adidas AG

John-Paul O’Meara - Vice President, Investor Relations Herbert Hainer - Chief Executive Officer Robin Stalker - Chief Financial Officer

Julian Easthope - Barclays Andreas Inderst - Exane BNP Paribas Chiara Battistini - JPMorgan Cedric Lecasble - Raymond James Jürgen Kolb - Kepler Cheuvreux Chris Svezia - Susquehanna Financial Group Ingbert Faust - Equinet Adrian Rott - Deutsche Bank

Good afternoon, ladies and gentlemen. And welcome to our First Nine Months 2014 Financial Results Conference Call.

Our presenters today are Herbert Hainer, adidas Group CEO, and Robin Stalker, Group CFO. To allow for ease of comparison, all sales-related growth rates will be discussed on a currency-neutral basis, unless otherwise specified.

So with that, let’s get started and over to you Herbert.

Yes. Thanks very much JP, and good afternoon or good morning ladies and gentlemen.

Our financial performance in 2014 has not lived up to our high standards. Although we have enjoyed encouraging and solid top-line growth in the majority of our key categories and markets, significant negative headwinds from our golf business, weakening consumer sentiment in Russia CIS and unfavorable currency movements have held us back from growing our bottom-line.

In any sport, to reach your goals, tactics and desire are critical to compete and win. And we are here to do both.

And while certain external factors have gone against us over the last 18 months, we know we have to raise our game especially in difficult conditions. Over the last months, we have acted quickly and urgently, implementing a series of initiatives to drive more consistent growth and more profitability for our group.

So what have we done? We have been proactive taking decisive steps to stabilize the underperforming areas of our business, particularly at TaylorMade-adidas Golf.

We have adjusted our investment plans to account for current market risks, with Russia being a key focus. We have completed a major reorganization of roles and responsibilities in our marketing and sales organizations to speed up decision making.

We have stacked talent, both internal and external to revive momentum and growth in North America. We have increased marketing spend particularly in the developed markets.

We are working swiftly preparing our next strategic plan, taking the powerful capabilities we have built during Route 2015 and applying them with more vigor and intent. And finally, we have adjusted our capital management and shareholder return policies.

The current low interest rate levels are a good opportunity to reduce our cost of capital, and ensure we are well funded for future investments and shareholder returns. Before I get into the results of the last quarter, let me give you an update on some of these areas, starting with those that have most affected our results in 2014.

TaylorMade-adidas Golf has been our weakest performer in 2014, with sales declining 29% and an operating profit deviating by around €150 million compared to the prior year level. While the sport has structural challenges with declining participation levels, the biggest headwind to a faster recovery is the amount and slow liquidation of old inventories in the marketplace.

Therefore, we have remained laser-focused on inventory management, taking a leading and responsible role for the industry clean-up. We purposely chose not to chase sales for the second half of 2014 despite being up against the successful launch of the SLDR driver last year.

We also completed the major elements of the restructuring program we announced in August during Q3, commencing the closure of our Adams Golf facility in Plano, Texas, and reducing our golf segment global workforce by around 15%. These actions amounted to a charge of around €10 million in the third quarter.

As a result of all these steps, I am confident we will stabilize and grow sales and margins in 2015, returning the segment to profitable levels. Turning to Russia/CIS, a market that is highly prosperous for us but also facing significant near-term challenges.

In the first nine months, sales in Russia/CIS increased 18%. While this is positive, negative effects from the Russian rouble, higher promotional activity as a result of weakening consumer sentiment and our efforts to accelerate inventory reduction significantly impacted our margins and therefore our results by around €100 million compared to our initial plan for the year.

We have an enviable and strong position in Russia/CIS, being one of the most established and desired consumer brands with a wide-reaching network of over 1,100 stores. While we firmly believe in the long-term potential of the market, due to the rapid depreciation of the Russian rouble, which hit a record low today, and the considerable risk of further deterioration in consumer spending, the short-term fundamentals of the business have changed materially.

This warrants an even heightened level of capital and risk management as we plan for 2015. Therefore, we have and will continue working on accelerating our real estate and inventory management initiatives.

This has resulted in net store closures in Russia/CIS of 27 stores since the end of June, and we have reduced our net opening plans even further to around 30 per year for 2014 and 2015. In addition, we continue to work hard on driving down inventory levels, with an ambition to reduce inventories by a double-digit percentage rate in 2014, and to continue reducing absolute levels of inventory in 2015.

Finally, a quick word on currencies. In total for the first nine months, negative translation effects wiped out around €550 million of revenues from our Group’s result.

Taking the effects of translation as well as less favorable hedging rates, which impacted the Group’s gross margin by 50 basis points, operating profit was impacted by roughly €150 million. While these issues have been a steady burden through the year, we definitely should not ignore the strong successes and improving momentum in many other key parts of our business.

In fact, we even saw some trends accelerating in the third quarter. Sales for the Group increased 9% in Q3 and are up 6% year-to-date.

Strong momentum continued for our brands in the emerging markets, with European Emerging Markets, Greater China and Latin America increasing 19%, 13% and 16%, respectively. Our business in Western Europe grew 10% as we continue to rebound in the region, driven by stronger product assortments in adidas Football and Running and continued double-digit growth at Reebok.

In retail, we also enjoyed another quarter of positive comparable store trends in all regions. Our efforts to drive more leverage on store costs also yielded a very satisfactory two percentage point reduction in operating expenses as a percentage of sales.

In fact, our total concept store business excluding Russia will deliver record sales and profitability levels this year, which reaffirms our great confidence in the power and the value of this business model. At brand adidas, sales increased 12% in the quarter and 11% for the first nine months.

In football, sales year-to-date increased 31%. The success of our sponsored teams and players at the World Cup as well as new product introductions such as the Predator Instinct will ensure we reach our aspiration of more than €2 billion in sales this year.

And the World Cup has been our most successful event activation ever. In running, sales for the first nine months are up 14%, with a strong acceleration in the third quarter where sales increased by 20%.

Our industry leading Boost technology continues to grab market share and mind share, being hands down the best performing product on the world’s major marathon scene. Just remember, at the Berlin Marathon, adidas athlete Dennis Kimetto ran the fastest marathon in history wearing the super-lightweight adizero Adios Boost.

Since its launch, the adizero Adios Boost has won 27 major marathons and most recently completing the male and female double at last weekend’s New York Marathon. In Originals, after a difficult start to the year, sales recovered sharply, growing 9% in the quarter.

The ZX Flux remains a top seller and key franchises such as the Stan Smith, as well as the first product launches in the series of new collaborations, for example with Pharrell Williams and Rita Ora, are driving heat for the Trefoil. And finally, the adidas NEO label also delivered another remarkable quarter with sales up 33% as we expanded our product offering in key winter styles in footwear, jackets and denim.

Let me come to Reebok. At Reebok, we recorded our sixth consecutive quarter of growth with sales increasing 7%.

The brand’s positioning in fitness is resonating well around the world, particularly in markets where we are driving our own controlled space agenda. Sales increased at a double-digit rate in Western Europe, European emerging markets, other Asian markets and Latin America.

On a category level, Fitness Training, Walking and Studio were the key drivers, increasing 25%, 30% and 52% respectively. And I expect these trends to continue, as we broaden our partnership network and product offering to new and upcoming fitness disciplines.

This will also ensure that Reebok further increases its gross margin. While the brand’s gross margin was down 1.4 percentage points year-to-date and 3 percentage points in the third quarter, this was all down to the challenges in Russia, as well as activities to streamline Reebok even more towards its fitness positioning in North America.

In the U.S., this is mainly related to the old footwear closeouts, as well as preparations to rationalize the brand’s factory outlet business in North America, which we plan to reduce by 20% over the next 12 months. Speaking about North America, regaining our form in this market is the top priority on our group’s agenda, and we have made this market a key priority for all our senior management in the company.

And as I mentioned earlier, we have carried out a significant change in leadership in our North American organization this year, stacking high-caliber talent from various parts of our group and adding key external talent, particularly in design, as you have might read. We also have been very active getting back on the field of play, whether it be investments in the established or young NBA talents or the return of the 3-Stripes footwear to the NFL.

We will share more specific details on our future plans as part of our strategic update planned for the second half of March 2015. So, ladies and gentlemen, as you can see, while it has been challenging in 2014, there are many achievements we can also be very proud of.

Attention now turns to completing the year. Despite facing into the first major wave of World Cup product launches last year, we have plenty to play for in the fourth quarter.

And some highlights to look out for include, the further expansion of our Boost offering into new running models and categories. We will fully leverage the return of the NBA with a series of new icon products for Derrick Rose, John Wall and Damian Lillard.

We will have our largest ever winter apparel marketing campaign, Open All Winter, supporting our most technologically advanced ClimaHeat product. Originals will introduce several new products, including Pharrell Williams and Nigo collaborations, as well as a bold new silhouette born from some of the brand’s most creative minds, the adidas Originals Tubular.

And we also have a few product and partnership surprises to come at Reebok, which we will announce short before the end of the year. Therefore, with plenty to look forward to, I can reiterate the top and the bottom-line guidance we gave you in July of mid-to-high single-digit currency-neutral sales growth and net income to shareholders at a level of around €650 million for 2014.

And for 2015, we are also very confident that we will maintain a solid growth trajectory and despite tough football comparisons, we expect sales to grow at a mid single-digit rate on a currency-neutral basis. We will also grow our earnings at a faster rate than the top-line.

However, as there are still a number of moving parts, most notably the continued volatility of the Russian rouble which I spoke already a little bit earlier, we will give you a more specific quantification of our 2015 plan in March 2015. So, ladies and gentlemen, this is it from my side.

Let me now hand over to Robin and he will give you much more details on the financials.

Great. Thanks very much Herbert, and good afternoon ladies and gentlemen.

As you have just heard, our Group had a solid third quarter, with robust top-line momentum. Before my comments today, I want to focus on the following topics: Firstly, a look at our performance trends by region and channel; secondly, a review of the moving parts in our margin development; and finally, an update on our balance sheet and recently announced capital management measures.

In the third quarter and the first nine months, sales increased 9% and 6% respectively, with every region except North America posting sales gains. In particular, the emerging markets continued to do extremely well, with sales in European Emerging Markets, Latin America and Greater China increasing 19%, 16% and 13%, respectively.

In Latin America, the Group was able to keep the strong momentum from the previous quarters with revenues up 16% in the third quarter. This was driven by a 17% sales increase at adidas and 11% growth at Reebok.

Comp store sales grew 17% in the third quarter. In Greater China sales grew 13%.

Of particular note is clearly the strong development at brand adidas, where revenues grew 14%, driven by a 32% sales increase at adidas Originals & Sport Style. Our retail expertise continues to pay dividends in the market with revenues up 32% during the quarter, driven by an 18% comp store sales increase.

In European Emerging Markets, Group sales increased 19% in the third quarter. Sales growth was once again broad-based across the various markets, with strong double-digit increases in Russia/CIS, the Middle East and Africa.

In Russia/CIS, sales in the quarter were up 16% with comp store sales at the prior year level. In Western Europe, sales were up 10% in the quarter, driven by double-digit increases in Germany, Spain, France and Poland.

Several key performance categories, amongst others football, running and basketball all grew at double-digit rates, while Originals & Sport Style was up 8%. In Other Asian Markets, we saw ongoing strong momentum at both adidas and Reebok, with sales growing 11% and 33% respectively.

TaylorMade-adidas Golf remained challenged with sales down 39% in the quarter. So as a result, group revenues in Other Asian Markets grew 6%.

Finally, from a regional perspective, in North America, group sales declined 1%, as sales growth at adidas was more than offset by double-digit sales declines at TaylorMade-adidas Golf and Reebok. At adidas, football and running were once again stand-out categories, growing 45% and 12%, respectively.

Moving on to the profitability, Group gross margin decreased 1.3 percentage points in the first nine months or 1.9 percentage points in the third quarter to 47.4%. And the main reasons for the decline in the third quarter were, higher input costs negatively impacted the margin by about 80 basis points; increased clearance activities as well as negative currency effects in wholesale, the latter mainly in Latin America, also impacted margins by 80 basis points; lower margins in Russia/CIS related to the high levels of promotional activity, as well as the negative effects from the rouble devaluation resulted in about 50 basis point headwind; and finally, less favorable hedging rates accounted for around 40 basis points of the Group’s gross margin decline in the quarter.

These impacts were partly offset by an improved product and channel mix. Now below the gross profit line, other operating income and expenses increased 7% in euros or 9% currency-neutral in the third quarter.

Some modest operating overhead leverage gains in the quarter were offset by an increase in sales and marketing working budget expenditure, which was up 10% currency-neutral for the third quarter and 11% currency-neutral in the first nine months. Turning now to the non-operating items of the P&L.

Net financial expenses decreased 66% in the third quarter, or 31% in the first nine months compared to a year ago, driven by a €9 million positive swing in exchange rate effects in the third quarter as well as obviously lower interest expenses. The first nine months tax rate increased 110 basis points to 28.8%, due to a less favorable earnings mix.

Net income attributable to shareholders for the third quarter declined 11% to €282 million, and 21% to €630 million for the first nine months. Now by segment, wholesale revenues increased 8% in the third quarter and 6% for the first nine months, mainly due to high single-digit growth at Adidas Sport Performance, led by the football, running and training categories.

Sales at Reebok were slightly above the prior year level, driven by sales increases at Fitness Training, Walking and Fitness Running. Gross margin for the segment was down 2.1 percentage points for the quarter and down 90 basis points for the first nine months, as the positive effect from a more favorable product mix was more than offset by negative currency effects following the devaluation of currencies such as the Argentine peso and Brazilian real, as well as a higher levels of clearance.

In the Retail segment, revenues continued to grow at a strong double-digit rate, up 20% in the third quarter and 21% for the first nine months. Comparable store sales were up 6% for the quarter and 8% for the first nine months, with growth across all regions and store types.

By brand, adidas comp store sales were up 8% for the quarter and 10% in the first nine months. Reebok comp store sales were down 2% in the third quarter and remained stable for the first nine months.

The lower performance here was entirely related to the Reebok factory outlet business, which Herbert already mentioned. Revenues in our eCommerce business accelerated again during the quarter, with sales doubling in the third quarter.

For the first nine months, our eCommerce business was up 78%. Retail gross margin decreased 3.4 percentage points to 58.1% for the third quarter and 3.2 percentage points to 59.4% in the first nine months.

Our performance in Russia/CIS heavily impacted these results, with the impact of promotional activity and product mix, as well as currency devaluation in that market accounting for around 2.5 percentage points of that decline in both Q3 and year-to-date. Now on a positive note, segmental operating expenses as a percentage of sales decreased 2 percentage points to 38.3% in Q3 and 40 basis points to 41.9% in the first nine months.

At the end of the third quarter, we operated 2,822 stores, a net increase of 211 stores versus September 2013. Of the total number of stores, 1,569 were adidas, 426 were Reebok branded and in addition, the adidas Group Retail segment operated 827 factory outlets.

During the first nine months, we opened 277 new stores and closed 195 stores. 89 stores were remodeled.

And finally, coming to other businesses, revenues in the third quarter decreased 12%, driven by a 36% decline at TaylorMade-adidas Golf, as Herbert already mentioned. For the first nine months revenues of other businesses was down 17%.

The segmental gross margin remained virtually unchanged at 35.3% in the third quarter. For the first nine months, gross margin was down 3.9 percentage points to 37.7%, due mainly to lower product margins at TaylorMade-adidas Golf, as a result of the highly promotional environment in golf, as well as the timing of product shipments.

Finally, let me spend a minute on our balance sheet and cash flow development. At quarter-end, operating working capital as a percentage of sales increased 1.3 percentage points to 21.9%.

This development was driven by an 8% decrease in accounts payable. Although clearly impacting our margins, our strong focus on inventory management in markets such as Russia is definitely paying off, as inventory growth rate more than halved to 7% from 16% at the end of June.

In terms of cash flow development, we ended the quarter with net borrowings of €543 million compared to €180 million a year ago. Higher capital expenditure, including the purchase of the Spartenburg warehouse, was the main driver of this development.

So to wrap up, since we last spoke, we have taken some significant steps with regard to our capital structure. In October, we successfully issued two Eurobonds marking our first Eurobond offering since July 2009.

The 7-year Eurobond of €600 million matures on October 8, 2021 and has a coupon of 1.25%. The 12-year Eurobond of €400 million matures on October 8, 2026 and has a coupon of 2.25%.

The successful placement of our bonds reflects our group’s high credit quality and our excellent access to the capital markets. This offering allows us to benefit from current low cost financing opportunities in the Eurobond market to secure attractive long-term financing and reduce our cost of capital.

In addition, given our expectations for future cash flow development and current low share price levels, we also announced a €1.5 billion shareholder return program, which comes on top of our annual dividend. As announced this morning, we will commence the first tranche of up to €300 million tomorrow.

So with that ladies and gentlemen, I would like to thank you for your attention, and Herbert and I are now very happy to take your questions.

Hi, many thanks, and good afternoon, everyone. Three questions if I may.

First in terms of TaylorMade-adidas Golf, there’s quite a lot of decline I would assume is just destocking with the sellout I assume a bit better. So I just wondered if you had to sort of take as to what the sellout is like within the retailers relative to the destocking that took place, just give some sort of guide as to where the underlying market might be and what will happen once the destocking slows.

Just in terms of Russia, after the €100 million cost of the both different -- the €100 million to the EBIT this year, is it still profitable? And I guess the last question comes back to Reebok and TaylorMade.

So there has been all sorts of commentary about whether or not these may actually be sold in due course. I just wondered if you could give us your take as to whether that is a possibility.

Thank you.

Okay. Let me start with the first question and the third, and I think Robin will talk on the profitability of Russia.

So TMaG, the sellout situation, as I have said in my speech, we bring definitely much less product into the market to help retailers cleaning up the inventory, which has piled up over the last 18 months. Obviously, this is the result of 36% decline in the third quarter, because we don’t bring in so many products, but we start now in Q4 launching our new irons, which we just did last week.

And we definitely believe that from TaylorMade-adidas Golf standpoint, we getting into 2005 with a much cleaner inventory in metal, woods and iron and then we will come back with the launch of new product introductions starting with driver in January 2005 and new driver and then continue during 2015. The golf market in general, it generally will not have solved all the problems, as I said before that we have to deal with the declining participation rate in some areas.

But overall, from an inventory standpoint and I also do believe from a mindset of the industry, the golf industry and the golf business will be healthier going forward than it is in the moment. But as I said, structural problems will not be solved overnight.

Your third question concerning TMaG and Reebok, there were a lot of speculations, but you will understand that we do not comment on any rumors or speculations.

And Julian in terms of the Russia and the profitability, you know we’ve always -- although we don’t talk about specific market profitability, we called out that Russia has been one of our most profitable and it’s clearly down on what it has been but it’s still -- and I can confirm it’s still profitable for us and it’s a market that we have a long-term confidence and good expectations there.

Thank you. And just one sort of final thing for clarification, when you talk about your Investor Day looking at your longer-term planning, will it actually be on the day of the full year results on the 5th of March?

No. Julian, we’ll give you the date as soon as we can but it’s likely to be at the end of March.

Okay. Thank you very much.

Yes. Hello, everyone.

I have three questions. The first one on your cost structure.

Given all the headwinds you are facing and acceleration, accelerated decline in the Russian rouble, don’t you think your operating cost basis is too high, and what are your measures to tackle these issues? It’s my first question.

Then the second question, you indicated on Russia a decline on EBIT of roughly €100 million; is it for the first nine months or the full year? And based on current FX rates, what would decline look like or the negative impact look like in 2015?

And my final question is on FOBs, on input cost. What’s your expectation in terms of gross rate or decline year-on-year in 2015 given the decline in input cost in recent months?

Thank you.

Okay Andreas, thanks very much. And yes, you’re absolutely right to call out cost but you can assure that that is exactly a key focus for us, but it’s not new.

We have been focused on this for some time and a lot of the efforts that we undertook as part of Route 2015, were to give out whole organization less complex and more streamlined and we’ll be doing that. We’ve been consolidating warehousing above market; we’ve been consolidating services above market; we’ve been addressing the structure of marketing and sales.

We just recently at the beginning of this year, put the five key European markets together. And we continue to pursue concepts where we believe we will also in the future take cost out of the business and it is definitely a focus for us.

In terms of Russia and the 100 million that we mentioned in the prepared comments here that refers to the nine months. And yes, it is obviously with the continuing weakness of the rouble and the outlook for 2015 is going to be more of a headwind for us, but we can’t give specifics on that until we have a little bit more visibility on that and we will try and do as best we can in March.

And thirdly in terms of FLBs, we still think there is continued pressure on that and it will be the input pricing. It may not always be from the raw materials, but definitely labor continues to be a negative for our industry and therefore when you’re looking at the raw materials even though oil has gone down we’re talking about we use all derivatives obviously.

So, there is a timing lag sometimes in the change of the oil price for that. So, I think you should expect we’ll have a conservative view on FLBs likely there still be some pressure there in our industry next year as well.

Okay, thank you.

Good morning. Hi.

Thank you very much for taking my questions. Just a couple of questions from me please.

First, on your gross margin on adidas wholesale specifically, which was actually a major drag to the group gross margin, I was wondering whether you could provide more color on what caused that pressure if it was just on effects or more? And then in terms of marketing spend; it was up 10% again in quarter three.

Should we assume this to be the new growth run rate for this cost line, please? Thank you very much.

Okay, Chiara. And so, the pressure in the wholesale gross margin, obviously we have the input price that’s affected all of our channels in this quarter that was about 80% of the total group, sorry 80 basis points of the total group’s deterioration.

And then in wholesale, we’ve been continuing to clear certain products. And the third point is that we have the devaluation impact in markets where the hedging has not done.

And that is the Argentine peso and the Brazilian real. And the second question was about the 10% increase in MWB.

We called out as part of our second quarter announcement that we’re investing more particularly in the developed markets and that we are expecting our marketing investment to increase by about a percentage point in 2014 and 2015. And so that run rate that you’re seeing here is likely to be consistent for this year and for the total 2014 year.

Perfect. Thank you very much.

And just if I may, a follow-up on gross margin and following up also on the previous question on the input costs and what we should think about it into 2015. How should we think about our gross margin in 2015, weighing the fact that this year was penalized by ForEx meaningfully so and hedges and into next year where rouble will continue to be a headwind, but then I would assume you should also benefit from an easier base and lower drag from TaylorMade, please?

Yes. And I think that’s a good summary.

Obviously in the FOB increases, what have you, we try to mitigate this with the continued improvements and deficiencies in our supply chain and manufacturing processes. And also, obviously through price increases and that’s not always possible.

We are not too concerned about this for next year. And as you say, we’re in a situation where it’s not just the roubles, we’ve got a lot of markets and we benefit from channel and product mix, as we have done in the previous years also.

Thank you very much.

Okay.

Yes. Hello, gentlemen.

Cedric Lecasble from Raymond James. I have two follow-ups, please.

One follow-up on the marketing expenditure. When you decided to raise your marketing expenditure, especially in the developed markets, could you tell us why you decided to do that?

What’s your analysis? And what would be different from what you already did in the past?

And just to double check, the 100 basis points is a split between 2014 and 2015, or should we assume a new significant increase in percentage of savings in 2015? So that would be on marketing expenditure.

And the second question is on your working capital. Could you explain us what happened on payables?

You had a big decline in payables in the quarter year-on-year. Could you maybe tell us what has changed or if something has changed and how you see working capital going forward?

Thank you.

Cedric, let me start with the first part of the question number one and why do we increase our marketing spend. And this is two main points; on the one hand because this year lot of momentum in several areas as we said be it Originals, be it NEO be it football, be it running where we do believe we have to make better fast trains faster and on the other hand we also see in markets like America that we’re under spend.

And as we have said, North America is a top priority for us going forward. And we invest in people; we invest in designers and design studios.

As you have might read we invest in ambassadors; we’ve signed four of the six NBA drafts. We have collaboration with Kanye West, with Pharrell.

And we will definitely make more noise in this market. Therefore these are the two main reasons why we spend more.

And we have quantified that and the increase in point of sale and what have you as being about a percentage point for each year that’s ‘14 and ‘15 year. And we normally spend about 12% to 13% of sales on MWB, and we have said that there would be in the range of 13% to 14% in the future.

And then your last question about working capital. Yes, the working capital deteriorated a little bit this time because of the decrease in payables, but nothing especially; that is just related to the timing.

Obviously the time in World Cup product and when we pay it that year-over-year is different. But we are still very focused on further improving working capital.

And I think the best call out that I can make here is look at what has happened with the inventory now; that’s the key move in our working capital, while it has been over the last few quarters. That’s what we are focused on.

We hope by the end of the year to have even further improvement in the inventory growth.

Okay. Thank you.

Thanks very much. The first one on the online business, another very strong quarter.

Could you please give us some indications what happened there? Why the online business continues to take off?

Have you put additional money in there, or what drove the success there? And then on NEO, also apparently a strong performance.

How much further do you want to stretch NEO here really? Again, another category, winter more pronounced, you have no concerns that you might overstretch the category a bit?

And lastly on Reebok, the warehouse -- or sorry, the factory outlet consolidation, so remind me how long will that take? When will we be finished with that?

And the general idea behind it is that just because Reebok has declined in the overall business and you just downsized it to the reality or what was the idea behind it? Thanks.

Yes Jürgen, this is Herbert. Let me start immediately with question number three because you said Reebok overall business has declined which is not the case at all.

The reason why we are consolidating our factory outlet in the U.S. is twofold.

On the one hand, we definitely want to carve out more the positioning of the training and fitness brand in the U.S. which we do around the world and we are growing with Reebok everywhere outside of the U.S.

So we definitely have to be more focused in the U.S. to bring the message across.

And secondly, I do believe we have -- simply we just have too many factory outlets. We do want to have a real business in connection just to consumer and not the majority of our business on factory outlets and this is why we consolidated it.

Second question on NEO, NEO is doing extremely well and we get great feedback from the young consumer base, especially from the female consumer. And you might remember when we launched NEO, this was one of the target consumer groups where we said we are not strong enough with the 13 to 19 year old especially female consumer.

And so far we are only in a few countries where we sell NEO. This is China; this is Russia; we have some test stores in Germany; we have a little bit of business in America.

Believe me; we are quite careful how we roll it out because we don’t want to stretch the brand too far. But on the other hand, the positive feedback from the consumers and it’s not just the sales, it’s also the qualitative feedback, which we get is definitely encouraging.

And we will carefully see, but there is definitely more potential as I’ve said. And last but not least, our online business, you might remember in the Route 2015 plan this has been one of our strategic targets as we said we want to do at least €500 million, of course we will overachieve the €500 million until the end of 2015 and this is by consistent investment into people and into our system.

We have now platform for all our businesses around the world. We have lot of people sitting in Amsterdam who are experts in the digital business in all the different function speed, conversion speed, how we drive traffic to the site, what articles we choose et cetera.

And we are absolutely convinced that this is just the starting point. I mean even if we do €500 million, this is just less than 2% of our total revenues for adidas and Reebok and we definitely want to get to higher percentage with our eCommerce business.

All right. Understood.

Thanks very much.

You’re welcome.

Thank you everyone for taking my questions, a couple from me. First, just on North America, I’m just curious we continue to see some challenges just in terms of share losses in some key categories; running, basketball and lifestyle.

It seems like in our conversations with retailers, Boost doesn’t translate or has not translated as well as other markets around the globe. So, I’m just curious how you plan to address sort of the product pipeline marketing point-of-sale in North America to have more consistent product sell-through in this region?

The second part to that question is the new hires that you made, the three gentlemen, I assume they have non-compete. So, I’m just curious if that’s true and when they actually start and when they can actually have an impact?

The other question I have here, just on the golf business, I’m curious your comments, Herbert, about seeing improving sales and margins next year. And given the fact that there’s continued consolidation here in North America and just the overall challenges with the market, I’m just curious how you prevent similar play out versus last year where you sold in a lot of product in Q4 last year only to have the challenges sort of unfold.

So I’m just curious how you protect that. And very lastly here, just on FX, just how do we think about FX as it pertains to the gross margin as we move forward and how you are hedged?

Thank you.

Okay. Let me start with the first question.

When you say Boost is not resonating with the consumer in the U.S. than in the rest of the world, then it’s true to a certain extent, but we also have some very positive signals.

For example, in running, when you go the running specialty stores then our Boost shoes are selling very well. When you go to the normal sporting goods or especially to the mall, we definitely have work to do there is no doubt.

We just have launched the new Rose basketball boot, which is the Boost shoe for US$140, I think it was 10 days ago and we pushed 20% in the first two days. So, we’re definitely making inroads with Boost, there is no doubt.

At the New York Marathon as I have said in my speech the first two guys in the men’s running Kipsang and Mutai and lady Keitany, they all were wearing Boost, all won the races. So, we’re definitely making a huge headway around the world with Boost, but there is definitely more work to do in America.

But this is also what I said before, why we’re spending more marketing money budget that we can communicate it with the consumers especially in America in deeper and broader way. When it comes to the new hires, yes, your speculation is also right and we will see domestically in the second half of next year.

And third question was on the golf business, when you look to the golf business in the last 10 years and key success factor for becoming the number one in the golf business was because we have been the most innovative golf company and we brought out innovation speed on the metal, wood or on the iron side on a permanent and consistent way. And this is what we will do in 2015 as well.

We do believe -- first and foremost let me also say that, we at TaylorMade-adidas Golf we have a very clean inventory. So, the inventory which is too much is still in the retail side and this is decreasing step-by-step.

But we definitely will energize the market with new product innovations, which we’re bringing out in 2015. And as I said, we have started a week ago with irons and we follow this driver in January as it will continue during the course of the year that all our refactoring is done in 2014, which will not hit us in 2015.

So, the one makes us confident on the top-line side, the other one makes us confident on the bottom -line, because we will definitely have a better cost structure. And we do believe by having cleaned most of our inventory this year that the margin will go up next year again.

And in terms of FX and gross margin, Chris, the key here is obviously the dollar euro, although we are subject to the other payers that we hedge as well. And here, the hedge rate for 2015 is slightly better than what has been in 2014.

So, it should be a slight positive for us.

Okay, thanks very much gentlemen. I appreciate it.

You’re welcome.

Yes, good afternoon. Two questions from my side.

One follow-up on Boost. Can you confirm the 8 million pairs of shoes in 2014, and I think for 2015 it was 15 million, just a confirmation, if that’s possible?

And the second thing, on your outlook for 2015, mid single-digit sales growth and the pass-through portion of profit growth. Well, we have, if I am correct, around 80 million restructuring costs in 2014?

Is this above proportionate profit growth indication; is that adjusted for the 80 million or is it just in reported figures? Thank you.

So point number one, yes, I can confirm the 8 million in 2014 and the plan for 15 million; obviously we have not done it yet because it is ahead of us. But all what we see is definitely confirming that we are achieving our target.

And in terms of the profitability, our guidance was in accordance with (inaudible). And I don’t quite know where you get your 80 million restructuring from.

We’ve talked about so far is the restructuring in the third quarter for TaylorMade which is around €10 million.

I thought there were additional costs this year for TaylorMade and for the Russian operations. So one-off effect in the area of 80 million, but I might have been mistaken.

What we communicated in the second quarter, I’m happy to repeat was our expectations for the second half included obviously the poor trending of the business in terms of margin in both Russia and also in TaylorMade-adidas Golf, and we used that to explain why the total year for 2014 would be down. But the restructuring is just in the TaylorMade and that’s as I said about €10 million and already booked in the third quarter.

Okay. Thanks for the clarification.

Hi, everyone. Thanks for taking my questions.

Again on Golf, please. I’m just curious to hear what the sort of new normal at TaylorMade would look like in your view.

So I mean it’s quite some time since we’ve seen an EBIT margin for the brand. And obviously it’s that segment should be profitable again next year.

But what’s the sort of mid-term target corridor, considering the structure changes in the industry and also your new setup post the changes at Adams were first and so on. And secondly briefly on U.S.

again. So obviously TaylorMade is U.S.

heavy, but can you lever it again and how are you seeing Adidas and Reebok trends brand selling? And that would be it for my side.

Thanks.

So, let me start with the second question, the U.S. Obviously, as I said before, really when we look at to the Adidas and to the Reebok performance, especially in the third quarter with 12% and 7% up, then we are quite satisfied with the exception of America.

As I said, we are stagnating in America. I am positive for 2015 that we are growing again in Adidas; Reebok will be more flat, because as I said we are closing factory outlet, having cleared a lot of products and want to compact to more regular sales in Reebok.

But for Adidas, I definitely expect the growth in 2015, but one that will not happen overnight. So, we have not changed the management; we’re investing; we want to have a quality distribution; we have to spend more for Boost as we just said before, but we definitely want to build a sustainable growth business in U.S.

The first one was to TaylorMade. Yes, I think you were asking why we’re confident in growing our profit in 2015 and going forward.

First and foremost, we will have a lower revenue base in the future as we head in 2012 and 2013 but we definitely will have less clearance sales. As I said we’re bringing in much more new innovative products and you will see already some.

And as I said, the new drivers are coming in January next year, so not far away from today. This should -- less clearance sales, this should give us a better margin.

And on the other hand we will have an improved cost base as I said and therefore our profitability will grow, will be there in 2015 again and then will be growing going forward.

Yes. All right.

Correct me if I’m wrong, but I think 2006, 2008 TaylorMade was sort of delivering 8% to 10% EBIT margin. And I mean there is a big gap between turning Golf profitable again.

And are we ever getting back to those margins? So, what’s your best case assumption in the mid-term for TaylorMade and Golf?

Yes. This is definitely correct what you said with our margin.

This is definitely our target and we will get to that as I said on the lower revenue base but all the measures which we’re doing helps the revenue business which gives us higher margin, lower cost base and this is definitely bringing us back to the margin which we had in the past.

All right, thanks.

So, with that ladies and gentlemen, that completes our call for today. And thank you very much for your attention.

Our next communication will be on March 5th for our full year results. So, enjoy the rest of the year and the holiday season.