2022. First, the largest portion of the one-off costs related to our decision to wind down our business operations in Russia. To give you some examples, these include costs related to terminating lease agreements, permanently closing all stores, as well as cost reaches the write off of hedging contracts, deferred tax assets, distribution centers, et cetera. The majority of these costs already appeared in Q3 with a minor portion expected in Q4. Second, we incured one-offs accelerate a cash pooling and high inflationary countries. While repatriating the cash comes at a cost, which is reflected in our Q3 numbers, it still makes economic sense given the devaluation of the cash if it were to stay in those countries. Third, we are building higher provisions for our customers related risk in Europe. While we feel quite strong about our position, we have already been provisioned in Q3 and expect to do similar in Q4. The fourth one-off is related to a recently settled legal dispute related to a patent case, which also had a negative impact in Q3. And lastly, we have established a business improvement program to safeguard the company's profitability in 2023 with negative one-offs to a queue in the fourth quarter of 2022. I will get to the details of this little later. I just provide a background on the one-offs from a qualitative perspective. Let's now have a look at their size and the relative decomposition by type and P&L item. In Q3, we incurred one-offs in the of almost €300 million on net income, with the majority related to Russia, followed by cash pooling, the legal dispute and customs risk. If you take a closer look on which P&L items are affected above the net income line, you will see that around 50% was in cost of sales, while the majority is related to operating overheads with around 55% followed by financial expenses and income taxes. For the full year, we expect to incur around €500 million of one-offs on the net income level, while the majority of the full year impact is already to Russia, with around 45% customs risk represented on 20% followed by cash pooling, legal dispute and the business improvement program. With regard to the impact on different P&L items for the full year, you can see that around a quarter of the €500 million relates to cost of sales impacting our gross margin, while the majority is also expected to be reflected in operating overhead with around 55% followed by financial expenses and income taxes. Now turning to the balance sheet. Looking at the end of Q3 our inventories increased 63% on a currency neutral basis was 72% in report terms. The slowing consumer demand and major Western markets and the further deterioration of traffic trends in Greater China in September has clearly led to a significant inventory built up for us and to industry as a whole. However, there are also other important drivers behind the significant increase, which I will discuss in a second. Receivables increased 4% currency neutral, and payables were up 67% currency neutral. The increase of the latter is of course directly related to last year's factory lock downs in Vietnam and the resulting significantly higher sourcing volume this year. But now, let's take a closer look at the underlying inventory development. As you can see from the slide, €1.6 billion of the total €2.7 billion increase. So around 60% of the year-on-year growth is due to four special effects. Firstly, as you know, last year stock level was significantly too low as the inventory position was impacted by the supply shortages as a result of the factory lock downs in Vietnam. So part of this he has increase is reflecting the catch up mechanism from last year. Secondly, we continue to see global lead times being approximately one month longer than usual. This means that we are ordering sooner to make sure our products arrive on time. It also means however, that we are carrying one additional month of stock, certainly the strength of the U.S. dollar drove part of the inventory growth. And lastly, the average cost per piece increased significantly. This increase is driven by higher freight costs, higher FOBs and to a lesser degree a different product mix. So, if you take these effects into account, this leaves you with around €1.1 billion or 21% of underlying inventory increase, which is quite significant, but at the same time, much closer to the order book and initial Q4 growth aspirations. When looking at the composition of the inventory, we definitely see an overhang of apparel inventory, as the market is more fragmented, with more ability to trade down, and more price conscious, less brands heavy consumer. On the footwear side, the strong momentum of our product forum adizero, supernova X, et cetera, differentiates us from the competition and helps us limiting the inventory increase in subsequent discounting. Region-wide imagery increase was the strongest in North America. The inventory normalization going forward will be driven by four distinct actions mainly focused on North America and core Europe. Firstly, we'll be clearing excess inventory aggressively, and as a result expect a significant impact on our gross margin Q4 from higher discounting, something we talked about a few minutes ago. Secondly, we are significantly decreasing our overall buying volume for spring summer 2023. Certainly, we are lowering the planned purchases for more than 1000 factory outlets in order to have the space to clear our excess inventory. And finally, we will tactically repurpose existing evergreen and carryover products if you cannot sell that black yoga pants, white training T or regular sentiments now, the product can still be perfectly used in spring 2023. This might not be ideal in terms of working capital, but it helps us to limit the discounting in Q4 and generate an attractive margin next year as the product was still bought at significantly better hedging rates in 2022. Let me provide you some tangible examples from our inventory normalization plan for core Europe. We are now only operating with around 10% plant buys for factory outlets compared to up to 50% in a normalized environment. In terms of overall buying volume, we have reduced our buying volume for spring summer 2023 by a double digit percentage compared to the fall winter 2022 season. Overall, our inventory level has peaked at the end of Q3 and is expected to decline from here onward. While the underlying decrease to at the end of Q4 will still be masked by an adverse impact from our decision to terminate the Yeezy partnership. We already expect a meaningful inventory reduction by the end of Q1 and by the end of Q2 we should be backed to a normalized level. Let me now provide you with an update where we stand from an operational point of view. While we continue to face heightened uncertainty externally, we are making strong progress internally as we focus on the things we can control and double down on continued momentum in the majority of our strategic focus areas. We are posting exceptional growth rates and our performance categories. More than 85% of our markets are growing double digits, and elevated physical and digital experiences are bringing our direct connections with consumers to the next level. Let's now take a closer look at all of these extracts. As I just said, we are posting strong double digit growth rates in our performance categories, which combined grew 16% in the first nine months of the year. Football was up 30%. Running increase 160 and U.S. sports grew 28% and why the latter might be relatively small in size it's important for the positioning of the adidas brand and its authentication and all important U.S. marketers message. Turning to the momentum we are enjoying around the globe. I will let the numbers speak for themselves. North America increased 14%. Europe was up 9%. Emerging markets plus 31% and Latin America grew 42%. All of these numbers are year-to-date September numbers. And while our D2C focus is clearly paying off in all of these markets, let's not forget that we are also able to grow market share with our strategic alliance partners. Overall, I'm proud to report that markets representing more than 85% of our business, so including APAC, grew 12% in the first nine months. And that's despite all of the macroeconomic challenges we have been confronted with. We have always said the D2C is our main playground and ensuring a seamless enhance consumer journey is a key priority for us as a brand. Physical experience plays a main role there, and as we are inspiring consumers firsthand with three stripes products and stores. Recent improvements of our store fleet provide strong proof points for this elevated physical consumer experience. What they all share in common, true connections with the local culture, countless consumer facing digital touchpoints and integrated sustainability concepts with our latest product innovations at the core. At the same time, we are bringing our digital experience to the next level, especially our members benefit from a vast array of benefits in our end to end ecosystem. Our latest members we can almost certified countries offer our most exclusive brand stores in collaboration with Marvel's Black Panther or unique raffles with some of our top athletes like Leo Messi, Donovan Mitchell, or Garbine Muguruza. Talking about a unique value proposition on World Mental Health Day, we announced a new partnership with Calm the world's leading mental health platform. The partnership will kick off in the UK and the U.S. with adiClub members being able to redeem points to unlock premium services, something no other brand is able to offer. On confirmed, sneaker heads are going after our golden ticket that grant prioritized access to product drops or get invited to augmented reality raffles for a chance to win physical products. Speaking of combining digital and physical worlds, by scanning the QR code on our latest made to be remade ultra boost consumers offer detailed insights about the product sustainability, credentials, alongside a direct incentive to return the product to us and our recycled partners after usage. You have just seen that we remain focused on leveraging the momentum across our performance categories. The majority of our markets as well as when it comes to the elevated consumer experience we are offering across all touch points. At the same time, we have to acknowledge that we are facing several market and company specific challenges that we need to overcome as one team together with our nearly 60,000 employees around the globe. The good thing is, I know we have what it takes and that overcoming these challenges will only make us better. While I have previously discussed challenges read to one-offs and excess inventory, I'm now going to focus on the current situation in Greater China, impact from the Yeezy termination, as well as several cost headwinds we faced as a company. Starting with Greater China. We continue to see several market specific challenges that are affecting our entire industry. The strict zero COVID-19 policy with nationwide restrictions remains in place amid more than 2000 daily new COVID-19 cases in November. As a consequence, offline traffic is subdued due to the imminent risk of new lockdowns. In addition, local lifestyle influencers are still hesitant to collaborate with Western brands. While these challenges are industry wide in nature, you also have to admit that we face additional company specific challenges, which is a slower than expected recovery from the market specific challenges just mentioned, our inventory levels, which were higher at the start of the sluggish market and development remain significantly elevated and will keep us busy for some more months. In addition, we have been highly dependent on lifestyle influencers historically, making us more exposed to the sudden loss and followership last year. Our somewhat more limited sports partner portfolio hasn't helped either in this situation. While we continue to make huge progress in our district capabilities, activities and reach, our ability to interact directly with the Chinese consumer, which is particularly important nowadays is somewhat more limited. And when taking a closer look at the effectiveness of our marketing initiatives, we need to acknowledge that why localized, we run too many small campaigns creating too little impact on our target consumer. Ultimately, our point of sale landscape lacks efficiency due to a retail footprint that is not differentiated enough. Let me be very clear. We are aware of both the market and the company's specific challenges and our teams work diligently on executing the comprehensive turnaround plan to set our business in Greater China up for success. This turnaround plan includes distinct initiatives aimed at different parts of our business. To drive a normalization of inventory levels we are reducing orders for upcoming seasons, and executing inventory take back to clean the full price channel for the launch of new product innovation. We will continue to leverage our factory outlets and upcoming commercial moments to speed up this process. To put our progress into perspective, we already executed inventory take backs in the amount of more than €200 million in the third quarter. The other half of the previously communicated €400 million takebacks in H2 will follow in the fourth quarter. While both our local creation center and in house marketing agency are already driving an increased degree of localization we are moving away from the previous activation model centered around lifestyle influencers and shift gears to its social, communities, membership and closer to the point of sale. In addition, we have started to significantly right size our China organization to reflect the current size of the business and growth profile. At same time, we are increasing our focus on building our sports partner portfolio, and just recently have signed an agreement with the China Tennis Association, while also increasing our efforts in the grassroots marketing. Accelerating the scaling of our own digital ecosystem in China will continue to be a priority alongside the ongoing rebranding of our adiClub membership program. To better differentiate our retail footprint we are diligently reassessing the efficiency of our retail fleet, closing unprofitable stores, while at the same time continuing to invest in key cities and locations. Now Turning our focus to Yeezy. As publicly communicated on October 21, we had terminated the partnership with Yeezy immediately. End production of Yeezy branded products and stop all payments to YE and his companies. This decision is expected to have a short term negative impact of up to €250 million on the company's net income in 2022. I can confirm that adidas is the sole owner of all design rights, ready to existing product as well as previous and new colorways under the partnership, and we intend to make use of these rights as early as 2023. Let's have a more detailed look on the incremental Yeezy business. Given the high seasonality of the Yeezy business, where we are typically generating around 1/3 of the total annual revenues and almost 40% of the annual profit contribution in Q4, we expect the revenue shortfall related to the immediate termination of the partnership of around €500 million Euro. As mentioned, the expected net income shortfall is forecasted to reach up to€ 250 million in Q4. In this context, let me emphasize that the implied profitability of the Yeezy business is overstated due to the fact. Its cost only includes those expenses that are directly related to the product and the business. In other words, it does not include any further central costs or location for sourcing digital, retail, or any other services that this part of our business has been benefiting from and that we are essential for success. Going forward, we will leverage existing inventory with the exact plants being developed as we speak at the same time, we will save around €300 million related to royalty payments and marketing fees. In combination this will help us to compensate the vast majority of the top and the bottom line impact in 2023. Talking about 2023, we forecast several cost headwinds. First, the strengthening of the U.S. dollar against the Euro will have an adverse effect as our sourcing is mostly dollar denominated. Second, FOB is expected to increase driven by higher raw material and product costs. And third, freight rates are still forecasted to be at elevated levels and fourth, we expect salary adjustments to compensate for inflation. Turning to the challenging market environment and mitigate these cost headwinds, we established a business improvement program to safeguard our profitability in 2023. The program consists of eight structural initiatives in four areas. Let me now provide you with some examples for each of the four areas. Across our headquarter functions, we will adjust the size of the organization to the size of the business and install the hiring fees since mid September. In addition, we will accelerate the expansion of our Global Business Services footprint and expands the scope of it. In brands we are increasing our marketing efficiency by focusing our brand spending and activation efforts on key countries, cities and franchises as well as optimizing the effectiveness and efficiency of all communication layers. In our markets, we have launched an operating excellent program to improve our retail profitability, as well as the as to optimize our footprint, pricing architecture and discount desk. And ultimately in global operations we are implementing FOB mitigation measures by consolidating or material toolboxes range size, prioritizing out IT spent towards initiatives linked to D3C growth and consumer experience enhancements and assessing levers to reduce return costs. While the program will result in one-offs of €50 million in the fourth quarter of 2022. The program is expected to compensate cost headwinds of up to €500 million in 2023. In addition, it is expected to deliver a positive profit contribution of around 200 million Euro next year. So the total positive impact from the eight initiatives next year will be around 700 million Euro. That brings me to the outlook. Let's start with our expected top line growth profile, both for Q4 as well as for the full year 2022. On October 20, we adjusted our full year top line guidance to mid single digit growth as a result of the deteriorating traffic trend in Greater China, implying a mid to high teens increase for the total company in Q4. After the decision to terminate the adidas's Yeezy partnership on October 23, we subsequently had to incorporate the expected revenue shortfall of around €500 million into our expectations for the fourth quarter and full year 2022. As a consequence, we now expect currency neutral revenues in Q4 to grow at a mid single digit rate, resulting in low single digit growth for the total company in fiscal year 2022. If you go back to the monthly growth profile, you can see why three weeks ago we had still been optimistic to be able to grow at mid to high teens rate in Q4. In October, our revenue growth accelerated to more than 20% supporting our optimism about the top line development during the remainder of the year. However, as you all know, the strong underlying improvement will now be masked by the around €500 million adverse revenue impact from the termination of the Yeezy partnership I had just explained. But this doesn't change our positive view on the underlying sales development, which in the fourth quarter will be supported by three main growth drivers. First, the FIFA World Cup as mentioned before, we expect a tailwind of €400 million event related net sales overall with the majority of this benefit to occur in Q4 as you prioritize our own D2C business. Second, our comprehensive product pipeline, I've highlighted the underlying momentum and key categories and there's much more to come in Q4 including the launch of Adios basketball, technical running innovation, and the scale up of our sportswear offering and further pre amortization of lifestyle. Third and on a more technical level significantly easier comms as we will be running against the €400 million top line drag from the supply chain shortages in Q4, 2021. Let us now take a closer look at the first two buckets. With only a few days away to go on to kick off, our products will be omnipresent on the world's biggest stage; the FIFA World Cup. We started to launch event related product back in March by revealing the ultimate official match ball Al Rihla, driving nearly 50% net sales growth and football accessories and gear year-to-date September. In a phased approach our official Federation kits followed in the summer with strong consumer and media feedback. And after the official match ball and kits, we complete our Hero Product offering with introduction of colorful World Cup editions of our key football footwear franchises, X, Predator and KOPA. Lastly, we will continue to leverage consumer excitement as things get serious on the pitch and are going to launch the official CME and final match ball in December. During the World Cup, we can build on a unique roster of more than 100 players. A core element of our activation plan are two dedicated campaigns. In the first campaign, which will launch tomorrow, adidas is creating the world's biggest football family reunion, spotlighting the fun in the game with interactive experience across social media platforms, and the focus on Gen Z. So stay tuned for that. As part of the workout, we are going to endorse our product beyond the football category itself across other key categories with the strong support of all players. We have carefully curated the product to be worn by all players and Federation's not only on the pitch before and after the game, but also for training and lifestyle. As a result, and for the first time ever during a World Cup, you will see all three labels of our brand architecture come to life with dedicated product; performance, sportswear and [Indiscernible]. We will leverage the unique setting and timing of this year's event and for the first time ever also offer winterized packs given the northern hemisphere of market needs. Our bold story of the world's biggest football family reunion will be consistently executed with an integrated omni-channel approach across a point of sale, digital and membership. All styles and tools used are designed in a modular way for different store formats, and countries ensuring consistent return activation. In terms of digital, we will provide emotional experiences and optimized shopping journeys across our ecosystem with planning right down to the daily level. And ultimately our members will experience it all in the most exclusive way as we leverage our partners, provide selectors campaign extensions, as well as hyperlocal physical events. Turning now to market level. We will use a unique opportunity to excel rate our underlying momentum in emerging markets from bringing our global campaign to life at the local point of sale, to augmenting, the store landscape as pop up stores, to introducing hyperlocal product and dedicated experiences at airports and fan zones. I think I can say it's going to be one of the best event activations in a long time. I'm definitely looking forward to the first whistle. Shifting gears and introducing the next big highlight adidas basketball. Our vision for the adidas basketball could not be clearer. We are re-imagining and disrupting the category as a lifestyle led strategy and holistic end to end product offer across our brand architecture. First, we authenticating Adios basketball from the street to the court, while acknowledging that performance on the court drives credibility. Second, Jerry Lorenzo and Fear of God represent the pinnacle expression, and new visual direction of adidas basketball. Third, our marketing strategy focuses on next gen athletes, partners that are part of the culture that surrounds the game and global activations. Talking activations, we have already kicked off the Adios basketball launch with new versions of the Donovan Mitchell and Trae Young signature shoes. While forum already represents our fastest growing footwear franchise. All of these already have a direct link to the new creative direction of adidas basketball. Rest assured our new vision will also be properly introduced with an iconic anthem film in November to build up hype and anticipation for the official launch of Adidas basketball and the Fear of God athletics presentation. Afterward, we'll drop our big moment, marking the first time you bring this vision to life and showcase of adidas basketball proposition across all three levels. Ultimately, we will unveil the top of the house of basketball, The First Fear of God athletics collection, which will enter our stores through immersive store takeovers, accompanied by an elevated online experience. Lacing up for running. We celebrated Evans Chebet impressive winning in New York last weekend. Chebet crossed the finish line in two hours, eight minutes and 41 seconds, making him the first man to win the Boston and New York Marathon in the same year since 2011. It is also his fifth win in the last six marathons. So far in 2022, our most prominent technical running franchise, adizero or Adios Pro 3 delivered major marathon wins in New York, Boston, London, Chicago, Berlin, and at the World Athletics Championship in Oregon. Our strong double digit growth hit at September speaks to our ability to leverage this running credibility for the scale up of everyday running franchises like Supernova, or 4D Forward. And we're not stopping there. Inspired by the success of our athletes we continue to bring performance innovation in the market and just launched adizero Prime X Strung featuring, a data driven footwear upper coded thread by a thread for the long distance runner. Moving on to sportswear at the junction of lifestyle and performance. After the successful launch of the first capsule collection we introduced the second chapter of our new Gen Z Pacific offering with supremely comfortable as leisurewear for the colder season. And as you saw previously, sports will also play a major role off pitch around the World Cup in Qatar. Talking lifestyle. Our most hyped fashion partnerships, Balenciaga and Gucci continue to make headlines around the globe. While the Balenciaga product was revealed at an iconic world's fashion show earlier this year, we are now dropping exclusive product through a series of dedicated pop up stores and our confirmed app. In addition, the overwhelming success of our first adidas X Gucci product drop is a clear proof point that we're on the right track with our strategy to caramelize our lifestyle offering. This also helps us to elevate our original proposition with a similar style to the latest adidas X Gucci drop. But at more affordable price points, the Adicolor 70s collection draws heavily on the historic silhouettes and classics such as [Indiscernible]. And this is just the beginning of us leveraging our fashion partnerships for growth in originals. Let me now give you an overview of our top line outlook per market for 2022. I want to make it clear that this outlook reflects the further deterioration trends in Greater China and also incorporates the decision to terminate the Yeezy partnership. For Greater China that means that we now expect to and neutral revenues to decline as a strong double digit rate in 2022. The decision to terminate adidas Yeezy partnership reduced our growth expectations for North America, EMEA and Asia-Pacific. Accordingly, we now expect to mid teens growth for North America, high single digit growth for EMEA, and mid single digit growth for APAC. Our growth expectations for Latin America remain unchanged. For total adidas we now expect revenues to grow at a low single digit rate in 2022 in addition to the deteriorated traffic trends, and the impact from the termination of the Yeezy partnership, our profitability is also impacted by the higher clearance activity to reduce inventory levels into one off costs of around €500 million. Incorporating all of these effects, our gross margin is now expected to reach a level of around 47%. The operating margin is expected to come in at around 2.5% in 2022 and net income from continuing operations is forecast to reach a level of around €250 million. Before we conclude this presentation, let's have a quick look at the underlying net income development in 2022 and the major puts and takes for 2023. While we will only provide our detailed guidance in March next year, I can already share with you that we expect a strong bottom line improvement in 2023. This shouldn't come as a surprise as the non recurrence of the €500 million one-offs cost will have a similar positive impact on the net income development in 2023. In addition, our Business Improvement Program will not only help us to mitigate cost headwinds of up to €500 million next year. The program is also expected to deliver a profit contribution of around €200 billion in 2023. So far, so good. The further development of our profitability will largely depend on things that are mostly outside of our control. I have discussed adverse impacts of the development of consumer sentiment, FX or freight rates before. As a result, we focus on the things we can control, first, build on our underlying momentum, second, drive our lifestyle business. Third, continue to elevate the consumer experience and fourth, diligently address the challenges we face. We will closely monitor all the environment and adjust our game plan wherever needed, switching between offense and defense, depending what the situation allows, and requires. Before I sum it up, let me provide you with effects on our CEO transition. As you heard yesterday, Bjørn Gulden appointed as member of the Executive Board and CEO effective January 1, 2023. Kasper will stepped down as our CEO at the end of this week. In the interim, I will lead the company until year end. So to sum it up, we will leverage our continued momentum and key categories, markets and D2C to drive strong underlying top line growth in fourth quarter. We are excited about the upcoming FIFA World Cup. And we'll leverage the world's biggest event for both storytelling and the reveal of a unique product pipelines across a number of key categories. In addition, we will be diligently executing our actions, action plans to overcome market and company's specific challenges. Ultimately, the appointment of Bjørn Gulden ensures a smooth and timely CEO transition. We know Bjørn well and look forward to working with him into a successful future for our company. And with that, very happy to take all your questions. Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. [Operator Instructions] First question is from the line of Jurgen Kolb from Kepler Cheuvreux. Please go ahead. Jurgen Kolb: Thank you very much. And a special thanks for all these details to information really quite comprehensive given obviously the lots of information we received over the last couple of months. I know it's very difficult Harm to even talking about the next month, but you have not talked about maybe the longer term implications of all that we've seen. We, I think all have still in our minds that you put out 2025 targets and given this environment maybe you have some additional comments on that level here. And probably an easier question on the inventory level. Could you give us a little bit of a breakdown as to how much of the inventories is kind of never auto stocked products? How much is seasonal products? Just to get a better feeling about the quality of the inventory level. Thank you very much. Harm Ohlmeyer: Yes. Thank you. So trying to get my voice back here after the 55 minutes. So first on the longer term 25. I know you're all interested in what does it mean for on the game. So the strategy is in place. We focus on executing it. But given where we are and the volatility that we have in the marketplace and around the world, our we are laser sharp on focusing on 2023. So finishing the year strong, and focusing on '23. So that's why we refrain from talking about a 25 at this point. On the inventory levels, the good news really is as high as inventories are in the industry, and for us, it's all fresh inventory. And we are very diligently going through that inventory, whether it's apparel or footwear what is really evergreen, what is probably more seasonal, but the vast majority of that can be reused for spring summer 2023, or the respective quarters in 2023. And again, in hindsight, even some benefits, because we bought them at better hedging rates, and at low FOB, so even so it's not looking good on the inventory level. It's an opportunity for us to start fresh in 2023 and utilize that inventory. So the good news is, it's largely fall winter 2022 inventory in Europe and North America. Jurgen Kolb: Okay, okay. Thanks very much, and best of luck. Harm Ohlmeyer: Thank you. Operator: Next question is from the line of Warwick Okines from BNP Paribas Exane. Please go ahead. Warwick Okines: Yes, thanks very much Harm. You talked about the weakness in the U.S. and EMEA in September. I was just wondering if you could give a bit more detail around the sort of categories where you saw the most of the slowdown? Or what areas of the business? Or was it across the whole board? And then just in terms of China, you talked about right, sizing your store portfolio? How many directly operated stores do you have? And how many have you closed year-to-date please? Kasper Rorsted: Yes, thanks Warwick. First one, we talked about the weakness. In September, I mean, something we talked about before, when consumers are coming back from the vacation, and back to school, I mean, that's something we saw that slowly coming in, in September. And when it comes to categories, not really categories, in specific, but it's was apparel and footwear, and that's where we see it's a more competitive marketplace in the apparel and sporting goods and footwear, where we can differentiate a much clearer. So apparel is really the product type, where we see some no down trending, and price sensitivity. So that's on the September side. On the sizing of our point of sale in China, historically we had around 12,000 point of sales. Right now we are finished around 8000 to 9000, point of sales in China. And this is what we are evaluating going into next year, as well there, that we make sure that we are closing unprofitable stores, and make sure that we not just have fewer points of sales, but also bigger point of sales, and differentiating these points of sales through the category of setups. And that's what we're focusing on. So we believe this might not be the end. But from a former _ point of view, we're getting close to the end, because it will be more impactful stores going forward. But that's probably the size that we have 8000 to 9000. Warwick Okines: Thanks very much. Operator: Next question is from the line of Adam Cochrane from Deutsche Bank. Please go ahead. Adam Cochrane: Hi. Good afternoon. A question on the business improvement plan. You talked about the €700 million benefit. Is this an annualized number? Or are these programs all taking place in the next couple of months? So that they benefit from the first of January? Or do they build throughout the year? Just give us some flavor for how that develops over the quarters? And then secondly, a number of people asking about how the Yeezy product lines will work? Is the plan just to rebrand them as Adidas and can you achieve the same price points, etcetera? What are you at the moment at least intending to do about that? Thanks. Harm Ohlmeyer: Yes. First of the Business Improvement Program, I mean, clearly look at the €700 million as an annualized number for 2023. So these things have started already a couple of months ago, knowing what's coming towards us. So it's clearly an analyze numbers, but it's in the motion already. But analyzed for 20'23. And on Yeezy, very clearly, I want to repeat again, that we are the sole owner of the IP rights, of current and future colorways. And of course, we have a lot of things in the archive as well. So definitely the different plans that we have getting right now, again, too early to say when and how we come up with these plans, but it's definitely current products, but also future products and as you say, not under the Yeezy label, but we also look at the current inventory that is relevant enough to close the gap in 2023 compared to '22. Adam Cochrane: Okay. Thanks. Operator: Next question is from the line of Geoff Lowery from Redburn. Please go ahead. Geoff Lowery: Hi, team. Just one question please on China. Do you have any sense of what the sell out of your product is in the market? Because obviously, we see a blended number between your selling and your D2C operations. But do you have any flavor to sell out is? And secondly, on China, your comment about global inventories being normalized by the middle of next year. Does that also apply to China specifically? Many thanks. Kasper Rorsted: Yes, Geoff, first on China. Yes, we have visibility of sell out. One indication that we said on the call, as well retail 7% up. And of course, as we are taking products back, we get fresher product in and whenever we do that, and it's not, because they got €20 million in Q3 and €200 million in Q4, but whenever we clean the marketplace and create space for new product, the sell out is improving, of course, in a much better way than the net sales are showing, because sell out the fresh products. That's what we're seeing. And then yes, it relates on the inventory cleanup in China as well. It will not be clean by the end of the year. But it's similar to what I said across the board for North America, Europe, and China, we also expecting to be at a much cleaner level by the mid of next year which gives us depending on the zero carbon policy and everything, but definitely a cleaner start going into next year. And as I said, Q2 shall be the first significant growth quarter next year, as Q1 was still a significant quarter Q1, 2022 in China. So the second half is definitely what we're looking towards, in China, with inventory being normalized. Geoff Lowery: Great. Thanks very much. Operator: Next question is from the line of David Roux from Bank of America. Please go ahead. David Roux: Good day Harm. And thanks for taking my questions. So just two from my side. Firstly , on Yeezy. You spoke about the same store costs supporting the Yeezy business away from the marketing and royalties, which I think was €300 million. On the same store costs, I mean, what flexibility do you have to perhaps reduce these costs in the event that you don't perhaps get the revenue recovery on some of those Yeezy products that you're anticipating? And then my second question is on the China turnaround plan. I assume this will take some time to implement. How should we think about the cash costs associated with this plan and what are you, how are you thinking about the returns on this in terms of whether it's marginal improvements or growth? Thank you. Harm Ohlmeyer: Yes. First on the Yeezy and the central cost. Of course, there's some flexibility in it, but not all the flexibility. But it was important for me to explain that we're always looking at the profitability of Yeezy and we got to look at that as an incremental profit. And that's really important because we have built an infrastructure. If we now scale, after being somewhat muted on Stan Smith. For example, if you bring Stan Smith back, it's also an incremental profit at a very attractive margin with no additional cost. That's why I think we shouldn't get carried away of the single profitability of Yeezy, because all incremental on the platforms that we have built and any other products that we are scaling right now, whether it's a forum or Stan Smith going forward or new products, we get the same benefit, as we are incorporating with the Yeezy that's it. And again, on top of it, if we will not be able to accommodate it fully, there are some flexible in the cost, but there's definitely some fixed costs as well. On the China piece, do not expect additional cash impact on this one. We have built the plan already. It's in full motion, it's already underway, and will come to the fruition next year. The most important thing in China is, of course, on the one hand, getting normalized from an inventory point of view, and then getting our sport portfolio in the right place. And hopefully after zero COVID policy in some opening of China did we have a better ability to get the one of the influencers back as well. And that's just needs to be the first one. And we were very confident than the second and third one that come very quickly as well, which will help us to represent it as the western brand and a successful brand in China again. So that's pending zero COVID and all the influencers how quickly they will come back. But everything that we showed today is in full motion with no extra cost in 2023. David Roux: That's helpful. Thank you. Operator: Next question is from Thomas Chauvet from Citi. Please go ahead. Thomas Chauvet: Good afternoon. My first question is a follow up on Yeezy. So you suggest your compensates the vast majority of the revenue and profit shortfall by rebranding the product not being the royalties and marketing, if that's the credible base case scenario, with a way, what was the rationale for doing this partnership in the first place and become so dependent on one single partnership, if you could have achieved the same results without these artists. So keen to understand also how you want to approach collaborations in the future with existing or new partners? Secondly, what was the dedicated marketing spend for Yeezy as percentage of sales, and will you reallocate a significant portion of that spend towards other lines. And if so what will be the priority between pushing Jerry Lorenzo, original, or luxury collaboration, which has been much more visible this year. And just finally, if I maybe clarify some accounting. Just small accounting questions. In which part of the P&L were the royalties paid for the Yeezy contract? Was it all captured, within EBIT and can you comments on risks of disputes over the termination of that contract? Anything we need to be aware of, especially for 2023? Thank you. Harm Ohlmeyer: Yes. Thomas that's lots of questions. I'm not sure that qualifies for two questions. But let me try to answer all of these. First of all, on the Yeezy collaboration, we said it numerous times, it has been probably the most successful collaboration ever done between an influencer musician, and a sports brand. So we have been proud of what we have built together. And again, it came to an end, as we said earlier for the right reasons. But again, these collaborations will continue with other influencers as well, that is part of our business model. And I don't understand the question why we have done it to begin with. But it's always something in the short term that we can compensate. On the midterm, we have a portfolio of influencers, the portfolio of sports, portfolios of positions or influencers. And that's always the approach that was the most successful one. And that's why it's not easy to replace in the short term that obviously in this year, but we are confident through other collaboration to scale them up and through our product portfolio to compensate for it. But again, there will always be collaborations that we will build on. On the marketing spent, the €300 million that I mentioned, the combination of royalty, and marketing spend, that will be not spent any more in 2023. Because that was linked to the labor of Yeezy, which we're not going to use on new products going forward. And as I said, there's always different portfolios. We will continue to work with Jerry Lorenzo. We will have Bad Bonny. We will have Beyoncé and of course, we have a lot of sport athletes that we are working with. This is part of the investment into the bigger brand, and gets us Halo to begin with. And that's what Yeezy definitely did for the last couple of years as well. I think the last question was the accounting question where the royalties will be booked. They're clearly in the EBIT and the royalty payments you would have found in the gross margin and some of the marketing spent would have been in the marketing line, but as the majority of the €300 million, you would find in the gross margin. And the last question, there's another one maybe the fifth one, the risk of disputes. We believe we have a very solid contract replace that we of course terminated. So at this point, I would not be concerned about any disputes, or any costs that are not even accounted for in 2022 but definitely no dispute going into 2023. David Roux: Thank you Harm. Operator: Next question is from the line of Omar Saad from Evercore ISI. Please go ahead. Omar Saad: Thanks. Good evening, thanks for taking my question. I was hoping maybe you could dive in a little bit deeper what to expect with the basketball, Jerry Lorenzo rollout kind of size and breadth timing. Also maybe also a little bit deeper on the running commentary. I think it's up 16%. And how much of that has been driven by some of the new products? And then also lastly, an update on the originals business, especially some of the opportunities in North America including the footlocker partnership? Thanks. Kasper Rorsted: First of all on basketball. Again I wouldn't do justice to explain how deep the basketball, the launch will be from a product point of view. But we will launch kind of the full set, not just what we launched in December and early next year, but what you will see in the launch events in December is the full breadth and depth of the basketball. Category, even so it doesn't all launch in the first month. But we want to make a big event that the consumer and of course the consumer and media sees the whole size and the ammunition that we have in basketball even so we'll be staggered from a launch point of view, going into next year, month by month. On running. I mentioned earlier how successful also the Supernova is. The whole concept from hero to Halo, and building credibility fields for the marathon wins that we have, and then commercializing these technical silos and more technical silos to come going forward to see swift technology in everything that is coming in 2023. That is always the concept and is working, given the growth rates that we have. And I could not tell you all what disclose in details by franchise in how we commercialize that, but rest assured with the growth rate that we have that we continue to have next year. That is the hero to Halo concept that is working, and maybe you can repeat the footlocker question. I'm not sure I captured that correctly Omar. Omar Saad: Sorry. Yes. Both originals and in the U.S. footlocker channels that we think you guys have highlighted as opportunities for the brand. The originals, relaunch when a lot of that product hits the market, and then the footlocker opportunity expanding the space and footlocker where do we stand on that? Thanks. Harm Ohlmeyer: Yes, first and foremost, it was important for us to have as a teaching partnership with footlocker that we have announced because we want to be more than just a product of footlocker. We are rolling out significant, new significant investment outside the footwear walls. And whenever we do that, at footlocker, we get much higher comps to prior the footwear wall rollouts. Key to that is also not just the original product that we are bringing out whether it's a foot-roll or the rivalry that is coming soon. But also the setup is basketball is fundamental for the consumer that is shopping at footlocker. So the combination of partnership first, Footwear Wall significantly across us into many footlocker doors, much better comps, originals with new products coming in, and then basketball as a key opener to the footlocker consumer. That is definitely working so far but it's a plan to accelerate that going into 2023. Omar Saad: Thanks Harm. Operator: Next questions is from the line of James Grzinic form Jefferies International. Please go ahead. James Grzinicl: Yes. Thank you. Good afternoon. I had two quick ones. The first one is, Harm can you perhaps provide us with a split of inventory across apparel and footwear, just to get an understanding of how the average position really looks like in the two categories? And secondly, where do you think the overall marketing spend will be in 2022 and how, given your cost size program, how do you expect that to develop is 2023 please? Kasper Rorsted: Well, James, first on the inventory, I mean, what I can tell you that the increase is higher in apparel and footwear, that we also said we want to be more promotional on the apparel side than on the footwear side. That's what I can tell you about apparel without going into further details. On the marketing spend don't expect any fundamental change over potential net sales, these are in 2022 now going to 2023. Maybe going in the right direction in 2023. But we want to see what really the flexibility that we have in 2023. But that's part of our business improvement programs that we not just keep the ratio on probably different net sales that we originally had planned on the game. But depending on what the net sales development will be in 2023 want at least keep the ratio but potentially get better as we want to be, as we want to get more out of what we spent in 2023. And so far, we haven't had such a crisis or such a profitability for many, many years, as we experienced in 2022. So now is clearly a wake up call to look at every year again to do it more effectively and marketing and get more for the bang or for the buck, what we invest. So clearly keeping the ratio of better. James Grzinicl: Right, thank you. Operator: Next question is from the line of Aneesha Sherman from Bernstein. Please go ahead. Aneesha Sherman: Hi, thank you. So I have two questions. The first one is on China kind of looking at that business medium term. So you've talked about cutting back orders, closing unprofitable stores, significantly reducing your footprint. Is it right to say that you're looking at perhaps a smaller and more profitable business medium term? And in related to that last quarter, you talked about the medium term margin target of 30% over time. How do you see that playing out? Is that still the target that you're envisioning with the store closures and profitability or is that ramp up the target? And then my second question is on the D2C versus wholesale performance in North America and EMEA. There's obviously a difference in performance between the channels there. I am curious was that mainly due to kind of mix effects and pricing or underlying demand? Or were there some takebacks embedded in there? What's driving that differential? Thank you. Kasper Rorsted: Yes. First on China. Clearly, we believe in as a midterm opportunity in China. But we also believe given where we are we have still a lot of lockdowns and immediate consumer sentiment in China and China has not opened up. It's really important that we get stronger before we get bigger. So we are very, very confident to get to the right profitability in the short term midterm first. And then as the market is opening up, which we don't know when it's opening up, but when it's opening up, we want to be prepared, that we have the right size inventory, that we're back to a better profitability. And I'm not saying right now, because we get the guidance in March that we get immediately to 30% profitability again, but that's the number one priority. And then when the market opens up, we believe, the western brand is well-positioned in China again, and we can start growing significant in China again. So clearly, we believe in the midterm. We believe in the growth in China, but the market needs to open up. We want to make sure that inventory is right. And we are working on the profitability relentlessly to be ready for growth when the market is opening up. On D2C, you're right, I mean, D2C was growing faster in Europe and North America. And the reason is, when we saw a more muted September, they've automated decision to sell in more cautiously into wholesale as you're selling through our D2C. And of course, it's impacting some of the tremendous order books that we have as the conversion wasn't at the level that we used to have. So that's the result of that. We can always convert to order book better, but you also want to make sure that we are not shipping in more than the consumer or our accounts can sell through. That's what we try to balance. That is clearly the effect. That's why D2C is growing faster. Operator: Sherman are you finished with your questions? Aneesha Sherman: Yes, sorry. I was on mute. Yes. So Harm can you clarify so when you said the conversion wasn't as good. Does that imply that you have some kickbacks in there as well? Or is it just that you pulled back orders or you pulled back delivery of orders for the current sponsor? Harm Ohlmeyer: It is clearly the latter. There's no take backs. It's the latter that we made the decision not to convert the full order books given the inventory situation. Aneesha Sherman: Got it. Thank you. Sebastian Steffen : We have time for two more questions. Operator: Okay. Thank you, Sebastian. The next question is from Simon Irvin from Credit Suisse. Please go ahead. Simon Irvin: Hi, thanks for taking my call. Can we just drill a little bit more into the numbers on Yeezy in terms of the impact through 2023? I mean, given what you said about the sales and EPS impact in 2022, is it right to think of this business as being about €1.8 billion in terms of sales? And if you just pro forma, the initial EBIT, then you're talking about something in the region of a billion. Now, obviously take off the €300 million in terms of royalties and marketing you talked about, but you still end up with a net year-on-year decline of €500 million. Is that what you think you can fill by reselling the Yeezy product? And what do you think about the reputational risk of selling that Yeezy product even under an ID label? Kasper Rorsted: Yes, I mean, first, let me give you some more details on the Yeezy business. So, as mentioned, we will leverage the existing inventory that we have, which was exact plans being developed as we speak. But that should really help us to compensate the vast majority of around €1.2 billion, around €1.2 billion business in 2022. That was a plan. So it's not a €1.8 billion that we need to anniversary, it is around €1.2 billion, a business that we need to anniversary in 2023. At the same time in 2023, we will save on the €300 million and marketing royalty, as I mentioned earlier, and we are far away from an €800 million impact or €1 billion that you mentioned. So in combination, this will enable us to mitigate the vast majority of the bottom line impact of around €400 million in 2023, as well. So again, looking at all the costs and infrastructure and how we're going to scale other product lines. So we are more compensating a €1.2 billion in our top line and the €400 million bottom line. That's how we look at it. And in fact, given the large savings, it will be even easier to achieve rather the profitability in 2023 rather than the top line and that's how we look at it. Again, how we do that exactly, how we use the archive, how we utilize the existing inventory, how we rebrand, what we do with these products, we got to do carefully as you say. There might be some reputational topics that we need to be aware of. But at the same time, we also believe it can be done well. And we own the IP, and we want to be confident about the IP and the silhouette that we have, and maybe some of different colorways. So we are confident about executing the right plan. Many of have decided what the right plan will be, but there are different options. Simon Irvin: Okay. Thank you very much. Operator: Last question for today is from the line of Graham Renwick from Berenberg. Please go ahead. Mr. Renwick can you please unmute your telephone? Graham Renwick: Hello, good afternoon. Sorry about that. Thanks for taking my questions. I just have two. Just thinking about momentum into the first half of 2023, you had a good step up in Q4. On the last call, you're very helpfully provided us your growth in order books, H2, I was just wondering how they are shaping up for H1, you've talked to the stronger product pipeline, but you're also a bit more cautious and buying for spring summer. So just wonder what sort of growth order books are currently indicating into the first half. And then just on 2023 net income, just wondering how we should interpret the net income bridge and the €950 million stop point you've given? There's a list of moving parts, of course, but the shaded area of the bridge looks to suggest you expect slightly more negatives and positives. So I'm just wondering if we should be currently assuming that net income next year should be somewhere between €750 million, €950 million? Thank you. Harm Ohlmeyer: Yes, hi, Graham, first on the 2023 momentum. So not going to comment on Q1 or Q2 right now. We give a guidance in March. And then we will give a guidance in March, we're not going to comment on that at this stage. Secondly, when it comes to the net income bridge, as I mentioned, there's a lot of puts and takes, we're currently we can only speculate about the magnitude, whether it's and freight rates, or Yeezy mitigation plan. So in some cases, it even remains uncertain, where the impact is going to be a positive or a negative. But if you asked me today, I would indeed see a higher likelihood that some negative drivers, why there will be some positive drivers. And again, you can clearly change. And I have to admit, even as a CFO, I've never been in a situation in November to prepare a plan also those who advisory board in such a volatile environment. So want to keep it open. But we want to make sure that we are rather focusing on the actions that need to be taken. And then we will come out in March with the right guidance. But again, remain confident with the product pipeline that we have. And we always will play by the month, whether it's offense or defense. We want to make sure that first and foremost, we have flexibility in the plan. And that's what we need to get prepared for. Because the volatility and all the crises that we deal with since two and a half years, will not go away in the short term. That's we want to keep some flexibility and give the right guidance in March and take the time. There's not an easy situation right now. But let's get used to the volatility and rest assured we give it a good shot in March then. Graham Renwick: Okay, great. Thank you all. Harm Ohlmeyer: Thank you. Sebastian Steffen: Thanks very much, Graham. Thanks very much, Stuart. And thanks very much Harm. And also thanks very much to all of you, and thanks very much to sticking to our two question rule. Ladies and gentlemen, this concludes our Q3, 2022 results conference call. I can only echo what Harm mentioned at the beginning. If you have any further questions, I can imagine that they are still going to be a few, be it today or over the next couple of weeks. Please feel free to reach out to any member of the IR team or myself. Actually, we're very much looking forward to meeting with many of you over the next days and weeks during upcoming roadshows or conferences. As in the past, this will be a combination of physical and virtual interactions. And while it was previously COVID that prevented us from meeting in person. We're now back to more profound challenges like tube strikes that actually don't allow me to meet with you in London over the next two days. But I still hope that I'll be able to catch up with you in person over the next couple of weeks. And with that, thanks very much for your participation. Have a good remainder of the day. All the best. Bye. Bye.

Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the adidas AG Second Quarter 2022 Conference Call. Throughout today’s recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead. Sebastian Steffen: Thanks very much, Stuart, and good evening, good afternoon, good morning, everyone, wherever you’re joining us virtually today, and welcome to our Q2 2022 results conference call. Our presenters today are our CEO, Kasper Rorsted; and our CFO, Harm Ohlmeyer. As always, we will kick it off in a second with their prepared remarks, and we will have enough time afterwards for your questions. Again, as always, I would like to ask you that during the Q&A session, you limit your initial questions to two to allow as many people as possible to ask their questions. And with that, over to you, Kasper. Kasper Rorsted: Thank you very much, Sebastian. First, I'll recap our business development in the second quarter, and then Harm will provide you with details on our financial performance. And at the end, Harm and I will discuss the outlook. We continue to face heightened uncertainty as we still operate in a very dynamic environment with several external challenges. The devastating war in Ukraine and elevated inflationary pressure continue to leave their market on an accounting activity around the globe, weighing on consumer spending across several categories. So far, we have not experienced a meaningful slowdown in the sell-through of our products. We have also not experienced significant cancellations of wholesale orders in any other markets in Greater China, but we clearly need to be prepared that this might change as the year progresses. In China, we are still confronted with a challenging market environment characterized by continued widespread COVID-19-related lockdowns and restrictions. In these uncertain times, together with our strong team here in Herzo and in all our markets, we remain diligently focused on all levels we can control in order to cope with the market backdrop. Let me be clear, this is a time where the strength of our brand makes a difference. With this in mind and the consumer at the heart of everything we do, we're convinced that we have the right building blocks in place to drive a significant top line acceleration in the second half of the year. Harm and I will talk more in detail about the drivers and the shape of this acceleration later. Upfront, let me briefly provide you with my key takeaways before I share a detailed Q2 business update. Our strong momentum in Western market continued on the back of a successful product launches and brand strength in North America, EMEA and Latin America. As we also returned to growth in Asia-Pacific, these four markets, which represent more than 85% of the business combined, grew at double-digit rate in Q2. You will see it in our second -- in a second that we remain dedicated on driving product innovation and the conversion of our strong pipeline, always focused on the consumer. This, together with the support from major sporting wins such as the FIFA World Cup, the restocking opportunity with our strategic wholesale partners, given uncertainty supply as well as easier prior year comparables, will enable us to drive an acceleration of the top line growth and deliver our adjusted 2022 target. Let me be clear, we are thoroughly managing the short-term industry-wide challenges in an agile way while going after the long-term opportunities and structural growth drivers the sporting goods sector has to offer. I just said it, the consumer remains at the heart of everything we do. Q2 saw several -- saw multiple consumer highlights across both performance and lifestyle. The latest iterations of both Supernova and Solar Glide franchises drove strong growth in running, specifically at price points below €100, as we broaden our range offer for the everyday athletes on the back of continued wins at the world's leading race events. In football, we are capitalizing on the excitement building up to the FIFA World Cup. The official match ball, Al Rihla is already known all over the globe, while latest footwear launches such as [indiscernible], Predator Mania sell out in less than two days. In training, we introduced a high-performance yoga collection made in part with Parley Ocean Plastic. And moving to lifestyle, we launched our first sportswear capsule collection with extremely positive consumer feedback. In lifestyle footwear, our former franchise doubled in size, while YEEZY continues to be up strong double-digits. Finally, high products in collaboration with our premium partnerships such as the adidas Gucci Gazelle or adidas [indiscernible] just secured a top spot in the renowned list last index of hottest fashion brands. Let me now share the progress in our strategic focus areas, starting with credibility. Football is essential to our performance DNA, and the win of titles on the world's biggest stage crucial to drive brand credibility. Together with millions of fans around the globe, we celebrated Real Madrid's clenching its fifth Championship title in the past 10 years. What an achievement for our long-standing partner. At the same time, we're also sharpening our edge in lifestyle and continue to premiumize our offer by leveraging fashion partnerships. Following the adidas Gucci Hype our collaboration with Balenciaga made its debut on the trading floor of New York Stock Exchange, and we're excited about everything that is yet to come. Moving on to experience. We've always said that membership is the golden ticket to our brand. It grants access to exclusive events and experiences money can't buy. That's exactly the kind of experience our adiClub members were able to enjoy at major events such as the Champions League Final in Paris or the Coachella Festival in California. In addition, we're taking the physical consumer experience to the next level in our own retail fleet. The new Madero Brand Center in Mexico City or selected adidas Gucci pub of stores in several of our key cities are strong proof points. And closing with sustainability. In sustainability, we continue to scale our Run for the Oceans. This year, we have almost 7 million people globally participating at our headline event to end plastic waste. Sustainability dedicated activations in our retail stores ensure we keep consumers consistently engage for good cause day by day. Now, turning to the strengths and weaknesses for the second quarter. We saw continued momentum in Western markets, with strong net sales growth in North America with 21%; EMEA with 7% or 13%, excluding Russia; and Latin America with 37%. At the same time, Asia-Pacific returned to growth, as expected, with revenue up to 3% plus compared to a minus 16% in the first quarter. The strong sell-through of our products drove double-digit growth in e-com of 13%. In the performance category, product innovation drove strong growth, with double-digit increase in football with 22%; running with 17%; and outdoor with 14%. Unfortunately, macroeconomic constraints continue to limit our topline growth, with supply chain constraints in Russia/CIS posting a drag of more than €300 million to net sales in the second quarter; EMEA and North America being particularly affected here. In Greater China, sales declined in line with Q1 rate at minus 35% as COVID-19-related restrictions continued to weigh on traffic in revenues. Higher supply chain costs and unfavorable market mix due to the strong net sales decline in China kept our gross margin recovery muted. Harm will give you more details in a couple of minutes. Ultimately, we continued our operating overhead investments into digital capabilities, our DTC business in China with the respective costs weighing on our operating margin development. Let me discuss our Q2 P&L developments. Revenue increased 4% currency-neutral, while being up 10% in euro terms, despite a negative effect of more than €300 million due to macroeconomic constraints. Significant better pricing mix was more than offset by higher supply chain costs and unfavorable market mix, bringing our gross margin down to 50.3%. Our operating profit came in at €392 million, reflecting additional investments in current and future growth areas both in marketing and overheads. Net income from continued operations was down during the quarter as a result of the pressure gross margin and additional investments just mentioned. Again, Harm will comment in detail on major P&L developments shortly. Greater China. I just said it, sales in Greater China continued to be pressured by COVID-19-related restrictions, and we'll take a closer look on the situation later in this presentation. On the bright side, e-commerce posted double-digit growth as we're accelerating our efforts to build local and direct connections with the Chinese consumer. Overall, our sellout in China was significantly better than the overall revenue number suggested as also evidenced in the minus 18% decline in our DTC business. This reflects the robust underlying demand for our products as well as our cautious approach to managing inventory in the channel. In North America, we achieved strong double-digit growth in DTC plus 23% and wholesale plus 20%, underlying how well our new product launches resonate with the consumer and the progress we're making in taking share within our key accounts. From a category standpoint, the growth is also evenly divided double-digit between lifestyle of 19% and performance of 23%. EMEA also saw strong underlying growth of 13%, excluding the negative impact from Russia and CIS. To make clear what I mentioned before, with Asia-Pacific returning to growth, the four markets, which, combined, represent more than 85% of our business, grew at double-digit rate in Q2. EMEA, North America, Latin America and Asia-Pacific together increased plus 14% in the second quarter. This clearly shows that nowadays, our brand and products resonate extremely well with the consumer. Turning to our strategic growth channels. The introduction of new products and elevated experiences across all physical and digital consumer touch points drove DTC growth of 4%, with double-digit increases in North America, Latin America and Asia Pacific. Excluding the negative impact from Russia/CIS, DTC sales in EMEA and for the company as a whole would also have been up double-digits. E-com increased 13% driven by the exceptional increases in North America by 33%. In addition, Greater China grew 12% and Latin America grew 15%, so also posting double-digit growth. As you know, membership remains key to our DTC first mindset, and adiClub continues to expand with now more than 270 million members globally. The new value proposition, dedicated member weeks and further go-lives, in addition, countries drive continued strong progress with our most valuable consumers. From a category standpoint, football continued on its excellent growth trajectory with a growth of more than 20% as we leverage the consumer excitement around major events such as the UEFA, Women's EURO or the FIFA World Cup later this year. Together with our strong portfolio apartments, we continuously launch new products such as match balls, iterations key footwear franchises, the Predator X and the Copa and official jerseys to keep our consumers engaged on and off the pitch. In addition, both running and outdoor posted double-digit growth, with technical product innovations such as the adizero or Adios Pro 3 or Aquavik Ultra 2 driving credibility professionals and everyday athletes alike. Within lifestyle, the introduction of sportswear now complements our offer as we launched the first capsule collection with strong consumer feedback. Moreover, basketball drove significant growth in Originals. With that, I would like to hand over to Harm, who will provide you details on our financials before I'll be back later with exciting product releases and the outlook. Harm Ohlmeyer: Thanks, Kasper, and warm welcome from my side. Good morning, good afternoon. So, as always, let's start by having a closer look at the development of our markets. We continue to see strong momentum in all Western markets, which is clearly reflected in the 21% and 37% growth in North and Latin America, respectively. In EMEA, the strong underlying performance is masked by the sales decline in Russia/CIS. If adjusted for this effect, growth in the region would have been 13% in Q2. Increasing our market share within our key accounts has definitely been an important part of our growth story in North America and EMEA, but the majority of the growth in these two markets is driven by our own D2C business, which grew 23% in North America and plus 22% in EMEA, excluding Russia/CIS. This shows a strong sell-through of our product and is proof for the momentum that we've been building in these markets. In addition to the strong development in the Western markets, Asia-Pacific returned to growth in the second quarter with 3% currency neutral growth, and we expect this growth to accelerate significantly in the second half of the year. Combined, these four markets grew 14%, and this despite the €300 million headwinds we have been facing during the quarter. And it's not only the topline development in these markets that is worth being called out. The bottom-line performance is equally impressive. For the first time, all of these four markets have delivered an operating margin of more than 20%. This clearly shows the progress we have been making, particularly in North America. In contrast, the challenging market environment as well as COVID-19-related lockdowns continue to weigh on our sales and profitability in Greater China. While the 35% sales decline was in line with our expectations going into the quarter, it was significantly worse than planned for at the beginning of the year. Despite this revenue shortfall, we decided to continue to invest in the market as we remain committed to China and convinced about its potential for the years to come. This has clearly left its mark on the profitability in the market in the short-term. Moving over to the company P&L. As promised, we returned to growth in the second quarter with currency-neutral net sales being up 4%. In reported terms, revenues increased 10%, reflecting the significant positive translation effect in the quarter. Our gross margin declined 1.5 percentage points to 50.3%. I will provide more details on the development and drivers on the next slide. Other operating expenses increased 19% to €2.5 billion, reflecting our continuous investment into D2C and digital as well as into the launch of new products and campaigns around major events. Consequently, marketing and point-of-sale expenses were up 8% compared to the prior year period. While operating overheads increased 23%, I will elaborate on these two line items a bit later in more detail. Our operating profit declined 28% to €392 million. This number includes other operating income of around €45 million from Reebok. As a reminder, we expect roughly 70% of last year's stranded costs to be eliminated this year. Our operating margin decreased 3.7 percentage points to 7% in the quarter. Net income from continuing operations for €360 million supported by a one-time tax benefit of more than €100 million, due to the reversal of a prior year provision. Let's now have a closer look at the gross margin. As mentioned before, I would like to explain the main drivers of the gross margin development in the second quarter and into the second half. On the negative side, an unfavorable mix effect mainly driven by the significant sales decline in China weighed on the margin development in Q2. In addition, we once again saw a large adverse impact from higher sourcing costs as well as increased freight rates and duties on gross margin. While the movement of foreign exchange rates has a slightly positive effect on our margin development in Q2, pricing had a significantly more pronounced impact. While not yet able to fully compensate the higher sourcing costs, the low level of promotional activity, our selective price increases on DTC exclusives as well as an overall more favorable pricing structure led to a 10% increase in our ASPs during the quarter. This basically means that our top line growth in the quarter was achieved through better pricing alone, whereas volumes declined at a mid-single-digit rate. Let's turn to the second half view. You will see that we expect to have an even bigger impact from pricing in the back half of the year. Let us start with sourcing first. As mentioned several times in the past, supply chain cost will rise strongly in fiscal year 2022. This was confirmed in H1, and we expect this development to continue throughout the remainder of the year. When it comes to the overall mix impact, we experienced a significant drag on the gross margin due to the less favorable market and channel mix in the first half of 2022, reflecting the significant sales decline in Greater China as well as tough prior year comparables in e-commerce. In contrast to our previous expectations in May, we focus this development to continue as we are no longer expecting sales in China to recover in the second half. Our continued focus on DTC will not be able to offset this development. Third, on FX. After a slightly positive effect in H1, we will benefit from somewhat more favorable hedging rates during the remainder of the year, but some of this will be compensated by the impact of exchange rate fluctuations on the unhedged portion, we still expect a positive FX impact in H2 as well. Fourth, on pricing. As previously mentioned, we had already implemented first price increase on DTC exclusives in H1 and saw the consumer responding very well to it. In the second half of 2022, we will see broad-based price increases at a mid- to high single-digit rate on average. Therefore, for fiscal year 2022 in total, we expect a significant positive impact from price increases on our gross margin development. And lastly, on discounting. In the first six months of the year, we saw very limited promotional activities. For the second half, we are expecting an increase in discounting both for us and the industry overall. As for the first time in a long time, supply will not be constrained anymore. We expect promotional activity to be particularly pronounced in Greater China, reflecting initiatives to clear excess inventory in the market. In addition, our adjusted gross margin guidance for the year also takes into account higher discounting in other markets as a result of the potential slowdown in consumer spending in the second half. Moving down the P&L a bit further. Our marketing spend increased 8% in the quarter. This increase reflects investment into the launch of new products such as our completely new sportswear collection, the next iteration of our successful Super Nova running franchise, the first drops raised to our Gucci and Balenciaga collaborations, just to name a few examples. In addition, we further invested in campaigns around major events like Run for the Oceans or the Women's European Football Championship, increasing credibility with consumers across the entire spectrum. Our operating overhead expenses increased 23% versus the prior year period. Roughly one-fourth of this increase was related to unfavorable currency movements. The vast majority of the remainder reflects investments that are directly linked to the priorities outlined in our strategy. If you want to own the game, we need to continue to invest in initiatives that will help us to strengthen the foundation for future growth. Be it improvements to our own retail network, additional logistics costs, reflecting the growth of our e-commerce business or further strengthening our digital infrastructure. We operate in an industry that rewards scale and we will continue to leverage our size to strengthen our competitive positioning. Own the Game is a growth and investment strategy and we will not jeopardize long-term growth for short-term profit optimization. This is also the reason why we continue to invest in Greater China. We couldn't have grown e-commerce by 12% in the quarter if we had not been investing into our brand and infrastructure. We are committed to China and convinced about the long-term opportunity in the market. Having said that, of course, we will keep an eye on our investments overall, especially in current times that are characterized by severe macroeconomic challenges. Now, turning to the balance sheet. Last quarter when inventories were up just 12%, I said that I would like to see a stronger increase here. Now, inventories are up 28% currency-neutral. We will need most of this product to fulfill the strong demand we are seeing in our Western markets as well as in Asia-Pacific. As you know, we were still somewhat supply constrained in Q2, but we have all the products we need now to cater for the growth ambition in the second half. In addition, given the still significantly longer lead-times, we are ordering our products earlier to ensure it is available in our markets when it's needed, for example, right in time for the back-to-school season. As a result, we are still having a significantly higher share of inventory in transit, which is responsible for about a third of the inventory increase. And lastly, the lockdowns in China and our cautious approach to inventory management reduced talent and higher take-backs have also contributed to the inventory increase. Kasper will elaborate on this in more detail in the outlook section. Receivables increased 22% currency-neutral, reflecting the continued strong demand and revenue growth in our Western markets. Payables were up 50% currency-neutral driven by the significantly higher sourcing volume in anticipation of the double-digit growth in H2 as well as higher product costs. Overall, average operating working capital slightly decreased 0.4 percentage points to 21% in Q2 2022 versus 21.4% in Q2 2021. This is still somewhat higher than I would like to see it, but it's something that we accept for the time being as we are prioritizing product availability over working capital optimization in the short-term. Looking at our inventory composition, you can clearly see what I mentioned before. While the situation has improved compared to the end of last year, the picture did not change so much compared to Q1 as we still have almost 40% of our goods in transit, which is significantly above normal levels. And in markets that are particularly impacted by the supply chain constraints, namely EMEA and North America, almost half of the product was still in transit. We expect the situation to improve during the remainder of the year, which should then also have a positive impact on our overall working capital picture. Before I hand back to Kasper, I would like to give you an update on the status of our shareholder return program, an important part of Own the Game. As a reminder, until 2025, we plan to return between €8 billion to €9 billion to our shareholders via dividend payments and share buybacks. This will be complemented by returns related to the proceeds from the Reebok divestiture. We already announced that we intend to return up to €3.1 billion to our shareholders in 2022. Of these €3.1 billion, we already completed €1.6 billion consisting of a regular €1 billion share buyback tranche in the first two months of the year as well as the dividend payout of €600 million in May. This is complemented by an additional share buyback program of up to €1.5 billion to return the cash proceeds from Reebok divestiture. Until today, we have already completed more than two-thirds of the total amount. Again, this share buyback comes on top of the €8 billion to €9 billion from Own the Game. The remaining amount to the €8 billion to €9 billion, namely between €4.8 billion and €5.8 billion, will be distributed to our shareholders between 2023 and 2025. This will be a combination of share buybacks of up to €3 billion and annual dividends of between 30% to 50% of our net income from continued operations. And with that, back to you, Kasper. Kasper Rorsted: Thank you, Harm. Our focus going forward is clear. We will be leveraging exciting new product drops our collaborations with our unique portfolio of partners and key events to drive brand heat and top line growth. Against a challenging macroeconomic market backdrop, we are diligently focusing on all factors that we can control to maintain our growth momentum in Western markets and to accelerate growth in Asia-Pacific. In Greater China, we continue to decisively address the challenges on the ground, always prioritizing the creation of direct connections with the local Chinese consumer. Ultimately, we'll continue to invest into growth while thoroughly managing our cost. I just mentioned it, we have what it takes to drive excitement going forward. Sports take center stage in 2022 and just saw the incredible consumer enthusiasm around UEFAs Women's EURO. We look forward to being in the spotlight of all these big sport events still to come, culminating with the FIFA World Cup later this year. We leverage all of this to underline our commitment to loud and product storytelling. It's clearly paying off, and you'll continue to see both brand campaigns in line with our strategic growth categories. Ultimately, it all comes down to the consumer and strength of product newness we can bring to the market. We'll continue to unveil our strong product pipeline across both performance and lifestyle and are excited to now provide you key insights for the upcoming months. We just experienced an incredible UEFA Women's EURO with the three stripes at the heart of the tournament and record attendance in stadiums as well as viewership rates. Not only did we record a steady increase in demand for our jersey since the start of the matches, we also elevated brand credibility with dedicated activations in our key city women [ph]. And there's so much more to come in football in 2022. While we just launched official jerseys of our federation partners, Argentina and Mexico, there are more jerseys to be introduced in the coming weeks, including those for tournament favorites like Belgium, Spain and Germany. With European leagues returning to stadiums, we've also successfully introduced the official jerseys for unique club portfolio Juventus, Arsenal, Manchester United, Bayern and Real Madrid. In the first week of the launch alone, jersey sales increased strong double-digits, more than 40% with both Real and Bayern particularly high demand. Our official FIFA World Cup match ball, Al Rihla continues to generate strong revenues and headlines with the connected ball technology providing referees with precise real-time ball data to support fast and accurate decision-making on the pitch. Speaking about fast and accurate, we're launching the X SPEEDPORTAL, our fastest ever football boot, alongside iterations of other key franchises like Predator. To bring the boot to life for broad consumer audience, and we have teamed up with iconic animation characters, Rick and Morty, and created an original short film where the two experiment with the multiple dimensional speed power our in our boots. Shifting gear to running and training. With the launch of the adizero Adios Pro 3, we continue to deliver what matters most, wins and medals. Our prominent technical running franchises already delivered most wins during the 2021 World Major Marathons Series. Recently, adidas athletes took home 24 medals, including several gold as well as world records at the World Athletic Championship in Oregon. Our double-digit net sales growth in Q2 also reflect the strong proof point of driving credibility at the top of the pyramid while scaling our offer for everyday runners with franchises like Solar Glide or Super Nova. Apart from performance, we're also addressing the growing consumer demand for athleisure. adidas sportswear is born from sport and worn for style. Going forward, we've built on the overwhelming positive consumer feedback from the launch of the first capsule collection and will introduce additional aspirational product with a Gen Z focus. Talking lifestyle, Originals is launching the next iteration of it Always Originals collection in campaign. Right in time for back-to-school, the collection offers a wide selection of apparel pieces and updated footwear franchises such as Forum and Ester. Iconic footwear also was at the core of this week's YEEZY Day. Over the past two days, we have offered exclusive access to a variety of items. Within 48 hours, we've been dropping 26 footwear models across USA, Canada, Europe, South Korea, Japan, and Greater China. Our focused execution drove strong results with global demand significantly topping supply and our own expectations, reflecting particular strength in the North American -- in North America and Europe. And we're not stopping there when it comes to hype. Our latest premium fashion partnership with Gucci and Balenciaga continue to elevate our lifestyle offering. The Drop of the Edges and Gucci collection marked the best Membership Acquisition Day ever, and I'll confirm that while the adidas Balenciaga fashion show revealed at the New York Stock Exchange led to exceptional engagement on social media. And this is only the beginning as we expand these partnerships going forward. Stay tuned as we'll launch first footwear in collaboration with Balenciaga later this year with our D2C focus. Let me now explain how these events, products and campaigns are going to translate into acceleration of our topline in H2. In Q1, markets representing more than 70% of our business grew 13% on the back of a strong brand momentum. That's our Western markets, EMEA, North America, and Latin America. In Q2, our market growth even increased with the return to growth in Asia-Pacific and continued strong growth in Western markets. More than 85% of our business grew 14% despite all of the macroeconomic challenges we are confronted with. The performance also defines our focus for the next couple of weeks and months, driving continued momentum in more than 85% of our markets. We'll fuel brand heat through inclusive and emotional storytelling across all categories and leverage the excitement around major sport events and performance. In lifestyle, hype scale remains in focus with more to come from fashion partnerships as well as exciting original product drops. At the same time, we'll launch and scale new consumer propositions in sportswear and basketball. To drive conversion with our most valuable consumers, we are scaling adiClub with new member proposition and elevate the consumer experience in key cities. In addition, our improved profit offering will significantly increase our market share with key alliance accounts across all these markets. In contrast, Greater China represents less than 15% of our business is unfortunately still affected by continued widespread COVID-19-related restrictions. Against this negative market backdrop, we implement initiatives to clear excess inventory through factory outlets and commercial moments. Simultaneously, we strengthened connections with a local Chinese consumer wherever possible both physical and digital. So let's have a closer look at China. While I called out the continued challenging market backdrop in Greater China before, let me now provide you with some key facts on what this actually means. The emergence of COVID-19 cases took a new dynamic recently with an average daily in new COVID cases more than doubling in July versus June 2022. Consequently, around 80 cities are at least partially impacted by lockdowns. In general, the zero COVID policy remains in place with strict and preventive measures across the entire retail landscape. As a result, we are still seeing very cautious consumer behavior due to the ongoing volatile situation in imminent risk of new lockdowns. Taking all of these considerations into account, own retail traffic remains well below normal levels, as you can see from the data displayed on the right hand side. After seeing trends somewhat improved in June compared to the month before, own retail traffic actually worsened again in July, still being down 21% year-over-year, which is also indicative for the trend development in franchise stores. At our Q1 results released back in May, we had called out several forward-looking assumptions regarding the business development in Greater China. As of today, we have to acknowledge that at least two are violated due to the negative influence of the external factors discussed. First, we are seeing at least partial lockdowns in major cities as of Q3. Second, own retail traffic is still well below normal levels. Overall, you can see the challenges remain severe, and we keep on diligently focusing on the things that we can control together with our strong team on the ground. Our focus initiatives we are currently actively driving is the clearance of excess inventory in this market in the second half of the year. We want to assure a clean full-price channel to bring our strong H2 product pipeline to life. To be more precise, this means the following: first, we're taking back slow-moving excessive inventory to fulfill the demand in our factory outlet. That says, please keep in mind that we've already completely stopped our factory outlet specific product buys before. Second, we are leveraging the big commercial moments in the second half of the year to clean our product. While events like the general seasonal promotion like 9 9 or Singles Day are generally in focus, these will be complemented by our own promotional sales event such as the Yeti fest. Third, we're setting up additional temporary outlets in lower-tier cities in light of healthy price sensitivities and demand for our products we are experiencing here. Overall, we expect to see a negative top line impact from inventory take back in the magnitude of around €400 million in the second half of the year, which, of course, fully reflected in our adjusted guidance. As mentioned before, these initiatives to clear inventory masked the significantly better sellout of our products, which is best reflected in the DTC decline of only 18%, which was half of the 35% we posted for the Chinese business as a whole. Another focus for our team in China is to strengthen connections with a local Chinese consumer wherever possible both physically and digitally. The Q2 e-com growth of plus 12% is prove that our brand still resonates whenever we are in a position to directly engage with our consumers, particularly through local storytelling and new China for China product drops. We're rebuilding our brand portfolio for the continued timing of Chinese athlete and small-scale cultural partners. At the same time, we leverage existing and new global brand partners for China such as the Korean -- or South Korean Group BLACKPINK. We're securing a top position of localized lifestyle footwear like Adimatic. On top, we doubled down on women's with an integrated assortment plan and win the kids and youth segment with an upgraded retail concept. Third, we leverage investments in our China for China digital capabilities to support our local e-com acceleration. One example is the recent launch of the X SPEEDPORTAL portal franchise, which we promoted through a live stream event at T Mobile with several local football players as well as global icons, Messy and Kaka. Similarly, we continue to invest and activate the brand wherever possible to maximize consumer engagements. This includes creating our new -- this includes creating new or leveraging existing events such as adifest or the T Mobile Super [indiscernible] Day. To make it clear, we drive local brand activation and host physical events wherever the situation on the ground allows. As a title sponsor of the Chun Lee 168 Ulsa [ph] Race, for example, we hosted a remarkable event to showcase the best areas vis-à-vis more than 10,000 registered participants. Through events like these, we show a commitment to China and the Chinese consumer. We continue to be optimistic about our brand and long-term industry growth prospects in Greater China, and we're ready to accelerate as soon as the environment allows us to operate without major disruption again. And now let me hand over to Harm again to provide you with an overview of our topline development in H2 before I end this presentation with our adjusted 2022 outlook. Harm, over to you. Harm Ohlmeyer: Thank you, Kasper. The initiatives Kasper just talked about in each of the markets will help us drive a significant top line acceleration in the second half of the year. Based on the strong momentum experienced in H1, already, we expect growth in H2 to accelerate in North America and EMEA, while remaining at an exceptional level in Latin America. In addition, Asia-Pacific will continue its positive top line trajectory and is expected to grow double digit in H2 after still being down minus 7 in H1. In Greater China, while still down, we expect a double-digit net sales decline for the second half of the year, which will still represent an improvement versus the first half. Taking everything I just said into consideration, this means that markets representing more than 85% of the business are each expected to grow strong double-digits in the second half of the year. Let me now elaborate what the expected H2 topline development looks like from a total company perspective. To apply the same view as before, let's first have a look at our H1 net sales. Our topline came in flat versus the prior year, while growing plus 11% excluding Greater China. Please keep in mind that we still saw a significant negative drag of around €600 million from supply chain constraints in the first half of the year, €400 million in Q1 and €200 million in Q2. In the second half, we do not expect a major impact from supply chain constraints anymore. This will support the acceleration that we expect in H2 where, on a company level, we expect double-digit increases, while net sales are expected to be up at least mid-teens, excluding Greater China. You just heard me. Excluding Greater China, we continue to expect at least mid-teens revenue growth in the second half of the year based on four key growth drivers. First, our comprehensive product pipeline, which you saw our innovation day back in March. Kasper just elaborated on the Q3 highlights, and there's more to come in Q4, including the much anticipated launch of our new basketball offering with Jerry Lorenzo. We will bring this pipeline to life with bold brand storytelling and the support of major events. Second, the FIFA World Cup. We expect a tailwind of up to €400 million event-related net sales. While sell-in, of course, plays a role, we expect the majority of this benefit to occur in Q4 as we fully leverage our DTC channel. Third, we are making use of the restocking opportunity with strategic wholesale partners such as JD Sports, Dicks and Foot Locker. And last, from a more technical side, we are comping around €1 billion of external headwinds in the prior year period, in particular, COVID-19-related lockdowns in Asia-Pacific and industry-wide supply chain constraints. The non-recurrence of these events will also act as a tailwind to our top line acceleration in the months to come. All of this is supported by an extraordinarily strong order book. We continue to see broad-based order book strength across North America, EMEA, Latin America and Asia-Pacific. It is up more than 25% in H2, reflecting continued strong market share gains within our alliance accounts. While we haven't seen major order cancellations so far, our adjusted guidance already assumes a lower order book conversion in the second half as a result of a potential slowdown in consumer spending. We will also continue to elevate the experience in DTC across all consumer touch points. We doubled down on e-com and enhanced retail to drive traffic and conversion both in our Halo stores as well as the overall brick-and-mortar fleet. This includes digital investments focused on personalization and the footwear category. To round up the experience, we and leverage our revamped membership program, adiClub with new reward systems and Money Can't Buy access for our most loyal consumers. This brings me to our adjusted outlook by market for the full year 2022. Given the continued widespread COVID-19-related restrictions, we now expect revenues in Greater China to decline double-digits. While we have not experienced a meaningful slowdown in sell-through in any other markets, we think it is prudent to take a conservative view on the consumer in light of the current macroeconomic challenges. As a result, our adjusted guidance also accounts for a potential slowdown of consumer spending in these markets during the second half of the year. On the one hand, this downside risk is directly reflected in our adjusted outlook for EMEA and Asia-Pacific. In EMEA, we now expect low teens growth for the full year, while APAC is expected to post high single-digit growth. On the other hand, and despite us taking a more cautious view on our business development in H2, we have even increased our guidance for North America and Latin America, reflecting the better-than-expected momentum in these markets. For North America, we now expect high-teens growth, while Latin America is expected to grow between 30% and 40%. As you can see, we expect markets representing more than 85% of the business to grow strong double-digits in 2022, which clearly shows that our strategy is working. And with that, back over to you, Kasper. Kasper Rorsted: Thank you, Harm. Let me now give you the complete picture on our adjusted outlook for the full year 2022. We now expect mid- to high single-digit top line growth for the company. And as you've just heard from Harm, this reflects a slower-than-expected recovery in China as well as headwinds from a potential slowdown in other markets. To be precise, at the lower end of our top line guidance, roughly 50% of the adjustment is related to China. The remainder is related to a potential slowdown in other markets, which we've not seen so far. The gross margin is now expected to be around 49.0% in 2022, mainly reflecting a less favorable market mix due to the lower-than-expected revenues in Greater China as well as the impact from our initiative to clear excess inventory in this market. In addition, this expectation reflects higher discounting in other markets should the risk of a potential slowdown in consumer spending materialize. Our operating margin is now forecasted to be around 7.0% in 2022 as a result of the lower gross margin as well as continued investment into the launch of new products, brand storytelling and digital. Consequently, net income from continued operation is now expected to reach a level of around €1.3 billion. This brings me to our adjusted outlook by market for the full year. Given the continued widespread -- excuse me. Before I conclude the presentation, let me call out that we stay focused on what we can control. We're going after long-term opportunities in an environment, which is currently characterized by severe external challenges. We're operating in a growth industry and continue to see multiple consumer trends, we directly cater to at leisure betterment digital, sustainability and premium. All of these are here to stay or even expected to accelerate in the long-term. You can expect us to maximize opportunities in this attractive backdrop all supported by a more balanced top and bottom-line contribution across markets and making us less exposed to local challenges. Again, we are growing double digit in more than 85% of the business, which means we are very ready to accelerate as soon as all markets can operate without major disruptions again. To sum it up, the launch of innovative products drove continued strong demand in our Western markets and a return to growth in APAC in Q2. With multiple growth drivers in place to accelerate our topline momentum in the second half of the year and lower in our adjusted 2022 targets. In Greater China, our focus is on executing initiatives to clear excess inventory while strengthening consumer connections. And lastly, we are thoroughly managing industry-wide challenges in the short-term, while going after long-term opportunities. With this, Harm and I will be happy to take your questions. Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] First question is from the line of Grace Smalley from JPMorgan. Grace Smalley: Hi, thank you very much. My first question would just be on gross margin, please. I know clearly, it's too early to give specific guidance on gross margin in 2023. But in in gross margin this year, it'd be really helpful if you could help us understand directionally the headwinds and tailwinds you expect to face next year, and in particular, what levers you have to potentially offset currency pressure as you move into 2023. And then my second question would just be on the EMEA growth you saw this quarter. I think at the time of your Q1 results, you had said that you expected EMEA growth to accelerate in Q2 despite the headwinds that you knew at the time from Russia and supply chain. So just perhaps you could help us understand what changed in Europe in Q2 relative to your initial expectations a few months ago? Thank you very much. Harm Ohlmeyer: Well, first, Grace, on the gross margin. Of course, it's definitely too early to talk about 2023, but we understand the uncertainties about the consumer and development and input of supply chain costs as well as exchange rates. Again, gross margin will indeed be challenged, given the headwinds that we have on the FX right now with almost parity as the dollar. But of course, we can do a lot of things, growing our DTC business, working through our ranges. So again, there's a lot of puts and takes. But given where we are right now, it's definitely way too early to talk about 2023. And again, the guidance will be given in March 2023. Kasper Rorsted: So on the acceleration of our business in EMEA, it did accelerate, excluding Russia, from 10% to 13%. As you remember, the Russian crisis or war started on the 24th of February. That meant you had half impact in the first quarter or first year, full impact in the second. So the underlying growth grew from 10% to 13%. Grace Smalley: Thank you. Operator: Next question is from the line of Graham Renwick from Berenberg. Please go ahead. Graham Renwick: Hi, good afternoon, everyone. Thanks for taking my questions. Just firstly, just wondering how we should think about supply and demand into 2023 in Western markets. You're acknowledging that there could be some softer demand towards the end of the year and that there'll possibly be some additional discounting across the second half, which is all reflected in your new 2022 guidance. But as we go into 2023 with macro possibly weakening further, how flexible are you in terms of supply to be able to deliver on the opportunities next year in an upside scenario but also react quickly should demand continue to slow, and we possibly have too much stock in the channel that needs further discounting next year? And then the second question on China. It looks like China sales are running about 40% below 2019 levels. It feels like you're a bit more confident that the BCI issues have faded, and it's now largely just the lockdowns that's disrupting the business. Appreciate there's a lot of uncertainty on when zero COVID will end and when we can expect to see a more normalized environment in China. But when COVID-driven disruption does completely end, is there any reason why the China business can't quickly rebound to 2019 levels again, which I think is quite important to hit the mid-term sales margin targets, or do you think there's been a sort of structural rebasing of the China business perhaps as local brands have taken a bit more share, and therefore, we should expect a more progressive recovery in China once restrictions are gone? Thank you. Harm Ohlmeyer: Yes. Graham, thanks for your question. I'll take on the first on supply and demand. And of course, as we -- as you heard in our guidance, we have reflected some potential softness in the Western markets. So that's directly in our guidance for fall/winter 2022. And going to next year, we are coming back to our Innovation Day. We have shown a strong product pipeline that is not just hitting fall/winter 2022, but also spring/summer 2023. And of course, we are using our speed capabilities and the higher share of DTC to react no later to what we need to buy, and that's how we look at 2023. But again, it starts with understanding what the potential softness could be in fall/winter 2022, reacting already buy for spring summer 2023 and having also selective products that we can carry over, as we always do, going into 2023 and buy less of this, but making sure that we have newness in the product that you are seeing at our Innovation Day, and that's what we're driving to it, and using our capabilities in our DTC channel that is getting bigger every season. That's really the answer to the supply and demand. Kasper Rorsted: And Graham, to your question regarding BCI and underlying demand. I think if I were to characterize it, we believe that the COVID is a much more severe impact on the business right now than BCI. And the reason why we do that is, as we reported, we are growing our online business by 12%. So, you can see there is an underlying demand for our product. And the primary issue right now we have is traffic in store because had it been the reverse, we wouldn't have been able to grow our online business. So, we believe that the majority of constrained resides in COVID and not in BCI. And that's why we could do the 12%. Graham Renwick: Thank you. Operator: Next question is from the line of Aneesha Sherman from Bernstein. Please go ahead. Aneesha Sherman: Hi, thanks for taking my questions. I have two, please. So the first one is on North America and just on the guidance raise for the fiscal year. Can you comment on whether the raise in fiscal year guidance is purely a result of the Q2 performance, or in other words, have your H2 numbers stayed constant in your plan, or have you taken up H2 numbers in your plan? And if H2 numbers are up, then what's improved in your plan now versus kind of what you saw last quarter? And then my second question is on overhead. So the deleverage on overheads that you saw in growth markets like EMEA and North America, I appreciate some of this was currency-driven. But can you comment on a currency-neutral basis, did you see leverage in these markets? And are you expecting to see elevated overheads going into next year as well from all the investments you're doing into DTC and scale? Thank you. Harm Ohlmeyer: All right. Thanks, Aneesha. First, on the North America guidance. Of course, we had a really good performance in the second quarter. And we are basing our guidance based on the performance within the first half, but also the order books that we have in the second half. But unlike what you have stated, I mean, we're even more cautious based on what we're seeing in the second half that there could be a potential consumer slowdown. So, that's really baked into the guidance. On the operating overheads, you're absolutely right. We had deleverage in the first half some with currency. And of course, we are investing into the market. Especially in China, you can't leverage if you have such a drop in the net sales. But we also, as part of our own the game strategy, invested significantly into tech investments, whether it's S/4 HANA, whether it's data analytics, data scientists. We invested into sustainability. We invested -- continue to invest into D2C, whether it's the physical retail fleet and our e-commerce business. And of course, we had some onetime items linked to CIS and Russia as well. So, you should expect that we have a continuation of investment in the second half, but should also expect that we are moving into a leverage scenario in the next year because we need to look at the company as a whole. And with the drop that we have in China, of course, some of these will be reflected in China in the market because we have more time to rec to what the size will be in the future in China and there will be other initiatives where we kind of pre-invested according to our strategy. So, we definitely should expect going with leverage assumptions into next year. Aneesha Sherman: Thank you. Operator: Next question is from the line of Cedric Lecasble from Stifel. Please go ahead. Cédric Lecasble: Yes, thank you for taking my questions. I have two also, if I may. So, first one on the [indiscernible] in China, could you maybe elaborate a little bit, explaining to us what level, what magnitude of excess inventory you have, what could be the intensity of the promotional activity there, the lens and the financial impact on your second half results? That's number one. And the second one, I would be interested in your thoughts about the inventory situation in the US. You had a fantastic performance in the US. What's your overall inventory situation in the market? And how do you see the back-to-school period? There were some a little more cautious comments in the market about this period. How do you see it coming? Thank you very much. Kasper Rorsted: I will take the North American question, and Harm will take the China question. We have very healthy inventory levels in the US, and we continue to see strong growth. And right now, you've not heard from us at least any, I would say, cautionary remarks about back-to-school. So we still expect very healthy performance in the US, as indicated in our guidance. So -- and as I said, we're not over stocked by any means. We're still having very healthy inventories at all levels. Harm Ohlmeyer: Yes. And in China, as we mentioned earlier, we are planning to take back around €400 million of product from our retailers. So again, that is the reversal of the net sales in the second half. That is something we're going to clear then, not just in the second half, but over the next couple of quarters. And of course, we have an inventory situation given the lockdowns already at the end of June, as you saw in our results here as well. So again, both of it is baked into our guidance for China as well and for the company overall. But again, to repeat, it's €400 million take back that is, in fact, in our net sales as a reversal. Cedric Lecasble: And the take back, excuse me, if I may, it would be exclusively to the Chinese regions, or will you try to ship -- yes, exclusively China, China, China? Harm Ohlmeyer: China, China. Cedric Lecasble: Okay. Thank you. Operator: Next question is from the line of Jurgen Kolb from Kepler Cheuvreux. Please go ahead. Jurgen Kolb: Thank you very much. Two questions also from my side. In the current year and maybe also 2023, can you maybe share with us a number or a broad range of the sales share that you expect from newly issued products? Is that going to be higher this year than -- next year than in the past with all the products that you've shown to us during the Capital Market Day? That's the first one. And the second one is on China again. You indicated traffic was down. Maybe some additional comments in terms of conversion rates and average basket that you've seen in the Chinese market to maybe get some indication about the status of the Chinese consumer. Thank you. Kasper Rorsted: So of course, we believe right now we have a better product line -- better product pipeline than we had in the past couple of years. And I think, Jurgen, that is also what you saw here. So we don't give -- we don't quantify the number. But of course, we believe that the growth is going to come from our product pipeline. And the consequence of that is that you are expecting more growth from new products, whether it's in basketball, lifestyle, sportswear, et cetera. So it is driven, of course, by new product introductions very much based on what you saw. And if you look upon China, we saw our revenue in wholesale in July. Our revenues in wholesale and DTC continue to differ significantly given the decision to take our inventories back from our franchise partners. Sellout in July was below our expectations as formerly back in May, given the slower-than-expected recovery of traffic. However, we still saw DTC business improving significantly in July versus the minus 18% in Q2. So you are seeing, again -- and that goes back to there is a demand for the product. So the consumer-related business continues to improve in China. And right now, it is -- it's inventory and traffic that we have as an issue. Jurgen Kolb: Okay. Good. Thank you. Operator: Next question is from the line of Zuzanna Pusz from UBS. Please go ahead. Zuzanna Pusz: Good afternoon. Thank you for taking my questions. I'll stick to two. So maybe first question on your mid-term outlook. You've changed your outlook for 2022, and I think it's been very well explained what has driven that, but it sounds like you're still sticking to your 2025 outlook. So can you maybe share with us kind of what assumptions are behind that? I know we still have, let's say, three years ahead of us. But given that we're in a less certain macro environment and the fact that the industry has historically grown at roughly twice the global GDP, I guess, we're all wondering what if next year ends up being a bit weaker, what levers will you have sort of in place in order to make sure that you can deliver on that midterm outlook? So, that's my first question. And secondly, I think you've mentioned a few times during the presentation the really impressive growth across all of the performance business. Can you just maybe share with us what's been the performance in the lifestyle business? Just to get an idea of what has been the split of lifestyle versus performance within that 4% revenue growth in Q2. Thank you. Kasper Rorsted: Harm will take the second. And we really remain focused on executing our Own the Game strategy. And I would say we still have three and a half years to go, and you can see 85% of our business is performing extremely well. But should the underlying assumptions change permanently, we will provide you with an update. But right now, we're doubling -- we're growing double-digit. As I said, 85% of our businesses, which means we are already accelerate -- we're ready to accelerate as soon as all markets can operate without major disruptions. So, I think that is where we are at this stage. And there's three and a half years to go, We'll look upon whether the assumptions change. And when they do, of course, we'll update you. But right now, I think the most important part is getting 2022 behind us in the best possible way. That means protecting the growth rate in the 85% and doing whatever it takes to make sure that we build a foundation for growth in China because that is really right now the constrainer for us. And with this, I'll hand over to Harm on the Originals question. Harm Ohlmeyer: Yes. I want to start, and Sebastian probably continue on this one. First and foremost, as we mentioned earlier, Zuzanna, in football, running and outdoor in the second quarter, and then Sebastian can elaborate on the Originals sides. Sebastian Steffen: Yes. So on the Originals side, we also continue to see strong growth -- high single-digit for Originals overall. And Kasper already mentioned in his prepared remarks that also in North America, we see a very balanced growth actually between performance and the lifestyle side of things, with lifestyle growing 19% and performance growing above 20%. Just -- so just equally like we're seeing a very balanced growth trajectory from a channel perspective in North America. We're also seeing it from a lifestyle and performance perspective. Zuzanna Pusz: Thank you very much. Just to clarify. So -- but when you talk about the double-digit growth in performance and high single-digit in lifestyle, because that doesn't necessarily add up to the 4% you saw. So when you talk about these figures, is it excluding China? And then we get to that 14% growth you see in Western markets? How should I refer it, or maybe one of the categories is down significantly. Sebastian Steffen: So, let me clarify that. So, what I referenced to was 19% growth in lifestyle and 23% growth in performance in North America. For the company as a whole, we've seen high single-digit in Originals. We've seen strong growth in certain performance categories like football, running and outdoor, and others haven't been performing as well. And that's how you get to the 4% for the company. Zuzanna Pusz: Excellent. Thank you. Operator: Next question is from the line of James Grzinic from Jefferies International. Please go ahead. James Grzinic: Yes, good afternoon everybody. Just two quick ones, really. The first one is, can you perhaps help us understand what China margin underpins that around 7% group margin expectation for this year? And secondly, can you perhaps give us some context in terms of -- particularly on DTC in North America, what the average selling price has done in Q2? And what's happened to the full price sales ratio, please? Thank you. Harm Ohlmeyer: For the second one, on DTC, North America, of course, ASPs are up, and we saw good full price sell-through in the first half, I mean, given the constraints that we sell out on the inventory availability. So -- but we're not going to go any more details than that, but the ASPs, similar to the rest of the company, have been significantly up in North America. I didn't really get your first question on China. James Grzinic: What China margin assumption you make to underpin that around 7% group margin assumption for the year? Harm Ohlmeyer: Well, you have seen what we have delivered in the first half, right? So let's assume the profitability is still driven by the 85% of the business that is growing double-digit and delivers, as you have seen in the second quarter, more than 20% profitability, and that is balancing what we expect in China. But you shouldn't expect a rebound in China to previous levels. So the first half is a good indication what ultimately will happen in the second half from a profitability point of view. James Grzinic: Great. Thank you. Operator: Next question is from the line of Thomas Chauvet from Citi Research. Please go ahead. Thomas Chauvet: Good afternoon. My first question on pricing. You've passed on significant price increases in the second half at the time you have to – to clear excess inventories in China and possibly other markets, as you said. How do you think about how this might impact your brand image in both China and Western markets at the time you're trying to elevate the brand, in particular? Secondly, on Slide 17 with the gross margin bridge, you had a strong tailwind from pricing with selective price increases and lower discounting. How does that compare to your expectations in the second half where you have much higher price increases but also higher promotional activity? And just a clarification on the World Cup impact, which is one of your building blocks of growth in the second half. You mentioned a €400 million tailwind in -- mostly in the fourth quarter. How does that compare to, say, the last World Cup, 2018? Thank you. Kasper Rorsted: So before I go to pricing, I think the important part to see in our P&L was that our investment in brand has gone significantly up this year and much higher than our overall revenue. So that means we continue to invest to protect our brand. From an inventory standpoint, you have to separate the world again in two, you have excess inventory in China and you have very balanced or inventory and the other one. So the clearing that you're speaking about is predominantly a China issue. It is not the rest of the world issue. And that's why we actually don't think it has globally any impact because we continue to sign up new athletes, spend a lot of money on our brand. And in China, we are in a very similar position to the rest of our industry. So I think the important part is that it's two different scenarios. One is excess, the other one is not. And secondly, we have not saved our spending on marketing. Marketing is outgrowing our top line, which is, of course, why you have a more muted bottom line. So we're doing that to certainly we protect the brand. And maybe thirdly is we also think a lot of brand equities coming through new products. And we are seeing new products resonating extremely well, particularly on the performance side, but also now on the high end with Gucci, Prada and Fear of God coming out by the end of the year. Harm Ohlmeyer: Yes. On the pricing, of course, the first look, I would say, if you have more broad-based pricing in the second half with mid- to high single digit that we should have a bigger impact on this one. But you're absolutely right, we're executing that pricing to mid- to high single digits. On the other hand, we have to deal with the China situation and clearing some of the inventory, which will be a reduction in gross margin. And of course, in our guidance, we also assume some softness in the other markets and expect there's some promotion coming back in the second half in the bigger Western markets, whether it's North America and Western Europe. That's why it's counterbalancing the price increase that we have. But it's still important that we get the price increases into the market with the new products and then be selective where we need to clear some inventory. And secondly, you had the question on the World Cup, how it compares to the 2018 World Cup. We would say it's probably on a similar level, but it's more comprised from a time period because it's a Winter World Cup right now. So, we have a different launch cadence, and everything is more comprised in the shorter period. In the past, we always had a longer period to prepare for World Cup. So that's the only difference. But the magnitude for the full year would be similar, but it's more pronounced in the second half compared to previous World Cups. Sebastian Steffen: And maybe just to give you a feeling for that, Thomas. Usually, when there's a World Cup in the summertime, we would launch the first jerseys in November, the year before. So, you would already have a significant impact in the year preceding the event. Now, we're actually about to launch all the jerseys that we did and have done so at the beginning of this quarter in Latin America. So, a much more condensed topline impact than we would usually have. Thomas Chauvet: Thank you. And who is your favorite to win the competition and exceed maybe from 2018? Kasper Rorsted: As long as France and England doesn't win, we're pretty open. No, we're -- of course, as a German company, I think we back our host country, Germany, which is our oldest-- Sebastian Steffen: Thanks for the question. Thomas Chauvet: Best of luck for the competition. Kasper Rorsted: Thanks Thomas. Operator: Next question is from the line of John Kernan from Cowen. Please go ahead. John Kernan: Excellent. Thanks for taking my question. When we look at China, there's obviously been a lot of questions on the margin profile. Historically, this has been an incredibly profitable business for adidas. And I would imagine the trough is occurring in the back half of this year as you take back inventory and the market gets back to a more full price environment. What does the long-term margin structure of the business in China look like as sales recover and the inventory position of adidas and your competitors improved? Harm Ohlmeyer: Well, assuming there's no second question, so I answer the -- all the questions now. No, we honestly believe -- as we said earlier, we believe into the midterm potential of the Chinese market. And we always said, we're not going to stay at a 35% margin that we had in 2018, 2019. We always said over time, it becomes a more competitive market. It's more about comp growth. Of course, we had some challenges in between. But we believe there's an opportunity to go back to around 30% profitability in China because the market still benefits from marketing and other and clubs, in the rest of the world from influencers in the rest of the world, and we are in the sourcing region. And that's why we always said it's more attractive to do business in China than other markets. And so if you model it, around 30% is definitely a good assumption that we can go back to that in the midterm. John Kernan: Excellent. And maybe just one more quick follow-up. It looks like the promotional environment in North America, particularly in apparel, has increased recently around back-to-school. Some of your peers have fairly heavy levels of inventory on the balance sheet. I'm just curious if you've seen any changes in the promotional environment in North America around -- particularly around apparel and your anticipation as we get into holiday around the promotional environment in North America? Kasper Rorsted: No, we've not seen any significant difference. And you can look about our margin in North America, which remains very, very healthy. So right now, that's not the case. Of course, you will eventually get into promotional periods, but that is not related to this year. This is related to every year, and I think that's how you see it. But right now, we've not seen any significant change in that. So no -- the answer is no. we think that -- but we -- of course, you will get the normal promotional environment probably following back-to-school, which is very normal. But I think the most important part is really looking upon the operational margin in North America, where that has stabilized around that shows that we've been capable of reaching a business size and also an overall margin of footwear and apparel, which is attractive. John Kernan: Thank you. Sebastian Steffen: Thanks, John. And Stuart, we have time for two more questions please. Operator: Okay. Thank you, Seb. The next question is from Warwick Okines from BNP Paribas Exane. Please go ahead. Warwick Okines: Yes. Thanks very much. Two quick ones, actually. Just following up on that last question. I think you are planning or assuming that the business, I think, has additional promotional activity in Western markets in the second half of the year, and then how do you see those – those risks split between apparel compared within footwear? And then secondly, could you just confirm that you're still on track for about €900 million of CapEx this year, please? Thank you. Harm Ohlmeyer: Well, thanks, Warwick. First, yes, we reflected that in our guidance because we're expecting some more muted consumer confidence in the second half. Again, we haven't seen it, as Kasper just said. But I guess it could happen after back-to-school on the fourth quarter. And as you always know, it might be more in apparel than footwear because footwear is always a more differentiated offer. So that will be the assumption. But also that it's too early to tell. But historically, it would fit or it would hit apparel always more than footwear because we have a more differentiated offer, and this is where we can build really the franchise and have the innovation more so than in apparel. So that's what you should expect. On the CapEx, we changed our direction there slightly because we need to look at -- given the challenge that we have in China, we also look at our CapEx profile overall and react to this one. Now we moved from around €900 million to up to €700 million in CapEx for the fiscal year 2022. Warwick Okines: Thank you very much. Operator: The last question for today will be from the line of David Roux from BofA. Please go ahead. David Roux: Okay. Thanks for taking my questions. I had two follow-up questions just on new products and then China. So firstly, in terms of the timing of new product launches for lifestyle in the second half, has this timing changed at all since your last set of results? And then do you expect the bulk of the new product to hit in 3Q or 4Q? And then my second question is on China, just referencing Slide 37. We've seen a few examples of other sort of international consumer brands, noting that July was either stable or sequentially improving in July. I'm just trying to understand why adidas was different. Could you perhaps just give me some reason as to why July was different from some of your international -- your wider consumer peers? Thanks very much. Kasper Rorsted: So for obvious reasons, I can't really comment on other consumer peers, but what we did say is that we did see that our DTC business improved significantly in July versus the 18% that we saw in the second quarter. So I think that's the best indicator. So I can't say what other ones are doing. So we are seeing that. But of course, we saw -- if you go back sequentially, we saw a overall traffic for the second quarter had a very different running where it was very low in April and May, then improved in June and then it deteriorated in July. But overall, we say our DTC business significantly improved in July versus the run rate of the second quarter. On the apparel launches, we don't -- we might be a we're still -- that's related in the guidance that we have. The only thing that is still -- there is no impact from our manufacturing plants. They're up and running, and there is no impact from that. What you still see is shipping time still remains a challenge, I think, for everyone and also the rate. So that's it. David Roux: Thanks guys. And just a follow-up on July in China, that minus 21%. What was the impact, if any, from take-backs? Sebastian Steffen: So, let me clarify that, David. Minus 21% is just the traffic, right? That is the traffic in our own stores. And what you can see is that actually, we had initially expected that the trend that we saw between May and June, which is a significant improvement in the traffic, would continue into July, which unfortunately, given the increase in COVID cases, we didn't see. And we actually saw a deterioration in the traffic to the minus 21% that you see on the chart that you've been referring to. But as Kasper has mentioned, the overall business development in our own D2C business improved significantly in July compared to the minus 18% that we posted for D2C in Q2. And then clearly, on the wholesale side of things, you would have seen development that is worse than that because it would reflect also our initiatives to take products back and clear it through our own channels and support our franchise partners. I hope that clarifies. David Roux: Yes that does. Thanks very much. Sebastian Steffen: All right. Thanks very much. David, Thanks very much, Stuart. And most importantly, thanks very much, Kasper and Harm. This concludes our call for our second quarter results. As always, if you have any further questions either this afternoon or over the next couple of days and weeks, there's going to be someone available in the IR team. We're also looking forward to being in touch with you over the next couple of weeks during our physical and virtual roadshows. And with that, thanks very much again. Have a good remainder of the day. And for those of you who haven't had it, have a lovely summer break. All the best. Bye, bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Good bye.

Operator: Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the adidas AG Full Year 2021 Conference Call. Throughout today’s recorded presentation all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead. Sebastian Steffen: Thanks very much, Nairobi and good evening, good afternoon, good morning, everyone, wherever you are joining us virtually today, and welcome to our full year 2021 results conference call. Our presenters today are our CEO, Kasper Rorsted; and our CFO, Harm Ohlmeyer. We will kick it off in a second as always with their prepared remarks, and we will have enough time afterwards for your questions. As always, I would like to ask you that during the Q&A session, you limit your initial questions to two in order to allow as many people as possible to ask questions. And now, without any further ado, over to you, Kasper. Kasper Rorsted: Thank you very much, Sebastian. Also from my side, I welcome everyone to our full year 2021 presentation. Before I start with the actual presentation, I'd like to address a topic, which is on everyone's mind right now and that is, of course, the current war in Ukraine. As I'm sure all of you I've been watching the events in Ukraine with great concern and dismay. My thoughts are with the people who are suffering and I'm joining all those calling for peace. Main our concern is particularly for employees in the region, their protection and safety are our highest priority. In addition, we provide immediate humanitarian aid to other people and communities on the ground who are in need of support. To provide help, we made a total donation of 1 million to refugees and children's charities. We've also donated clothing to distribute to our people in need. Many of our employees are contributing as well as we as a company made the donation. It's hard to switch topics, but now let's turn to how the first year of our Own the Game strategy went. I can confidently say that 2021 was a much better year than 2020. On the back of successful vaccination campaigns around the globe, the worldwide economy started to recover. Sport returned to the global stage, creating huge excitement around the world. And that said, the COVID-19 pandemic continued to impact lives and businesses across the globe. At adidas we delivered strong results despite heavy disruption in supply and demand that you'll hear more about during the presentation. But let me stay on the topic of sport because that's what adidas is all about. Sports defined our past, present, and the future. I'd like to mention three personal highlights. For us, it was a great pleasure to host the German National Team in a newly built home ground at our headquarters in Herzo in Germany. Hosting a world-class team on our premises during such a tournament was an industry first. I was happy to see our long-term partner and best football on the planet, Lionel Messi, finally winning a title with the Argentinian National Team at Copa America. And finally, we had a fantastic year in running with more wins, more world records, and more podiums at major road races than all our other brands, all other brands combined. We continue to win consumers around the world with innovation -- with innovative new products, exciting new store concepts, and great experiences. Again, let me just mention a couple of highlights. Building on the success of the initial franchise, we launched the NMDs 1, a new key lifestyle product exclusively on our Confirmed App and achieved 100% sell-through with a demand ratio of 1:78. We further rolled out our Confirmed App to 22 countries at the end of last year as a go-to destination for sneaker heads. We made our most iconic shoe the Stan Smith green by bringing out versions with a series of high-performance recycled materials. We tap into football culture in jerseys for our most important football partners such as [indiscernible] Arsenal that won the hearts and minds of football fans around the world. Exclusive partner collection launches, such as the 100% Vegan Football Boot, Predator Freak amplified the strong growth in our football franchises in line with our sustainability leadership ambition. Talking about sustainability, we opened our first two stores completely dedicated to our adidas Terex Outdoor offering in Shanghai and Munich. The stores are the most sustainable yet and serve as an emotional platform for consumers to join and support our sustainability journey. But let's now look upon our agenda for today. As you remember, we launched our new 2025 strategy Own the Game in March last year. So I'll start with the strategic update. I'll then follow up with more information about our business performance in 2021 before Harm will give you all the details about our financials. I'll be back to provide you with an outlook for 2022 and in the end, we will, of course, open the floor for your questions. So let me start with a strategic update. Our strategy Own the Game starts with the consumer. Consumer is at the heart of everything we do. Our industry is marked by five consumer trends, At Leisure, Betterment, Digital, Sustainability, and Premiumization. All these five trends even accelerated through the pandemic and make the sporting goods industry a highly attractive one to be in. And our Own the Game strategy is based on these strong industry trends. And as mentioned, Own the Game puts the consumer to harbor everything we do. It is deeply rooted in sport. Our strategic focus is on increasing the credibility of the adidas brand, elevating the experience for consumers and pushing the boundaries and sustainability. To successfully deliver on this strategy, we will invest consistently into our people, into innovation, and into our digital transformation. In essence, Own the Game is a growth and investment strategy that leads adidas into a successful future. Let's now look at the key elements of our strategy and our key achievements in 2021, one by one, and I'll start with people because people always comes first at adidas. With the coronavirus pandemic, unfortunately being far from over in many parts of the world, securing the well-being, health, and safety of our own employees and those of our suppliers remain our first priority. We continued our journey to become an even more diverse and inclusive company and organized our second week of inclusion in September last year. We made significant progress increasing the number of women in leadership positions. At the end of 2021, women made up 37% of our Executive Management positions up from 35% in the prior year. And we received great outside recognition for being an employer of choice with a clear focus on diversity, equity, and inclusion. Our people are also the key force in our relentless drive for innovation. The number priority remains driving brand heat with exciting product innovations across our strategic growth categories and is clearly paying off. The introduction of three new industry-leading mid-sole technologies in running led to strong double-digit growth in 2021 as our efforts took home more world records, wins, and more podiums in the top 50 road races globally than all other athletes combined. I'm proud to see the three stripes reclaiming credibility in technical running with the success of our groundbreaking Lightstrike Pro technology, featured in the prominent Adizero franchise. At the same time, our success extends to all other platforms and franchises as we further diversify our running offer with the introduction of Repetitor, which just became available in our newly launched ADISTAR franchise. Complemented by the multibillion Euro boost platform and the commercial scaling of 4D, we're making running accessible to more people globally than ever before. Digital is also setting us up for success. Let me remind you that by 2025, the vast majority of our net sales will come from products that are created and sold in digitally. We're making strong progress in digitizing our core processes across the entire value chain, which is helping us to build better products, react to trends faster, and engage more personally with consumers. And I'll provide you with three tangible examples. First, we were able to shorten production creation time from six months to only a few weeks for certain new concepts in originals and training which will start to have a meaningful impact on net sales in 2022. Secondly, our D2C business model equips us with more and more consumer data, which will have been levering to drive an increase in full price share for D2C inclusive launches for up to 70%. Third, we continue to significantly invest in digital, tech and data analytics capabilities and hired an additional 2,000 digital experts in 2021. Overall, digital is becoming a core competency and an internal value driver for adidas as we're able to meet consumer needs even faster and more effectively. We envision to create more direct relationships across both digital and physical touch point is fully embraced by experience as a strategic focus area. We always said that we will become a member of space first, and we're making strong progress towards this target. In 2021, we've added 75 million new members to our digital ecosystem, which brings the total number of members to now 240 million. And let me reiterate, members are our most profitable consumers as they buy more than 50% -- buy more than 50% more often and have a lifetime value that is more than two times higher. But we're not stopping there. Our seamless enhanced consumer experience also extends to our retail space as we added an additional 61,000 square meters net selling space throughout the course of 2021, including new brand Halo stores in Dubai, Shanghai, Beijing, Berlin and Hamburg. Adidas always had an unique and strong heritage in both sport and culture. We're increasing our credibility by sharpening both edges of our brand, delivering inspiring campaigns, grounding innovation and sport, and making women a company-wide priority and elevating originals into premium lifestyle. We are loud [ph] and proud as we launched our biggest brand campaign ever, Impossible is Nothing. Communicating with one voice, we reached more than 1 billion views on social media. With stay-in play, we activated more than 60 partners in a record-breaking campaign, aimed at keeping more women and girls in sport. I'm excited about the commercial opportunity as we start to scale NMD alongside our foreign franchise in 2022 with additional durations, dedicated marketing, and exciting partnerships. Talking about scale, we're committed to create a comprehensive sustainability offer at scale. It is the right thing to do and continues to be on the top of consumers' mind. As you know, we have a strong ambition that 9 out of 10 articles offered will be sustainable for 2025, and I'm proud to report that we achieved a 69% share of sustainable adidas in 2021. The target is complemented by other ambitious sustainability targets that got approved by the science-based target initiative last year, which means that our targets are aligned with the 1.5-degree target. An improved sustainability product offering is essential to achieve these targets. After three generations of prototypes, we successfully commercialized made-to-be-made concept with the rollout of additional franchises. And together with Allbirds, we created a performance running shoe with the lowest carbon footprint ever. We're also innovating with new business models and introduced shoes to give back in collaboration with 3Up, aimed at helping to extend the life cycle of sportswear, apparel, and footwear. And we've also invested into several strategic partners like Spinova, Infinite Fiber, and Punt Biomaterials. Now let's continue with the business update for 2021. I'll start with highlighting strength and weaknesses. On the strength side, we saw broad-based growth across all regions with strong double-digit increases in EMEA with 24%, North America was 17%; and Latin America with 47%. Those markets had operated without major disruption. Our focus on D2C is clearly paying off as our own channels in each of these markets grew strong double digits. Despite higher marketing investment and more than 200 million of stranded costs related to the divesture of Reebok business, our profitability improved significantly and I'll come to the details in just a second. On the weaknesses side, of course, we also saw our set of challenges. With the majority of Western markets being able to operate without major disruption, momentum remains subdued in Greater China and Asia Pacific as a challenging market environment and extensive COVID-19 related lockdowns weighted on demand in these regions. Unfortunately, supply chain constraints also continued to impact our sales trajectory with product outages and shipping delays posting a significant drag on our top line development. In addition, significantly higher supply chain costs and negative FX developments mask our underlying gross margin improvement, and Harm will comment on this in more detail later. We delivered a strong set of results in 2021. In total, we added almost 3 billion to our top line in 2021 despite several external factors weighing on both demand throughout the year. Our gross margin increased 0.7 percentage points to 50.7 significantly higher supply chain costs and negative currency development. Our operating profit increased by more than 150% despite more than 220 million of stranded costs related to Reebok. And as a result, we increased our net income from continued operations by more than 1 billion despite the 200 million higher marketing spend to drive brand heat. Coming to our strategic growth markets. Our North American business grew 17%, and we saw the strong growth also in D2C. Overall, the increase was driven by double-digit growth in lifestyle and football categories while outdoor was up triple-digit. Our EMEA business grew by 24% and we saw also a strong growth in D2C with 20% year-over-year. From a category perspective, outdoor training and running, football and lifestyle, all recorded strong double-digit growth. And in Greater China, we grew 3%. After a very strong start to the year, the challenging market environment weighed on our top and bottom line results. I'll talk about the current situation in China and the progress we're making with our action plan later in my outlook part. We see a strong growth momentum in undisrupted markets and to make it very clear, around 70% of our markets operated without major disruptions in 2021, and that reflected in a double-digit revenue growth in EMEA, North America, and Latin America. Taken together, these markets grew 23% in 2021, a clear proof for the strong demand for our brands and products. So 70% of the markets were undisrupted and the growth of the undisrupted were 23%. From a channel perspective, we saw an 18% increase in owned retail, and that was again driven by exceptional growth in EMEA, North America, and Latin America. In e-com, revenue grew double digit in EMEA and Latin America compared to 2020 despite the exceptionally high growth in the prior year period. In North America, we were able to increase our full price share in e-com to more than 70%, reflecting an increase of almost 20 percentage points. Overall, our e-com business grew 4% compared to 2020, reflecting an increase of 60% over the past two years. And let's have a closer look at the latest digital and D2C share of our business. In 2021, D2C and that includes owned retail as well as e-com, accounted for 38% of our net sales. From this 38, own e-com accounts for roughly 50%. Digital, which includes owned and third-party e-com, accounted for 34% of total net sales. There are more than 50% from our own.com. These figures clearly illustrate our progress made to address consumer-driven changes in our industry. Consumers prefer to shop with their favorite brands directly hence, the monobrand part of the market is expected to grow twice as fast as the multi-brand. As consumers shop more and more online, online channels will be growing three times faster than offline channels and represent more than 40% of the industry by 2025. So we're doubling down on the biggest opportunities in an already extremely attractive industry. From a category perspective, running and training both grew double-digits, thanks to the introduction of industry-leading mid-sole technologies in running as well as women dedicated training offer that sparked consumer excitement. Football saw exceptional increase, driven by jersey launches amid major football events such as UEFA, Euro Football, Copa America. Outdoor continued its excellent growth trajectory, mainly driven by footwear launches as a release of sustainable products such as Terex, MTBR, Free Hiker Drove, Credibility. Revenues in the lifestyle category are also increased double digit as we scale successful franchises such as the Forum and introduced new premium collaboration with -- such as with Prada and [indiscernible]. And I'll share more exciting news and upcoming product releases across all our strategic growth categories later. Before handing over to Harm for the financial update, now let me recap 2021. First of all, we delivered on our financial guidance for the year despite a negative impact of more than 1.5 billion from external factors. Our top line growth was driven by increases across all strategic growth markets and categories, reflecting the success of our innovative products as well as an elevated consumer experience. We continue to focus on D2C. Our member's first mindset brought unique and tailored experiences and products to consumers globally, both online and in stores. On the bottom line, we added more than 1 billion to net income from continued operations while driving significant marketing investments into the brand. Taken in -- taking it all together, 2021 was clearly a successful first year within our new strategic cycle. And now I'd like to hand over to Harm. Harm Ohlmeyer: Thank you, Kasper and also a warm welcome from my side. As always, we start with the market segments. Our top line development in fiscal year 2021 was still impacted by COVID-19 and heavy disruptions in global supply and demand. But this impact was different between the regions. You have heard it from Kasper, wherever markets operate without major disruptions, we have experienced strong top line momentum. This is reflected in high double-digit growth rates in Western part of the world. So again, 70% of our markets grew 23%. EMEA, North America, and Latin America grew 24%, 17% and 47%, respectively, driven by strong double-digit increases in both D2C and wholesale despite the negative impact -- effect from significant longer lead times about which I'm going to talk about in a moment. Furthermore, all of these markets just mentioned, recorded an operating margin close to or above 20%. Particularly in the case of North America, this is a major achievement and the result of a dedicated effort to drive profitability in the market in 2021 to compensate the profit shortfall from China. Sales in Asia Pacific were up 8%, reflecting the negative impact on demand from the extensive lockdowns in the region. In Greater China, the geopolitical situation, resurgence of COVID-19 related lockdowns as well as natural disasters weighed on the top and bottom line. Given the situation, I'd like to give you some more information about Russia CIS. Of course, all our offices and stores in the Ukraine are closed, and we do our utmost to ensure the safety of our employees. Kasper already mentioned our humanitarian aid. When it comes to Russia, we fully support and strictly follow all sanctions imposed by the German and European government. We decided to suspend our own retail and e-com operations and stopped shipping goods to Russia. We suspended our relationship with the Russian Football Federation. We also removed the Ball of the UEFA Champions League Final that was supposed to be held in St. Petersburg from competition and stopped selling the ball. With revenues of around €500 million, the entire market represented around 2% of total revenues in 2021. 75% of these revenues are generated through our own D2C business, the 500 owned stores that we operate in the region as well through our own digital platforms. While D2C tends to be less flexible and more fixed costs heavy in general, the situation is actually quite different in Russia. In fact, the share of variable cost is fairly high as most of the existing lease arrangements are linked to the revenue development. In addition, lease agreements in Russia are much more flexible and usually allow a termination within only a few months. One of the big benefits of operating a large D2C business is the flexibility when it comes to pricing. We can adjust prices quickly on a weekly basis and we have already made use of this flexibility and increased our prices by more than 20% over the past two weeks to at least partly compensate the strong devaluation of the Ruble. In addition, a relatively high share of D2C comes along with the limited risk related to receivables. The overall setup means that we can limit the impact on our profitability from the significant revenue decline we are assuming. Let's now turn to the company P&L. You have heard it, the challenging market environment in China, COVID-19-related restrictions, and supply chain challenges reduced our top line for more than 1.5 billion in 2021. However, we were still able to increase revenues by 16% currency neutral. Our gross margin increased by 70 basis points to 50.7%, I will come to the details in just a second. Other operating expenses increased 4% to 8.9 billion in 2021, driven by higher marketing investments mainly in EMEA and North America. We leverage sport events to drive brand heat and in addition, we supported the introduction of new products and drove consumer experience, both online and offline. Operating overheads increased slightly by 2%, but would have been down if adjusted for the more than €220 million stranded cost related to the divestiture of the Reebok business. Our operating profit increased more than 160% to around 2 billion as a result of the strong top line increase in combination with improved gross margin and lower operating expenses as a percentage of sales. Consequently, the operating margin increased 5.3 percentage points to 9.4. Our net income from continuing operations improved by more than €1 billion in 2021, also supported by a tax benefit in the fourth quarter related to the Reebok divestiture. I'm now going to take a closer look at the gross margin development in 2021. I would like to discuss the main factors in the composition of our gross margin development. First, in terms of pricing impact, higher full price sales, and selected price increases already in 2021 had a significant positive effect on our gross margin. Second, better inventory management and the non-recurrence of last year’s purchase order cancellation costs impacted the gross margin development positively. On the negative side, we saw a normalization of the market and channel mix compared to 2020 with an overall lower contribution from China and e-commerce. Moreover, we experienced a significant increase in sourcing and freight costs that pose a headwind of around 1 percentage point to our gross margin in 2021. In terms of currency development, the significant negative impact continued in 2021 and remained a drag on our gross margin. Due to our hedging practices, this effect will only turn into a tailwind in 2022. Now talking about 2022, let's now take a closer look at the expected gross margin development this year. Starting from 50.7%, we expect gross margin to reach a level of between 51.5% and 52%. As you know, higher supply chain costs have weighed and will continue to weigh on our gross margin and post a drag on the development also in 2022. The total cost per piece is expected to double in 2022 compared to last year. Moreover, air freight costs will further increase despite a significant reduction in our overall volumes. In order to compensate these higher costs, we are implementing significant price increases as we speak. In the first half of the year, these will be more limited to D2C exclusive products. The second half, we're increasing prices broadly by a mid- to high single-digit percentage on average. In total, we expect this to largely compensate the headwinds from higher supply chain costs. On top of these developments and improving channel mix as we continue to focus on driving our D2C business in general and e-com, in particular, as well as the positive FX impact will drive significant gross margin improvement this year. I would now like to talk about our investments in 2021. Overall, we spent 2.5 billion on marketing, the largest portion is spent on our unique portfolio of brand partners. With our partners, we employ an open-source mindset to inspire fresh perspectives, and we amplify our credibility by leveraging the power, authenticity, and reach of our partnerships. To drive brand heat and create consumer excitement, we successfully launched several campaigns in 2021. Impossible is Nothing which was rolled out in more than 50 countries, campaigns around the major sporting events as well as campaigns focusing especially on women like Stay and Play or Watch Us Move. Overhead expenses amounted to €6.3 billion in 2021, with the biggest portion being spent on D2C to elevate the consumer experience across all of our touch points. And of course, a significant part of our operating overhead expenses went into logistics in order to fulfill consumers and customers' needs when it comes to the timeliness and reliability of delivering our products. Now turning to the balance sheet, inventories were down 12% currency-neutral. This development mainly reflects the divestiture of the Reebok business. The strong sell-through of our product, successful inventory management, as well as the impact from industry-wide supply chain challenges also contributed to the decline. Receivables increased 6% currency neutral at the end of December 2021, reflecting our strong top line growth. Payables were down 6% current neutral, mainly due to the normalization of payment terms as well as the divestiture of the Reebok business. Overall, average operating working capital decreased 5.3 percentage points to 20% for the full year versus 25.3% in 2020. Let's spend a minute to look at our inventory composition in a bit more detail. Due to the supply chain challenges in the last year, we saw a clear increase in lead times. At the end of December 2021, only around 60% of all goods where goods on hand the rest was in transit. Comparing these numbers to the prior year, you clearly see a difference. At the end of 2020 more than 70% of goods on hand and less than 30% in transit. In markets that are particularly impacted by the supply chain constraints such as North America and EMEA, goods on hand were even as low as 50%. You can clearly see how much these two markets have been impacted by the lack of product. We expect the situation to improve significantly during the first quarter, and as a result, don't foresee any major impact from last year's lockdown anymore beyond the first quarter. We talked about the importance of investment into the brand and marketing before now I would like to focus on our capital expenditure. In 2021, CAPEX increased more than 50% to 667 million. Investments in new or remodeled-owned retail stores, our e-commerce business as well as the broader IT infrastructure represented once again the majority of the expenditure. This is in line with our company strategy Own the Game according to which we will focus on D2C and digital to ensure a seamless consumer experience. Another important part of our Own the Game are shareholder returns. Until 2025, we plan to return between €8 billion to €9 billion to our shareholders via regular dividend payments and share buyback programs. These €8 billion and €9 billion will be complemented by the returns from Reebok proceeds. Let us go through this piece by piece. In 2021, we already returned €1 billion to our shareholders via share buybacks and 600 million via the dividend payment, resulting in a total payout of €1.6 billion. Going into 2022, we already completed another tranche of our share buyback program in the amount of €1 billion in January and February. In addition, the dividend payout we announced today will add another €600 million. On top of that, we announced last week the launch of an additional share buyback program of up to €1.5 billion in Q2 and Q3 to return the cash proceeds from the Reebok divestiture to our shareholders following the successful closing of the transaction. Again, this amount comes on top of the €8 billion to €9 billion from Own the Game. So in total, we will be returning up to €3.1 billion to our shareholders just in 2022. I mentioned the dividend proposal for 2021 already. We will recommend paying a dividend of €3.3 per dividend entitled share to shareholders at this year's AGM. This represents an increase of 10% compared to the prior year dividend where we paid €3 per share. And with that, I would like to hand over to Kasper for the outlook for year. Kasper Rorsted: Thank you very much, Harm. And talking about 2022, I'll remind everybody that we still operate in a very dynamic environment and heightened uncertainty. The war in Ukraine and continued challenging market environment in Greater China, COVID-related restrictions and supply chain challenges and inflationary pressures will be leaving a mark on our business also in 2022. Together with our committed team of employees around the world we will continue to tackle these challenges in a decisive manner. As a result, we will drive double-digit top and bottom line improvements also this year, and we remain optimistic about our long-term growth opportunities. In addition, our accelerating brand momentum as well as our strong product innovation lineup will help us gain market share. And let me now tell you how we'll get there. I have mentioned it before Own the Game is a growth and investment strategy. So our focus in 2022 is exactly that, investing into double-digit growth. This year, we'll invest close to 3 billion into our brand campaigns, into our most important product launches, and into new partners, both in sport and lifestyle to accelerate our brand momentum. We doubled down on further growth in our two largest markets, EMEA and North America and we have a plan in place to accelerate our growth in China, and we'll continue to build direct relationships with our consumers through digital and our owned stores. In 2022, sport is back on the biggest stage with the FIFA World Cup, the UEFA Women's Euro, and the Winter Olympics that closed three weeks ago, and adidas was and is front and center at all big sports events and moments this year. Our pipeline of new innovative products is full and will be rolled out on a weekly basis throughout the entire year. Our focus is on our five categories that I'll speak about in just a second. We are leveraging our 5,000 brand partners across broadened lifestyle to showcase our products, our brand, and our attitude Impossible is Nothing. We will launch four key chapters of our long -- our year-long brand campaign, Impossible is Nothing featuring women, sustainability, adidas Originals and football. And last but not least, I'm happy to share that we have appointed Alasdhair Willis as adidas new Chief Creative Officer last week. In his role, Alasdhair will lead our design community to shape, define, and shepherd the future creative direction of the brand across performance, originals, and sportswear. Alasdhair is an icon of the industry with a long-standing connection to adidas that dates back to 2005, most notably through his role in the concept and development of adidas by Stella McCartney in partnership with Stella McCartney. In terms of our brand momentum, we are off to a great start in 2022. We started the year with our biggest women's campaign ever, I'm Possible. It's running in all markets globally and has already reached more than 0.5 billion of consumers in the first three weeks since its launch. Our woman’s campaign came on the back of an already highly successful campaign to launch our new innovative sports bras collection that offers the right bra for all women and all types of sport activities. This campaign alone generated more than 1,000 pieces of social media coverage and reached almost 90% positive sentiment across the entire social media ecosystem. We have clearly defined our most important categories, football, running, training, outdoor, and lifestyle. And we just talked about training with our women's campaign in our bra revolution. Let's now look one by one into some of the highlights in the other categories. And we'll start with outdoor because our Terex outdoor range was front and center of the Winter Olympics in Beijing. We kitted out the entire German team that came second in the middle count. We continue to see huge opportunity in this space for us and more and more consumers worldwide enjoy outdoor activities to stay fit and stay healthy. In the first part of the presentation, I've called out that our successful Adizero Adios Pro franchise is driving credibility by securing marathon wins at the top of the pinnacle. At the same time, we're making running accessible by diversifying and scaling our offer to every runner at more commercial price points. Our latest solar glide is available for €140 and just the first of many product introductions across all price points. 2022 will be a great year for football with the Women's European Championship being played in England this summer and the FIFA World Cup in Qatar at the end of the year. And this comes on top of the excitement around the UEFA Champions League and the various national leagues. Our portfolio of federations clubs and players is by far the best in the industry. Just think of national teams like Germany, Spain, or Argentina, the clubs of Real Madrid, Bayern Munich, Juventus, Arsenal, Manchester United to mention only very few. Messi [indiscernible] I could go on forever. We'll leverage this competitive advantage all year long by launching innovative new football products and activations and activating our clubs and our players. Next on the list is the launch of the official World Cup match ball at the end of this month. But I have more exciting football news to share with you. Today, we are proud to announce that adidas and the Italian Football Federation will start working together as of January 2023. We are happy about this new partnership, and we are very much looking forward towards the current European Champion and adidas can achieve together. Without any doubt, this partnership makes our leading football portfolio even stronger for the years to come. Now let's switch gears and talk about our lifestyle segment. Here I'm equally excited about the leading portfolio of partners we can bring to the table. Yohji Yamamoto with Y3, adidas and Prada, Kanye West and Yeezy [ph], Beyonce and Ivy, no other brand can draw on such a list of renewed partners that bring a unique proposition to our consumers worldwide. And we'll not stop there and we'll expand into new exciting collaborations in this space. Last year, we announced a partnership with Jerry Lorenzo. Under the leadership of Jerry we will disrupt the basketball category. In the meantime, Jerry and his team have joined our hub in our key city LA and worked on the first products. In January, in Shanghai, which is China's biggest street wear fair, Jerry provided Chinese consumers with the first glimpse into how the product will look like. Long lines were building quickly in front of the exhibition as the excitement in anticipation of the launch of first products during the summer. 12 days ago, we launched our newest partnership at Milan Fashion Week, adidas and Gucci. Gucci and adidas Originals are joining forces in a new collaboration, which combines the heritage and the creative codes of both brands. At the Gucci Runway Show, the adidas gazelle model and our famous three stripes trademark were front and center and the talk of the entire fashion world. Media around the world picked up the news and called this collaboration, the most exciting collaboration of the year. On the day itself, we recorded the highest number of sign-ups for Confirmed App and recorded the most successful Instagram post ever. Our intent is very clear, as stated one year ago at our strategy launch, we want to premiumize adidas Originals. And it is collaborations with some of the hottest brands in fashion such as Gucci or Prada that will get us there. By extending adidas Originals in to the premium segment and at the same time, sharpening the edges of adidas in sport, we created a space in the middle for a completely new consumer proposition, adidas sportswear. This summer we launched the first adidas sportswear collection perfectly catering to the GenZ consumer. With adidas sportswear, we are perfectly addressing the growing relevance of At Leisure trend towards sport-inspired leisure wear, and we will be able to capture the huge opportunity it presents. We are very confident about our innovation pipeline. And let me show you that there's much more that -- there is much more that's yet to come. In less than two weeks, we're opening to host our Innovation Day and cannot wait to welcome you here at our unique World of Sport. And let me remind you that this event will be a physical attendance only due to the confidentiality of products that will be displayed. We're not only going to provide an exclusive and comprehensive preview of 2022 product highlights across our strategic growth categories, but we will also offer a preview of our Spring/Summer 2023 collection. Finally, you can look forward to multiple opportunities to engage with inspiring special guests and brand partners throughout the course of the event. We definitely hope to welcome many of you here in two weeks' time. Our strong and comprehensive innovation pipeline will also fuel the acceleration of our top line momentum in strategic growth markets in 2022. And let's take a closer look. EMEA operated without major disruption in 2021, and we experienced an acceleration of our top line momentum. We've been on this momentum across channels and categories and expect mid -- and expect mid-teens growth in EMEA in fiscal year 2022. We'll drive an expansion of our membership program and market share gains with key alliance accounts. Building on our Impossible campaign and our broad revolution, we will particularly increase the market share of our women's business by winning with key items and bringing the premium offer to life. In football, we'll leverage the major upcoming events, the Women's European Championship, the FIFA World Cup, etcetera, introducing key footwear innovations and new approach to team wear. And in lifestyle we will strengthen momentum by scaling key franchises in originals and with the help of Jerry in basketball. North America is a second strategic growth market where we can build on a strong top line momentum from last year. For 2022, we once again expect mid to high teens growth driven by both D2C and wholesale. In e-com, we'll drive personalization, scale membership, and leverage high products while only retail will see an improved consumer experience through increased investments into the store fleet as well open new halo stores in New York and L.A. In wholesale, we'll significantly increase our market share with key alliance accounts in the market and look forward to continuing driving our business, in particular with Foot Locker Dicks, J.D. Cost and Nordstrom. In lifestyle, our collaboration with Jerry Lorenzo will leave its mark as we premiumize originals and reignite basketball. I will not -- it will not surprise you that we see a huge opportunity in the ball and the timing here could not be any better given the recent announcement. Now let's turn to Greater China. We continue to focus on things we can control as we are still operating in a challenging market environment. We developed a detailed action plan, which is thoroughly executed and that's why we're confident to achieve mid-single-digit growth in Greater China. And let me give you the details. We have strengthened brand heat and signed several new athletes to our roster partners, such as Su Yiming just before the start of the Winter Olympics. She's the first Asian snowboard medalist in Winter Olympic history. New athletes like Su are also part of our localized Chinese New Year campaign that created more than 1 billion impressions and views. But this was not the only campaign in China year-to-date. We invested in double-digit €1 million amount and we had a total of three campaigns in the first two months, allowing us to connect with the Chinese consumer in unprecedented way and sparking their excitement around the brand. This is complemented by a significant ramp-up for China for China product creation. More than 30% of products will be Chinese-specific in 2022, which will lead to more commercial impact. And as a result, we've already achieved a markdown reduction of 15 percentage points in e-com in Q4. Our investment in digital capabilities start to pay off as we improved our range and activation plans and realized exceptional sell-through of new hyper leases. When the product is telling a story, it works extremely well with Chinese consumers. And there is many stories that can be told around Jerry Lorenzo, Gucci, just to name a few. Ultimately, we're making strong progress in transferring significant product volume into other markets to make sure that we're well prepared to start growing again in Q2. Of course, as I said, we are aiming to achieve mid-single growth in 2022 after growing 3% in 2021. We're excited that our team in Shanghai will be led by Adrian Siu who have been appointed as Managing Director of adidas Greater China. Adrian succeed Jason, who assumed the new role of Senior Vice President of Global franchise. Adrian has a long and successful track record with adidas. He joined Adidas back in 2002, as Sales Director at Hong Kong and later assumed the role as Managing Director. Until 2019, Adrian was our Senior Vice President for Commercial for Greater China being based in Shanghai. And since September 2019, Adrian has been successfully leading the transformation of a local apparel brand, CosmoLady as CEO based in Shenzhen. We're convinced that Adrian together with the Chinese team will ensure we return to growth in the short term and leverage the attractive opportunity this market provides in the long term. And it's particularly important to mention that Jason not only knows the market well, our team well, but of course, all our customers extremely well in China. We will also continue to double down on D2C in digital, bringing the consumer experience to the next level. We have more than 20 halo store openings planned for 2022. Halo stores are top of our retail pyramid. These stores are true brand builder, thanks to exclusive products, enhanced consumer experiences, and members-only areas. They also help us understand what resonates best with consumers in our global key cities. The creation of seamless enhanced consumer experiences is central to how we approach D2C, and we invest into the next generation of concepts and digital capabilities across our entire retail store fleet. This consumer-first mindset also extends to the online space and membership continues to be a strategic priority. Going forward, we are rebranding our membership program to expand the adidas value proposition. AddiClub will mark the next step of this journey. We'll introduce new program mechanism to unlock even higher consumer lifestyle value as members will be able to redeem points for exclusive jobs and special events in the future, another industry first. Summing all of this up, we have four strong growth drivers in place to continue growing both our top and bottom line at a double-digit growth amid heightened uncertainty in 2022. And let's now turn to the financial outlook for 2022. Currency-neutral revenues are projected to increase at a rate between 11% and 13%. This growth assumption reflects a risk of up to €250 million or around 1 percentage point of growth in our Russia CIS business due to the war in Ukraine and reflects the suspension of our retail income operations in Russia. Our gross margin, you've heard from Harm, is expected to continue to increase and reach a level between 51.5% and 52%. Our operating margin is expected to increase significantly to a level between 10.5% and 11%. And in addition to the higher gross margin, lower operating expenses and percentage of sales will benefit the company operating margin in 2022. This development will be supported by the non-recurring of approximately 7% of Reebok-related strainer costs, which accounted for more than 220 million in 2021. Driven by the strong top line growth in combination with the marketing improvements, net income from continuing operations is projected to increase to a level between €1.8 billion and €1.9 billion in 2022. Let me provide you with additional detail regarding the quarterly phasing of our top line guidance. While we continue to experience very strong demand in EMEA, North America, and Latin America, these markets will be impacted by the even more pronounced supply shortage in Q1, approximately 600 million in Q1 versus the €400 million we saw in Q4 last year. As of Q2, we do not expect any significant supply shortages to weigh on our business in these markets anymore. So while we expect first quarter revenue to be down mid-single digits, a supply shortage will reduce our growth by more than 10 percentage points, we project a significant acceleration in the second -- in Q2. This growth expectation is backed by an extraordinary strong order book even if adjusted for more aggressive ordering patterns, we have seen from wholesales in light of the current supply shortages. To sum things up, we performed well in a challenging market environment in 2021 and delivered a successful first year of our new strategic cycle. We added almost 3 billion to our top line. We invested almost 10 billion into OPEX and CAPEX to drive brand heat, appropriate loyalties digital D2C. In 2022, we'll build on this momentum and continue to grow our top line by around 2.5 billion and will return up to 3.1 billion to shareholders via dividend payments and share buyback throughout the course of the year. Own the Game is a growth and investment strategy fully executed across the entire company. I look forward to successfully -- to successful 2022 as we will drive continued top and bottom line growth together with our more than 60,000 employees. As I mentioned at the beginning of this presentation, the health and safety of our employees is and always will be our first priority in these unsettling times. Now let's take your questions. Operator: [Operator Instructions]. The first question is from the line of Graham Renwick from Berenberg. Please go ahead. Graham Renwick: Hello, good afternoon. Thanks for taking my two questions. Just firstly on North America. I just wonder what your view is on the general health of the U.S. consumer so far this year and also looking ahead across 2022 there have been some concerns on U.S. consumer spending this year, particularly given the tough comparatives due to stimulus last year, sharply rising inflation, etcetera, the U.S. sports retailers have been a bit more cautious on 2022 recently, all guiding to like-for-like sales declines, whereas you have a much more encouraging guidance of mid to high-teens growth. So, I just wanted to understand what's bridging that gap and what is giving you the confidence in the U.S. against that tougher backdrop? And then secondly, just on the supply disruption from the Vietnam closures and the impact of sales. Of the 1 billion net sales impact in Q4 and Q1, should we be thinking that those sales have essentially just remained on order books and are delayed into Q2 and beyond when supply normalizes and wholesale partners restock. So we've had 400 million of sales that has been carried over from 2021 into 2022 and then there'll be a 600 million shortfall in Q1, but that's going to be made up later in the year. Or those of 1 billion sales, are they largely lost sales and adidas could have delivered even higher revenue this year if it wasn't for those Vietnam issues. So just trying to get a better understanding of those dynamics? Thank you. Kasper Rorsted: Hi Graham, this is Kasper. I'll take the first question, and Harm will take the second. So let's start with North America. We see a huge opportunity for market share grab in the U.S. this year and the years to come. In the past two years, we are focused on getting a more balanced position between growth and profitability. And remember back, we had a profitability around 6% in North America, now it's 20%. And this year, clearly, we're going to start accelerating our revenue and capture market share. We do not see a big setback from a consumer standpoint at all. We think that the consumer demand has been outweighing the supply and you've seen the supply chain issues that we've had, and I think that has had a very negative impact, particularly in the Q4 revenue numbers. We're very bullish on that. And if you look upon the portfolio of partners, we have now lined up in the U.S., the latest one being Jerry on the best ball side, of course, Gucci on the fashion side we're quite bullish in North America, and that's why we're guiding the way we are and heading around with the right balance between profit and top line. I think you'll see a strong opportunity for us in North America in 2022. And that's why we're very bullish around it. And then maybe lastly, I think we have a big opportunity with key wholesale partners in the U.S. Right now, we've been the fastest-growing brand with Coles. But as I said in my presentation, whether it's JD or Dick's or Foot Locker, huge opportunity and we'll push that very aggressively. Harm? Harm Ohlmeyer: Yes. And Graham, on your second question, very straightforward answer. You can largely assume that the 1 billion that we lost is really lost it's not shifting into the next quarter or whatever. So everything that we're seeing in Q2 and forward is a fresh order book. This is not a delay from Q4, Q1. It's really a fresh order book with fresh products. So unfortunately, that sales is lost as the factories couldn't compensate it for the future. We are running at full capacity. So it's a fresh order book going forward. Graham Renwick: That’s very clear. Great, thank you very much. Kasper Rorsted: Thanks Graham. Operator: The next question is from the line of Piral Dadhania from RBC Capital Markets. Please go ahead. Piral Dadhania: Hi, good afternoon. Thank you for taking my questions as well. I'll stick to two. The first is just on price increases. You guys have flagged for a number of months that you'll be taking mid- to high single-digit pricing for autumn/winter 2022, which you're confirming again today. I just wanted to understand, it's been many years since we've seen this level of pricing in this industry. What gives you confidence that the volumes will remain where they are, how do you think about the demand elasticity for footwear, in particular, in this industry, in this kind of consumer environment, if you're going to push pricing that high, do you expect to see any volume drop off and sort of what sort of feedback are you getting from your wholesale partners as you present these higher price points to them? And secondly, I just wanted to ask on sort of the guidance -- revenue growth guidance for the year, 11% to 13%. A few questions we've been getting today, it's fairly ambitious and confident in its sort of pitch, if you like, but to what extent does it factor in any slowdown in the macro wall consumer environment, particularly as we progress through 2022? At worst-case scenario -- well, a negative scenario, if things are not perhaps as supportive as they are today, could you still feel confident you can land towards the lower end of that guidance range, just wanted to understand the sort of the flex within that and how confident you are that you'll be able to deliver that in the context of the macro going forward? Thank you. Harm Ohlmeyer: Yes, Piral, let me tackle the first question, then Kasper will answer the second question. So on the price increase, you're absolutely right. I mean it's mid to high single digit in the second half of the year. And we really believe we are confident about it and we really believe that the consumer on the one is ready for it. Inflation is here to stay longer than we probably would have anticipated. So that's why we believe the consumer is ready for that. We have a clear strategy of premiumization, as you saw with our collaboration with Gucci and other partners, that we have that opportunity. And quite honestly, we have a lot of experience with that one, whether it's in Argentina or Turkey or what we're doing in Russia right now with the flexible pricing that we execute there. So we are definitely confident that this will not lead to volume reductions. This is a true price increase that will compensate the product cost increase that we have and the freight increase that we are seeing. Kasper Rorsted: When it comes to guidance, of course, we have taken this very, very serious. Starting off we still think it's a hugely attractive industry. And if you take 2021 into account where a lot of regions and countries have actively impacted and slowed down the growth, we managed to grow 23% and 7% of the market. So very strong growth. We think that the underlying demand for our products remain high. Number one, we have great innovation coming into the market point. Two, and I do want to remind us that sometimes we need to look upon the assets and liabilities at the same time. I don't think anybody would have said that we could grow 47% in Latin America last year, and we did so. So we think it's an appropriate guidance of this year. And you should also remember that the vast, vast majority of our products are sold in the price range between $50 and $200. It is an affordable luxury that people can get access to. So we -- at this stage, we remain -- we're very confident that this is the appropriate and correct guidance for the year and getting all regions to continue to grow, albeit at a lower level than 2021. In 2021, we grew 16% and we think that this is an appropriate and also guidance within the current context. Piral Dadhania: Okay, thank you very much. Kasper Rorsted: Thanks Piral. Operator: The next question is from the line of Warwick Okines from BNP Paribas. Please go ahead. Warwick Okines: Yeah, good afternoon. Thanks for taking my questions. My first question is on visibility of the order book. How far do you have visibility into H2 and when you talk about the order book, are you also including orders that should have been delivered Q4, Q1, but have not yet arrived? And my second question is on China. Could perhaps you give a bit more detail about your consumer campaigns and what sort of customer reaction are you seeing and what are the green lights you'd need to see before you start to use influencers again? Thank you. Kasper Rorsted: Let me start with China, and then I'll hand over. The influencers have moved from entertainment to sport, and that's what we're doing. So we're continuing to change the portfolio of influencers from entertainment to sport because that is where the direction is. Of course, when we look upon the reaction over the campaigns, it's number of use, it's reactions that we're looking at we grew, as you know, 3% last year. So it was not an environment that we didn't grow. And we did increase the number of sports partners by 30% compared to the 12 months ago, and we continue to invest very heavily into the market. We think that the opportunity remained unchanged high, and we also believe that over time, you will have a more normalized market environment. But I do want to remind everybody, we're actually growing the market and will continue to grow. I think getting back to a double-digit growth is a long-term ambition for us, which we've stated in our strategy. But we're getting a stability in and making certain we continue to grow in the second, third and fourth quarter after a negative first quarter, which I said, I think is the important part of we're quite confident that's going to happen. And we think also the market sentiment will, over time, probably be more changed moderately. It might take longer than we thought, but we think that will happen because the demand for Western products in all other categories, and sport right now remains extremely high, whether it's automotive, electronics, or luxury goods. Harm Ohlmeyer: So what we have done to the order book visibility, of course, we have solid visibility into Q4. There are some assumptions on -- in Q2. There's some assumptions on reorder business in Q2 as well. And we have partly visibility into Q3 especially when it comes to back-to-school in North America. That's why I believe the visibility is pretty good. Do not expect there's a lot of phasing happening from Q4 into Q1 and that there are delayed orders. Most of these orders have been phased into the right quarter, so that's part of it. And we have also cleansed the order book to what we believe is a reasonable order book because we all talked about that retailers might order too much but we definitely looked at every account and what should be the right order book. And based on the cleansing effect we're still very confident on the order book that we are seeing. And then, of course, when you go into Q3, a lot of customers have not seen what we're doing with -- what we're doing with sportswear, what the impact of Gucci will be. So there's a lot of fresh product coming that many retailers haven't seen yet. So that is also an additional opportunity in the second half that we're looking into. So it's not just the order book and wholesale, it's all the momentum that we want to drive in our D2C business that comes on top of it. Warwick Okines: Great, thank you. Operator: Next question is from the line of Jurgen Kolb from Kepler Cheuvreux. Please go ahead. Jurgen Kolb: Yes, thank you very much. First of all, thanks guys for such a precise guidance, given the challenging environment and it has even gotten more difficult compared with 2020 as it feels at least. So thanks for that. First question on China, you mentioned that now 30% of the products are done and designed by the local team, where do you think that can go, how far of this autonomy of this specific market can you give to the team around Adrian going forward? And secondly, all the new products you're launching with Lorenzo, with Gucci, hype drops, but also the new co-operations and collaborations, how much sales contribution will that or might that actually have in 2022? Thank you. Kasper Rorsted: So on the China side, I think the important part is we need to find the right balance between being a global brand and of course, a superstar remains a superstar or [indiscernible] and the same with in DS1. You might have Chinese iterations of it, but it is important that we really get the strength of being a global company come to fruition. I very often say, if you work for BMW, you sell the 3, the 5, and 7 series across the world. So that will remain, I would say, the majority of it. But we will still have -- and right now, we have around 30% and whether that slightly increase is to be seen. But we need to make certain that particularly in markets where you might have cultural differences, that we have the relevant markets, not only in the product but in the storytelling. So what you can envision is global products, you might have a more relevant local product storytelling. And we're not trying to put a, I would say, lid on and say you can't do more than the 30%. I think the important part is that we leverage our global franchises because a lot of the marketing is global. When a Kanye or when a Jerry does something in LA, it does resonate in Shanghai. And we to make certain we have that on our side because if we only try to do Chinese products in China, then we become 100% competitive to the local Chinese, and we don't have the global scale, the global benefit that we have as our company. So we think probably staying in the balance we have right now, whether it's 30% or 35% does make a difference is the right one. The important part is we win with the consumer in product and storytelling. Harm Ohlmeyer: Yes. Jurgen to your question on Jerry and Gucci and all the other collabs that we have, of course, we want to build them for the long term. And this is not just one season. They will be meaningful in the second half, but this is not like Kanye we have today or half of our growth or whatsoever. But it will contribute to the growth in the second half and more importantly, this will pay into the brand, especially when you look at Gucci or Jerry Lorenzo, these are definitely things that will generate brand heat for us, not just now, but also in the second half. And then, of course, you want to scale that into 2023, they want to grow again significantly as part of our Own the Game strategy. And again, on Jerry Lorenzo, we will not disrupt the basketball business in the first season, right. But it's -- we want to leave a dent in the second half of the year and then build on this one, and that is really the strategy. So it will be meaningful, but it's not defining our growth pattern in the second half. Jurgen Kolb: Very good, thank you. And all the best. Operator: The next question is from the line Geoff Lowery from Redburn. Please go ahead. Geoff Lowery: Yeah, hi team. Just one question really, please, and it's a slightly bigger picture one. Sitting here a year ago, your EBIT margin expectations for 2021 were probably quite similar, give or take a bit to what you delivered. And yet at that time, logically, you wouldn't have had the China situation in your plan, you wouldn't have had Vietnam closures, you wouldn't have the degree of air freight and distribution costs. And yet, you still delivered at a margin level very similar to where we probably were. I guess my question is, has that required you pulling forward the self-help that you had identified for outer years in the U.S. and Europe. And so now you're more sensitive to market developments or sales developments from here or is it that you have found more in the business by way of sort of long-term opportunity that you've been able to access, but there are still significant opportunities ahead? Kasper Rorsted: No, we didn't pull anything forward, if you were to say that way. I think what we're doing is we're running a more, I would say, disciplined business model. You can look upon the increase in the margin that we found as we made more progress in the U.S. than we anticipated from a margin standpoint. So I wouldn't say that we feel very confident with the progress we are making, and we need to get the company back to the level it was in 2019, where the margin was 11.3% with a very high marketing spend. So we think we have a scalable business model. We think that the more we drive top line in, the more expansions we will get. But at the same time, there's always room for improvements in every single element of our P&L. And that's, I think, is what you saw last year, that despite certain things that went against us that happened, but I also want to say sometimes things go for you. And we very often look upon all the things that goes against us. Some of the things went also our way, and that's why we are capable of capturing or maintaining the margin guidance that we had despite certain headwinds that we haven't seen. So the important part is to get the right balance between the top line and the margin and not saving ourselves to beauty because our strategy is based on growth, and it's clear to everyone within our company and within the senior leadership, the value creation happens through the top line, but through the top line in a way whereby over time, we also will increase the margin, but it's a top line-driven business that we have. Geoff Lowery: Answered, thanks very much. Kasper Rorsted: Thank you. Operator: The next question is from the line of David Roux from Bank of America. Please go ahead. David Roux: Good day gentlemen and thanks for taking my question. My question relates to the gross margin outlook. There's that slide, Slide 29 in the presentation and most notably, the guidance for the sourcing headwind. I just wanted to know whether this estimates on the sourcing headwinds to gross margin assume some sort of normalization of input costs as the year progresses or is it marked against what you see as of today? And then I think just leading on from that, could you also remind me how much forward visibility adidas has in terms of finished goods costs for the year, i.e., how far forward does it order? Thank you. Harm Ohlmeyer: Yes, we're definitely not assuming that freight costs, first and foremost, will ease in 2022. I believe that is something we're going to wait for in 2023 then. And of course, reflecting some of the raw material increases already in 2022, which we also believe, based on the contracts that we have in place with our suppliers are well planned for 2022. So we do not expect significant easing in 2022, neither on the input cost nor on the freight. And then we have some visibility going into 2023. But in 2023, we have visibility, but there's still flexibility in how we calculate and get our FOBs under contract with our suppliers. So the visibility is there, but we haven't finalized all the agreements yet going into 2023. I would assume that freight rates are to some level normalizing. Otherwise, I wouldn't believe in the market dynamics anymore, but from an inflation and cost pressure point of view on the FOBs, it's probably another year where we'll see some increases there. We need to work through and hopefully continue to work on the price increases as well. And if you look at the price increases, what we do in the second half 2022 will of course, benefit the first half of 2023 as well because we haven't done that in spring summer 2023. So that's really how we should look at the gross margin. And it needs to be managed in a volatile environment. There's no question. David Roux: Okay, thank you very much. Kasper Rorsted: Thanks David. Operator: The next question is from the line of Elena Mariani from Morgan Stanley. Please go ahead. Elena Mariani: Hi, good afternoon. Thanks for taking my questions. I have two as well. The first one is on your gross margin development. So it was very useful to have all the buckets that you have provided. But there are two that I haven't seen in the gross margin progression into 2022. So I just wanted to ask you about these factors. So the first one is about a potential return of some broad base discounting activities. I mean 2021 has been a very special year and many of your peers, but even tons of retailers have seen peak reordering happening and they've talked about the likelihood of a more promotional environment. So how do you think about this and could this be another negative for your gross margin? And also as part of this question also, can you comment about the geographical mix and the effect that we might see? And the second question is a more generic one on the guidance, so back in -- top line guidance, back in Q3 2021, you had given a sort of preliminary outlook talking about 8% to 10% growth for 2022. Now if you exclude Russia and I think about what you were supposed to guide before conflict emerged it's about a 12% to 14% growth. So what explains the delta between the preliminary outlook of 8% to 10% and the new 12% to 14%. Is it about the product innovation, your confidence on that, is it about you having more visibility on the order book, so understanding this would be very helpful? Thank you. Sebastian Steffen: Elena, let me -- this is Sebastian speaking. Let me take the second question here because I want to be very clear that what we did provide in November was not a guidance, and what we actually said is that we expect at least 8% to 10% growth. So already back then, we were expecting growth that will be higher than the 8% to 10%. We just didn't quantify what it exactly is. And yes, we -- with more -- 4 more -- 5 more months under the belt, we're clearly even more confident in our top line development in 2022. But it's not like our assumption would have been 8% to 10% in November, and it would have immediately changed to 12% to 14% in March. Just to clarify that, and now I'll hand over to Harm for the gross margin portion. Elena Mariani: Thank you, very clear. Harm Ohlmeyer: Yes, on the gross margin, I mean, very clear that the first half is still short of for in the market. So we are very confident that the first half is a non-promotional environment. We also said that we have cleansed the order book to be reasonable in what we are shipping in based on the sell-through that we are seeing and the inventory that our accounts are carrying. And then, of course, in the second half and the combination of having enough supply again, and raising prices, we are not assuming that the industry is necessarily getting smarter. I said that many times. So there will be enough product, and we now got to stay disciplined on sell-through, staying in a pull model, and not moving in a push model. And it's important that we stick to our strategy as well to have a higher share of D2C, where we have a better grip on the prices and a better control on the pricing mechanism in the market as well. And that is really important. But there will be some markets or some accounts that will potentially not win in the second half or in the fourth quarter towards the holidays, and there might be some promotions going on. So that's something we got to manage and stay disciplined. And again, pushing our D2C strategy is the right thing to do to get the right control over our pricing for the benefit of the long term. Elena Mariani: Thank you. Kasper Rorsted: Thank you Elena. Operator: The next question is from the line of Cedric Lecasble from Stifel. Please go ahead. Cedric Lecasble: Cedric Lecasble from Stifel. Thank you very much for taking my questions. I have two. The first one is a follow-up on China. Could you maybe comment on the underlying trends at market level you are seeing in China? And regarding your guidance, does it imply that you regain some market share versus local competitors in particular or stabilization of market share, how do you see the market going with the macro, which has been pretty weak over the last few quarters? And the second one is on the last problems you might have in terms of disruptions. You are saying Vietnam is easing, everything is going more smoothly except in Russia. How do you see Asia Pacific going on and how do you see the COVID situation evolving, do you expect anything more positive on run? Thank you very much. Kasper Rorsted: So on the China situation or the China market, there's -- the guidance we've given, we believe that, that growth will probably be more or less in line with the Western competitors in the market. We still think that the local Chinese competitors will grow at a higher rate than that. And that's, of course, over time, while we have to make certain that we are perceived more as in China for China relevant brand. So with this, we foresee that the local competitors with, I would say, the market forces right now in China will still favor the local competitors, and they will grow at a higher rate. Of course so compared to those, we will lose market share. But of course, over time, it is our very outspoken and explicit desire to regain market share and the market under more normal market circumstances. But we're first stabilizing and getting back to a more stabilized growth following the 3% growth in 2021 and a bit higher growth in 2022. Harm, regarding the remaining part of Asia? Harm Ohlmeyer: Yes. On Asia Pacific, it's a good point. First and foremost, we are starting with pretty low base, given all the restrictions in 2021. We are still in a restrictive environment in Asia Pacific, but we believe it's easing to some degree in the second half. But we're also not counting that tourists are coming back significantly. And we all know that in key cities in Tokyo and Seoul, it's the majority of the sales in these markets, whether it's in Japan or in Korea. So it's still -- given the relative low base, and some opening up and easing in the second half gives us confidence that also Asia Pacific will contribute to our growth profile in 2022. But again, they are somewhat behind the Western markets, I would say, from an opening point of view and from COVID-19 restrictions, but second half should look much better. Cedric Lecasble: Thank you. Operator: Next question is from the line of Grace Smalley from J.P. Morgan. Please go ahead. Grace Smalley: Hi, thank you. Two questions for me, please, both on China. So firstly, on the guidance for mid-single-digit growth this year, how should we think about the shape of growth and in particular, in the first quarter, should we still expect double-digit revenue declines similar to what we've seen in the back half of last year? And then more broadly, on the competition, do you attribute sort of the market share losses you've seen towards the local brands solely due to kind of the consumer trend and the local price trend or do you think also the local brands have improved their product innovation and product quality and that's a structural improvement in the market? Thank you. Kasper Rorsted: Thank you very much. You've seen the guidance that for the year, we expect double-digit decline in the first quarter, and then we expect the normalized growth coming up over the coming quarters that will get us to the guidance. There's no doubt that we see very strong growth opportunities, particularly with entry into basketball around Jerry. So we feel confident around the position in China and also the store fleet we have, and I've seen recent videos for obvious reasons, I can't be in China. And I see the quality of the store fleet is exceptionally high. I will say in a political correct tone, that the competitive environment in China is different to others, which is favoring local competitors versus Western competitors. And we assume over time that consumer trends will revert to a more normalized environment, like it has done in all other industries in China, whether it's phones or cars or luxury, as I said, or clothing. And I think that will then normalize the competitive environment. But you can also see with the guidance we are giving, we're not anticipating that, that will be the full case throughout the entire year. Grace Smalley: Thank you. Operator: Next question is from the line of James Grzinic from Jefferies International. Please go ahead. James Grzinic: Yes, good evening. Thank you. I have two quick questions. First one, perhaps can you just remind us of what sort of U.S. dollar tailwind you've locked in contractually for gross margins in 2022, what sort of basis points lets you get from that? And secondly, Kasper, I guess, more broadly, when you look at D2C shifts, would you expect perhaps the U.S. to be different in the coming year, feels like Colombia wholesale customers will be in need of more products given what Nike is doing, are you seeing that as an opportunity to step into that or not? That would be very helpful to hear your thoughts on that. Thank you. Kasper Rorsted: Thank you very much. I'll take the second part. There's no doubt that our D2C strategy is a universal one that we will implement. But there's also no doubt that particularly with some very high-quality partners in the U.S. like a Footlocker, DSG or Cole’s or J.D. we do see opportunities to drive growth with those quality partners. So you might see a "abnormal development" in the U.S. in the, I would say, shorter to medium term. It doesn't change the overall direction. I think what you're going to see is you're going to see a consolidation or increased consolidation around the high-quality partners in the U.S., which offers an opportunity for us this year and probably the years to come. But that is not in contradiction to our D2C strategy, but it is an opportunity. Harm? Harm Ohlmeyer: Yes. Just on our hedges, of course, we're not going to disclose the details of our hedging positions but rest assured, that it's better than 2021 that's why after two years of headwind, we finally have tailwind going into 2022. Also assume it's significantly better what the current spot rate is. And then thirdly, of course, that's why we are so confident about our gross margin will improve the gross margin over 2021 and the hedging position, primarily, of course, in Europe -- U.S. dollar to the Euro, will contribute to the gross margin improvement. That's where we are. James Grzinic: Thank you. Harm, can I push you on that point, am I crazy, I'm thinking 100 basis points? Kasper Rorsted: You can clearly try to push us, James, but we're not getting pushed here, but it's also not necessarily overly concerned if you mentioned numbers like that. Harm Ohlmeyer: And again, the point is it's a positive element in 2022, but we're also running a company for a longer time, right. So it's something we've got to manage. We're not going to on these things. And again, there's also a hedging position in 2023 and 2024 again right, but let's enjoy what we have in 2022. James Grzinic: Alright, great. Thank you. Sebastian Steffen: Thanks James. Nairobi, we have time for one final question, please. Operator: And our last question is from the line of Anne-Laure Bismuth from HSBC. Please go ahead. Anne-Laure Bismuth: Yes, hi. Thank you for taking my question. Not sure -- I have 2. The first one is, can you provide us some indication about some to the increase in oil derivatives on your gross margin, which is most likely to impact 2022, but it would be great to have that kind of sensitivity? And my second question is about the impact from the World Cup that is embedded in the top line growth guide for this year. Would it be fair to assume that it would account for 2 percentage points or is it -- yes, if you can provide some details on that? Thank you very much. Sebastian Steffen: Laure, this is Sebastian speaking. So I'll take the second question again. I think we've spoken about the importance of events quite frequently in the past. And that's quite different when it comes to the commercial relevance compared to 10 years ago, where we were a completely different company. So these kind of platforms are clearly important for us to present ourselves as a brand. And there will be quarters where we will introduce the jerseys where it will also have a meaningful impact on our top line development. But the assumption that you were just describing is definitely overemphasizing the importance in commercial terms of what the World Cup could make up for. Harm Ohlmeyer: And if I understood your question correctly, it was the question around oil price increases into our FOBs material cost in 2022. And I mean, the increase that we're seeing are more on other materials, whether it's cotton or some of the sustainability efforts that we're doing to replace some materials with more sustainable materials, that's where the increases are coming from. When it comes to oil prices, that is more something that we look into for 2023, if these would stay were, but definitely for 2022, that is not a not a significant impact for our FOBs. Sebastian Steffen: Alright. Thanks very much. And Laura, thanks very much. Nairobi, thanks very much, Kasper and Harm. And also thanks back to all of you. Ladies and gentlemen, this concludes our full year results conference call. As always, if you have any further questions, I'm sure there's going to be still a few, be it today over the next couple of weeks. Please feel free to reach out to any member of the IR team or myself. Actually, we're looking very much forward to meeting with some of you over the next couple of weeks during our upcoming road shows, be it virtual or be it physical. This is clearly not the only thing that we are excited about and looking forward to, as you've heard from Kasper, our Innovation Day is just around the corner and we are thrilled to welcome many of you. We have already almost 100 people signed up. And we've talked quite a bit today about what is going to drive the growth in 2022. So I can only tell you if you're interested in that question, come to Herzo and experience it yourself. And with that, thanks very much for your participation. Have a good remainder of the day. Stay safe. All the best. Bye-bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

Operator: Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the adidas AG Q3 2021 Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. Presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Sebastian Stephan, Head of Investor Relations. Please go ahead. Sebastian Steffen: Thanks so much, Stuart. Good evening, good afternoon, good morning everyone, wherever you are joining us virtually today and welcome to our Q3 results conference call. Our presenters today are our CEO, Kasper Rorsted and our CFO, Harm Ohlmeyer. We will kick it off in a second with their prepared remarks which will be followed by a Q&A session. As always, I would like to ask you that during the Q&A session, you limit your questions to two in order to allow as many people as possible to ask a question. And now, without any further ado, over to you, Kasper. Kasper Rorsted: Thank you very much. And welcome also, from my side. First, I'll provide you with a high-level view on some recent developments. And our focus areas as towards our recap, our business development in the third quarter. And then Harm will take us through the financials in greater detail. And he will also provide an update on operational -- on the operations situation and how we addressed the current external challenges. And finally, I will discuss the outlook. And despite being confronted with severe challenges on both the supply and demand side, we were on track to deliver a successful first year of our new strategic cycle. We have the right strategy in place to succeed even in challenging market environment, like the one we're currently faced with. On the game, is our growth an investment strategy is ground and sport on his -- the consumer at the heart. With clear strategic direction until 2025, we're an execution mode as 1 team together with more than 60,000 team members globally. Speaking of owning the game, I'm very proud to say our people clearly own the game. Out of 750 companies, Adidas has been ranked among the top 20 companies in Forbes World Best Employer list for 2021 and is 1 of only 4 driven companies included in the ranking. This recognition clearly goes out to our people. It's them who help us create a working environment where everyone can be successful, feel like they belong, and consistently thrive. It is also our people who contributed to forming our new people strategy that we rolled out in August. Our people strategy focuses on leadership, betterment, and performance with diversity, equity, and inclusion right across all 3 dimensions, ensuring inclusion and an equal starting line for everyone. In addition to the commitments we've already made, I'm delighted to share another concrete and measurable goal we put behind DNI. It is to increase the share women in leadership positions to above 40% by 2025. At the end of last year, the number was 34.5 for Adidas. With our people strategy, we'll set the pace even beyond our industry. We're also making great progress in another strategic focus area of our strategy; sustainability. I'm happy to report that leading rating agency, Standard & Poor's just awarded us a strong ESG rating for our outstanding sustainability performance. Adidas was given an ESG profile score of 79 out of 100, one of the highest scores applied across all companies assessed globally. Combined with a strong [Indiscernible] score of 6, the Company's overall score amounts to 85, placing Adidas 6th in the entire S&P rating universe. In its comprehensive assessment, Standard & Poor's emphasized our industry-leading approach to innovation, supply-chain management, and consumer engagement. The results further underlying our leadership approach to manage sustainability across all dimensions of our Company. I'm convinced that the continued integration of sustainability into our strategy will support ongoing future success of Adidas. Now, let me give you a business update and start with consumer highlight. On the NMD, S1 we launched this new key lifestyle product exclusively on our Confirmed app and saw a 100% sell-through, as well as strong [Indiscernible] net sales on -- in the entire NMD franchise. On the 4DFWD, we start ed to scale the 4D franchise with better-than-expected sell-through in [Indiscernible] and in EMEA. Ivy Park Rodeo, which was the last drop, our successful collaboration with Beyonce was a D2C exclusive activation driving high average order values. And when it comes to the Ajax Bob Marley pack, we sold 50,000 jerseys in the first 24 hours and created one of the highest ever consumer engagement for Club Joshi launch on Adidas football. And on form as promised, we've been diversifying the franchise for the additional durations, dedicated marketing, and exciting partnerships, leading to strong sell-out ratios. When it comes to experience, serious mounting Loft Shanghai means we've opened a flagship store with a unique outdoor retail experience. The first of its kind, and more to come. On the Confirmed app, we rolled out our Confirmed app in Canada as latest additions and continue to offer member exclusive access to Hype launches and partner interactions. And when it comes to sustainability, our UltraBOOST Uncaged lap, we've taken the next step towards ending plastic waste using tinsel, a new bio-based material, and we're also now introducing No-Dye and No-Dye footwear collection in golf. Let me speak now about our strategic enablers in more detail. Credibility. Our ground breaking innovations in running continue to deliver what matters most; record wins and podiums. In 2021, the Adidas Lightstrike Pro technology has enabled our athletes to take home more world records, more wins, and more podium positions in the top 50 road races globally than all other athletes combined. including multiple wins at the Marathon Majors in Berlin, London, Boston, and New York. Just last weekend, Peres and Albert won the New York Marathon with Adidas athletes representing 4 out of the 6 runners on the podium. With Sunday's victory, Peres is the only woman in history who has won an Olympic gold and 1 of the world's 6 major marathons and she did it in 3 months. While I'm excited to see 3 stripes reclaiming credibility in the technical running community, we're also making strong progress in driving commercial success in this category. At the top of the peer pyramid, the Eddie share of franchise strives exceptional sell-through rates with the latest iteration of Adidas Cerro Pro2, PrimeX and Boston 10 models. And at the same time, we continue to diversify our running across the board, and results speak for themselves. UltraBOOST is up strong double-digits versus 2019, while 40 is growing triple-digits. When it comes to experience, we've all reiterated that we will become a member first brand, and we're making strong progress in delivering exceptional consumer experiences. Let me provide you with two concrete examples. First, we've introduced the Terex product finder on both our app and.com, a guided 62nd digital journey for finding you the right outdoor here. With the completion rate of north of 80%, the experience creates fewer band and shopping charts and carts, higher conversion rates, low returns, and ultimately happier customer. Second, our latest member week in August provided even more of these exceptional consumer experiences. For the first time ever, we integrated and confirmed that into the sales event, driving 1 million unique sign-ups globally. Overall, 24 countries participated this time, and we overachieved our sales and acquisition targets, adding 3 million new members to our digital ecosystem during that 1 week alone. And when it comes to sustainability, being externally recognized for outstanding sustainability performance is one thing, continuous innovation to stay on top of the game is another. Our partnership with Pond Biomaterials marks the latest step in pushing boundaries to make 9 out of 10 articles sustainable by 2025. Together with Pond, we're striving to substitute fossil-based plastic materials with plant-based raw materials, all without compromising our performance proposition. We also innovating with new business models as we introduce Choose to Give Back in collaboration with ThredUP aimed at helping to extend the life cycle of sportswear apparel and footwear. The program invites consumers to send in used products via Adidas Creators Club, in order to be reused or resold. It's currently being piloted in the U.S. and will be rolled out more widely online and in stores in 2022. As mentioned before, we're committed to sustainability as part of our only game and continue to push boundaries for consumers and for a better future. Turning to strengthen weaknesses for the third quarter. Let me be very clear, we saw a strong top-line momentum in all markets that upgraded without major disruption with double-digit growth across EMEA, North America, and Latin America. Our focus on D2C is also clearly paying off, as we saw a double-digit growth in each of these markets. Unfortunately, we're still confronted with -- by severe challenges on both the demand and supply side in many other parts of the world, posing a significant drag on our top-line development. Sales decreased in Greater China as a challenging market environment, delays some of recovery while COVID-related lockdowns in Asia-Pacific, are weighing on demand in the market. On the supply side, shipping and handling delays have been impacted sales in EMEA and in North America. Well, let me just stop there for a second and just really reiterate the situation. We are seeing a tale of 2 cities. We're seeing, when the world is operating in a somewhat normalized environment, we are growing high single, low double-digits and gaining market share, which is very encouraging in the West, whether it's EMEA, North America or Latin America. But we're also clearly impacted by the East, which is growing negative double-digit, which is why we having the numbers that we have. But the underlying performance in a somewhat normalized market is very satisfying to see. In total, the charity market environment in Greater China, extensive lockdowns in Asia-Pacific, as well as industry-wide supply chain constraint, reduced revenue around -- by around $600 million in the third quarter. Despite these negative external factors, we were able to grow revenue by 3%. Excluding these external factors, our top-line growth would have been in the mid-teens, around 14%. Significant higher food price sales were more than offset by negative currency developments and a higher supply chain costs, bringing our margins to 50.1%. Our operating margin came in at a strong 11.7% despite a double-digit increase in marketing spend and $60 million of stranded costs related to the Reebok divestiture. Harm will come in more detail on the major P&L stool. And again, let me reemphasize. From a regional perspective, we experienced strong profile products, top-line momentum across all markets with largely undistributed demand, i.e., EMEA in North America and Latin America. In North America, we saw an exceptional growth in D2C, 18% year-over-year and 17% versus 90 -- 19. We saw an overall increase driven by double-digit growth in lifestyle and football categories, while outdoor was up, triple-digit. In EMEA, we saw strong growth in D2C, again, 11% up, or 28% up over 19, an overall increased driven by robust growth in running, football, lifestyle, and outdoor also grew at an exceptional rate. And in Greater China, we remain confronted by [Indiscernible] challenges. The geopolitical situation, the resurgence of COVID-19 -related restrictions as well as natural disasters, delayed top-line recovery. And again, Harm will give you more details on this. From a channel perspective, our top-line development was driven by a strong product sell-through in our own retail stores, leading to double-digit increases in EMEA, North America, and Latin America. Our e-Com revenue grew 8% to almost $1 billion in just 1 quarter, driven by double-digit growth in EMEA and North America, while global full-price was up by 15 percentage points. This reflects an increase of 64% compared to the 2019 level, also accounting for the exceptional high-growth in the period -- in the prior-year period. Our focus on membership and mobile offering continues to elevate the consumer experience with more than 220 million members globally by the end of the third quarter, we're almost halfway to reach our target of 500 million members by 2025. Overall, we're progressing in our D2C led business transformation to become the member brand -- first brand, deeper connection with the consumers through personalized, relevant experiences and brand moments that only Adidas can create. From a category perspective, both football and outdoor, that our growth in the performance category. Football grew strong double-digits as key football franchises such as Predator in the launch of major football club jerseys spark excitement for the game. Outdoor continued an exceptional growth trajectory with footwear like growth while sustainable and technical products launches, drive credibility. I will share more exciting news and upcoming product releases across all our strategic growth areas and our innovation outlook. But before I hand over to Harm let me just read a rate, what we said approximately 6 to 9 months ago. We're very optimistic that our performance let growth. Our performance product related to sport, i.e., our licensed product would have a strong pickup as soon as the stadiums were filling up, and we're seeing that across the globe. Whether it's in the U.S. or in Asia, or in Europe, when the stadiums are filling up, the fans are buying licensed gear again, and that is what we're seeing across all our sports in those markets where you can actually enjoy the sport in a stadium. And with this, I'll hand over to Harm. Harm Ohlmeyer: Thank you, Kasper And good morning, good afternoon to everyone on the call. Let's start with the financial update and then I will go a little deeper into the operational update as well to give you some more transparency on what has happened in Q3 and what will happen in the next quarters. But let's start with the overall top-line development in Q3 that was negatively impacted by the challenging environment in Greater China, extensive lockdowns in Asia-Pacific, as well as an industry-wide supply chain constraints, which I will cover in more detail later. When we look at the revenue growth per market segment, we can basically divide our business into 2 parts. On the positive side, net sales growth was driven by strong momentum across all markets operating result major disruptions: EMEA, North America and Latin America. And as Kasper said, if you combine these 3 markets, it would stay for double-digit growth. EMEA and North America both grew 9%, driven by strong double-digit increases in D2C, despite the negative impact from significantly longer lead times due to ongoing global shipping and handling delays. And again, result to shipping delays, both market would have grown in the double-digit territory. Latin America was up 55% driven by exceptional increases across all channels. Furthermore, all of these markets just mentioned recorded operating margin of above 20%. On the negative side, of course, sales in Asia-Pacific declined 8% reflecting the negative impact on demand from the extensive lockdowns in the region. In Greater China, the geopolitical situation, the resurgence of COVID-related lockdowns, as well as natural disasters weighed on our top-line recovery with a revenue decline of 15%. I will provide more details about this as part of my operational update in a few minutes. Let's now turn to the Company P&L. You have heard it, despite severe challenges on both global demand and supply during the quarter, we were able to increase currency-neutral revenues by 3%. As Kasper mentioned before, the changing market environment in Greater China, COVID-related lockdowns, as well as industry-wide supply chain constraints, reduced revenue growth by around 600 million in the third quarter. Our gross margin slightly declined by 20 basis points to 50.1%, due to an unfavorable FX development and higher sourcing logistics cost. I will deep dive into the gross margin puts and takes in just a second. Other operating expenses increased 7% compared to the third quarter 2020, driven by an increase in marketing spend of 25%, reflecting double-digit increases across all markets. Firstly, we're making sure to leverage major sporting events to drive brand heat. In addition, we're supporting the launch of new products with investments into meaningful and emotional consumer experiences, both digitally and physically. Operating overheads were basically flat at a level of EUR1.6 billion, also reflecting the continued benefits from strong operating efficiency improvements that we made last year. Please note that we once again incurred temporary stranded costs in the amount of around EUR60 million related to the Reebok divestiture. Our operating profit came in at a level of EUR672 million, pretty much on the same level as last year if adjusted for the stranded costs. At 11.7% of our operating margin reached a strong double-digit level despite the challenges we have been facing. And again, without the stranded costs, it would've been roughly a percentage point higher. I'm now going to take a closer look at the gross margin development in Q3 '21. As last quarter, I'm also providing 2020 impacts to put things into perspective. I would like to discuss 3 main factors in the composition of our gross margin development. First, in terms of pricing impact, the drag from higher discounting in the prior year, almost fully recovered this year as we were able to increase our share of full-price sales significantly year-over-year and quarter-over-quarter. As you see roughly in the picture, this alone makes 250 basis points. Second, looking at sourcing, we incurred more than EUR50 million additional costs in the quarter to mitigate the multiple supply chain challenges we are currently faced with. In relative terms, these costs posed a headwind of around 1% point to our gross margin in the quarter. And third, in terms of FX impact, Kasper already mentioned that negative FX developments remained a drag on our gross margin. Over the 2-year period, FX regarding the headwind of more than 250 basis points due to our hedging practices, this effect will only turn into tailwind going into 2022. Excluding the unfavorable FX impact, our gross margin is already back at the 2019 level, further supported by a positive channel mix due to higher D2C sales at all markets that operate results major disruptions. Now turning to the balance sheet, inventories were down 23% currency-neutral. This development was, of course, also supported by the exclusion of Reebok inventories, but mainly reflects the factory lockdowns in Vietnam during the quarter. But, of course, we continued our efforts to optimize our inventory as well. On a like-for-like basis, our inventories were still down almost 20%. Looking behind the headline numbers makes it even clearer that we have a supply problem. At the end of Q3, almost 30% of our inventories globally were goods-in-transit, that means they're sitting somewhere in a harbor, sitting on a ship, or sitting on a truck or a train, but not being delivered to a customer or to a consumer. In markets that are particularly impacted by supply chain constraints such as North America or EMEA, goods on hand were even as low as 60%. And these numbers will continue to come down until the end of the year, which explains why we are expecting an even larger impact from the supply shortages in the first quarter of 2022. Just finishing up on the balance sheet, receivables were up 9% currency-neutral year-on-year, mainly driven by higher net sales in EMEA and Latin America. And payables were up 13% currency-neutral year-on-year, mainly reflecting the normalization of payment terms in last year's third quarter. Before I provide you with an operational update on how we are tackling the external challenges on both the supply and demand side, let me quickly summarize the latest status on Reebok. As announced on August 12th, we have signed an agreement to sell the Reebok branch to Authentic Brand Groups, for a total consideration of up to Euro 2.1 billion. The majority of the consideration will be paid in cash at closing of the transaction, which is subject to customary closing conditions and expected to occur in the first quarter 2022. As previously communicated, we intend to share the majority of the cash proceeds to be receive upon closing with our shareholders. This will be on top of the EUR8 billion to EUR9 billion that we intend to share anyway, as part of Own the Game. Kasper will provide you more detail about our shareholder returns later. As a result of the agreement, we recorded a write-up of the previously impaired Reebok trademark in Q3 in an amount of EUR402 million net of tax. This has been recorded within discontinued operations. And now bear with me to turn to a more detailed operational update. As you know, we are currently operating in an environment that is characterized by severe challenges on both sides of the equation. All industries are being impacted and the sporting goods sector is clearly no exception here. I would like to repeat that in total, the challenging market environment in Greater China, extensive COVID-related lockdowns in Asia-Pacific, as well as industry-wide supply chain constraints, reduced our revenue growth by around EUR600 million in Q3. In other words, excluding the negative impact from these issues, our growth would have been in the mid-teens during the quarter, or precisely plus 14%. Given the magnitude of these headwinds, I want to spend some time now on each of those to provide you some context and help you understand what we're doing to take out these challenges. This should also help to give you confidence, that we had planned to carry forward in '22. Let's have this China, which accounted for roughly half of the top-line headwind in Q3. Several factors are having an adverse impact on our business here. As we had told you in August, after hitting a low point in early April, we had recorded a slow but steady business recovery during Q2 with sequentially improving sell-out trends. As a result, own-retail and e-Com revenues had already turned positive in June. And while the recovery from the geopolitical situation might have been somewhat slower and a bit more bumpy than initially expected, we have continued to observe an overall positive trend in this regard throughout the third quarter. At the same time, however, ever since the second half of July, the business was impacted by regional lockdowns due to the resurgence of COVID in China. In addition, flooding in certain parts of the country further reduced overall retail traffic and contributed to the double-digit sales decline in the quarter. And while things have improved somewhat in September and October, the overall situation continues to be volatile. In this very dynamic environment, there are clearly things that are out of our control. Together with our team on the ground, we are making sure that we are laser -focused on the things that we can influence. We have formed a team of senior leaders from both the local market and our global organization, assigned to work full steam on improving our business in China. A detailed action plan has been developed and is already in execution. The key levers we have identified are the following. First, strengthen brand heat. Second, create more commercial impact. Third, improve the range and activation plan. Fourth, optimize our store network. And fifth, take excess product out of the market. All of this is in full implementation as we speak, and we're making progress in many areas. Since the end of September, we have been running a localized campaign of our global brand attitude, Impossible is Nothing, featuring both global and relevant Chinese athletes. Especially for our digital channels in China, we create more of the content on our own in real-time on the ground. Therefore, we have opened our own creative studio for this year and have already produced more than 1,000 stories on products and partners. But we're not only developing locally relevant stories, more and more of the product also comes with a local angle. Our local creation center in Shanghai is up and running and in 2022, the results will become even more visible. Roughly 1/3 of our new products and China will be tailored to the needs of the Chinese consumer. In addition, we are scaling our digital capabilities by accelerating investments into our tech infrastructure, by hiring more than 300 additional digital talents in China. We also expand the marketplace with more than 100 new premium points of sale. In addition to an expansion of our Y-3 and Stella offering the first Terrex flagship store globally, has opened its doors to the public and the heart of our key city, Shanghai, in October. Showcasing our complete outdoor offering from hiking to cross country skiing is the destination for the growing group of outdoor lovers in this country. Given the challenges in the market, sell-through clearly hasn't been where we expected it to be. Against this background, we have been applying a cautious approach to selling, at the same time, we're also repurposing the inventory in China, and are reallocating it into other markets where we are short of supply. We have done this with more than 10 million unit so far, and while it comes with additional cost, it is still a win-win situation globally. let me be very clear. Greater China is one of our strategic growth markets, and we remain confident about the long-term opportunity. Key to this will be to show consumers our appreciation and respect to earn their loyalty and complement our global brand strengths with a strong local angle and understanding. As we speak, we are showcasing the best of Adidas at the China International Import Expo in Shanghai with a focus on sustainability and innovation, and I can tell you, we're experiencing a lot of interest and excitement there. So, there's good reason to remain excited about opportunity in China as outlined in our strategy, but there's clearly also still quite some work ahead of us. Turning to Asia-Pacific, where COVID unfortunately continues to have a very significant impact on people's live, The situation in the region has continued to deteriorate throughout the year with more and more countries introducing increasingly drastic restrictions over the past 6 months, including government mandated store closures. While at the end of Q2, still more than 80% of our stores were open, we had more than 50% of our shops being either completely closed or operating at a significantly reduced capacity for the most of the third quarter. As a result, traffic across our stores in the region was down more than 30% during the quarter. In addition, the continued lack of travel and tourism within and into the region has been impacting the business, particularly in key cities like Tokyo, Seoul, Hong Kong, or Singapore. With the vaccination campaigns also slowly progressing in this part of the world, we have seen things improving somewhat lately. Nevertheless, the recovery will take its time. Thirdly, in addition to the challenging demand environment in Asia-Pacific and China, there are also several aspects impacting the supply side. Firstly, we have been experiencing significant delays in Asia due to the shortages of both vessels and containers. Right now, around 1/3 of our shipments are leaving Asia with significant delays, in many cases by more than two weeks. In addition, we continue to see significant delays at the destinations in the U.S. and Europe as a result of productivity reductions at the ports compounded by challenges in inland connections due to railway congestion and labor shortages. As a result, our end-to-end lead times are many cases currently roughly twice as high than normal, reflecting a delay of more than a month. As mentioned before, these challenges have not only impacted our ability to ship and deliver our products on time, it has also led to significant increase in logistics cost. Given the higher freight rates, our accelerate use of airfreight and additional expenses related to our mitigation efforts in Vietnam, which I will come to in a second, freight costs in 2021 will be almost 200 million euro higher than initially planned. That's an increase of more than 70% and it's clearly leaving its mark on our gross margin. As you know, since July, we have been experiencing an additional challenge within our sourcing network due to the surge in COVID infections in Vietnam. Due to government mandated large-scale factory lockdowns, the vast majority of our supplier capacity in the country has been unavailable since the middle of July. When we last spoke in August, we were expecting the situation in the country to start improving during the second half of the month, leading to a largely operational sourcing network by the end of Q3. This scenario would have translated into loss of production capacity of 8 to 10 weeks. Unfortunately, the situation in the country required restrictions to remain in place for longer, leading to more extensive shutdowns compared to our initial plans. We only saw first factories starting to open at the end of September with the ramp up of capacity also progressing at a relatively low pace. Nevertheless, thanks to the strong collaboration between the local authorities, our suppliers and ourselves, things have improved significantly over the past couple of weeks. We were able to make great progress in the vaccination of the workforce with almost 2/3 of workers having received their second shot by now. All of our footwear and apparel factories are operational as of today, with overall capacity at nearly 70% as we speak, and expected to reach 85% by the end of November. And now, anticipating to approach full capacity by year-end, compared to our initial assumptions, this reflects a loss of an additional 8 to 10 weeks of production capacity. As a result, we have lost capacity of around 100 billion units in total during the second half of 2021. In order to limit the impact from the significant disruption to our sourcing operations, we have intensified our mitigation efforts along five key action items. We have secured additional production capacity in more than 30 million pieces in other countries, mainly in China and Indonesia. This clearly shows that sites matters in our industry, that we can rely on our excellent relationship with all suppliers, which in many cases, we have been building over decades. Together as all supply partners, we are proactively prioritizing product supply for our strategic growth categories in the upcoming spring, summer '22 s season. We will use airfreight for products around key campaigns and launches as they are essential to continue driving brand momentum. This will however be largely restricted to high-priced products. And using airfreight for more medium- and low-priced products doesn't make economic sense given skyrocketing airfreight rates. We are redeploying existing market inventory and creating new sales packages, utilizing existing stock. It's all about selling what we have in the markets. And last but not least, we are reducing the depth and the breadth of our discounting activities during the upcoming commercial moments. At the same time, we will increase our prices by an average mid-single digit rate in 2022. While these measures will help us to significantly reduce the overall impact, we are still expecting the supply shortages to weigh on our top line over the next 2 quarters. In our expected [Indiscernible] of around EUR400 million in Q4 and EUR600 million in Q1 2022, but no significant impact beyond the first quarter in '22. Now, talking about '22, we clearly continue to operate in a very dynamic environment with quite some uncertainties around the issues that have been leading the mark on our business this year. But they're all -- but they have all one thing in common; all of the challenges are transitory in nature. None of them changes our optimism about our long-term growth opportunities. We are a market leader in a highly attractive industry that rewards scale. By focusing on executing our long-term Own the Game strategy, while tackling the short-term challenges in a decisive manner, we're convinced that we will be able to leverage these promising market fundamentals and drive strong top and bottom-line improvements in the years to come. And we will start in 2022. Taking into count all the puts and takes, we are convinced that the recovery from some of this year's headwinds will provide support for our business next year. We will grow in China and we expect fewer lockdowns around the world. In addition, our accelerating brand momentum and the strong product lineup, will help us to gain market share across the globe and in all of our key markets. Summing all of this up, we are confident that we will grow at least in line with our long-term ambition of between 8% to 10% top-line growth next year. But first, we need to bring 2021 home and Kasper will now explain how we will do this. Kasper Rorsted: Thank you very much, Harm. Before we turn to our financial outlook, let me stress that we remain focused in driving brand heat by launching new product innovations, excluding expiring campaigns and celebrating major events. As crowds return to major sport events, whether the Champions League, the NFL, the NHL, or marathons, we bring brand and product stores to life through our athletes and teams. And through our global brand campaign, Impossible is Nothing, we will ensure that brand awareness and visibility also cuts through to all the everyday athletes and consumers. You've heard me before, and I remain very confident about our brand and product momentum going into 2022. Before I give you the latest detail in our innovation, let me briefly walk you through some exciting product drops in key categories [Indiscernible]. running a dedicated boost stay with new durations of our most successful UltraBOOST models will drive continuous strong growth of our assets Blanc Franchise. In football, we just launched our first ever 100% vacant football boot, the Predator Freak, matching elite performance standards with our sustainability leadership ambition. This product is a result of unique collaboration between Stella McCartney and Paul Pogba. And talking about sustainability, we continue to push boundaries with the introduction of Prime Adopt Apparel collection in October, combining high-quality insulation materials and recycled highly ocean plastic. Yeezy continues to drive brand heat and with new drops such as the Boost 350 Oat or Beluga Reflective mainly available in our Confirmed app in North America [Indiscernible]. Originals is celebrating the 30th birthday of the [Indiscernible] equipment franchise by reissuing fan-favorite models with both classics and never seen before styles. Across the entire brand we continue to drive credibility through partnerships and stay tuned for our latest drop in collaboration with Prada as we expand our reach into the lifestyle segment. Last, but not least, we're making great progress on our women premium offering, introducing the Stella McCartney Earth Explorer collection. Innovation is in our DNA and we can't wait to provide you with an exclusive and comprehensive preview of all that is yet to come on our upcoming Innovation Day on December 13 and 14. The focus is set on 2022 product highlights across our strategic growth categories: running, football, outdoor, training, originals, and sportswear, underlined by inspiring pain moments and [Indiscernible]. Presenters will include members of the executive board, the GMs of all strategic growth categories alongside designers, as well as the Senior Vice President for Global Marketing was going to share with you how we'll further elevate the brand and bring the products to life. The focus of the day will be product, no numbers. Do not expect a trading or financial update. There will be none. By now, you should have received an official invite with registration details, and we're very much looking forward to welcoming you here at our unique world of sports. Let me remind you that this will be a physical event only to enable the best possible experience for all of you, for all our guest, and to ensure the confidentiality of what we're going to show you. Be prepared for an exciting product newness, and blockbuster brand moments right at the heart of the three stripes. And let me now turn to our financial outlook. We are confirming our top and bottom-line outlook for 2021, despite several external factors, continuing to weigh on industry-wide demand and supply. As a matter of fact, you've just heard Harm that several key assumptions on our business developing Q3 that we provided you back in August 5th did not turn out to be true. We're experiencing more pronounced supply shortages in Q4 than initially expected. Due to the longer factory lockdowns in Vietnam, the impact will be 400 million in 2021 instead of 250 million. In addition, demand in Greater China continues to be impacted by challenging market environment. And while we still expect revenues to increase by a rate of up to 20% in 2021, we expect a more or less flattish Q4, which would result in revenue growth for the year to come in at the lower end of the range. As a consequence, we also expect both operating margin and net income to reach the lower end of the previous communicated range of between 9.5% and 10%, between EUR1.4 billion and EUR1.5 billion. At the same time due to the significantly higher sourcing and logistics costs, as well as a less favorable market mix, the gross margin is now expected to increase to a level between 50.5 to 51.0 in 2021. Being able to confirm our outlook despite severe external challenges clearly underlines our confidence in underlying product momentum and brand heat in markets that are operating without major disruption. 2021 definitely turned out to be a different year than what we had originally hoped for in January. The pandemic is still impacting many lives around the world and continues to severely disrupt the function of the global economy. Against this background, we once again acted quickly and adjusted our game plan. And while some uncertainties remain around the last 2 months, there's no doubt that 2021 will be a successful year for everyone. Revenue was up more than $3 billion or 24% in the first 9 months, back above the pre -crisis level. And this is despite the headwinds that we've been facing since the beginning of the year, which has been weighing on our topline with more than $1 billion so far. Our operating margin also recovered to strong double-digit and Net Income is more than $1 billion above last year's level. Both in spite a significant higher supply chain costs and around a $180 million of stranded costs related to the Reebok divestiture. We are becoming a much more cash generated business and our shareholders are benefiting from this. By the end of the year, we will have returned $1.6 billion to shareholders through a combination of dividends and share buybacks. Since October 18th, we've already bought back shares worth more than $170 million within the second tranche of our latest share buyback program. This is part of our plan to share between 8 and 10 -- $8 billion and $9 billion with our shareholders through dividends and buybacks during the 5-year cycle of Own the Game. On top, as you've heard from Harm, we intend to share the majority of the cash proceeds from Reebok sale with our shareholders effort after the closing of the transaction, which is planned for the first quarter of 2022. To sum it up, we're not only performing well in a challenging environment in Q3, we're clearly well on track to deliver a successful first year of our new strategic cycle. And let me remind you, we've just confirmed our elevated full-year top-line outlook despite now expecting more than 1.5 billion of top-line headwinds in which -- in total which had not been reflected in our original guidance back in January or in March. We're also navigating through the worldwide supply chain constraints and look forward to 2022, a year where we'll grow at least in line with our long-term growth ambition of 8% to 10% driven by our top line momentum, our product pipeline, and the recovery from some of this year's headwinds. And with this, I'd like to thank you for listening in and Harm will now -- Harm and I will now look forward to take your questions. Thank you very much. Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions]. We're using speaker equipment today, please lift the handset before making your selections. [Operator Instructions]. One moment, for the first question, please. First question is from the line of Graham Renwick from Berenberg. Please go ahead. Graham Renwick : Hi. Good afternoon, everyone. Thanks for taking my 2 questions. And just firstly on China, and on the last call, you said China sales in June were already back to 2019 levels. If we were to exclude the impact of the lockdowns in Q3, do you think you would have seen a continued progressive improvement in China, for matching level or maybe put another way. How are you performing in regions of China the one on the lockdown, did you continue to see a sales recovery back above 2019 levels trying to get a sense of the underlying trend there? And second, on fiscal '22 guidance, to very healthy [Indiscernible] with a bridge for revenue growth, thanks for that. I was just wondering how we should be thinking about the puts and takes to margin next year. It looks like there's several margin tailwinds building for you with higher DTC FX turning to tailwinds. You got the recovery in China and some of those Reebok costs are also going to roll-off. And you did mention that you'd be raising prices as well, which should help mitigate some of that cost inflation. So, alongside the 8% to 10% revenue growth, would it be reasonable for us to think that Adidas can return to, say 2019 margin levels in '22? Thank you. Kasper Rorsted : What we're seeing in China is we're seeing a light deceleration. So basically, in the regions that -- where we don't have -- that we are seeing a fairly healthy situation and we are seeing a, I would say, lightning of the political tension or the BCI situation in China. And on the '22 guidance, Harm Ohlmeyer : Yeah, Graham, of course you're interested in what our guidance is in '22, and I would relate to 2019. It's too early to give you a guidance, we will do that in March. But rest assured everything that we're seeing right now, including the price increases that we plan for next year and what we're seeing in how we want to expand our D2C business, again, the gross margin will definitely be up to our 2021 levels. And of course, we'll see growth that we're planning next year where we say it's at least the 8% to 10% growth that we have an average now on the game plan, we clearly want to leverage that to the bottom -line. Whether that is exactly comparable to '19 already, again, this is what we'll see in March. But very clearly, you can leave today with confidence that the gross margin will be better than '21 and the operating margin will be expanded over '21. Graham Renwick : Great. Thank you. Operator: Next question is from the line of Warwick Okines, from Exane BNP Paribas. Please go ahead. Warwick Okines : Yes. Thanks very much for taking my questions. So, in my two are --especially how much would you say that the external conditions have delayed you putting units in front of the customer or if at all? I mean, you talked before about quadrupling forum and just to -- I am just wondering whether you feel like the improvements to your product roster and brand hits are being a bit disrupted or whether all of the supply constraints have really been in more mid-priced products? And then secondly, I've got a question on inventory. I think you said that about 30% of your inventory is goods-in-transit, which doesn't seem like a particularly unusual number. I think it was 28% in 2019 or so, perhaps I missed that. But maybe you could explain, because presumably, transit is unusually high at the moment. Thank you. Kasper Rorsted : I'll take the first question and Harm more take the second. If you look upon [Indiscernible] that crudely, the overall impact on what we're seeing in Asia has been more volume-based and newness-based. We have not seen a disruption to the creation of new products, and if you take the forum as social, while we are seeing a slight delay, like we're seeing a slight delay of introduction of the NMDH1, but the newness is not really -- the innovation is not being impacted, it is more the speed of introduction. And that's why we're quite confident that we'll continue -- we'll look upon the current ramp up of forum. We feel very comfortable where we are, of course, we'd like to have more products into the market. But I think that the more important part is that we have created the product innovation, and is coming through the pipeline. And you will see that in the fourth quarter, I assume you're going to be here next month. And you're going to see it in the first and the second quarter, where of course, you're going to have a different ramp, so it's more delay and it's more volume-related than it's newness related. But of course, if you don't have the volume then you might have the newness, but you don't get the revenue. Harm Ohlmeyer : Warwick, on the inventory situation, you're absolutely right, our goods-in-transit is normally between 25% and 28%. But you've got to look at the 30%, first, it's not the same in every market, and in some markets it's more like 40%, especially when it comes to North America and EMEA. And then secondly, this is 30% without having production in Vietnam which would have led to more goods-in-transit as well being on trips or whatever. That's why the 30% is end of Q3, and this number will increase significantly in the fourth quarter, and that's where the supply challenges come in. Again, we're not worried about the gift under the Christmas tree. There will still be different choices, but we got to buy early on this, so don't wait for December. Warwick Okines : Okay. Thanks very much. Operator: Next question is from the line of Elaina Mariani from Morgan Stanley, please go ahead. Elaina Mariani : Good afternoon Kasper and Harm. Thanks for a very comprehensive presentation. I actually have one broader question. If we take average performance of your largest global peers. They were able to grow sales up double-digit versus 2019, both year-to-date and in Q3, despite facing the exact same supply chain challenges, COVID restrictions in Asia, and also, I challenging market environment in China. So, what is holding you back in European? What explained this gap considering the fact that you have restarted investing in marketing and have really pushed the button further on product innovation. Kasper Rorsted : Thank you for asking an easy question. I think if we were to -- instead of trying to go through the nitty -gritty details I think there's a couple of things, so let me try to outline those. One is that we have relative a higher share in Asia than most of our competitors, which means it has a higher impact. Of course, you'll see that we have a half footwear share also, which is where it's coming from, and we were more impacted, particularly in the beginning of the year, through the close-down of sports because we're more dependent on selling of licensed products. If we're to look upon those, these will be probably the 3 buckets that we have. If you look upon the western world, we actually have a lesser -- a disconnect to our peers at this stage in the western world than we have in Asia. Of course, we're working very hard and diligent on bringing new products into the market and investing heavy in marketing to make certain that we get back and have similar growth rates to that of our competitors. Elaina Mariani : Thank you. Operator: Next question is from the line of Zuzanna Pusz from UBS. Please go ahead. Zuzanna Pusz : Good afternoon and thank you for taking my question. So, my first question is on China. When we look at your performance in China on a 2-year stock, you've been -- basically seen only a small deceleration sequentially, especially if we compare to some of your peers. So now given that the majority of the business I think in China is still wholesale driven, given the franchise model. Would you be able to comment if you've actually seen a similar level of deceleration if we look at the sell-out, or maybe there was some unusual activity related to orders and things like that? Just to get an idea of whether this was actually the underlying trend in the market, which would have suggested that actually you didn't see such a big deceleration as perhaps, maybe some other companies have seen in the market. And the second question is, I guess maybe more specific in Q4 outlook. You've provided some very useful information in the presentation, but given that your outlook calls for an increase of up to 20%, I guess the lower end of that could be read in a different way. And I guess if I just take them roughly 14% underlying growth, you suggest you -- so in Q3, if we excluded the headwinds and if I applied it to Q4 and remove the headwind which you provided us with related to Vietnam, that would probably get me to roughly mid-single-digit growth on FX-neutral basis in Q4. I'm just wondering if you would be able to comment on that. I understand there's a lot of uncertainty, but just to get an idea of what kind of growth rate, given the current visibility you would expect in Q4. Thank you very much. Harm Ohlmeyer : Yeah, thanks, Zuzanna. First on Q4. Of course, Q4 is not just Vietnam, there are other factors as well, and that's what we're clearly saying -- we're talking more about a flattish Q4. And then we can do the calculation, so the lower end of -- up to 20% would mean then 17% to 18% if you look at the flattish Q4. But again, this is not just Vietnam related, it's a continuation of what we're seeing in China right now as well. On the other question on the 2-year [Indiscernible] in China, you're absolutely right with the deceleration trend. There's nothing special in the franchise channel. That's a trend in the overall market that we're seeing, it's not specific to the franchise channel or to other channels. It’s the overall trend that we're seeing. Zuzanna Pusz : Thank you. And just to clarify, follow-up on China. Given that there was quite a lot of intra -quarter volatility, would you say that there was a similar exit rate from China in Q3 or that there wasn't any further deceleration? Just to get an area of also what we should think of Q4 in China. Harm Ohlmeyer : It's steadily improving, but slowly improving. That's similar. I don't want to compare Q3 with Q2 exit or whatever, it's too volatile as a market. But that's really what we're seeing. It's a steady improving trend. But again, not to the satisfaction that we would have liked to see or that we had planned originally. Zuzanna Pusz : Perfect. Thank you. That's great to hear. Operator: Next question is from the line of Jurgen Kolb with Kepler Cheuvreux. Please go ahead. Jurgen Kolb : Yeah. Thank you very much. 2 questions from my side. On page 26, you detailed your actual plan for China. I was wondering how much of those plans are just plans or initiatives that are here in the short-term, will be changed, or will they extend it? You said you have more than 100 marketplace expansion with new Terrex and Y-3 point-of-sales. Is that a new program that you planning to open more of these specific Terex and Y-3 and Stella stores in China. And then secondly, it also seems as if you're experiencing a lower promotional environment. I was wondering if you could comment on how you see the current environment on a market-by-market basis and how long do you think these lower promotional environment will ask from your observations? Thank you. Kasper Rorsted : So, let me take the first one what we are asking is when we put in place of course, the set of actions now and this is a dynamic way of looking at VA1. So, we're not going to say when we do these and we over, what you can see it from -- as an example Saman from a store standpoint, by introducing a 100 new Terex stores and by 3 stores instill points, we are entering into higher price points. And that is, of course a key power strategy. Terrex goes back to outdoor while [Indiscernible] goes back to women and goes back to high-end leisure. What you'll continue to see is pending where they are an expanse in what we're doing, but of course also a continued, I would say, review of what are the appropriate measures to make sure that we turn China around in sustainable way. We're giving you an insight to what we are doing, but I think that the Chinese market is such a fast-evolving market that will continue to have a game plan on what to do, but here are some of the measures that we believe are the right ones now, and we've spoken about that also in previous meetings with you, what we're doing. It's an evolution and it, of course, will scale up if we believe that it makes sense to scale up. I will give it over to Harm. Harm Ohlmeyer : Yeah, Jurgen, the promotional environment you've got to differentiate the East from the West. And of course, there's a promotional environment in China as our plans or other brands plans didn't come to fruition, so there's clearly -- there's too much inventory in the market. That's why we also mentioned that we already moved 10 million units, which is significant for the market to other markets that are in the demand. Yes, China, I would say it's too promotional given the inventory they have in the market it's different than in [Indiscernible] again. But on the flip side you see Latin America has the lowest inventory ever, and you see it in the operating profit as well in Latin America, it’s the highest ever. The same in North America, again north of 20%. And that gives us confidence also in the future profitability of the Company now being consistently in North America above 20%, and it's the healthiest environment that we have seen for many, many years. The same in EMEA as well. So, it's really a 2-story of the East and the West. Very healthy environment in the West. And yes, we got to work through some of the geopolitical challenges in China, but also that we will work through it. Kasper Rorsted : Jurgen, let me just reiterate what Harm said North America. About 3 years ago, we had an operating margin North America of 6%. Right now, if you could criticize as anything in North America, is that our full-price sales was going up in every single channel across the U.S. and that's why you're seeing that. You can almost say that the margin is hindering our top-line. We are getting the right balance and that's why the important part was we have a, "More equal distribution of revenue and margin by country. " But definitely, you're seeing a very, very strong improvement in the U.S. from mid-single digits to now a margin of 20% at the highest sales through that we -- the highest full-price sales that we've had for many, many years. Jurgen Kolb : Understood. Thank you very much, guys. All the best. Kasper Rorsted : Thanks. Harm Ohlmeyer : Thanks, Jurgen. Operator: The next question is from the line of Cedric Lecasble from Stifel. Please go ahead. Cedric Lecasble : Yes. Thank you for taking my questions. I have 2 also. The first one is on China. Just to know what you can do or not do in terms of conducting marketing operations, organizing events using ambassadors. You had some constraints over the past months because of what happened in March. Where do you stand today? And are you on par with what local competitors can do? That's question number 1. And the second one on your forecast of easing problems from Q2 are at least not material hits on your top-line in Q2. How do you see the U.S. situation, the bottlenecks, the ports congestion, also delays in the U.S., going into next year -- into '22? Do you think -- from Q2, do you see any easing of these issues or do you still have some negative assumptions for this in your forecast in '22? Thank you very much. Kasper Rorsted : So, Cedric, let me try to answer the China question in the most appropriate way. As you know, that most Western brands were -- didn't lost their brand versus in -- at the end of the first quarter, bidding on the second quarter, we are seeing a somewhat normalization, but abide at a very slow rate. So, the recent event -- a trade event in Shanghai that took place last week and branch, at New Hampshire picture of it. We had a very well-known, valuable female sports star on the podium. So, we are seeing a normalization, but at a very slow rate and there is no doubt that right now there is a difference in the use of athletes and entertainers, if it were local versus non-local companies. And that of course, is our thing, having a negative impact in our capabilities to drive traffic to our websites and to our stores. We are seeing slightly recovery, but there is a substantial difference between local and non-local companies in China. I think that would be the most appropriate way of answering that question. Harm Ohlmeyer : [Indiscernible] I hope I got your question right on the port in the U.S. Clearly, we still have a lot of challenges in the inbound, in the port, but also on the railway, and shortage of labor. And we believe this is not going away by the end of the year so, all intelligence that we have, especially in the U.S. where it's more pronounced than in Europe, it will definitely take until the summer of '22 where we have impact. And in Europe even, it's just longer lead times to get into Europe and we just need to plan for a different lead and produce the product earlier to have longer lead time. But rest assured that whatever you see in the port, this is a smaller issues than what we're dealing with in Vietnam right now. And whatever the port situation will be next year, it's already baked into our -- I wouldn't call it a guidance, but the direction that we're going with 8% to 10% top-line growth, at least next year, that's factored in there already. It's not good, but we will learn to deal with it. Cedric Lecasble : Clear. Thank you, gentlemen. Kasper Rorsted : You're welcome. Operator: Next question is from the line of Thomas Chauvet from Citi. Please go ahead. Thomas Chauvet : Good afternoon. My first question on pricing, I understand you're not going to provide detailed numbers behind your coming pricing increases. But how much do you think will come from pure pricing to offset input cost inflation, and how much from mix you're elevating the brand towards more premium lifestyle offering, collaboration, limited edition products? Secondly, on your sourcing strategy, I was wondering whether the disruption caused by COVID over the past year, [Indiscernible] of course and so what happened in some markets like Vietnam in the last few months may change the way you think about geographic origin of sourcing in the future. If we look at the split of sourcing by countries and the various product categories, would it make sense economically, industrial, to rebalance part of the footwear and apparel sourcing from Southeast Asia to Vietnam, Cambodia and Indonesia, and China, to South Asia and Western Asia, for instance, Pakistan or Turkey, where you have significant production for accessories and gear, but rarely for foot ware and apparel. And so, I was just wondering. And then just a follow-up on the goods-in - transic -- in transit, sorry. So, you said 30% over the inventories at the end of the quarter was intended more delays expected in the fourth quarter, Have these unusual delivery terms changed the way you recognize revenue with your wholesale partner? Is there any accounting impact in Q3 and Q4 to be aware of or it's just irrelevant because these are intra Company flows? Thank you. Kasper Rorsted : So, I will take the part of our manufacturing strategy to which extent are we revisiting that. We actually have acquired diversified portfolio if you look upon from a footwear standpoint. We're spread into 3 countries where the fourth, delivering a bit on the apparel. It is a less consolidated industry and thereby, frankly, you can't even do it in this country, so that's why we've spread out more. Footwear is a dedicated competence that is not so easy to find, and that's why it would make very little sense to try to diversify even more because you also have to go back and say, where is the original origin of the materials? You might be able to spread the factories in theory, but if the vast majority of the materials come from less countries, then you're going to have the same impacts. I think while it's interesting to look upon, I think we also need to understand that right now what we've experienced in the last 18 months have been situations that has never occurred before, and we have to assume that vaccination will bring the world back to somewhat of a normal position. If not, we'll continue ever a completed disrupted world moving forward that will have profound negative impact across all economies and all industries. So actually, we believe that with the diversification we've done, in the last couple of years, we have actually mitigated a lot of it. And moving footwear out of the three main countries, is going to be an extremely difficult test and will not be short of the test when it comes to the diversification of the origin of the materials. I'll then hand over to Harm. Harm Ohlmeyer : Yeah, Thomas, first on the price increases. First and foremost, it will be more significant on pretty much the same product where we increased the prices. You can call it an inflation as well, but that's what we're going to do. And you will see a more pronounced increase in the fall, winter '22 season versus spring, summer '22 season because a lot products have been sold in already, so there will be some on a speed creation timeline that will be impacted by higher prices if you have D2C exclusives, where we take advantage of that. But some of the products, or many of the product we have sold in for spring, summer '22 already, so it will be more pronounced to the second half when it comes to the main -- same product pricing. At the same time, with the new brand architecture that we're rolling out next year with Performance Sports Band, and also Originals to definitely take advantage of preimmunizing. Originals, it's much more than today, not just for Core Labs, but also for the product itself, and that's where we go, further in the lifestyle segment and there is a premium pricing that will be throughout the year with new products coming in. Secondly, you asked about the goods in transit. Has nothing to do from an accounting point of view, so we will account for the inventories and the goods in transit. And the balance sheet has nothing to -- from a revenue recognition point of view, the only impact on revenues is if a product is on a ship or in a harbor, and it's being stuck there, it’s not available to ship to an account or sell to an end-consumer. That's why we have the impact through the lateness, but from an accounting point of view, there's absolutely no impact. Thomas Chauvet : Thank you. Operator: Next question is from the line of Omar Saad from Evercore ISI. Please go ahead. Omar Saad : Thanks for taking my questions. Good afternoon. My first one is on your comments around the supply chain issues. I think in the market people are pretty concerned that that's going to drag well into '22. Sounds like you guys are pretty confident that it's not going to persist beyond the first quarter. Maybe you could talk about some of the factors giving you confidence that things should realign by that timeframe. And then also, another follow-up on China. Sorry. I know you mentioned that you saw some deceleration and in non - COVID regions, but it'd be helpful to know how much of the China slowdown or shortfall, if you will, is related to COVID, COVID restrictions, travel restrictions versus other, whether it's competitive issues, geopolitical issues, consumer sentiment, real estate concerns, stuff like that? Thanks. Kasper Rorsted : Omar, when we look upon the factory opening, we look at how many factories are open? Which is factual. How many people are being vaccinated within the factory? How many has first vaccination? How many have second vaccination? And how many workers are back? And that is the statistical data we're looking upon, and that's the only thing we can do there's nothing else. So, we can be worried and onward, we're taking a very statistical and very effective in approach and saying this is the level workers in the factory. This is a level of output, this level of vaccination. This is a little vaccines they have at hand. And based on that, we're getting their projections. And I think that is the only thing we can do. So, we're not passing any adjustment on -- we're taking and just simply looking upon a short fuel, a pure number standpoint, and then fast-forwarding that. Does that mean that there is a guarantee you're not going to have a Corona infection in Country B? No. You don't know that and we don't know that, but we can only do it with the best capability with the data we have at hand and the data we have at hand we showed very clearly to you in this presentation today. Harm Ohlmeyer : On China, it is really difficult to go through the details of what the impact is, of what, but rest assured the geopolitical attention is easing. And it is just to remain to volatile environment, we see no natural disaster, this COVID outbreaks here and there. And a different restrictions in the one of the other district, but now decomposing a district by district is difficult. But again, it's improving every week and every month and that's why we remain confident going back to a -- in a gross paths and market share gains going into '22. Omar Saad : Thank you. Sebastian Steffen : Stuart, we have time for 2 more questions, please. Operator: Okay. Thank you. The next question is from the line of James Grzinic from Jefferies International. Please go ahead. James Grzinic : Yes. Thank you. Good afternoon, everybody. I just had a quick follow-up actually on China. Kasper, you talked to the BCI tailwinds in your view -- headwinds rather, becoming less of an issue recently. And that's despite you not really being able to talk to the brand like others in the market. Can you perhaps -- what gives you that confidence? What sort of KPIs are you thinking when you get that feeling in terms of that backdrop improving for you and western brands? Kasper Rorsted : I'm looking for [Indiscernible] and traffic. That's what we're looking upon and that's the only way we can judge it. James Grzinic : Okay. Understood. Thank you. Operator: Next question is from the line of Ann Laurie business from HSBC. Please go ahead. Anne-Laure Bismuth : Hi, guys. Thanks for taking my question. I have 2. The first one is on China, so some competitors are thinking about reinvesting around the winter Olympic. So just the right window or do you seem to further reinvest in China? And my second question is about the percentage of sales that. Put price are you where you want to be? Thank you very much. Kasper Rorsted : When it comes to the Olympics and investing into athletes, I spoke about what we're doing, so we will continue to increase our investment into athletes to make sure that we actually support the Chinese governmental plan that we're engaging people in sport. The Olympics is one, but I think what is even more exciting is the growth in investment that we're seeing into outdoor will continue to open new stores and of course, will [Indiscernible] on athletes. The second part, I didn't get if that was a question about full-price sell -through. I simply didn't hear it. Anne-Laure Bismuth : Are you where you want to be on full-price sales? Kasper Rorsted : I think that -- are you speaking about which market because it's a bit like the global weather forecast then. Anne-Laure Bismuth : No, but globally, the percentage of sales at full-price, are you where you want to be? Kasper Rorsted : Sorry, I think if you go back you can say in the West, it's almost too high and the East is too low. You can look upon the margin where we are. The margin is pretty much as a -- on a Company level where we need to be, but we're at very different situations. And if you look upon in the -- in China, of course your inventory surplus, so that you will have a probably less sell-through at full price. And the West, we are going to have shortages in the products and you're going to have quote-on-quote, almost too high of a full-price sales rule. Overall, what we have is we're more or less in line where we need to be, and we're very clear on what we guided on the margin for this year, but we're also very clear on the margin guidance for 2025 is 12% to 14%. We were 11% in '19, so we're confident that we can get that mix, right. Also moving forward, but we got to have somewhat of a stabilized environment. So, we don't have 2 markets that they're operating in very different scenarios where one is growing double-digit and one is declining double-digit. With this, I think I'll hand over to Sebastian will close the session for now Sebastian Steffen : Thanks very much, Kasper, thanks very much Harm and also thanks very much, Stuart. Ladies and gentlemen, this concludes our Q3 results conference call. If you have any further questions and I'm sure there's going to be. If you'll be at today over the next couple of weeks, feel free to reach out to any member of the IR team or myself, obviously, actually Kasper, Harm and I are very much looking forward to meeting many of you during our upcoming roadshow to London, New York, Boston, Frankfurt, over the next couple of weeks. But believe it or not, we cannot wait to get stuck in New York traffic again, this is not the only thing that we're actually looking forward to as you've heard from Kasper, our innovation day is just around the corner and we're very excited to hopefully be able to welcome many of you here at our unique World of Sports in five weeks’ time. And with that, thanks very much for your participation. Have a good remainder of the day, all the best, bye. Operator: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.

Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the adidas AG Q2 2021 Conference Call. Throughout today’s recorded participation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] And I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead. Sebastian Steffen: Good evening, good afternoon, or good morning, wherever you’re joining us virtually today, and welcome to our Q2 2021 Results Conference Call. Our presenters today, our CEO, Kasper Rørsted; and our CFO, Harm Ohlmeyer. As always, we will kick it off in a second for prepared from Kasper and Harm, which will then be followed by the Q&A session. As always during the Q&A session, I would like to ask you to limit your questions to two. I know you can count to three, and even beyond, but please limit your questions to two to allow as many people as possible to ask a question. And now without any further ado, to you, Kasper. Kasper Rorsted: Thank you very much, and welcome to our call. I will first share a high-level view on where we stand and, afterwards, I’ll provide you an update on business progress made in a certain quarter. And subsequent, Harm will take you through our Q2 numbers in further detail. And finally, I’ll discuss the outlook and, while civil challenges persist, our [indiscernible] line is filled with exciting new products and will drive successful first year -- and will drive successful first year of our strategic cycle. We have a very clear strategic direction until 2025, and we are already in execution mode. The strong second quarter results are past and proof of that. Own the Game is a growth investment strategy that’s rooted in sport, and that’s one of the reasons why it was so fantastic to see that sport is finally center stage again, and we really see sport is back on the center stage. I think many of you and all of us have really been longing for this, and we can see also the enormous interest there is for sport, whether it’s the Copa Americas, or the tennis Grange Lane Cup [ph], or the Olympics. And I, personally, had the opportunity to go to a number of Euro games. It was a relief and a joy to be in the stadium again, and also see the excitement coming back. And no matter if football is coming home or coming to Rome, it’s back for everyone who loves this game at that stage, and we can see the sheer excitement that is across the globe. And, of course, we’re using this stage to showcase our brand when it comes to major events, but also smaller events. While our strategy in our brand is rooted in sports to help people to bring them to life, I’m excited that we continue to make a lot of progress in our diversion, equity, and inclusion ideas, and we’re making good progress on hiring targets for our black and [indiscernible] employees in the U.S., and most recently, we had our former Olympic champion, Jackie Joyner-Kersee, who was with us in Herzo this week during our supervisory board. We celebrated pride months internally and externally with our consumers with dedicated adidas Pride collection, and we’re not stopping there. We continue our DNI journey, whether it’s having a DNI activation week in September, or the DNI managers that we have employed in our various countries to make sure we have the right focus. I’m very confident that with the release of our people strategy of Own the Game, which we communicated internally today to our employees globally. We’re making the right progress on our DNI journey beyond 2021. As you know, the consumer is at the heart of the game, and that’s why we like to start the business update with some consumer highlights. The euro, which was a fantastic determinant, and 35% of all employers were wearing our equipment. We had tournament like Donna Romar and the young player in the tournament, a pitcher from Spain, so great to see the progress that we’re making in football. On the outdoor side, we saw Timothy Olsen run the fastest time on the Pacific Crest Trail running 52 marathons in less than 52 days. Huge impact on the media that we’re seeing here. And also, really credibility profile to our Outdoor business. We’re showing training Spain play campaign and the proof offering with strong consumer engagement with more than 40 million views, increasing our credibility with women. And the immerse launch of the jersey, which was a party jersey, drove four times the sales in 2019. On the experience side on the member week, we added more than 4 million members during that week. And our sustainability, we continue to make a lot of progress in innovation, whether it’s collaboration where we created the running shoe with the lowest carbon footprint. The UltraBOOST made to be remade. The Stan Smith, Milo, an industry first with a layer substitute made from mushrooms or run for the ocean where we had more than 5 million people participate. Let me give you a bit more detail on some of these elements. When it comes to credibility, that means we deliver ground-breaking innovation in sport, and in running, winning is the most tangible currency for innovation. We create industry-leading footwear innovations like our new cushion platform, Lightstrike Pro that empower athletes to win and break records. The Adidas Pro enables our athletes to security three world records in a few months and reclaim credibility in the running community. The second generation of the shoe was just launched at the Tokyo Olympics. We now bring these innovations and performance benefits to more runners globally by broadening the franchise with Prime X, Boston 10, Aereo6 [ph] and inhibition. Even beyond the asero [ph] franchise, we continue to make running accessible by diversifying for every runner. More to come when I discuss our product pipeline later on. When it comes to experience, our Members Week in May provided a number of experiences in delivery except [indiscernible]. The week offered different experiences and rewards including opportunities to win. Match ball use in the euro or one of only 100 pairs of the ADS All Brit sneaker. Not only did we acquire four million new members during the week alone, we also generated revenue of more than $100 million during that period. In total, we have significantly more than 200 million members today. Compared to the prior year, the number of buying members who access our digital ecosystem grew by 80%. And if this wasn’t enough, just last week our program had been recognized by U.S. consumers as the best in the industry according to 2021 loyalty program. A lot to report. And when it comes to stores, we just opened our first Halo store in Toberg [ph] with 58 digital touch points and the largest retail area globally dedicated to sustainability. And talking about sustainability, as you know, we gave a strong commitment that 9 out of 10 articles offered will be sustainable at 2025, and we’ll be achieving this type by scaling our three loop offering while also working with strategic partners. And we have now invested the in two of them. Together, we’ll push boundaries in the use of renewable raw materials such as wood fiber. And in partnering with Infinite Fiber, we’re driving the mainstream of circular process to convert one apparel into new fabrics that looks and feels like cotton. And we’ll continue to raise the bar when it comes to sustainability because it’s the right thing to do, and it’s the mind of our consumers. 70% of our consumers claim it is important as a purchase driver. Moving onto the store opening trend. And let me briefly provide you with an update on our current retail economics. As a reminder, 89% of our global store fleet were open at the end of March. 44% were open in Europe. The opening rate increased above 90 during the month of May as COVID-related lockdowns in Europe got lifted. When lockdown materialized in APAC, the positive opening trend was somewhat halted at a high level. At the end of June, 97% of our global store fleet was open. Our efforts to revitalize retail has led to continuous improvement of traffic in the stores that we opened. However, traffic across our retail fleet continues to be significant below pre-pandemic levels due to the reduced opening hours, social distancing guidelines and changed shopping behavior. On the other hand, we continue to experience strong increases in conversion rate and reopen stores as consumers that visit stores turn to a clearer buying incentive. And this is lastly to compensate for the lower. On the strengths and weaknesses side, let me start with the weaknesses side. The external factors like the geopolitical situation, industry-wide supply chain issues and the apex lockdown remains a significant drag on our supply and development. Lower growth in footwear also due to major footwear that’s driving revenues and apparel and hardware. On the positive side is we experienced a better-than-expected top line recovery with sales well above the 2019 level, driven by stronger than expected demand for our products. Our momentum is strong across all markets that are operating without disruption. Revenue in strategic markets like EMEA are 99% up and America is 87% up. So almost doubled, driven by exceptional growth in our retail stores and wholesale. And our business in Latin America was up triple digits. So very strong growth in a number of regions where we have a somewhat normalized economic environment. On the P&L at a glance, revenue we recorded was exceptionally strong and so was the profitability improvements. The revenue increased 55% in the second quarter, achieved against the background of the geopolitical situation and extended lockdown in the Asia-Pacific region. Excluding these external factors, our growth would have been in the mid-60s. Both growth and operating margin almost fully recovered to pre-pandemic levels. Harm will comment more in detail on our major P&L development side. We also seeing the top line acceleration. The brand strength and better than expected product demand grow the top line acceleration in the second quarter. Let me remind you that the revenue increase of 27% in Q1 was achieved despite a high single-digit drag from external factors: the prolonged EU lockdowns and industry-wide supply chain challenges. In Q2, the revenue increased 55%, despite a low double-digit drag from external factors: geopolitical extensions and lockdowns in the Asia-Pacific region. And, as a result, revenue were above the pre-pandemic levels in both quarters and accelerated from 1% versus 2019 in Q1 to 5% in 2019 versus Q2. In fact, our Q2 was the highest in June and we will have double digit in the quarter versus 2019, excluding the headwinds we’ve been facing. This clearly shows the strong underlying demand for our product. The strong momentum is particularly visible in North America and EMEA where revenue almost doubled in the second quarter and were up 15% compared to the second quarter of 2019. In North America, we show exceptionally strong growth, as you can see, with 35% year-over-year and 27% versus 2019. We more than doubled the sales with our key partners. And let me quickly also update you on a very recent leadership change. Our current MD of adidas America, Zion Armstrong, has decided to leave the company at the end of this year to return to his home country New Zealand, where his young children live since the start of the coronavirus pandemic. We have activated our internal succession plans and have appointed Rupert Campbell as his successor, effectively January 1, 2022. Rupert, a British national, has a long and successful track record within adidas. He’s currently our MD in Russia. And under his leadership, adidas increased its market leadership in the region and recorded double-digit sales growth. Rupert will be on the ground in Portland in Q4, and CN and he will work closely on a smooth succession.CN and the team have built a strong foundation for us in North America by making adidas a strong number two in the market. We’re certain that Rupert and the team will further expand this position. In Europe, or EMEA, we’re seeing a similar position in the U.S. We’re seeing exceptionally strong growth in D2C and overall an increase, a triple digit growth, in football and in running. And as I said, we’re seeing triple-digit growth in Latin America. China was down 16%. And before I speak about the situation in more detail, please allow me to remind everyone this development also reflects a strong recovery in last Q2 when sales in Greater China have grown a strong double-digit rates in May and June. Overall, we recorded a slow but steady business recovery during the quarter with sequential improvement sell-out trends, as you can see from the development of our e-commerce revenue. E-commerce sales growth versus 2019 was still positive in March before hitting a low point in April. The trend improved sequentially as we successfully started to launch products and campaigns in the second half of April. As a result, e-comm revenue already returned back to growth in June, overall sales force improving throughout the quarter, resulting in a flattish exit rate versus 2019. At the same time, we remain very disciplined when it comes to sales in, as this is not about short-term optimization. Greater China is one more strategic market, and we remain confident about the long-term opportunity, especially after the state council announced yesterday, they will further promote sport and exercise among its people. Our force is to show consumers appreciation and respect and to earn their loyalty. Teaching this will be complimenting our global brand strength with a strong local angle and understanding. Our local creation center in Shanghai plays a key role here. So the trend in China is clearly positive, and we remain excited about the long-term growth in China as outlined in our strategy. And while it’s too early to tell how the business in China will look in detail in 2021, we continue to expect strong growth in China this year, as well. From a channel perspective, top-line development was characterized by the strong recovery from the material declines and fiscal distribution last year. As you remember, more than 70% of our stores were closed. We saw wholesale business and sales in our own stores grow at high-double-digit rate. At the same time, e-Com was down 14% with exceptionally high growth last year when digital revenues had almost doubled during the store closure. Over a two-year period, e-Com sales, excluding China, increased 86% versus the 2019 level. Looking behind the headline figures, our Digital business is developing extremely well with our mobile and members approach paying off. We’ve been able to add more than 15 million new members to our program during Q2. Mobile and apps already reflect more than two-thirds of our business. The full price share is up strong double digits, and the month of June was the biggest month this year so far. We continue to significantly invest in digital data analytics capabilities and will create almost 2,000 new positions in 2021 and 2022. And this year alone, we have hired close to 1,000 digital experts already. From a category perspective, growth was led by our key performance categories, Running, Outdoor and Football. We achieved growth in Running as we diversified our franchise and technology portfolio with DDC, exclusive launches of new products such as the UltraBOOST made to be remade, all of the adiZero, Adios Pro. Outdoor sales more than doubled as we’re leveraging the trend towards more outdoor activities through a strong product offering and successful activations. And Football grew more than 150% as excitement returns to the pitch in both professional and amateur levels. I will talk about our product pipeline in these and also other carriers a bit later, but now, over to Harm. Harm Ohlmeyer: Thank you, Kasper. And always, we support the revenue growth by market segment. Top line expansion in Q2 was driven by increases in all markets except as we heard from Kasper already, revenues declined despite a steady business recovery and potential stand-out improvements throughout the quarter. Sales of both female and almost doubled versus the prior-year period, and revenues in Latin America grew by more than 200%. This reflects strong double-digit growth for the 2019 level and shows that our momentum is strong across all markets that are operating without disruption. Sales in Asia-Pacific increased 66%, but remain below the 2019 level due to the negative impact from our standard lockdowns and lower rhythm in the region. Let me call out that the top line increased across all markets except Greater China were also complemented by exceptional profitability and margin improvements. I’ll especially call out 19.3% in North America, up a very profitable quarter already in 2020. I’ve always said that North America, over time, will get close to a mature market like Europe. You see that development and similar developments also in Latin America with 18% profitability. Turning also to the P&L; our strong product momentum drove an impressive top-line recovery with sales well above the 2019 level. Currency neutral revenues increased 55%, despite the geopolitical situation and APAC lockdowns reducing top line growth at a low double-digit rate. Our gross margin improved 50 basis points year-over-year. Given there is a lot of puts and takes in this development, I will provide more details on a separate slide in a minute. Our operating expenses were up 5% compared to the second quarter 2020. The increase reflects higher marketing and point-of-sale expenses which increased 17%, or almost 100 million euros compared to the prior year. Kasper mentioned it, the return of sports marked an important moment for people around the world. We are making sure that we are leveraging these moments and have been connecting with our consumers in a meaningful and emotional way through our digital channels but also physical platforms and events. Operating overheads reflect at a level of around €1.5 billion excluding the temporary credit costs in the amount of around €60 million related to the Reebok divestiture. Overhead costs would have been down at a mid-single-digit rate year-over-year. This also reflects the efficiency improvements that we gained last year and that we will continue to benefit from going forward. Our operating profit was up to €543 million while the operating margin almost fully reached this pre-pandemic level and recovered to 10.7%. Let’s now take a closer look at the gross margin development in the second quarter 2021. I’m also providing Q2 2020 impacts to put things into perspective. In terms of pricing impact, the drag from higher discounting in the prior year almost fully recovered this year as we were able to increase our share of full price sales significantly year-over-year and quarter-over-quarter. The positive mix impact in Q2 2020 related to the exceptional growth in e-comm and last year’s recovery in China was fully offset in Q2 2021 amidst a normalization of our channel mix as well as an unfavorable regional mix. Sourcing costs on the other hand increased in the second quarter 2021, a direct result of supply chain challenges we are currently faced with and which have led to higher freight and logistics costs. Kasper will talk about these challenges in more detail in the outlook section. The non-recurrence of last year’s inventory allowance balance out a negative effect experience in the second quarter 2020. Looking at FX, which was slightly positive in the second quarter 2021, as we slowly start to see our hedges improving. Nevertheless, we still experience a very significant negative currency effect of more than 200 basis points relative to 2019 level. So excluding this unfavorable FX impact, our gross margin is already back at the 2019 level, which just like the top line development, clearly speaks to the speed and quality of our recovery. During the second half, we expect currency to remain a drag on our gross margin with both to 2019 and to 2020 level. This is mainly due to unhedged currencies and will only turn into tail wind in 2022. While lower discounting and a better channel mix will support our gross margin development in the second half, higher freight and logistics costs will act as additional headwinds especially as we will work on mitigating the supply chain challenges in order to ensure we can meet as much of the strong demand for our products as possible. Kasper will speak about this in more detail. Let’s also look at our net borrowings or equity position. Let’s have a more detailed look at the balance sheet. Adjusted net borrowings amounted to €3.1 billion at quarter-end. This represents an improvement of €1.8 billion compared to the position one year ago and underlying increased financial strengths we have gained over the past 12 months. Our equity ratio remains very solid at 32.5%. To look at the operating working capital, first, both inventories and operating working capital decreased year-on-year. Inventories were down 22%, currency neutral and this development was of course supported by the exclusion of Reebok inventories as the prior-year restatement of the balance sheet is not permitted under IFRS. Let me emphasize that on the like-for-like basis including Reebok, our inventories were also down at a double-digit rate year-over-year with 14%. We are happy with the progress made over the last 12 months reducing our inventory to this healthy level. If anything, we wish we had more stock given the strong demand for our products on the one hand and industry-wide supply chain challenges on the other hand. Again, Kasper will give you some more details how we are dealing with the situation in a few minutes. But I’m definitely happy for every t-shirt and pair of shoes that we have on stock right now. Demand is definitely not our issue at the moment. It’s supply side of things but we have been making great progress over the past few weeks in mitigating these impacts. Just finishing up on the balance sheet. Receivables were up 26% currently neutral year-over-year reflecting the broadbased top line increases especially on the wholesale side. Payables were down 16%, currency neutral year on year, as our payment terms with vendors continue to normalize compared to prior year. Look at our cash returns to shareholders. Kasper and myself will talk about increasing our investment into our brand, our direct to consumer channel, as well as the digital transformation. We have talked about the €100 million year increase in marketing spend in Q2 alone and the hiring of almost 1,000 digital experts in 2021 so far. All the game is not only of growth, but clearly also an investment strategy. At the same time, we are becoming a more free cash flow generator for business than ever before. As a result, we plan to return between €8 billion to €9 billion to shareholders through either dividends or buybacks during the five-year strategic cycle of on the game. And we hit the road running in 2021. Given our strong financial profile, our positive outlook for the year and, the successful start of our new strategy, we have made the decision to resume our share buyback activities. As a result, the dividend payout of €585 million in May is complimented by share a buyback program with a volume of up to €550 million until the end of the year. Since the beginning of July, we have already bought back shares worth more than €130 million as of today. This means that in total we will return around €1.1 billion through a combination of dividend and share buyback to our shareholders in 2021. And rest assured, this is just the beginning. Just a couple notes on Reebok. Currency neutral sales grew strong, double digits compared to both the 2020 and 2019 level. So 94% over 2020 and 13% over 2019. And the profitability improved significantly. The divestiture process is well on track, and we expect signing until the end of the summer, as I mentioned also on previous calls. We will, of course, make an official announcement once we have come to a final decision. And with that, over to you again, Kasper. Kasper Rorsted: Thank you very much, Harm. I’m going straight into the outlook. Our number one priority remains driving brand head with exciting new products and global campaigns and celebrating major sport events. We’ll also continue to invest in digital capabilities to engage and win members, our most loyal and profitable consumers, as you know. And the next member week will take place later this month. A dedicated action plan will drive the mitigation of industry-wide supply chain challenges as our products remain high in demand. And we are executing on the game as one team and continue to accelerate top line momentum, fueled by innovative product pipeline. Our broad portfolio of product innovations continue to drive brand heat. We fuel brand credibility by executing all arching brand campaigns and showcasing our brand on both major and smaller stages through our athletes and teams. Major sporting events, including the Olympics and the Paralympics in Japan, the start of the club football season in Europe and the NFL kick off in the U.S. as well as grassroots activities around the world, provide ideal platform to bring our brand and product stories to life. Against this backdrop of significant brand awareness, we’ll have an array of product releases that will cut through and continue to drive growth momentum. And now I’ll take you through some of our brand initiatives and product launches in more detail. There is probably no other sport events that affect our brand attitude better than the Olympics. Everyone could feel over the last weeks how important it was for the athletes to be able to compete. And so far, more than 20 adidas athletes have already taken home gold medals. And there are four more days to go. Our top two Olympic teams, Great Britain and Germany, are performing very well, showcasing adidas’ latest performance products to a worldwide audience. And so are all the 650 participating athletes that we equip. But the Olympics are not just a great platform to showcase our brand. They’re also, the perfect stage to introduce our latest innovation to the global stage. British tri-athlete Johnson Brownlee [ph] not only wore the adidas during the triathlon race, but also together with his teammates also accepted their medals wearing our brand new 4D4. And as you can see, the Olympics provide the ideal platform to start scaling our 4D4 franchise. After two very successful limited quantity drops, which sold out quickly, we actually launched -- we’re actually launching the 4D4 today with seven days early access for D2C. Next week we’ll expand the launch to our sport wholesale partners in all our locations around the world. 4D4 will continue to retail at €200 with a strong increase in volume. At the same time, we’ll be making running accessible by diversifying and commercializing our offer for every runner. As part of this, we’ll introduce the 44Pulse at a price point of $160 and open this up to a wider selection of retail partners, including the [indiscernible] of our distribution. As you can see, we’re driving impact in the biggest sporting category, running, through strong franchises and innovative technology platforms that address different consumer needs. In football, or soccer if you will, both professional and amateur teams are excited to return to the pitches around the world. And we’re fueling this excitement with the launch of mater [ph] jerseys, and today we’re launching the Rail Madrid away jersey. I can’t wait to see the stadiums across Europe being filled with spectators again, cheering for their team and being united in the passion for the game. And the passion for the game is uniting fans across continents, and this will be evident during the MLS All-Star game in Los Angeles at the end of this month. In anticipation, we created a jersey that sparked exceptional consumer attention in the U.S. While football apparel increases triple-digit during Q2, we remain equally excited about the opportunity in footwear and key franchises X Cover [ph] and Predator. The latest pack is made up of the franchises with the jewel in the crown being the new X Speedflow, endorsed by Lio Messi, who would bring a new proposition to the important speed segment of the football/footwear market. Speed is also relevant in other key categories, and let’s take a closer look. With the Ultra, we’re taking performance in speed to the outdoors, so cocreated by the best trail runners, and it will debut on the upcoming Ultra-Trail Mont Blanc race. For us, performance does not mean cutting down sustainability. The shoe is made in part with recycled material and no virgin polyester used. One of the most exciting new launches comes from the lifestyle category. We will be reintroducing the NMD, one of adidas most successful and iconic franchises in recent history, with a completely new look and feel. The new NMD S1 [ph] has a broad appeal with iterations for sneakerheads and the broader lifestyle community. And we’ve seen exceptional engagement on social media, who are seeing the product a few weeks ago and look forward to the member exclusive drop in our confirmed deck next week. On top of that, our ZX franchise will be further diversified through the addition of new styles led by the ZX 5K Boost. The ZX 5K will provide this franchise a new, premium identity that elevates the ZX to a new audience and higher price points. This is part of the strategy Originals, which we told you about before. Our form has developed into after the successful incubation throughout the first two quarters, will now quadruple the franchise in size between the second half of the year driven by several dedicated marketing, and exciting partnerships, and as always, we’ll offer members early access to campaigns, product drops, and personalized PFC experience. In lifestyle does not start with footwear, we explained our successful apparel portfolio, combining the DNA of adidas Originals with a luxury fashion lens. Blue version represents a collection of our most iconic apparel pieces recorded for today. And we are expanding our successful collaboration with Beyonce and released latest FLEX PARK. The swimmer capsule includes beach-ready styles, like swimsuits for both men and women, as well as athletic tops and shorts, many of which sold out quickly. We’re also taking preparations with products to the next level and launched La Luna ROSSA 21 in two color waves. These great color waves a version of the sneaker worn by legendary Luna ROSSA Prada in a team as they won the Prada Cup. Hyped releases like that continue to drive brand-heed, and offers, in many cases, member-exclusive VR. We continue to diversify our collaboration and bring newness to well-established franchises, such as UltraBOOST, to stay highly relevant for the consumer. The latest version of our legal collaboration uses the UltraBOOST DNA platform with a brick-inspired texture and is available in several new color waves. And while it’s still early days, we’ve been experiencing very strong sell-through, particularly in North America. As you know, we are looking into having an Innovation Day. And I just covered our Q3 product in stores, but there is much more to come, of course, and we remain very confident about the brand and product momentum. We will host a dedicated day in mid-December to do our high-quality innovation pipeline justice. This will be a purely physical event to provide you an exclusive and comprehensive preview of unreleased future platforms and products. We’re going to share more details with you soon. Our unique world of sport experience awaits you, and we can’t wait to have you here on December 13 and 14. Now let me speak about some of the global supply chain challenges that the world is experiencing. While our product pipeline provides us some strong tailwinds going into the second half, we are also faced with some industry-wide headwinds. There are four aspects of supply chain challenges due to the long-lasting pandemic that the global economy is currently confronted with. The drop in demand in first half of 2020 has led to significant capacity reduction in both vessels and containers and led to a hike in freight rates. In addition, a significant production reduction at the ports due to the health and safety measures have led to congestion in key markets such as U.S. West Coast and UK and Europe, causing additional delays. These challenges have been leading to significant delays and additional logistics costs, particularly as we’ve been making more use of airfreight. Since July, we’re now experiencing an additional challenge within our sourcing network due to a surge in COVID-19 infections in southeast Asia. Most impacted country is Vietnam where the government mandated large-scale factory lockdowns. And as a result, the vast majority of supplier factory capacity in the country has been unavailable since the middle of July, with current restrictions lasting until August 15. While other countries have been impacted as well, we are currently not seeing any major interruption outside Vietnam. While we of course are supporting all measures taken by the authorities, as health and safety remain a top priority, we have identified five key actions to mitigate the impact from the shutdowns in Vietnam. Number one, we are making use of the proven sourcing flexibility and are reallocating production to other regions. Number two, we are making use of our excellent relationship with our suppliers and are securing additional production capacity. So far, we’ve already been able to secure additional capacity for 30 million pieces. Particularly for high-priced products, we will use airfreight. Number three, we are prioritizing key campaigns and product launches as essential to continue driving top line and brand momentum. And number five, and not least, we are redeploying existing marketed inventory, creating new sales packages utilizing existing stock, which will allow us to reduce cancelation rates and discounting. We remain optimistic the disruption will only be temporary, and our mitigation efforts will help us to reduce the overall impact. We expect the current situation to start improving later this month leading to a largely operational sourcing network at the end of the third quarter. And while the current interruptions will have a negative impact on our business in the second half, as we’ll not be able to fully cater to the strong demand for our product, the expected impact is already built in to our full-year guidance. In total, external factors did weigh on our top line in the magnitude of more than €500 million in the first half of the year, and our current guidance already fully accounts for a similar negative impact on our top line in the second half due to the supply chain challenges, the lockdowns in certain countries, as well as the impact from the geopolitical situation. Despite these challenges, we are confident that the strength of our brand, the strong momentum we are experiencing across all markets that are operating without disruption and our innovative product pipeline will drive sales acceleration in the second half of the year. As a result, we now expect currency-neutral sales growth of up to 20% year-over-year for the full year 2021. This increased outlook implies 7% growth year over year, during the second half. Compared to 2019, this translates into a growth of up to 6% in the second half which reflects an acceleration compared to the 3% increase we reported in the first half. Given the acceleration of the top line momentum, we also increasing our bottom line outlook for this year. While the gross margin guidance remains unchanged given the unexpected increase in sourcing costs, we now expect an operating margin increase to 9.5% to 10%. Consequently, we are expecting net income to increase to between €1.4 billion and €1.5 billion. This outlook is based on a number of assumptions. The last year operational store fleet, reflected in our store opening rate at least 95% throughout the second half of the year. And let me remind you, we were running at 97 in the second quarter. Improving factory capacity starting the second half of August leading to a large-scale operational sourcing network at the end of the third quarter, and a continuation of the steady recovery in China. Being able to increase our outlook despite various sources of uncertainty and another potential $500 million drag on sales clearly underlines the [indiscernible] mention they’re currently going. We delivered a successful Q2 despite being restrained by [indiscernible] factors. Driven by the strength of our better-than-expected demand for our products top-line acceleration and will continue to do so in the second half. Sales in our strategic growth areas EMEA and North America almost doubled. Revenue in key franchise categories football given [indiscernible]. The share of increased strongly, fueling exceptional profitability improvement. And this momentum gave us the confidence to increase our full year despite the external challenges that our industry continues to face. On the game is in full execution mode across the entire company and I’m actually convinced that 2021 will be a successful start of a new strategic cycle. And with this, Harm and I now look forward to take any questions you may have. Sebastian Steffen: We’re happy to take questions now. Operator: [Operator Instructions] The first question is from the line of Graham Renwick of Berenberg. Please go ahead. Graham Renwick: Hello. Good afternoon, everyone. Thanks for taking my questions. Just firstly on Exane events and from the quarter, just a clarification from the presentation, really. Is it correct that you said the sales for the whole China business in June were flat versus 2019, and are you also able to provide the same June growth or exit rate for total group sales versus 2019, and how is that developed into July if possible in each, directionally? And then secondly on wholesale, a key part of your strategy or streamlining wholesale distribution and cutting undifferentiated wholesale doors, particularly in the U.S. and Europe. Something I’ve seen as accelerated faster through the pandemic. So when we think about the sales growth in 2021 versus the 2019 phase, has exiting wholesale doors been a headwind at all to your revenue growth, at least a temporary one, before you recapture those sales through D2C or better-quality wholesale partners. Thank you. Kasper Rorsted: I will try to answer the second question, and Harm will do the first one. We did see exceptionally strong growth in wholesale in the second quarter, but you have to take it on the back of what we’re comparing to because, of course, wholesale shut down overnight and we stopped shipping to them. So you have an abnormal comparison. As you know, for 2025, we expect the vast majority of our company growth -- approximately 80%, if I remember correctly -- to come from our D2C channel over that period, so you are going to see a normalization of the growth rate as we move forward. We’re also seeing a continued consolidation within our wholesale partners. So the likes of Dick’s, JDs, et cetera, in course will get an increasingly larger importance within our portfolio also due to the capability. And there is no doubt there has been an acceleration of the, I would say, slow going away from smaller wholesale partners that have either no wholesale capability -- no digital capability or have a very generic character. So we’re seeing acceleration of that, but we’re also seeing a consolidation around the big ones. As I said, you should assume that we -- that the growth rate we saw on wholesale in the second quarter is not the real run rate. It is simply a comparison to what we saw due to the lockdown in the second quarter last year. Harm Ohlmeyer: Yeah. And on your first question, Graham, you’re absolutely rightly stating your assumption on China. So revenues, as you saw in the presentation, we’re already running back to growth, and we also had a kind of flattish exit rate versus 2019 overall in China in June. And when it comes to the total company, as you’ve seen in the presentation, the first quarter was 1% over 2019. The second quarter was 5% over 2019. And growth in the second quarter was the highest in June. And actually, would have been double digit in the quarter versus 2019 excluding the headwinds we are facing. So also, there a good strong exit in June for the quarter. Operator: The next question is from the line of Zuzanna Pusz of UBS. Please go ahead. Zuzanna Pusz: Good afternoon. Thank you for taking my questions. I have two. So the first question would be on your weakest channel. Could you please comment on the performance in the channel on a two-year stack in Q2 versus Q1? Just to estimate that there was some acceleration sequentially. And the second question is on the footwear category. So it looked a little bit weaker relative to the rest of the business at flat, 38%. So would you be able to discuss maybe specifically reasons for that? Obviously, there’s been [indiscernible] maybe jerseys or some shipments around that. But any color on that would be very helpful. Thank you. Kasper Rorsted: Can you repeat the second part of the question? I simply did not understand it. Zuzanna Pusz: The second question is on Footwear. So footwear was flat 38% versus higher growth at the group level. Is there any specific reasons for weakness in Footwear? Kasper Rorsted: No, there’s no specific reason for it. Of course, what we have mentioned on the presentation, given the events, para growth was faster overall given the events and the returning football on the pitch, and that’s what we saw in apparel, and that’s a consequence, of course, in the Footwear is below the average growth of the company. That’s the main reason for it. It’s a mathematical calculation. Harm Ohlmeyer: Also, Zuzanna, keep in mind that a lot of this franchise that Kasper has talked about that we’ve started to introduce in the first half of the year will be scaled in the second half of the year. So we talked about the Adidas AdiZero Pro which we’ve only had in very low quantities in the first half of the year, and we’re adding not only quantities to that product family, but also adding additional franchises to our Running category. The same applies to the 4D which we’ve only launched in very low quantities. And as we’ve said, we’re actually launching in higher quantities today. So that’s definitely also something that is adding to the growth rate that you’ve seen. Zuzanna Pusz: Perfect. Thank you for the question. Kasper Rorsted: Yeah. And on your first question on region, of course it’s difficult. We definitely don’t talk about comps, given so many closures and not easily comparing your quarter-over-quarter or even prior year. But rest assured, in the second quarter we had strong double-digit growth in the key markets like EMEA and also North America, and that gives us confidence going into the second half, as well that consumers are returning, of course, not with the same traffic that we had in the past, but with a higher conversion. But, again, comparison quarter-by-quarter is really difficult. It’s not something we are focusing on. We want to make sure that the product is there, and we are there when the consumers are returning. Operator: The next question is from the line of Piral Dadhania of RBC Capital Markets. Please go ahead. Piral Dadhania: Yeah, hi. Thanks for taking my questions. Two, as well. Firstly, on OpEx. You touched on the cost savings you found through COVID and operating efficiencies. But when I try and look at your OpEx lift between your segmental costs and then your central costs, your central costs are down 17% versus 2019. I just wanted to understand how sustainable that cost structure is going forward. Is that the type of cost base that you can operate with on a run-rate basis into 2022 and beyond? Or should we expect some reasonable cost at the center going forward? And then secondly on CapEx, actually. Your run-rate CapEx for the first half of the year is well below historical trend. There’s obviously good reasons for that caution, given COVID, et cetera. And looking backwards, I appreciate you had some big projects in terms of expanding your HQ and your logistics footprint. But going forward, could you just help us understand what a sensible CapEx number would be? I think in the past, you used to guide to CapEx, but we don’t seem to see that guidance anymore. Thank you. Harm Ohlmeyer: Yeah. Thanks, Piral. First, on the OpEx. Well analyzed, and I’ve been on record for many years as we build a more professionalized procurement function as we’re rolling out our global business services. We’re looking to maintain the cost base as we’re driving the top line and rather be opportunistic on the brand investment. You’re absolutely right that we have reduced in the central function. And we believe that is largely sustainable. Of course, we are a little bit behind on hiring, given the COVID situation, as well. We would have loved to hire even more people. Even so, we hired more people a thousand people on the digital side. But also there, it will make us a more efficient company. So yes, largely, you should keep in mind that we retain that level by going forward, and it does show out in second quarter the discipline that we’ve put into the company to keep growing while we maintain the cost of that level. On the CapEx, it’s indeed -- we wish we would have spent more, but we have to be more cautious especially in APAC, also in some other markets given COVID. And of course, also in today’s environment, it’s not as easy to accelerate some of the retail openings that we had planned. And of course, given historical rates, we are not investing into significant corporate buildings anymore. We have been done with that one. And going forward, it’s still true to think about 3% to 4% over net sales as CapEx, so we had a guidance of around $700 million this year. I doubt we’re going to spend it all this year. But also going forward, there’s nothing we constrain. We want to keep investing into this company. And as we said, on the games, it’s not just the growth but it’s also an investment and a strategy. So 3% to 4% is still the right guidance for the future. Operator: The next question is from the line of James Grzinic of Jefferies International. Please go ahead. Piral Dadhania: Yeah. Good afternoon. I just had a quick one actually. Perhaps if you can nuance your guidance for an acceleration into your stack sales in the second half. When we look at where you’re coming from in the first half in the Q2 specifically, do you think there’s perhaps some macro context that needs to be taken into account when we look into the second half? I’m particularly thinking the U.S. stimulus. Kasper Rorsted: If you look -- we believe that the current guidance for the second half is appropriate because even if there is U.S. stimulus, I think the uncertainty that we are seeing and that you should be seeing is that COVID is by no means over. Supply chain constraints are by no means over. You still have a -- this week, there was 11 million people being tested in Wuhan. So, I think that you’re operating in an environment that, of course, you might have an upside in one region, but I think there’s so much volatility, and I also see a lot of companies that don’t even give guidance. We operate in a super, I would say, volatile environment. So, we think that the current guidance is appropriate under these circumstances simply because of the lack of transparency we have into what’s going to happen in the future. So even if you have stimulus in the U.S., you might have an upside there. But we have seen pretty much almost every month in the last 6 months or 12 months there’s been a downside somewhere else and that is, of course, what’s reflected also in the guidance that we have that we are running in a very volatile environment. Piral Dadhania: Can I perhaps ask a follow up, just my second one, I guess? That physical back-to-school in the U.S. actually happening this year, is that more of a help in Q2 or Q3? How does that fall within the business in terms of selling? I’m wondering. Kasper Rorsted: In both second quarter and third quarter. Operator: The next question is from the line of Warwick Okines of Exane BNP Paribas. Please go ahead. Warwick Okines: Yeah. Good afternoon. Thanks very much for taking my questions. I’ve got two on the supply chain, please. The first is thanks for giving us the sort of roughly 500 million top-line impact in the second half of the year from all the external factors. Could you just give us a rough sense of how much of that comes from the manufacturing lockdowns? Is it a quarter? Is it three quarters? Just some sort of sense on that, please. And then the second question is what sort of products are the most disrupted by the supply chain, particularly the lockdowns in Vietnam? And sort of how confident are you about introducing newness in that environment? Kasper Rorsted: So if you look upon it from the lockdowns, we’re probably 50/50. So you’re getting 50% from the current lockdowns, and it predominantly would be an impact in the fourth quarter more than anything else. And what you’re seeing is it’s predominantly footwear. It will have very little impact in us introducing new products. It will have kind of impact on the volume. But the introduction of new products, those that are coming out at this stage will not be impacted on that, so it’s more of volume than introduction of new. And of course, this is one where we are looking into a “FOB”. We assume that there’s going to be opening in August 15 because that’s what the government is telling us. So, we’re giving you the best estimate that we have but as I said, 50/50 and predominantly footwear related. And of course, what we are doing is, due to our large network, we are, of course, taking fairly precautious measures and saying, if the issue continues, what are some appropriate measures that we should be taking now so it doesn’t have a big impact on next year. But, of course, it depends on how long COVID will exist in one country because if you move things from Country A to Country B, and you have COVID in Country B, then it really helps as much as we can. Operator: The next question is from the line of Erinn Murphy of Piper Jaffray. Please go ahead. Erinn Murphy: Great. Thank you. Good afternoon. Two questions for me, as well. First on Women’s category. It was a very important callout at your Capital Markets Day. Could you just talk about how the Women’s business faired during the second quarter? Any proof points that you’re getting excited about there? And then secondly, on China, could you talk a little bit more about the current consumer demand environment between global brands versus local or national brands? Thank you. Kasper Rorsted: This year it’s been characterized on the Women’s side of introduction of a number of new products, and that’s why we’re still scaling our business on Women’s side. So we’re not getting growth this quarter from the Women’s that, of course, we expect to get, and that is due to product announcement and releases. And you’ll continue to see new product releases coming in, particularly around where we have a big set of launches. We’re still in scaling of it. So that is the reason why we’re not seeing a substantial growth come for Women’s as we speak. That is very much along the product pipeline that we’ve created. So we had some very exciting launches we believe in the second quarter with a lot of consumer excitement. We need to scale those now. And as I said, we have a number of launches coming up in the third and the fourth quarter. The second question was related to China. There’s no doubt that the overall demand in China is still very intact. I think that’s a starting point. You have GDP growth of 6%. You saw that the Chinese political setup announced its renewed focus on sport coming out yesterday. So we continue to see a strong demand for products in China. We believe right now that demand has been skewed towards local brands more than global brands. However, we’re also confident that there will be a rebalancing on that. We have absolutely no reason to believe that should not be the case. But the underlying demand in China is still very strong. Operator: The next question is from the line of Adam Cochrane of Deutsche Banc. Please go ahead. Adam Cochrane: Hi. Good afternoon. I’m wondering a question on something inventory. Is it possible for you to beat the 7% sales growth in the second half given the potential inventory that you’ve got or could get hold of, or is that a maximum number that would be achievable, assuming the conditions that you outlined earlier. Secondly, if inventory is running short, can you just describe how you allocate it between B to C, wholesale, by region. If you can give an idea on that, that would be great. Thanks. Kasper Rorsted: Yeah, first, of course, it’s a good situation to have. You don’t have too much inventory to begin with. But it’s definitely not the inventory that we have and what’s coming in from a product point of view will be sufficient to deliver the 7% as we have guided. But of course, the situation could also improve in Asia, and maybe we ramp up some production faster as the demand is there. So I would not worry about the inventory, which is also leading to the second question. We’ve got to be smart about how we use the inventory. We need to make sure that we use less clearance. What we normally do, of course we have a lot of factory outlets, but, of course, we could do things smarter and saying, it’s not 30% off, it’s 25% off, or 20% off. We can be smarter on some commercial events that are happening in the fourth quarter. And we definitely want to make sure we are prioritizing D to C channels, as well, as we’re supporting our key aligned partners on the wholesale side, as well, during the holiday season. Overall, I’m not worried about inventory, but we need to make sure we take it as an opportunity being smarter how we sell the inventory that we have, and how we prioritize the inventory that is coming in and utilizing that for faster sell-through as inventory comes in that it doesn’t get stuck in the warehouse too long or do direct shipments to key accounts already. Adam Cochrane: And with inventory being short across the industry, is it possible to take pricing at all? Kasper Rorsted: Yeah. Absolutely. That is part of the smart measures where we can, of course, do that easily in our D to C business where we have easily done it with exclusive products. But also, in the interest of our partners, as well, to use it as an opportunity and say, for the one or the other launch, or the key franchise that we have in the market, there’s an opportunity to optimize the prices, either upwards or optimizing the clearance of the markdowns that we have on the products. So that is what I mean with smart inventory management. It’s definitely opportunity on pricing, not just in Q4 but also going into 2022. Operator: The next question is from the line of Cedric Lecasble of Stifel. Please go ahead. Cedric Lecasble: Yes. Thank you for taking my questions. I have two also. The first one, a follow up on the previous one. Do you expect -- with the normalization of the situation at the end of Q3, do you expect potentially a stronger Q4 than Q3? Are you capped in Q3 by the level of inventory and production issues? That’s number one. Number two, if you could give some color on your 4D technology. What is needed to have capacity price points to become mass market in that technology? What’s the profitability of this technology today? And how can we expand it in the future? Thank you very much. Kasper Rorsted: I’ll do the second. First of all, I think the best answer to give you is to get you to come to in December. The 4D technology was introduced about five years ago, four-and-a-half years ago, and we have significantly worked on the manufacturing costs to make them much more competitive. And what you’re seeing is we’re now starting to bring a number of different variations of 4D out. We’re coming from lifestyle into a very good running shoe, the 4D FWD, which was the best running shoe, which is running at €200 price point, and we’re taking it “down” to €160 price point. We’re not going to take this down to a full volume product. We have no intention of taking a 4D shoe down to €100 because we don’t believe that that is where this shoe is really. I think that the much bigger opportunity is the capability we have to create different, what do you call, platforms that we run on. So instead of having one or two, maybe having three, four, or five different 4D platforms that look different. So, one is for running, one is for walking, one is for training. So, you’re going to see probably a proliferation of that moving forward. It’s for us a very, very exciting platform, and that’s what you could see when I spoke through the products. And the 4D FWD, I was using it over the last couple of weeks and tried to run. It’s a fantastic running shoe. A couple years ago, it was a great leisure shoe. It really evolved. So, it’s a proliferation of different uses for this shoe and probably taking it down, as we said, to the €160. We do not want to have a mass market shoe. This shoe, we believe, that actually the production costs but also where the shoe is positioned is at a high-end running/training shoe, not a lower volume shoe. Harm Ohlmeyer: Yeah. And, Cedric, on your first question, firstly, understand that last year we moved the order book -- or part of the order book from Q2 into Q3 and made a strong recovery in Q3 than, I always told, into wholesale. And of course, we’re going to see in this year we have a different comp in Q3 relative to Q4 this year compared to last year. And clearly, you’ll not be kept from the inventory point of view in Q3, so it’s not kept from that point of view. Maybe it has slight impact more in Asia where the lead times are shorter to the production that we have in Vietnam. But again, overall, they’re not kept in Q3 from an inventory point of view other than maybe a little bit in Asia. And then in Q4, we will have easier comps again compared to last year relative to Q3. Operator: The next question is from the line of Thomas Chauvet of Citi. Please go ahead. Thomas Chauvet: Good afternoon. I have two questions, please. The first one on pricing. In the media interview this morning, you mentioned potential price increases for the supply chain pressures. What type of magnitude are you thinking about, which categories, which regions? And do you think you can pass on these price increase with limited price resistance from the consumer in terms of volume impact? And secondly, a question on the adidas product collaboration and a new collection launched a few weeks ago. That collaboration’s been going on for 18 months now. I think collaboration with luxury brands are not new to adidas. But given it seems to be a commercial necessity for many brands, I was wondering what you’ve learned from the product experience. How does it make you think about collaboration opportunities with other strong brands perhaps in other categories and thinkers, particularly I’m thinking about equipment and gear? Thank you. Kasper Rorsted: So, we were the first with open source, and we are looking into how we drive innovation into our products whether it’s on the technology side with Boost, or we just spoke about 4D and of course also with fashion brands. I think that it is not a commercial necessity. It is a brand opportunity, and that is what I think is very important that when we work with a product, we are positioning our products at a different level to potentially a different consumer. And we think that that space is very attractive for us. And also moving our original spaces in up market which we spoke about at our Capital Market Day in March. So the combination of having partnerships with either luxury brands, external partners like a Kanye or a Beyoncé or a Stella where we’re priced at a very different level, or moving it up also. It is where the sporting goods industry is partially also moving. We want to make sure that we take that space and move upwards, and not having somebody else coming upwards and moving downwards, and we think that there’s plenty of room in our brand to do so. So we’re very excited about that. And you will also in the future continue to see an expansion of our space with more collaborations and more products, and also more available products. So going from a pure brand position also to a mixed brand/business position. And the first question was? Harm Ohlmeyer: Pricing. Kasper Rorsted: Oh, pricing. Pricing we’re going to -- it’s not only because of the supply chain shortages. It’s simply that globally right now, pretty much all raw materials are going up in price and you can see that whether it’s oil or rubber or whatever. And we’ll be making use of that opportunity and see what we will do for pricing. It will be a product by-product, region by region. We’ll do it, of course, depending on product position and the price sensitivity of that product. But it’s something that we’re looking very much into due to the overall global increase in raw materials, along with supply chain shortages. Operator: The next question is from the line of Ann Marie Bismuth [ph] of HSBC. Please go ahead. Unidentified Analyst: Yes, hi. Thank you for taking my question. Actually, I have one. It’s about the expenditure. How should we think about H2? Do you plan to accelerate the investments and the expenses in H2? Should we expect a marketing to sales ratio up to the top end of the 12% to 13% range in terms of marketing expenditure for H2? Thank you very much. Harm Ohlmeyer: Yeah. Actually, it’s a good assumption. We will definitely accelerate in the second half, so around 12% to 13%. It’s a good ratio to work with. And rest assured, we keep investing to the brand to make sure that we have a healthy top-line development, not just in the second half, but also going into 2022. Unidentified Analyst: Thank you. In Q3 it was 12% of group sales, so which you closed out to 13% in H2. Sebastian Steffen: Correct. You’re welcome. Ellie, we have time for two more questions. Operator: And the next question is from the line of John Kernan of Cowen. Please go ahead. John Kernan: Excellent. Thanks for taking my question. I wanted to focus on North America. It’s a region which seems like, just based on the segment, reporting you’re giving us far above some of the other regions in terms of its recovery and growth off of the pre-pandemic base in fiscal 2019. Just curious how you’re thinking about North America in the back half of the year and the overall opportunity in North America. You have been running I think above your long-term guidance off of your 2019 base this year, so clearly, some momentum. Just curious what you’ve embedded in your guidance for North America for the remainder of the year? Thank you. Sebastian Steffen: Yes. So we continue to expect strong double-digit growth in North America this year. And as you can see, what we tried to do over the last, or trying, what we’ve done over last five years is built a stronger market share position, while at the same time, consistently increasing the margin of course with the exception of the Corona year because we really wanted to have a more even contribution from the three largest regions in the world when it came to top-line growth and profit contribution. And our expectation is that we’ll continue to grab market share short and long term in the U.S., while also making use of the scale that we’ve now built which we’ve spoken about for many years and continue to have a very solid margin contribution. We’re very excited about our position in North America, and we continue to see great opportunities for growth. And, also, with people coming back to the offices, we think that will actually be a positive. We opened up our Portland facility starting of July with approximately 20% to 25% of our people coming back. That number will increase over time assuming, of course, the right health and safety considerations. But we’re very excited about this opportunity in the U.S. John Kernan: And then maybe -- YEEZY I think has a very large U.S. around North America component. Any update on YEEZY and plans for product launches into the back half of the year? Sebastian Steffen: YEEZY Day, which we just had was a global event -- was exceptionally successful globally and oversubscribed and really shows that the high demand we have on a global basis for YEEZY. We continue to be very excited about an ongoing launch of not only YEEZY products but also collaborations with Beyonce. Jerry Lorenzo, which is on the basketball side. So we have a number of key launches coming. Not only with our partners but, of course, with also our own product launches. So we think we have a very active, very high products coming out in second half, and that’s why we continue to be bullish around our position, not only in the U.S. but globally. Particularly in the U.S. where we’ll continue to build our share base. Operator: Our final question is from the line of Jonathan Komp of Baird. Please go ahead. Jonathan Komp: Yeah. Hi. Thank you. Just one follow up on the second half guidance. When you think about the slight two-year growth acceleration you’re planning, can you maybe just comment a little more directly on which segments you expect to accelerate, and those that you’re baking in more conservative assumptions for relative the second-quarter trend? And then just a broader question on the order book trends you’re seeing. Are you seeing any signs of momentum for some of the new product you mentioned and any early reads as you start to sell in, theoretically, the sportswear product for 2022? When would we expect to see that? Sebastian Steffen: Okay. First, on the second half. Two-year stake versus 2019, it will be, of course, again coming from outer, especially as we move into the winter season. But definitely running will continue with good growth, as well. These are two categories I would mention. Of course, in Q3 we have some returning to football, as well. That was more in Q2, but we’re continuing Q3, as well. Then from a product segment point of view, it will be more balanced from a footwear and apparel point of view. And when you come to the order book, yes, of course, we have visibility for the second half. But we start to have the first visibility into spring/summer 2022, as well, as Kasper just mentioned on North America. We are not just excited about the second half and the strong double-digit growth of the second half. We’re going to get that momentum into 2022, as well. And that’s really important. That’s what we’re working towards and that’s why we keep investing to the brand, as well. When it comes to sportswear, that is definitely too early. This is not an order book built for spring/summer 2022. That is more going into the summertime in 2022, then, as well, when it comes to sportswear. But that is definitely something where we’ll talk more about on the 13 and 14 of December when we talk about our innovation day. Sebastian Steffen: Exactly. So thanks very much, Harm. Thanks very much Kasper. And, Jonathan, I can tell you that while the consumer might need to wait a little bit longer in order to see the first sportswear product, as Harm said, in the summer of next year, I can tell you if you jump a plane and come over in December to Herzo, you’re going to have the privilege of seeing the product here. And believe me, we’re all very excited about that. Sebastian Steffen: So, that actually concludes our Q2 conference call for today. I want to thank all of you for your participation. I want to thank you for your discipline in asking the maximum of two questions. If you have any further questions, and that can easily be three or four, I know, please don’t hesitate to reach out to any member of the IR team or myself over the next couple of weeks. We definitely look forward to being in touch and talking to you soon. With that, thanks very much again. Have a good remainder of the day, and for those of you who didn’t have it yet, have a nice summer break. All the best. Bye-bye. Operator: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.

Operator: Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the adidas AG Q1 2021 Conference Call. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead. Sebastian Steffen: Thanks very much Sofia. Good evening, good afternoon or good morning, wherever you are joining us virtually today and welcome to our first quarter 2021 results conference call. Our presenters in today's call will be our CEO, Kasper Rorsted; and our CFO, Harm Ohlmeyer. We will kick it off in a second with the prepared remarks from Kasper and Harm, which will be followed by the Q&A session. As always, during the Q&A session, I would like to ask you to limit your questions to two to allow as many people as possible to ask a question. And I guess now we can kick it off. Over to you, Kasper. Kasper Rorsted: Thank you very much and welcome everybody. First, I'll start with a high-level view and where we stand, then a look upon our business and the achievements we had in Q1 and Harm will then subsequently take us through the Q1 in further details. And finally, we'll discuss the outlook. And of course, also hear our excitement about the product launches and the sporting events that we have ahead of us. So, let's get started. On the game is a growth strategy and of course executed by the adidas team, we launched this in March and right now, we are in execution mode across the entire company. It has the consumer at the heart and gives us a very clear direction until 2025 and as Sports life our team and three strategic focus areas, the increase in brand credibility, the elevation of the experience for consumers, and the push of the boundaries on sustainability. We have two enablers that will set us up for success, the mindset of innovation across all dimensions of our business and the acceleration of our digital transformation throughout the entire value chain. We're off to a good start and will create significant growth in value towards 2025. There's no doubt that we have what it takes. We believe that the people come first, it's the main force behind our lenders drive for innovation and exciting products. The consumers want to be part of our journey and we are inviting them to create change with us to large scale activations like run for the oceans. And with collaborations, we are sharing a mindset of innovation with partners and collaborators to create never seen before collections and drive brain heat. And of course, we are looking very much forward to the key events that we're seeing in 2021. We're also looking forward to having athletes returned to the stadiums. Trevor Lawrence, the number one NFL draft pick is the latest addition to our team, joining idols like Patrick Mahomes and Aaron Rodgers on our strong American football roster. We want to continue our mission to be the best sports brand in the world. And we're best when we have a credible, inclusive and sustainable leader, proud about the external recognition but committed to pushing further. We're excited that we again were selected for the Time Magazine's list of the 100 Most Influential Companies Globally. And this list highlights businesses that make an extraordinary impact around the world, and included for industry leading sustainability initiatives. We also continue to defend our top spot among the 10 most reputable companies globally in The Global RepTrak 100 ranking. And in addition, we continue to do very well in employer ranking, such as Lincoln's top companies. We strive to be the best and diversity inclusion is at top of our priorities. And together with our strong commitments of our employees globally, we have launched further initiative to drive greater diversity and inclusion at adidas. We've implemented a new DNI learning program on a regional level. We created additional inclusivity training for HR and line managers. We've launched the Edwin Moses Mentoring Program in North America and I'm sure many of you remember the greatness in the '80s when he was the world's best athlete and it's been with our family for many, many years. And we're very excited to have former Olympic athlete Jackie Joyner-Kersee nominated to join our supervisory board at the AGM which will take place next week. And we made good progress on the hiring tax we set ourselves for Black and Latin ex-employees in the U.S. Now let me come to the business update. Consumer is at the heart of our strategy and that's why we'll start with a business update with consumer highlights. When it comes to credibility, the UB 21 or Ultraboost 21 is the next generation of one of our most successful franchises. The member exclusive drop sold out in less than 48 hours. In addition, we continue to build credibility in technical running. With the Adizero Adios Pro, the Adizero family took no less than six world record since September 2020. And as a result, adidas athletes now hold two-thirds of the world records in their major mid- and long-term distances. Promotion. As promised, we're working hard on improving basic items for women, and in Q1 we took an important step with our D2C exclusive launch of our innovative bras and tights. Also, the successful launch execution of the German Football Federation Jersey led to a 5X that remained on e-com compared to the normal jersey launch. And of course, we're very much looking forward to hosting the German team here in Herzo for the upcoming European Championship. We formed a new collaboration with Peloton to authenticate training and we've seen exceptional e-com sell through. And under ZX, we kept the release cases high to further grow the ZX franchise and the ZX Krusty burger high drop was 25 times oversubscribed. And we also saw strong spillover into the apparel range. When it comes to your experience in Dubai, we opened our most digitally connected store, almost 60 consumer facing digital touch points and a focus on sustainability, women and innovation. We confirmed outage destination for launching high products is also now in Europe available, and when it comes to sustainability our Stan Smith program, one of our most iconic franchises becoming sustainable, activated by campaigns with Stan Smith himself and Disney's Kermit resonating extremely well with consumers. Now let's look upon the store. The global store opening rate trending downwards in March. When we last spoke to you in mid-March, approximately 95% or a bit above 95% of our stores were opened globally, 70% in Europe. The opening rate deteriorated to below 90 in the range of March, driven by additional lockdowns in Europe. In Europe, the opening rate even decreased to below 50 at quarter end. The trend has reversed in recent weeks. And more later when I will discuss the outlook. Looking at the overall quarter. On the weaknesses side, we continue to see retail traffic is still significant below prior year even though mostly compensated by higher conversion rates and e-com. The gross margin is not yet back to the pre pandemic level despite healthy inventories due to FX only being a drag and Harm will take you through that in further detail. But there are many good things in the quarter. Our growth strategy on the game is off to a very good staff and execution kick off across the entire company. We've seen better than expected top line recovery with sales above the 2019 level and 27% year over year driven by exceptional growth in D2C was 31%. With an over portion of growth e-com continues with a 41% sales increase on top of 35% growth in the prior year quarter. This means that e-com revenue almost doubled over the two-year period. So, if we look upon the P&L as a glance, we saw excellent revenue growth and a strong profitability improvement. The revenue increased at 27% in Q1, that was achieved against the backdrop of prolonged lockdowns in Europe and industry wide supply chain challenges. Excluding these external factors, our growth would have been in the mid-30s. The operating margin of 13.4 almost fully recovered to the pre pandemic level. Harm will comment again in more detail on the major P&L development. Now let me speak about our growth market. In all our key market markets revenue increased above the pre pandemic levels. Greater China, we saw growth of 156% driven by successful Chinese New Year's collections and I'll speak about the latest development in this market a bit later. North America we grew 8% and the growth was led by double digit increases in D2C, reflecting momentum we have with our products and campaigns. We also saw strong growth with our key wholesale partners, particularly Big Finish Line, JD and Kohl's and look forward to continue driving our business with these accounts. Growth would have been in the strong double digits excluding the impact from the port congestions. In EMEA, we saw growth of 8% the D2C revenue grew by more than 20% driven by exceptional growth in e-com with 65% and strong full price momentum, which helped us compensating the prolonged lockdowns in large part of the region. Excluding the impact from these lockdowns, growth in the EMEA would also have been in the strong double-digits. Now let's move on to the growth channels. E-com continues to drive profitability to see that growth. Our e-com sales were up 43% on top of the 35% growth in the prior quarter, almost doubling over the two-year period, result of a strong sales returns and growth in full price sales. The D2C revenue increased 31% and accounted for more than one-third of total sales. And we added more than 30 million members this quarter alone, our most profitable consumers' traditional ecosystem. We rolled out our membership program in Latin America and they confirm that for exclusive product drops, now also launched in Europe. And from a category standpoint. Our growth was led by footwear and our strategic categories. The global revenue growth was strongest in footwear with 31% and driven by strong double-digit gains in the training, running, outdoor, and lifestyle categories. We saw excellent growth in running as we launched our next generation of Ultraboost, the franchise [Indiscernible]. Our outdoor business up close to 60% with exceptional growth across all markets driven by fastest known time, trail running campaign, and a successful product drops like the ZX Speed Ultra. In training, we saw exceptional growth more than 30% as our women's dedicated innovation in this category went live, we successfully activated the Four Motion apparel line and launched the Watch Us Move campaign. And now I'll hand over to Harm who will take us through the quarter in more detail. Harm, please? Harm Ohlmeyer: All right. Thank you, Kasper and good morning, good afternoon, good evening around the world. First of all, I want to look at our market map again. As you know, we recorded growth in all of our markets in Q1. Kasper already provided you an overview of our three strategic markets Greater China, North America and EMEA. Let me reiterate that both North American and EMEA had grown strong double digits in absence of the external factors we mentioned, reflecting our strong brand momentum. The brand momentum is global, and enabled us to also grow in our two other markets within the surcharging environment. In Latin America, we recorded a top line increase of 18% driven by exceptional D2C growth of 45%. While the pandemic continued to disrupt store operations, sales in Asia Pacific increased 4% with an exceptional growth and e-com around 46% in context of continued restrictions in several countries, and limited travel to destinations that usually depend on tourism. Let me point out that we have not only experienced strong top line improvements, but also saw profitability and margins recover across all markets. North America and Latin America deserve a particular call out as their operating margin levels reached the high teens, a high even by historical standards. Now take a look at the P&L in more detail. The commercial success of our products drove Q1 results ahead of our expectations. Currency neutral revenue increased 27%. Our gross margin was up 210 basis points to a level of 51.8% and is already back at the pre pandemic level before currencies, which I will explain in a minute. Operating expenses were down 5% compared to the first quarter 2020. Our marketing and point of sale expenses declined versus prior year, as physical marketing activities remained restraint in many parts of the world, probably pushed social channels and digital marketing investments to support our D2C storytelling. Operating overheads increased 1%, mainly due to higher logistics costs related to our exceptional ecommerce growth. In addition, as planned and communicated in March, we incurred temporary stranded costs related to the intended divestiture of Reebok in the amount of around €60 million. As a result of strong top line recovery, significant gross margin improvements and the continued cost control, our operating margin at 13.4% returned to a strong double-digit level. Let's now take a closer look at the gross margin development during Q1. First, I would like to recall the drivers in the prior year quarter for your reference. Back in Q1 2020, the negative gross margin development was mainly driven by an unfavorable mix impact due to the over reported sales decline in Greater China, as well as higher sourcing costs related to the purchase order cancellations with our suppliers. In Q1 2021, this development basically reversed. The gross margin increase was supported by lower sourcing costs, as a significant purchase order cancellation did not reoccur. The impact from a more favorable business mix reflecting the exceptional growth in both Greater China and global e-commerce ahead of the 2019 levels was also favorable. These positive effects were partly offset by a less favorable pricing mix. To be clear, we experienced another pricing improvement versus previous quarters. However, it was still a headwind year on year, given that the prior year quarter has not been impacted by COVID related promotions. So, before FX, which was a drag of more than 2 percentage points in Q1, our gross margin was already back at the 2019 level. The negative currency developments then led to the reported margin of 51.8%. For the remainder of the year, we expect our healthy inventories as well as product and brand momentum to support further reductions in promotional activity. In addition, currencies will turn in our favor in the course of the second half of the year. All-in-all, this will lead to a significant gross margin increase to a level of around 52% for the full year 2021. Following the P&L discussion, let's now turn to the balance sheet. Adjusted net borings amounted to €3.3 billion at quarter end, this represents an improvement of €1.5 billion compared to the position one year ago. As you might be aware, we decided to change our definition for net borrowings in context of our first-time investment grade rating obtained during 2020. To be clear, we did not restate any of the underlying items entering the calculation, and the prior year values you can see here are fully comparable. And finally, our equity ratio remains solid at 33.6%. Let's look at all three-working capital. Inventories and operating working capital decreased. The inventories were down 8% currency neutral year on year. This development was of course, supported by the exclusion of Reebok inventories as the prior year restatement of the balance sheet is not permitted under IFRS. I want to emphasize though that inventories were also down year on year on a like-for-like basis, including Reebok. [ph] Other fields I'll speak about the healthy inventory position on a separate slide in a minute. Receivables were down 12% currency neutral year on year, reflecting our continued emphasis on cash collections. Payouts were down 70% currency neutral year on year as our payment terms was [ph] benders continue to normalize, given our comfortable liquidity position. Now let's take a deeper look at inventory development. As you will remember, we had already arrived at a normalized inventory level at the end of 2020. In addition, we made use of our operational flexibility and repurposed event related and evergreen products that were originally meant to be sold in 2020. Instead, we are now selling them through the first half of 2021. As a result, we were able to reduce our inventories further during the first quarter with a healthy composition across markets despite some adverse impacts from the prolonged lockdowns in Europe. As mentioned before, the further decrease was supported by the exclusion of Reebok, but the overall trend looks no different on a like-for-like basis. In short, inventories developed fully in line with our plan. And the healthy inventory position makes us well prepared for the expected significant sales and margin recovery in 2021. Now let's look at the plan Rebook divestiture, before I hand back to Kasper. As you know, we decided to launch a follow up process aimed at divesting Rebook already in February. Even so Rebook is now reported as in discontinued operations, I'm pleased to share that the brand experience and sustainable business recovery in Q1 with net sales up double digits, backed by a strong quarter book going into '21. The overall sales process is well on track, and we are confident about the successful future of the brand and the team behind it. We recorded strong interest during the completed phases of the sale process, will of course, talking about news in this regard, as and when appropriate. With that, back to you Kasper. Kasper Rorsted: Thank you very much Harm, and we're now coming to the outlook. But before I go there, I will speak about our focus and then I'll move to the product pipeline and the financial aspects. Our number one priority remains driving brand momentum after we navigate fast. We also continue to engage with members are those most loyal and profitable consumers. At the same time, we have an action plan in place to mitigate industry wide supply chain challenges, and meet the increased demand for our products. But most importantly, we are preparing for welcoming our consumers back in all parts of the world. With more than 1.2 billion people vaccinated globally and a big part of that in the U.S. and Europe, we're optimistic about a fast return of public life. With return to public life, we will see the return of real sport events. The month ahead will be packed with major sporting events, Club Football Finals, The Euro, The Copa America's, The Grand Slam, and of course the Olympics. Most of those are planning to take place with fans in the stadium. And it's great to have sport back for the fans. We will showcase our brand on all of those major stages through our athletes and teams amplified by overarching grand campaign, Impossible is Nothing. And against this backdrop of significant brand awareness, we'll have an array of innovative product releases, that'll cut through and continue to drive our growth momentum. I will take you through some of these key events and launches in some more detail. We promise to become louder and prouder as a brand communicating with consumers with one voice. In the spirit, we launched our biggest brand campaign ever, Impossible is Nothing. We add our best when we see possibilities and seeing possibilities where other see limits have always been our innovative engine. Together with more than 3000 partners around the world, we drove massive brand awareness with more than 150 million views in the first week of the campaign alone. That campaign will run over the coming weeks and accompanying major sport events and product launches. Our attitude Impossible is Nothing comes to life through our actions. We want to help in plastic waste by uniting people all over the world to take part in raising awareness of marine plastic pollution. Or started just a few years ago with a few 1000 participants we'll be expanding into the most inclusive digital and physical community persons for millions of runners. And we hope that you will mark your calendars and run with us in the month of June. And in football, our home game, we will finally have the Major Federation tournaments, The Euro and The Copa taking place immediately after the Club Football season. We are the official kit manufacturer for 8 out of the 24 teams in the Euro including Spain, Belgium and Germany, as well as for the couple of host countries, Colombia and Argentina. And we're excited to welcoming the German National team on our campus, who will have their home base during the Euro. The preparation is on full swing and of course we'll do the outmost to be the perfect host. And the excitement is also building ahead of the Olympics. It's an excellent platform for us to showcase our performance credentials and innovations with more than 4 billion viewers, 11,000 athletes from more than 200 nations will compete in 33 different sports. We're partnering with many of them and outfitting 14 Olympic teams and 35 Federation's. And just yesterday, we launched the official office for the German and the British Olympic teams. At the Olympics, personally, I look forward or most for to the running events. As you know we are on a winning streak with our Adizero Adidas Pro franchise which makes our fastest runners even faster. So, the three stars will be highly visible at the major sporting events this summer. We're also highly visible in all things sustainability, implementing sustainability innovation at scale by making our most popular products also our most sustainable ones and we just delivered an industry first and launched Made with Nature iterations of Stan Smith using Mylo, a mushroom based material that performs like leather. And after three generations of prototypes, we're also commercializing made to be remade, the Ultraboost made to be remade will be exclusively available for our members. The shoes made to be worn, returned and grind up and then remade into new pair. This is only the beginning we will be introducing made to be remade concepts to more franchises and categories very soon. And besides the record breaking Adizero Adios Pro franchise with its light strike technology, we have another major midsole innovation coming out into running. The 44 is the first performance running shoe that applies our innovative 3D printing technology for measurable performance benefits tested by 1000s of runners. And we've released the franchise just a few days ago with a D2C first focus and will then scale it with aerations for the Olympics, plus additional colorways later in this year. For the consumers running on and off road, our outdoor team innovates for consumers that enjoy spending time in nature. To that end, we introduce the Swift, our three most versatile outdoor footwear franchise. And for products like Swift, we are piloting new sustainable business models, consumers in France can rent our products and return them after the outdoor mentioned. Renting has become a major movement as younger consumers want newness and greatest gear, while at the same time still looking for sustainable ways to shop. First introduced - Form first introduced in 1984 as the most innovative basketball shoe at that time, the Form has become a streetwear icon. It relaunched its tip of our basketball lifestyle push, which will be led by Joel Lorenzo and our team based out of Los Angeles. When it comes to the ZX, we will see a high launch frequency in this area, our newest lifestyle franchise. After having successfully launched the ZX 2K boots, we selected drops last year, we're going wider now and scale the ZX franchise. By doing frequent drops of limited ZX colorways and collaborations, we're striking the right balance between driving awareness and going after the commercial opportunity. While many of our system integrations like the ZX 1K, or ZX 2K, or ZX 8000 are already new favorites for our consumers. We're excited to launch the latest addition to the family, the ZX 5K later this year. We're convinced that this will elevate the entire franchise to the next level. We've also established hype as a proven mechanism to drive brain heat and growth. We drive hype to scale by managing the volume and number of drops we're putting into the marketplace through our digital ecosystem. And let me give you one concrete example. We usually have confirmed that for sneaker heads for head drops of the Bad Bunny Forum, we achieved triple digit over subscription rates for the shoe, and more importantly, gained 1000s of new members through core selling into our digital ecosystem. Other thought after drops, like the ones from the ZX series, or the collaboration with LEGO are being executed according to the same proven recipe. Now let me speak about the store opening trend which we're seeing having an upward trend since Q2 - no since the start of Q2. The prolonged lockdowns and store closers in Europe had a negative impact on the global store opening rates throughout the Q1. But it has improved in recent weeks. Lately, lockdowns have been easing in several countries in the region as vaccination campaigns gain speed, improving our store opening rate in Europe to almost 80% up from 50% by the end of the first quarter. As a result, our global store rate is at 91% as of today, up from 89% at the end of Q1 and we expect they will be approximately 94% by next week. So, we will be able to execute our strong product pipeline until our consumer store is online as well as in physical stores. We have put a dedicated plan in place to mitigate the industry wide supply chain challenges. And while store openings improve and are north of 90% now, we still have to deal with some industry wide challenges on the logistic side for the time being. And there are three aspects to consider. Freight costs have increased. We're seeing capacities are constraints, especially regarding the availability of containers, and Port congestions have led to delays, especially in the U.S. Those are the results of the long-lasting pandemic, and have recently been intensified by the issue in the Suez Canal. We've been able to mitigate a significant amount of additional logistics cost, and all products that were stuck at the canal have been passed or diverted with an average delay of approximately two weeks. However, as a result of this disruption, there is still an overall shortage of container capacity, which could lead to further delays and or higher freight costs in the months to come. Especially if we decide to make exceptional use of freight. After all, we want to ensure availability of the products that consumers desire even if that comes at somewhat higher logistics cost. Let me be very clear, these external factors will have an impact on our business with the SEC magnitude still uncertain. What is certain, though, is that whatever the impact will be, it's already fully reflected in our 2021 outlook. We're also looking forward to working on consumers back in all parts of the world. Consumers want to engage with our brand because we're not only offering great products but also unique experiences. While we always iterated that we put health and safety first, we're excited to physically reconnect to our consumers as vaccination campaigns gain speed around the globe. We're prepared to present the best brand has to offer, the best experience, the best products, the best artist, collaborations, and location-based surprises and exclusive treats for our members. And wherever our stores are opening, and we're able to welcome our consumers back, we can clearly see the desire to consume is strong. We are excited about the consumers returning to our stores and we can see their excitement about our brand firsthand. The brand demand for our products have been stronger than expected across channels, which speaks to the healthy brand momentum. As a result, we are upgrading our full year sales outlook and we now expect to grow at high teens rate. This upgrade comes despite the impact from prolonged lockdowns, the supply chain challenges I just mentioned, as well as the geopolitical situation. In the second quarter, we expect a significant sequential acceleration with global currency neutral sales projected to increase by around 50% year over year. This exceptional growth will get us back to the 2019 levels in the second quarter as well, despite continued headwinds. Turning to China, let me first point out that our first course is to show consumers appreciation and respect. This applies to China and every other market in which we operate. After a significant drop in traffic across physical and digital channels in China at the end of March. We've experienced a slow but steady recovery throughout the past couple of weeks and expect this trend to continue. In the second half of April, we have started to tell our brand stores again on our digital channels. In addition, we have started to revitalize physical retail and participate in events like Five Five Shopping Festival in Shanghai. So, while the trend is positive, it is still too early to tell what Q2 in China will look like in detail. Accordingly, we have built similar scenarios for that. These scenarios are reflected in the Q2 guidance for around 50% global growth and in our upgraded full year top line guidance. And all of these scenarios are also fully reflected in our unchanged bottom-line outlook for the year. Regardless these scenarios, we continue to expect strong growth in China for 2021. And looking further ahead, there's no question that China will remain a fast-growing market and one of our long-term growth drivers. So, in summary, we're confident that 2021 will be a very successful year. We delivered Q1 ahead of plan, despite being restrained by external factors. We're showing exceptional growth in D2C which is reflecting our strong brand and product momentum. And against this backdrop, we upgrade our full '21 outlook this year to be very successful start of our new strategy cycle. We continue to expect strong growth in China in 2021 and an even higher than expected growth for the company as a whole, executing the gain across entire company as one team along with our more than 50,000 employees. Now let me come up with an announcement that we would like to invite you to. We would like to invite you to an Innovation Day in the fourth quarter. As you've heard, we are very confident about our trajectory due to the brand and product momentum we're seeing. Today, we have zoomed in on Q2 product releases in stores. But this is only a fraction of our innovation pipeline. To do the quality of our innovation pipeline justice, we will host a dedicated day on innovation during the fourth quarter. We're optimistic that we'll be able to welcome you on campus to give you an exclusive and comprehensive preview of unreleased platforms and products for 2022, including our new sportswear range. We can't wait to have you here and experience our world of sport. And with this, I'd like to thank you for your patience and attention during our presentation. And Harm and I would be delighted to take and answer your questions. We're now ready to take the questions. Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Graham Renwick from Berenberg. Your question, please. Graham Renwick: Hello, good afternoon. Thanks for taking my question. Just have a couple. Just firstly on China on the consumer boycotts. I was just hoping you could quantify just how much of a negative impact that had been to China from the end of March to-date? And what assumption you have for China imbedded in that Q2 guidance 50% growth. So, we get a sense of the size of the headwind and also how strong you're performing elsewhere? And are you currently seeing any product launches and marketing in the region? And if so, when will that regime? And then just secondly on inventory, you exit Q1 in a very healthy position, which is encouraging but given the disruption in China, alongside the continued lockdown that we're seeing in Europe, I just wondered if you foresee any challenges with inventory build again, and whether you think there's a risk that the promotional environment could, in fact, intensify again in China and Europe? Thank you. Kasper Rorsted: So, I'll take the first question regarding China. And Harm will take the inventory position. So, while the trend is positive, it's still too early to tell what China will look like in detail. And we will not disclose the details any further. Accordingly, we have built similar scenarios for that. These scenarios are reflected in our second quarter guidance for around 50% global growth and in the upgraded full year guidance. And all of these scenarios are also fully reflected in our unchanged bottom-line guidance. Regarding these scenarios, we continue to expect a very strong growth in China for 2021. And that's all the detail we will give - can give you on China at this stage. Harm? Harm Ohlmeyer: Yep, just on the inventories in China, of course, we had a lot of experience in 2020, how we deal with inventory. And the good news in China is that on the one hand, we have skate our effective online base. Secondly, we are in the sourcing regions, so we have more flexibility to optimize the second half, especially Q4 from an order profile point of view. And then of course, we have to manage it, whether we move some of the order to be placed with factories to other markets where we have additional demand. And again, all of this is baked into our guidance from a top line and also from a margin and from a bottom-line point of view. So again, as I told you earlier, Graham, do not worry about the inventory position that we have, we will manage through this one, market by market. Graham Renwick: Okay, that's great. Thank you. Kasper Rorsted: Thanks, Graham. Operator: The next question is from the line of Andreas Riemann, Commerzbank. Your question please. Andreas Riemann: Yes, good afternoon. Two questions. So, one again on China. Maybe a comment on the celebrities, artists, local celebrities are coming back to work with you again? And this would be my first question. And then the second one, on the reopening situation. Do you observe similar behavior of customers across countries whenever the risks reopening, any observations you can share with us would be appreciated? Kasper Rorsted: So, we still have very many services on the contract in China today. And of course, we an intense dialogue with those who have left us. On the reopening, we have somewhat similar patterns. And the overall pattern is that traffic is lower than before and conversion rate is higher. Thus, overall, I would say similar pattern. And as you can see here, the opening is still very different. The U.S. more stores are opening, in Europe, we're slowly opening up. But overall, I would say and this goes almost across all industries. And traffic is down conversion rate is up. And that is also building in the scenarios that we have looking forward that it's going to take a while before we're going to see the same kind of quote unquote congestion or density in the stores, you want to use a nicer word. Andreas Riemann: Maybe in terms of categories, after reopening a particular category that is benefiting or another one that is not benefiting, anything you could call out here? Kasper Rorsted: Of course, everything that's related to sport is benefiting, running teams plus tennis, what's still dragging is football in Europe because the football fields are closed. And what we do expect is that when you start seeing opening up the stadiums, we expect a dramatic increase in the licensing sales. We will see or we are very confident that the entire thing here will explode the moment you start opening stadiums and people in stadiums or around stadiums on public gatherings can start watching football. So, with the increased opening rate, we expect that will be the place and as I'm certainly you follow all stadiums opening up with very few exceptions for the Euro coming up, will open with participation rates between 20% and 100% in the stadium. So, we do expect a strong increase in the license sales. And of course, when you start playing football again, you start buying new boots again. Andreas Riemann: Okay. Thanks. Operator: The next question is from the line of Zuzanna Pusz UBS. Your question, please. Zuzanna Pusz: Good afternoon. Thank you for taking my questions. So, my first question is on the top line. So, you've upgraded your top line outlook, which basically at the low end implies very much top line growth on H2, I think sort of low single digit if we take into account your strong Q1 and also the Q2 outlook. So, and that is, despite the fact that I could be wrong, but I think majority of your product launches should be hitting the trade in Q3. So, can you explain us whether that cautiousness is driven just by rather conservative assumptions around China? Or is it just the fact that you may not be sure if you can convert full year order book, because the environment is still uncertain? So, any color around how we should think of the said outlook in Q3 Q4 would be very helpful. And my second question is on China, I guess it's just a follow up. But you mentioned towards the end of your kind of presentation that the trend is positive. You mean, there's a sequential improvement? Or have things turned positive? I guess the market is quiet, well, it's not the easiest one to read. So, the control over the place, so it would be very helpful to get an idea of what did you mean by positive? And also, maybe probably, what are the assumptions for China in Q2, given that it should have a pretty meaningful impact on profitability in the quarter? Thank you. Kasper Rorsted: So, from a low in Q1, we're now seeing a slow and steady recovery. And we're not giving any guidance on China for Q2. The guidance of 50% includes our assumption for China, which we're not giving. Harm? Harm Ohlmeyer: Yeah, no you're absolutely right. When you look at the second half, but we also shouldn't forget, we are still in the global pandemic. Of course, we have different scenarios for China that we built in our guidance. And again, we need to look at things that tourism is back. We don't know how travel will come back overall. But that's really how we look at it. But our focus is really quarter by quarter, and how we drive growth and then through our brand momentum, and how we will invest in the second half as well. And that's really what we're focusing on right now. So, again we're enjoying the momentum that we have right now. There's no reason it shouldn't continue in the second half. Zuzanna Pusz: Perfect, thank you. Kasper Rorsted: Thank you. Operator: The next question is from the line of Jurgen Kolb of Kepler Cheuvreux. Your question, please. Jurgen Kolb: Thank you very much. Just one question. With respect to the Capital Market day, you talked about you introduced the second sportswear line, sportswear between performance and originals. And I was wondering if you could share some feedback from retailers on that collection has been received and in what stage we're from that collection? Thank you. Kasper Rorsted: So, the retail feedback is still very limited, because we've only had the conceptual conversation with them, with which they're very excited about. They have not seen the product yet. I went through an extensive product review this week. And if you want to join us in Capital Market day here in the fourth quarter, you will see at that stage we have the full feedback from our retail partners. There's a lot of internal excitement about the products, which is full range from apparel to footwear that we will have ready by then and that at that stage you can see it. But overall, the strategic position may have been received extremely positive, of course, end of the day, it's a product. And we're now starting to see the first samples of our products and you'll see the full range for 2022, again, if you want to come to that show in the fourth quarter. So, it's very much up to you. Jurgen Kolb: Okay. I'll turn it over. Thanks guys. Operator: The next question is from the line of Chiara Battistini, JP Morgan. Your question, please. Chiara Battistini: Hello. Hi, thank you for taking my questions. The first one would be on the U.S. market and North America. You've mentioned that again, when you gave the guidance for the year, you're expecting this market to improve a high single digit but you're already a high single digit in Q1 by the congestion. So, I was wondering whether maybe your outlook for this market has improved. And we should be thinking about better growth for this market, specifically this year? And sorry, a follow up on China and your brand ambassadors here or rather your marketing strategy at the moment. What kind of communication are you keeping there? Are you keeping it low profile? Or how are you managing communication at the moment in China? Thank you. Kasper Rorsted: So, Chiara let me take the question on China, and just help you in repeat a little bit all the bits and pieces that we said about our communication. So, we have started in the second half of April, to tell our brand stories again, slowly on our digital channels, that has accelerated over the last couple of weeks. In addition, we've also started to revitalize our physical retail, we participated in several events, local events, like the Five Five Shopping Festival that took place over the last couple of days in Shanghai. And we will continue down that road. And we remain positive and expect this positive trend to continue. And with that, then over to Harm on the North America question. Harm Ohlmeyer: Yeah, North America curiosity, right. We gave a guidance of high single digit, and delivered that already in Q1. And again, there's brand momentum. And that's why we updated our overall guidance as well to the higher end. And of course, North America is contributing to that as well. But we are not updating every KPI that we have right now. But again, there's brand momentum. There's of course, a lot of impact from the stimulus checks that are being distributed. So too early to say, but definitely North America is contributing to the upping. That is the highlight of our company guidance. Chiara Battistini: When you say - thank you. Did you say that that is the region that is contributing the most to the upgrade? Kasper Rorsted: It's contributing. Chiara Battistini: Okay, thank you. Kasper Rorsted: Thanks, Chiara. Operator: The next question is from the line of Warwick Okines, Exane BNP Paribas. Your question, please. Warwick Okines: Yeah, good afternoon. Sorry, another question on China. I know most of the focus has been on the revenue impact. But have you had any challenges working with suppliers in China relating to the overall issue? And secondly, could you give us a bit of detail on the performance in Western Europe? Obviously, very impacted by store closures. But how do you feel about your market share performance in the first quarter? Kasper Rorsted: So, again a very short question and to answer your first question. The answer is no. There's been no constraint in relationship to any suppliers in China. Harm? Harm Ohlmeyer: Yeah. In Europe, I mean, of course, nobody talks about EMEA now and not about Western Europe. But just in Europe, as we have the lockdowns, it's too early talk about market share. Of course, we have some consumer panels and everything. But market share is too early at this stage. But we are having good momentum in Europe. And again, I don't need to repeat that we had some mediocre developments in the previous years, but strong momentum, especially with online retailers, and especially with our D2C business as well. Now driving tremendous growth with e-commerce in that market. And of course, it's almost a pure play as well. But just to mention so London, those are really good momentum for everyone who's prepared for the digital space. And we will definitely build on top of it going forward. Warwick Okines: Thank you. Operator: The next question comes from the line of Geoff Lowery of Redburn. Your question, please. Geoff Lowery: Yeah, hi team. Just one question, please. Harm, can you talk a little bit more about your e-com performance? I'm very struck by the degree of growth on growth. So, I was keen to understand really where is it coming from? Is this new customer's you're getting more of the Wallace's the existing customers anything by geography? We're just dealing with some very big euro million revenue additions now. So, anything you can help us understand on the where and how it's coming from would be much appreciated? Harm Ohlmeyer: So, if you look, we have now built a substantial e-com business, and it's almost doubled over the last few years. If you take the first quarter was up close to $4.5 billion last year. And if you look upon the membership or the number of members, it's up approximately 100 million year over year, and a big part of our business is getting through our membership. And what we're striving to do is of course, do selective launches, making certain that we increase the full price sales force to drive higher margins up. And that we're seeing, I would say with certain differences, but I would say also a lot of equal development region by region. So, what we are doing is we are implementing the app structure we have in different regions, whether it's a membership structure, or whether it's our firm data, as you've seen. So, it's a consistent global rollout with different maturity in different places. We still need to have the full suite rollout in Japan and Korea, which is coming later. But overall, it's a much more sophisticated engine that is driving a very consistent growth, a consistent rollout of our membership structure and our firm structure, and thereby increasing also our full price sales who are coming a lot through our membership base, where I said, we were up 30 million in the first quarter. And if you do the real math, our starting point was about 165. So, we're close to 200 million, now up a 100 million a year ago. So very, very strong growth in our memberships. Which is, of course, also a much stickier proposition. Geoff Lowery: Understood, and can I ask how much of your website revenue is done with products that is exclusive to you? And how much of your total product range is actually on your website, because I'm quite struck by some of the differences between you and some of your partners, in terms of what you're actually showing the consumer in the digital space? Kasper Rorsted: We're still not sure by any means showing all our products online, and that's what we're considering. So, we still have a vast majority of expansion, we can pull on and have on site. And if you look at the exclusive, if you look upon overall volume, overall revenue is still low. But what you are seeing is you continue to see an increasingly higher launch of exclusive products. So, whether it's a LEGO or ZX, or the Jersey, or the UB, so when we bring new products to the market, you're seeing an increasing use of our online site as the first destination either throughout the lifecycle if it's short of the longer life cycle, then through the initial phasing of the product. Geoff Lowery: Understood, thank you very much. Kasper Rorsted: Thanks, Geoff. Operator: The next question is from the line of Erwan Rambourg, HSBC. Your question, please. Erwan Rambourg: Yeah. Hi, thanks, gentlemen, for taking my question and look forward to seeing you on campus later in the year. Thanks for the invite. Two things. Maybe just a follow up on the online business. I'm wondering how you think about the balance between online and physical stores in an environment where you're now close to 94% I think you said in terms of opening. Are you seeing a rebalancing? Are you still seeing an ad performance of online despite the world reopening somewhat? And then maybe just the more general question on the guidance, you're increasing the top line, but not the margin. Is this essentially linked to reinvesting? Or is it linked to a change in the regional mix? Maybe with a, you had China booming in Q1, maybe that moderate somewhat, relative to other regions? Or is there something else to take into account to understand why the margin hasn't moved even though you're increasing the top line? Thank you. Kasper Rorsted: So, I'll take the first question and Harm will take the second. I think we have to separate between short term long term at right at opening, and then subsequent opening. There's no doubt in the long term that the primary growth driver is going to be online, that's very clear. And the shop is going to be an integral part of our online business. But the real growth is going to come from online. I will have put a caveat in. I think there's a huge appetite for consumers to come in the store. And that is what we see when we open up, particularly in countries where the stores have been closed for two or three, four or five months, there's a huge appetite to go and look upon products or purchase products. And that's where you're going to see a short-term deviation probably in the curve, and say when you open up, people will run to the store, so stand in line outside the stores simply because there's a pent up not only demand for product but a pent-up demand for an experience. So, I would not over interpret the short term, I would say maybe slow down on online and pick up on offline because it's really the medium term, that's the most relevant one. And that's simply just the pent-up demand in social activity. Harm Ohlmeyer: Yeah, and the reason why we didn't you know upgrade the bottom-line guidance is primarily two reasons. One is a supply chain challenges. So, freight rates are already up significantly and might see further increases given the container shortages that we have seen, and of course Suez Canal situation didn't help that either. In addition, we also want to make sure that availability of the products that consumers desire, we want to ensure that one and that might come with somewhat higher logistics costs, especially air freight. We want to make sure that the product is available. That will be a combination of gross margin impact and operating over the impact. And secondly, we want to accelerate our marketing spend. We want to build in our current momentum, sports returning, risk spectators, whether it's a football club, football finals, the Euro, the Copa Grand Slams, all in front of spectators. And consumers being enthusiastic to go out and celebrate sports, we will invest significant and welcomes them back around the road. So, in summary, having said that, it is fair to assume that with the increased sales outlook, of course, the lower end of our guidance has become less likely than it was two months ago. Erwan Rambourg: Thank you very much. Just a just a tiny follow up on logistics. I think you mentioned that without the hiccups in Q1, you would have grown in the mid-30s, rather than the 27%, which was already impressive. I'm just wondering, the gap of high single digit that you lost in Q1, do you make up for that in Q2 in parts? Kasper Rorsted: Largely yes, that is part of our guidance, where we say we accelerate in Q2 beyond the 50%. Erwan Rambourg: Very clear, thank you. Operator: The next question comes from the line of Omar Saad, Evercore ISI. Your question, please. Omar Saad: Thanks for taking my question and appreciate all the color. I really wanted to ask for more detail around the supply chain constraints and challenges you're facing. Is it mostly a port and freight issue? Maybe is it happening in the manufacturing and accessing materials? And do you think the outcome is mostly going to come in the form of a higher costs? Or are you having is product coming in late or are you having trouble getting product in and then is pricing, are you going to use pricing as a lever given this kind of supply demand imbalance? Kasper Rorsted: So, let me try to take a stab at it. If you look upon overall, you've seen the freight rate goes up. So, this is not area's problem, this is not industry specific problems. Let's say you're seeing a recovery, a quicker recovery in the industry than originally anticipated. And that's why you're seeing a dramatic increase in freight rates where the price has come up almost five times, I believe that normally a container would 2,000 and 5,000, now it's about 8,000 to 10,000. So this is the industry, it is across industries, you have a much higher demand than originally anticipated. And that's why I was looking upon the Danish company Maersk, which of course, we're proud of, we now have the best results ever on the first quarter in the history. So that's what you're seeing, that's not related to us. Then you have a second component you have which was the Suez Canal. And then you have the third component, which is simply just pull congestions around the globe, where you have containerships sitting outside the harbors. And when they come in to the region, particularly North America, you have a constraint on containers within America. Again, unrelated to us. The only thing you've seen that is really related to our industry has been the political situation in Myanmar. And that has minor impact. Because for us, because Myanmar is still a very small sourcing country for us. But the other ones are very much related to the global situation. Of course, we are looking upon pricing. I think you might not see increase in pricing, you might see less discounting, depending on the category. But of course, you got to hit the season. There's no point in coming with a pair of swimming pants if you land them in October, then you will be on promotion. So that's the way we look upon it. Omar Saad: Gotcha, gotcha. And so to be clear, at the manufacturing level procuring materials, you're not seeing nearly as much congestion? Kasper Rorsted: No, that's not what we said. Omar Saad: Gotcha. Thank you very much. Good luck, best wishes. Kasper Rorsted: Thanks Omar. Operator: The next question is from the line of Cedric Lecasble. Your question, please. Cedric Lecasble: Thank you. Cedric Lecasble from Stifel. I have to follow up, if I may. So first one on China, not on recent revolutions that longer term, how should we see a split between two channels going forward? The store developments auditions. And in e-commerce could you give some colors as a growing split between own e-comm and the global platforms such as T Mobile? How should we see things in the future? And the second one would be on your apps? Could you give us maybe the weight of your apps generating e-comm sales? So, what is so sure, e-com coming from your labs and what are your midterm targets and deceit? Thank you very much. Kasper Rorsted: So, if you look upon, we've set ourselves to target. See target of approximately 50% by 2025, you will see a very similar develop in China also. And that means that you're going to see a much stronger growth also in our own retail space and our own digital space. Of course, T-Mobile and increasingly TikTok will complain if you continue to play a very large role in China, but you're not going to see a fundamentally different split between the online and the offline, you are going to see of course, a very integrated retail setup. What you might see in China that is different to the rest of the world is our franchise partners, which will be very closely integrated in to our digital infrastructure because of course, from a consumer standpoint, he or she will not be able to recognize whether it's a franchise or not. But from a business model standpoint, you're going to see very similar to the 5050 we have globally. The revenue we're generating out of our portfolio sparks in 50% of our total digital revenue. And we know that that's a stickier model. So basically, one should assume that there is a higher lifetime value, as we said. So that means the following trading is going to be higher with that structure. So that's why rolling it out and quickly, in an attractive way has a very high, I would say ongoing value for our company. Cedric Lecasble: Thank you. Sebastian Steffen: So, we have time for one more question, please. Operator: The next question is from the line of John Kernan, Cowen. Your question, please. John Kernan: Alright, thanks for taking my question. And congrats on the momentum into Q2. Harm, I'm curious…sure, Harm just curious on capital structure outlook. A lot of cash on the balance sheet, there is a net cash position. I think a lot of us agree that your stock is very cheap versus many of your peers. I'm just curious how you're viewing share buyback as we go through the remainder of the year? Harm Ohlmeyer: Yeah, pretty straightforward answer. Thanks for the question. Of course, we have our annual shareholders meeting ahead of us next week. And so, we decided what we recommended to get the approval for paying dividends again. That's next week. We always said we want to be solid and reliable dividend payer first. And then, as liquidity allows, we will enter back in the share buyback as well. But let's do step by step. And don't forget, we are still in a global pandemic. We also have bond to be repaid in the second half in October. But again, let's wait and see. And let's see how the momentum continues. Let's see how the second quarter works and how consumers come back to the stadiums, then we will update you accordingly what we would do in the second half of going into '22? John Kernan: Excellent. And maybe just a follow up to some of the prior questions on Europe. What are your assumptions for specifically for Western Europe, which was hit very hard from a lockdown perspective? What are your assumptions in terms of the sequencing of the reopening? And how does that fit into your overall guidance for the full year? Kasper Rorsted: Well, first, we expect significant growth from Europe in Q2, regardless of the opening, and because we had the lockdowns last year more pronounced. And again, it doesn't really matter when a country or stores opening up what really matters is to traffic and to conversion, and primarily the traffic that is coming back to the stores, right. And that's where we have a lot of learnings from other markets. And we believe with summer coming, with sports event coming, and sequential opening the doors that we will have health to recovery of our own retail doors, and as important as also doors as well. That's our assumption. But again, whether it's opening or not, the key topic is the traffic needs to come back. And that is the burden our assumption. John Kernan: Got it. Thank you. Thanks very much, john. Sebastian Steffen: Thanks very much John. Thanks very much Kasper and Harm. Ladies and gentlemen, this concludes our Q1 2021 results conference call. If you have any further questions, be it today, next week or over the next couple of months as always, please don't hesitate to reach out to the IR team or myself. We definitely look forward to being in touch and talking to you soon. And with that, thanks very much for your participation. Have a good remaining day. Have a lovely weekend and take care. Bye-bye. Operator: Ladies and gentlemen, the contract is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.