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. If you would like to ask a question, you may do so by pressing star and 1. Press the star key followed by 0 for operator assistance. It's my pleasure, and I would now like to turn the conference over to Sebastian, Head of IR. Please go ahead, sir. Thanks very much, Francie, and good evening, good afternoon, good morning, everyone, wherever you're joining us today virtually for our full year 2022 results conference call. Our presenters today are our CEO, Bjørn Gulden, and our CFO, Harm Ohlmeyer. You can see the agenda here. Bjørn will kick it off in a second with his opening, followed by Harm, who will recap our financial year 2022. Bjørn 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 2 in order to allow as many people as possible to ask their questions. Having said that, we're obviously looking forward to your creativity, how to extend that limit, interpret the number 2 in your very own way. That's for later. There's lots to discuss today. Without any further ado, over to you, Bjørn. Yeah. Thanks, Sebastian. Hello, everybody. I guess this is strange listening to me on an adidas call, but that's how the world is. I have to tell you that this has been seven or eight very busy weeks, you know, to understand where the business is and look upon what resources and possibilities we have. I would like to say that, you know, I'm actually proud to be here. That might maybe sound strange after what I've told you when I was on Puma, 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 I left there. I think it's fair to say after 9 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. Having been there for 8 weeks, I'm extremely, what should I say, 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. I think before that, I'll give it over to the Adi expert,.m, so you can tell us what happened in 22. Thank you, Bjorn, thank you, Sebastian, and warm welcome from my side as well. Good morning, good evening, good afternoon, wherever you're dialing in from. Of course, it's a pleasure for me to talk about, you know, 2022. Of course, it was not just a disappointing year for me as a person, but definitely more importantly for adidas as well. We clearly did not perform as we should have performed, and I will get you through some of the details. Of course, there have been a lot of bright spots as well. After several years, sport took center stage again in 2022, Real Madrid winning the Champions League, Benzema winning the Ballon d'Or, the three stripes at the heart of UEFA Women's Euro. Germany, unfortunately, only coming in second, played very well, brought the, you know, female soccer to a different level. Ultimately, the FIFA World Cup, with Argentina winning and also that privilege, you know, being part of it, live in the stadium was a fantastic final. We also dominated running with adizero. We won, you know, more marathons or major marathons and combined all other brands together. We brought these athletes to our home turf here and helped 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, you know, bringing home gold. Also product highlights, whether it's the Y-3 kit with Real Madrid or the X Speedportal, you know, campaign, 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 Spinova Hoodie, Agravic Flow 2 for the trails. We launched sportswear as well, with the capsule collection focused on the Gen Z. A lot of collaborations with great, you know, creators out there, whether it was Pharrell or the collaboration with Gucci, just to name some. 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. Also the commitment to gender equality with I'm Possible campaign definitely, you know, took a lot of hearts out there. We shook up the marketplace with the bra revolution, and there's more to come, but clearly focusing on a better offering around bras and tights to win the minds of the female athletes as well. We continued the run for the oceans with almost 7 million people, you know, joining around the headline of end plastic waste and saving our oceans. The world's biggest football family reunion, dedicated campaigns spotlighting the fun of the game around the FIFA World Cup. Again, Rick and Morty, X Speedportal excited the younger football enthusiasts out there. You can see a lot of things that we excited the consumer with. Of course, we had a lot of you know, company and market specific challenges as well. Of course, the war with Ukraine, tragedy still and, more than 1 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. Of course, unfortunately, the termination of the Yeezy partnership, which definitely weighed on our, you know, top line and our bottom line. Again, you heard me saying that many times, if you lose 3 profit pools in 1 year, it has, at least it's marked on the P&L where we see it here. Net sales 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 EUR 254 million, according to the guidance that we set as well. Clearly we had planned for a different year. We originally had planned, you know, double-digit growth. We originally had planned a double-digit margin. Very clearly, after several, you know, profit warnings, this was not the year that we wanted to talk about. Very quickly we come back, how we wanna talk about 2023 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. We look at North America up, you know, 12%. Strong sales through of our product launches in football, running and outdoor. Latin America also double-digit growth, strong growth in both performance and lifestyle. APAC, strong growth again in outdoor, football and running and lifestyle was down low single digits. Overall, the profitability is still very good in EMEA and Asia-Pacific and in Latin America around or above, you know, 20%. Of course, you know, Greater China declining 36% was not what we were planning for, especially the profitability with only 10% is far away from what we used to see from Greater China. Also important that we are growing nicely in the performance categories overall, plus 90%. Again, football growing significantly based on the products that we launched, whether it was the Predator or 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, you know, net sales or the World Cup net sales. Running growing double-digit. 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 2023 and 2024. Outdoor was a very balanced growth of footwear and apparel. U.S. sports, definitely the highlight with Patrick Mahomes being the MVP and bringing the Super Bowl home, you know, for the brand. He's probably the athlete in the U.S. right now. Very glad to have him, you know, with us. There's more to come from him. We shouldn't forget golf, you know, after the, you know, COVID restriction, definitely a category that was growing nicely also for us. All of these categories are growing double-digit. A good foundation for what we need to do in the future. When it comes to lifestyle. Bjørn will come back to this in more detail. Clearly disappointing what we saw from a commercial offer in sportswear. There's definitely opportunity for the future. We launched the casual collection. Some of the offers could have been, you know, better there. Originals, great collaborations with Gucci, Bad Bunny, Pharrell Williams, driving hype. Again, commercially, we should have and we will do better in the future. That is something that Bjørn is gonna 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-com grew 4%, still reflecting some higher comes from early last year as well as some, you know, online fatigue after markets, you know, were opening up again and consumers moved more to the physical space. North America and LAM D2C as a whole, and e-com both, were up double-digit. Again, we shouldn't forget, wholesale is still 61% of the overall business and plays a significant role, not just in 2022, 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, where the net sales were down 1%. What has really happened there, because originally we wanted to grow around 20% in the fourth quarter. Of course, there was around EUR 600 million of Yeezy business that did not happen. Originally, we said EUR 500 million, but we also took some returns from our wholesale accounts, so it actually rounded up to EUR 600 million. Of course, there was something we decided, significant inventory takebacks in China, given the inventory situation that we have and some of the closedowns and then the opening up of the Zero-COVID policy, where actually consumers did not go out. That's where you see the minus 50%, which again, was not the original plan. Of course, these two effects, you know, weigh on our, you know, quarterly results. When we look at the P&L in more detail, again, no surprises here. You have seen it already twice, on the 9th of February and this morning. Again, I don't want to spend too much time on it. Gross margin down. I give you some more details on the next chart. The 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. Of course, one-offs that I go into more details of around EUR 300 million. The tax rate was up as well because some of the expenses were not tax deductible. That is something that you should read into the tax rate. More importantly, the net income, around the level where we guided was EUR 254 million. Also there were one-off cost of EUR 350 million in there. When I go to the one-off cost, something in more detail, EUR 59 million on the gross profit. That was a decision to wind down the business in Russia and also higher provisions for customs-related risk. There were operating expenses around EUR 253 million. Again, most of it linked to the Russian wind down, the settlement of the legal dispute, and some restructuring costs as part of our business improvement program that we, you know, booked in the fourth quarter. So overall operating profit impact of EUR 312 million. Then with some puts and takes, in between operating profit and net income, there was overall a EUR 350 million impact of one times in 2022. We come to the gross margin, the biggest factor here, was 400 basis points of supply chain cost, where it was higher FOBs, higher freight cost. They were definitely peaking in the third quarter. They're coming down then slightly, and we definitely talk about that as we move into 2023 as well. What's happening on FOBs and also freight costs. That was the most meaningful factor. When it comes to the category channel and market mix, most pronounced is China there, as it has been a significant profit pool in the past. Slightly, you know, downward trend on the FX that was originally planned to be positive as well. Inventory write-down covers the situation that we have. You should look at pricing and discount as a combination. Of course, we priced up, as the consumer wasn't as, you know, sound anymore, there was some discount, you know, required and 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 EUR 6 billion at the end of 2022, this already includes an inventory of Yeezy of around EUR 400 million. This is an overall increase of 49%. Again, that is the value. In volume, it will be less. You should see that in relation to the Vietnam closures last in 2021. That impacted the year-end inventory in 2021. Some FX as well, also the cost per piece increased and the lead times were longer. It's not one-to-one comparable. Still too high, very clearly. That's what we're working on. We are focused on, first and foremost, North America, and to some degree, Greater China. We made good progress in Greater China in 2022 already, and also in the first couple of months. Clearing excess inventory, where it's needed. We are focusing on apparel first and foremost, because footwear is easier to, you know, carry forward into other quarters. We significantly decreased our buying volume going into not just spring/summer 2023, but also more importantly, fall/winter 2023. We are technically repurposing some existing inventory, again, primarily on footwear. Also where it makes sense, moving it to markets where the demand is higher. We believe overall, depending on the market, we'll be in a much better situation in summertime. We still need to work through this one over the next, you know, 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. You remember that we probably were best in class in the fourth quarter, 2019. We dealt with that during COVID in 2020. We know how to do that. It always takes some months and quarters, but we are very confident that we will do it again. I mentioned what we are doing already, you know, buying less, clearing the inventory where it makes sense. This will definitely normalize again, you know, 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 2021. That's why we accelerated the share buyback in the first quarter 2022. We also, you know, returned the proceeds of Reebok back to shareholders at EUR 1.5 billion, so over EUR 2.5 billion in a share buyback, EUR 600 million dividends. Quite honestly, that was not the plan to build up that inventory that significantly and reduce it to that level. Clearly we overshot a little bit. It was the plan to reduce the cash position on the balance sheet, because back then we had negative interest as well. That has changed very quickly. It gives you an idea how we get from the EUR 2 billion adjusted net borrowings the end of 2021 to the around EUR 6 billion by the end of 2022. When you look at the rating KPI, the most important one for us is the leverage ratio. We clearly have the goal again, probably not in 2023, with some ups and downs, but clearly in 2024 again, to get back to our financial policy to get the leverage ratio below 2. We are going a good direction already in 2023, but I can't promise you right now that we get below you know, 2. Clearly in 2024, that is the goal to get there. All of this was discussed with Moody's and with S&P. Moody's gave us two notches down now on A-minus and Moody's on A3. As you all know, this is still a strong investment grade, with a negative outlook, unfortunately. This is that we are committed to, and also me personally as the CFO, to get that in the right direction again. Again, still a strong investment grade, but not really what I had planned for again in 2022. When we look at the dividend proposal, we are proposing EUR 0.70 on the shares outstanding of 179 million. That would be a total payout of EUR 125 million on the net income reported of EUR 254 million. This will be at the higher end of the payout ratio that we always gave a range of 30%-50%, and we move to the higher end of this with 49.2%, but believe that is also the right measurement given where we are as a company and where our situation is. That is really where we are for financials. No surprises in this. Happy to take some questions later on, but I also want to close before I hand over to Bjørn. The World Cup has not been the turning point for the company yet. Believe me, being there personally, being, you know, more than 100 accounts and customers that we had there was a lot of people, you know, of our company as well. There were a lot of tears in their eyes, a lot of happiness, bringing the trophy home. That was definitely a pleasure and a turning point for me personally. Back then, I was looking forward to January to hand over the baton to Bjørn. This is what I do now again. Okay. I hand over to Bjørn to talk more about the future. Thanks, Harm. Let's hope for us that Messi doesn't have his best day today. You know, he's playing for Paris against Bayern in Munich. Let's hope he has a bad day. It's more important for us that Bayern gets through. I've been here for almost 2 months, and I thought it would be worthwhile giving you a short look back what I've seen and talk a little bit about what I think that means. You know me as always, to get you in the right mood, here is Adidas. I think there's no doubt that this company is rooted in sports history. I've said it many times. I mean, this small town created the sports industry, of course, Adi, with his 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. When you look at the marks of the brands, I think there are a few companies in the world, regardless of what industry that has these kind of brand 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. I think the awareness, and the consideration of actually buying product with these logos is very, very high all over the world. 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 a credibility in fashion. When it gets to connecting to the street culture, which we all try to do, I wouldn't see many companies that has the opportunities 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 said, 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. I think it's much easier to complain about sports than it actually being part of it. When you see these kind of relationships, that tells you how rooted we are and how sports are organized. When you 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 they did last time. Although we also had a very good relationship with them in my previous company. 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 licensed market. The same thing goes for the athletes. I mean, we have the roster of athletes in all sports that is incredible. In America, in team sport, in individual sport, even in winter sport, with Mikaela. I think I also would like to say that you will see us invest more again, also in smaller sports and widen our portfolio. I think the DNA of adidas has always been to develop product for all kinds of sports. I think there was even an 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. 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 adidas used to be, in the smaller sports. Then adidas has been criticized for not creating brand heat enough, and, you know, not doing enough. I think if you look at that slide, that's the collab partners that adidas had over the last, I'd say 18-24 months, Moncler, 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. 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. The fact that all these four brands came to Herzo to go through our archive to work with us, on different franchises, has been, you know, a fantastic recognition of who adidas is. When I see the list of brands who wants to work with us, I feel we're here in great shape. If you then look at the famous world of street culture, I think Pharrell, Beyoncé, Bad Bunny, now also Jenna Ortega, again, the lineup to connect, to that culture is unique. Again, I think we have the resources and the scalability to really create brand heat there again, and that is of course, what we will do. Pharrell now also being the lead designer for LVMH on the men's side is of course, probably the hottest designer out there or creative at all. Him moving to Paris and being closer to us will of course also be very, very important for us. I think Jenna is probably the hottest, I would say, female connector that you can actually sign. Her impact after two weeks has been very, very, very strong. I also have to say that the state-of-the-art resources that you here find, meaning the infrastructure, is unbelievable. When I see the campus we're now sitting at, but also our offices around the world, Portland, Shanghai, and since a couple of weeks in L.A., I mean, it's unbelievable what we have. Here in Herzo, we have a science center for sports, which I've never seen anything like it. We have AM Factory, we have stitching lines, we have 3D printing machines. We have all the resources that you need to do innovations. The working environment that our people have around the world is, in my opinion, the best that you can have. The groundwork for having talent working in a creative environment is great. Same thing on the tech side. Artur has spoken a lot about tech. When you see they have 6 hubs where people are sitting, programming for us, different applications, working on our tech side, again, something that I'm not used to see. It's obvious that we have invested a lot on this side and also of course, for future growth, because it's obvious that the payback on this investment has not been there yet because the growth is not there. The pipeline we have when it gets to applications, when it gets to our analytics and our digital business is unique. 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 high-low 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. 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, Scheinfeld, where we have the capability to make very many different shoes. Here you see, for example, Copa Mundial. 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 a jewel that we haven't utilized. Me being a product freak, I think you will see us using this more than we ever done. Don't forget that shoe competence in Europe is not that easy to find and create, and we can use this, you know, as an education center and make sure that we never loses the focus on product, especially footwear. We talked a lot about distribution centers. Yeah, I think a challenge for many companies, the fact that the multi-channel distribution creates a lot of what should I say, new task for our DCs. It looks to me what I've seen, that adidas has invested a lot. That of course now we have an overcapacity because we have built, you know, distribution centers for future growth. Again, I think having them and be ready for the future is better than not having them. 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. The time when we were a German company exporting is over. This is a true global company. Of course, having 39% women in leadership is not good enough because, you know, 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 adidas, at least from the outside, you know, about negative culture and people not liking to work here. I think if you look at the different research that has been done, here are 2 examples, then adidas scores very, very high, in what should I say, in many research. Here just 2 examples out of many, many, many hundred companies, in all the industries, 16 in the Forbes and number 5 in Stern. As far as I could see, actually way ahead of also our competitors. I think there is a perception that this is not a great place to work, which is very, very wrong. 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 industry, 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. 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're saying. We all know that this will never stop, and we will have to continue to develop. Also here, I would say, it's a big check. 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. 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. You know, all of you have discussed this with me many times, performance is more difficult to create than fashion. 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. 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. I can tell you from the inside that both the running and the football line going into 2024 is excellent, and I'm not worried about this at all. On the performance side, as I said, you know, we added Italy, again, a little bit strange, but I have to say that Italian teams always look good. They did that with Puma, and now they look great also with us. Of course, happy that they are with us. I think it was a fun thing that adidas did, and has nothing to do with me, but, you know, 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 is, like, what should I say? The shoe carries him 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, you know, the trends in soccer by doing triple black and triple white shoes is working very well. As I said, the market share that adidas 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 adidas. When you look at running, the Boost technology has been there now for 10 years, and we know it's the most comfortable technology and never probably been as strong on the performance side. That's why the Adizero product that you see here has been doing unbelievably well. It's now a good, big business for us. 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, they probably right when they say that. 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. Sports marketing, and the product people doing a great job in running. I have seen also the 2024 line where they will bring back the Supernova. I think we will be super, super competitive in running going into 2024. Outdoor, I think the idea about putting all the outdoor product that they have under one umbrella, the Terrex brand, has worked very well. Those of you who know me know I'm a mountain freak, both in the summer and the winter. I can tell you the product is excellent. This is, meantime, a business, I think about half a billion. 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 float, both in the winter and in the summer. Also on the sports marketing side, you know, 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. Golf, new to me without clubs, but, you know, the apparel and the footwear businesses golf makes us actually market leader in many markets. Again, golf, we talked about that before too, has had quite some momentum during COVID, and coming out of COVID, the activity seems to keep high. We have very smartly kept our golf business outside of the normal adidas business. It's run out of Carlsbad 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 great growth perspectives. The performance side, I would say is in check, and that is very, very good to see. It's also good to see that our innovation pipeline and the resources to do innovation, from technologies and applications is great. 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. The issues that are negative and where my friend Harm has problems with the numbers is on the lifestyle side. It's a little bit ironic because when you look at the original business, the sportswear business, and of course the Greater China business, when you combine those three, you have all the elements to be successful. Unfortunately, I think that during COVID, and during, you know, the last couple of years, we have not probably utilized this in the best way. We've had too many franchises with too high inventory and too much discounting. You have the Greater China business, which again, in my opinion, 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 adidas, both in the products, 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, is in my opinion, next to nothing and or better than anything. Losing that is a very, very tough thing. 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&As. What is positive is that we currently have maybe the hottest shoe in the market, in the segment we call Terrace. It is the Samba, the Gazelle, and the Spezial. You see on the right side, actually a mock-up or, what do you call it? Pop. Pop-up store that we made in Shanghai two days ago. Team put it up very, very quickly. One shoe model. As you can see, people are lining up to buy only one product, and the product you can only buy in white or black. To help you a little bit, to be knowledgeable, you can call it Terrace, or you can call the shoes T-Toe, because as you see, the design has a T on the toe box, and all the shoes in this, what should I say, design direction is doing extremely well. For us, that's the Samba, Gazelle, and the Spezial. 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. It's a very, very fast growing what should I say, franchise. The good thing for me is 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. I can't remember last time I saw that. Again, look for the Samba, look for the Gazelle, and ironically, also the Spezial, which was actually a humble shoe that even I used when I was playing, which probably tell how old I'm getting. Again, an anchor into the fashion world, and I think something that if we manage it correctly, can be millions or millions of pairs. 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 overdistributing it, so we start to discount. You should have a look and judge how we're doing, but I'm very optimistic. When you look at the geography, Harm showed us that Latam, a very, very fast-growing market, I think it was 44% that he showed, it continues. Strong growth in the emerging markets, which funny enough, are those that are also growing the fastest. It looks like we have a good, I would say, start in all those markets with subsidiaries, and with good setups. 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, what should I say, 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. 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's some pictures of the marathon in Beijing that we sponsor. 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 lifestyle-ish, 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 I 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 60 in the world. 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. Of course, that is to try to explore as quickly as we can, the comeback of China as a market, but also the growth that we experience to see in performance. 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, you know, 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 test 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, you know, we are looking forward, and hopefully see a positive reaction on. As I said, people coming back to the stores, here's another one to buy our T-Toe or Terrace shoes. Again, I cannot remember having seen people lining up to buy Adi products for a long, long time if it wasn't Yeezy, 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, 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. Especially if you follow all the sector, you will see that a lot of online people are of course overbought, which makes you know, it a little bit difficult, and high discounts. I think we're still uncertain about, you know, the macroeconomic, you know, 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. Overpriced product 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 brand heat. 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. I think it's fair to say that it's the most difficult market for non-American brands. Inventory level, in the industry, even higher there, not only with the retailer, but also with the brands. 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 brands and the retailers were making their best results ever. We're back to over-inventory, and here we go again. Of course, it's hurting both retailers and us. Again, it's 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. Retailers 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 2024, 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 then especially in the U.S. On the positive side, you know, our partners in the U.S., I think Patrick, you know, winning the MVP at the Super Bowl, probably being the hottest male athlete in the U.S. right now is of course a positive for us. I think also in basketball, you know, with Chapter One and Chapter Two, which has been our launches, we have made huge progress. You know, again, told you many times, the reason why you invest in basketball on the court is of course to sell off court. Again, needless to say, the archive that we have in basketball is huge. I think what you see the next couple of months, we'll be launching Fear of God with Jerry Lorenzo. You will see take of this both on the performance side and on the street side you've never seen before. I'm extremely optimistic about that because I think it's going to be a game changer. 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. You know, our business is 50% rational and 50% emotional. I still believe that there's no machines who can 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 a reason to have fun and be part of a successful adidas. The optimization of the business model going forward, surprise, of course, 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. I will not even give you a target what I think it will be, because I think as we 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 that wholesale is the least profitable channel. I think that is a big misunderstanding depending on how you're actually looking at the business. Global, regional, 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 models are also different, and for us, having creation centers in Tokyo, Shanghai, in the US, now also in India and Europe, we will go more local. Here you see some examples what we did in China for Chinese New Year. It's obvious that you will look at different dimensions of the business model, and that we're much more local than adidas has been before. Speed and agility. You know, our previous friends, and I'm sure, Moritz, you're listening to this call, had the best, what should I say, year in 2022. I would say that's because of the speed and agility that Puma had. I think that's something that we all have to get. There is a big need in a market that is changing to be much faster than adidas currently is. Brand heat. There are many ways to get brand heat, but unfortunately, there is not a phone number where you can call and say, "I want more brand heat." It's the sum of everything we do. It's athletes, it's teams, federations, it is of course, celebrities, it's street culture, but also here, it is 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 heat as we can. As you know, adidas has always been able to come back again when the brand has been down, and I'm convinced we will do it again. You know this slide, it's from 1993. It's the core of the business, and you know, 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. Everything we do in this company should be focused on this, and it's actually to support it. A lot of the tech things are just to support this and make us better in doing it. We should never forget that because this is and is going to stay the core of the business and our income stream. In 2023, we will build the base for the future by focusing 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. Of course, we are there for the athlete and not the other way around. I think if we do this, over time, we will again be the best sports brand in the world. Short term, the geopolitical tensions are there. We of course, hope that things will calm down, but we don't have any 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 costs, when I look at a lot of the cost driver, that seems to ease. Inflation and different, what should I say, developments are still uncertain, so we have to have that into account. 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, you know, 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 a high single-digit decline in our sales, and break even profit on our ongoing operations. This is based on not selling any existing GC inventory, which then, you know, like for like, would then take EUR 1.2 million away from our top line and EUR 500 million from our EBIT. On top of that or below that, we are looking actually at a loss of EUR 700 million, which will happen if we write off and not sell any of the inventory that we have of GC. That is the EUR 500 million. Amid all the things going on in the business, we are looking at a one-off of around EUR 200 million, which then, if you put it all together, brings you to the minus EUR 700. 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, you know, extended his contract by five years, so he's now running parallel with me. We know each other since 30-ish years. 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. For me to have a very strong CFO that also understands the business, although he doesn't understand football, but he knows a lot about the other side. He will be, you know, my most important partner, and make sure that we together do all the right things. 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 adidas would not be where we are if it wasn't for him. I have known him also for more than 30 years, and we have over the last 2 months have a lot of conversations. We have then decided that one of his, I would call, trainees, Artur, 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 a adidas guy up and down. He's run Originals, he's been in different sales 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. Again, a big thank you to him, and a lot of expectations on Artur. On the brand side, brand for us means creative marketing and the business units. Brian came in I think 4 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. You know, when you have a new CEO coming in like me, and you have so many things that you wanna do on the brand side, very difficult. 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 a friend, I'm sure he will be three stripe branded for a long time. That's the changes. That means that the brand or the company will be led by this. We talked about me, Artur, and Harm. Amanda will stay on leading the human resources and the culture, Martin is running global operations and IT. That's the team we are going into, what should I say? The second half of this game. We're currently down 0-2, we think we can actually turn things around. With that, I think we've spoken enough, so I'll hand over to Sebastian and he will tell you what to do. Exactly. Friends, we're now ready to move into the Q&A session. Thank you. Ladies and gentlemen, we will start the Q&A session now. Anyone who wishes to ask a question may press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. Please limit yourself to 2 questions only. Anyone who has a question may press star followed by one at this time. 1 moment for the first question, please. We have the first question from Zuzanna Pusz from UBS. Please go ahead, ma'am. Bjørn, Harm, and Sebastian, thanks for the presentation. This is Cristina Hong from UBS, asking on behalf of Zuzanna Pusz. Thanks for taking my questions. I have two bigger picture questions for Bjørn, 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, you know, the brand has increased exposure to the lifestyle business to almost 50% of sales in recent years. We're just wondering, what's your view on the ideal lifestyle and performance sales split? Is it right to assume that, you know, given the technology involved, the sports performance business tends to carry a lower gross margin on average than the more fashion-driven product? That's my first question. My second question 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 a strategic update yet, so you won't be able to share much when it comes to your 2024 margin plans. Given the magnitude of profit drop in 2022 and also 2023, would you be able to help us understand a little bit more about how we should think of the cadence of the margins recovery trajectory in the coming years? Is it fair to assume that and it'd be more beneficial for the brand to maybe focus initially on sales growth instead and slowly build up from break even to the long-term double-digit EBIT margin? Is the underlying profitability of this business currently well higher with the brand being well invested, 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. 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 will make us different than all the other brands. I do think that adidas should keep the DNA of not being a copy of Nike, but we should stand on our own feet. You are also right that if you measure, you know, the real performance product and you compare them to lifestyle product, the margin on lifestyle is normally higher. 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. I think there's many categories where, you know, up to 80% of the product goes on the street. If you take football, it's not the case because no one is running around with football boots. 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. I think the street business is much bigger than 50%. I think for the brand, we need to make sure that we never, ever lose this focus on performance. When you see the development, I'm actually very, you know, relaxed when it gets to that because we are making progress in all the performance categories that we are in, and the pipeline on 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. As we said, you know, 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, you know, 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 2024 and going forward, I think it would be very premature for me to give you that after seven weeks here in the office. Those who know me know that I always said that a good running company in this industry should run at a double-digit EBIT. This is where adidas 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, you know, combine, a margin increase, with a leverage on our operating cost and what that trajectory is, I think it's too early to say. I'm very confident, that, you know, 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. 23 is to, what should 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 ourself, you know, see what I call a normal business. I would appreciate if we can leave it by that instead of trying in a spreadsheet now to define what the different components are, because I think it's too early. I can promise you that I will deliver you 10% EBIT before I leave this company. Okay, that's super clear. Just a little small clarification from my side, if I may. Is it fair to assume that it sounds like double-digit margin in the long term it's quite confident, but in terms of your initial focus, is it fair to assume that maybe it's gonna 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. First you need to think about that I have a GC business that is disappearing, so I'm actually losing sales. I have inventories that I need to sell and clear. 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. As we, as we do that, of course, we will have growth again next year. 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. Going forward, and again, not a surprise, I think that a company like ours should have, you know, double-digit growth and put some of that growth to the bottom line and some of that growth to investment in marketing. 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. What speed, how quick, and when it turns, again, let us get a little bit more time. Okay. Thank you very much. The next question comes from Graham Renwick from Berenberg. Please go ahead. Hello. Good afternoon, Björn, 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 2024 and 2025. Wondered what's captured in the EUR 200 million of strategic costs, and does that already include any organizational changes or any bigger investment into marketing and the commercial proposition? 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 gonna be a big sports event year, of course. Secondly, just on the business improvement plan. It was announced before your arrival, Björn, EUR 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, you know, having to reinvest more into the business? Thank you. You know, since these are things that happened before me, I think it's fair that actually Harm answers it, so I don't just say something wrong. Harm, you take over. Yeah, I'll probably start, Graham. With the EUR 700 million business improvement plan. Of course, that is fully reflected in our guidance that we gave, whether it's underlying and it'll break even company or if we would decide to write down the inventory of EUR 500 million, we get to the minus EUR 700 million. It's fully baked in there. As we said the last time, this is not all in comparison to 2022. This is mitigation actions as well because we saw FOBs, you know, increasing. We negotiated some of the, you know, freight contracts as well to bring that one down. We kept our ratios in marketing going into 2023 on a lower net sales base, so compensated for all of these. All of that is reflected. Overall, we mitigated the cost increases that we have seen. We also had some one-time cost in Q4, whether it was the closure of the one other retail store, whether it was some, you know, severance to right-size the organization that was reflected in Q4, we will take the benefits of that, you know, going into 2023. All of that has happened. Again, all of that is not a comparison to 2022, it's mitigating actions. Some is actually a reduction compared to 2022 as well. Of course, when it comes to additional EUR 200 million in 2023, this will be part of our strategic review. Again, bear in mind, Björn is only here for two months, we have looked a lot of things. You know, I expressed, you know, my opinion about what we should do and should not do, we need to vet all these things with the new team in place now, and will come forward. Of course, it will be all elements, whether we need to invest more, whether we need to, you know, review some of the new stores or review the organization. All of this, again, we don't want to be too detailed right now and too specific, but we believe EUR 200 million would do a lot to get to profitable growth in 2024, and that shouldn't take anything away from what we need to invest around the Olympics or the European Championship on home turf in 2024. We're well prepared for that. Okay. Thank you very much. The next question comes from Erwan Rambourg from HSBC. Please go ahead. Yeah. Hi. Thanks a lot. Erwan Rambourg from HSBC. Good to hear you, Björn, and good to hear you as well, Harm and Sebastian. Just wanted to follow up a bit on the long-term algorithm of growth. 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, you know, 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. Then just talking about the big hiccup of the day, looking at Yeezy, I'm just a bit confused by a few press articles around the solutions to Yeezy. 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. I'm just wondering what options do you have to treat the Yeezy stock that you have today? Thank you so much. I ask you. If you can't sell and you can't destroy, what's your option? Well, that's why I'm confused. I'm not running the brand. yeah, I am confused. 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? Please don't destroy. On the other side, please don't sell because you have a reputation issue. 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 EUR 1.2 billion in sales and EUR 500 million in profit, that's one extreme, you know? 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. 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 that we do something good. That's what we're talking to. Many interesting parties, you know, people that has been hurt by what should I 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. Yeah. we and the brand had to make the decision, should we finish the product or should we just stop it? In the interest of 10,000 of people that were working in the factories, Adidas decided to continue to produce all the components and then ship them to different destinations. 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. We couldn't really do anything before now. Now, at least from a logistic point of view, the product is there and we can decide what to do. There is still a lot of uncleared, what should I say, conversations with different parties that is going on. At a time when we think we have all the facts, we in 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. That is. You could eventually end up making a big gesture to a charity or. Of course. Um. Sure. Yeah. Yeah. Sure. Okay. Of course. Of course. Okay. The people that are saying send the shoes to Turkey or somewhere that where people don't have shoes or there has been a tragedy happening, I think you agree that this is not normal shoes. If you did that, they will come back again. Yeah. The value of the product is not the physical value of the ingredients. It is the premium- Yeah. because it's a branded merchandise that is sold at a high price. I can tell you since I started here, I probably got 500 different business proposals from people who would like to buy the inventory. Again, you know, that will not necessarily be the right thing to do. A very difficult, sensitive situation. I can just repeat, if you look at that business, there's no doubt that Ye is one of the most creative people that have ever been on the planet. I think Mm-hmm. The way this was taken to market is probably the best, I would say, go-to-market, job that any brand has done. Right. Right. You know, it's very sad that this is falling apart. So... Right. Right. Okay. Then maybe on the question of, how would you compare to Nike on a very long-term approach? Yeah. You know, 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's. I think going forward, there's no reason over long term that we should not be performing like Nike is doing. Will that happen tomorrow? No. 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. No, not really. Excellent. That's great to hear. Welcome. Hope to speak soon. Thank you. The next question comes from Geoff Lowery from Redburn. Please go ahead. Good afternoon. 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 some things so right and yet missing so badly. Is this just a case of speed? Is it a 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 sort of hit and miss quality to? Thank you. 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, you know, chase the business wherever it was, I think Adi was very strategic, and we're going for growth. I think we're much too optimistic about 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, had a momentum, then COVID hits, then you have a strategy change that is going for more growth and more D2C. I, and I just think that the circumstances didn't fit that. Thank you. I do think that the circumstances was making it difficult to reach those targets, and that made things difficult. Understood. Thank you. The next question comes from Warwick Okines from BNP. Please go ahead. Yeah. Hi, thanks very much. Similar line of questioning, really. Your comments to me suggest that 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? What do you need to do in order to do a better job in lifestyle? I think what I said is that the criticism that Adi hasn't brought innovation and performance is not true. Again, I always ask, what was the last innovation that Nike brought? Because you're always comparing it to that. When I look here at the 3D printed shoes, or 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, you know, creating trends, creating stories, using your archive, tweaking your archive, has been too slow. That might have to do with empowering people to be more creative. I think it has to do with being more executional than strategic. I think I'm disagreeing that adidas has all the resources to bring innovation, both from a lifestyle point of view and a performance. 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 inventoried because of too optimistic sales plans, therefore being hurt again on the discount side. That's why the lifestyle side and the brand heat has been missing. At the same time, you know, doing Prada, Moncler, Balenciaga, and Gucci within 18 months is also too much. Again, that is probably because, you know, COVID and the timeline and supply made it all be delayed. Suddenly, you know, the delayed projects went into the on time project, suddenly it was all at once. I think some of the street culture relevant things, if it's Pharrell or Lorenzo or Beyoncé, you have to remember that a lot of these artists and the people that have youth potential has not been out there for the last three years. You know, there hasn't been any festivals. There hasn't been any tours. There hasn't been any releases. I think a lot of the places where we again can create brand heat and a lot of excitement has kind of been hampered by many things. And at the scale that Adi is, it has not been enough. Speed, empowerment, timing, discipline are probably the elements that has made it difficult. 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. Thanks very much, Bjørn. The next question comes from Jürgen Kolb from Kepler. Please go ahead. Yeah. Thank you very much. Welcome, Bjorn, to adidas on the other side of the street. Two parts of the question from my side. One is, you mentioned Scheinfeld, and it sounds as if you're thinking about maybe rolling out a little bit more own 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? If so, is that going to be meaningful, or is that just really for special makeups that you have on mind? 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. 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. First of all, Scheinfeld is a factory 40 minutes away who has traditional making shoes for 50 years. I think what I tried to signal is that, you know, shoe competence is not easy to find today, at least not in Europe. 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 offshoring on shoe production back to Europe, I don't think will happen. I do think, you know, that we have something unique that no one else has and that we can combine, you know, 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 products, because I think it means something. You know, 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. 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. The question is, what's the high low effect? I have always thought, when I was at adidas in the 1990s and also later, that some of the creativity coming out of adidas in design or development and technologies was coming from the fact that they were working on smaller sports. Again, if that is the result, then it's worth, then it's worth a lot more than adding 100 SKUs to the line. I do think that we need to be careful in not being over analytical. Efficiencies and KPIs on productivity, I don't think 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, you know, more efficiencies on the SKU count. Again, you know, I'm a sports romantic. I think adidas level is a sport romantic. I think putting that DNA in again will make us different than any other brand. And that is, you know, for me, a small marketing cost compared to many other things we do. 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," you know? It makes us different. Next time you're here, you should go into our archive and see how many, what should I say, special product we have made through the years. What these special products, again, does have done for the inline product, then the connection is there, you know, and we need to do more of that. I think we have standardized too much and become too, what 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 lifestyle side. Mm-hmm. Maybe a small spoiler. Any specific sports you're thinking of? Anything where you sweat and can win medals. Understood. Very good. Thanks so much. The next question comes from Cédric Lecasble from Stifel. Please go ahead. Hello, gentlemen. Thank you for taking my questions. I have two also. First one on your distribution networks today. Could you comment maybe on the, on the wholesale organization, on your store network, on your e-commerce and digital ecosystem? What needs to be fixed, and what are you happy of, beyond today? The second one is on, is on China. Low base in 22, some signs of recovery already. When do you think China can definitely be back into equation? Do you think China can come back to the kind of old top-line growth and profitability in maybe a more open competition? Interested in having your thoughts. Thanks. I think that, you know, we have a EUR 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 go-growth come for free, and will it be as easy as it maybe was? No. Does China have a huge potential for us, with their population and their growing population in sports? Yes, definitely. Again, I don't have a crystal ball, but my feeling is that China will again turn in to be a major growth vehicle for us, when it starts to grow. I'm not saying that it will turn around this year and you should count that in to be, you know, 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. When it gets to, you know, your... Help me again, what was the first? Distribution. Distribution. When you look upon what has happened already, 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. The question is, what is an optimal balance between D2C and wholesale? 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. We should make it very, very clear to the retail partners that that is what we want. That is a change of mind in the sense that we need to stop talking only 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, you know, continuing to invest in all the applications, and the analytics we're doing. We need to make sure that 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, you know, 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. We need, you know, some high-low stores in our major cities, like New York, like Paris, like now in Seoul. 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, you know, 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, in a, in a mall or in a, in a shopping street where all our, what should I, retail partners are, because that doesn't make sense. I think it will be a more targeted brick and mortar strategy, and it will continue to be a strong e-com strategy. I think the way we go to market, I think it will be more, wholesale first and then, D2C afterwards. We will see how long that takes us. Thank you so much. The next question comes from James Grzinic from Jefferies International. Please go ahead. Thank you. Good afternoon, everybody. Bjørn, just I guess a couple clarification questions from me. The first one is, I'm unclear on your thoughts on sportswear and generally, the product segmentation that we saw introduced last year. To what extent can you work with that? To what extent do you think you need to change that? Secondly, did I get it right that you're saying your ambition is basically to compound double-digit growth for the business? That's what you're looking for? 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, yes. Again, in a world where we don't have pandemic, war or anything happening, but the normal world, again, I think that adidas should have the ambition of growing 10% again, yes. Okay. Perfect. 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, and 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're more commercial and that the collections breathe more. I think, you know, 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. 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. We have, I think, all the brand marks we need, but how we're 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. I said speed and agility in the local markets to exploit, you know, 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. 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. Understood. 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, you know, the product architecture is loaded into the channels up until when. Mm. Are you mostly to what extent you're committed as a business to what we saw last year and through to what point? We're trying to get a sense from that perspective. Yeah. You know, this is again, I mean, if you look at it now, we are already now signing off the collections for spring/summer 2024 as we speak. You know, we have the markets in today. 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 the speed of decisions where we need to do things different than the calendar. 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. You will see product that were meant to be in 2024 being pulled forward to 2023. You will see volumes of, for example, the Terrace collection being increased dramatically in 2023, even if the plan was different. You will see products that were meant to be innovation, be pulled into the first half of 2024. 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're not performing. There is a, I don't know what you can call it, but there is a wake-up call to get speed in, and to challenge certain rules and regulations why things are slow. Yes, definitely. Thank you. The next question comes from Edouard Aubin from Morgan Stanley. Your question please. Yeah, good afternoon, guys. Two questions from me. On China, sorry to come back on that, Bjørn, could you please comment on kind of the sell out, sell in 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. Related to China, I mean obviously you took back a lot of inventory, so I guess you're gonna be some of it is gonna be sold in outlets or discounted. To what extent, you know, that could impact, you know, the brand desirability in the next two, three years. That's number one. Question number two on your balance sheet and what it implies in terms of, you know, buybacks and dividend and so on. adidas used to be net cash X, you know, you know, lease liabilities. You're now net debt. How do you see the net debt situation evolve throughout the years? What about, you know, your share buyback program? I think you have EUR 2 billion, you know, more to go. You've not talked about that in the release as far as I've seen. What it could imply, I mean, should your net debt increase, you know, this year, what it could imply for your dividend next year? Thank you. I'll start, and then Harm will take the last one. I mean, the China model has been a push model. You know, remember that almost all the adidas stores in China are owned by retail partners. We sell into them eight, nine months before, they sell through in a quarter and, you know, 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're trying as we speak, it's not been done yet, to go into, you know, reduce the 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 been done before, you will see less take backs, 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 adidas issue, but because of the size of adidas, it has of course had a bigger impact on adidas. 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 at almost a close supply chain. We are working on that very, I would say, focused as we speak, to make it a more pull model than a push model. That has had no impact on the business yet because it's not in place. I think it could be in place at the back end of this year, so it could be fully utilized in 2024. Mark. On the balance sheet, you're absolutely right. The net debt is higher than we originally planned it for by the end of 2022. With the consequence results on the rating that I explained earlier. It's our ambition now in 2023 to course-correct that. 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. We should also keep in mind that we return EUR 3.1 billion to shareholders in 2022, EUR two and a half billion in share buyback, and EUR 600 million dividends. Our priority is, probably not fully in 2023, but, you know, starting to prepare for fully meeting our, you know, rating KPIs again in 2024. Until then, you should not expect a share buyback in 2023. Unlikely also in 2024, because first we need to get the authorization at the annual shareholders meeting in May, which we are proposing to get the authorization because we bought back almost 10% of our capital. Then again in 2023, very unlikely, and then we'll take count again, you're going into 2024. I know that there are EUR 2 billion outstanding from originally, you know, announced, you know, share buyback program, but that is secondary right now. First, we wanna make sure that we're generating cash again. Secondly, we wanna invest into the company because we wanna get prepared for growth again. Secondly, it would be dividends first, and only then we would look at share buyback again. Be patient, stay tuned, it's a focus right now to return to profitable growth first. 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, you know, roughly? Well, again, there are a lot of moving parts, right? I mean, we look at our guidance and, as you say, a lot depends on Yeezy. Whatever, you know, option we are choosing, it would probably, you know, preventing to write down the inventory, if you would sell it at cost. I mean, it's an easy, you know, cash in as well from a calculation. 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 2024 again, what is the reopening in China. Really, even if I would have it, I don't even have it in detail because we plan for different scenarios. The most important thing is generating cash, you know, turning the company around to be prepared for profitable growth in 2024. 2023 is a transition year. That's what we said. Okay. Thank you. Sure. Thanks, Ed. Franci, I'm afraid we're slowly running out of time. That's why we need to take the last question now, please. Okay. That will be from Olivia Townsend from J.P. Morgan. Please go ahead, ma'am. Hi. Thanks for taking my questions. I have two. The first one is on China. I'm just wondering, since you've been talking a bit about bringing some marketing back into that region, can 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? 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 mean around 2028. I'm just wondering, do you have a comment on that? Thank you. I'll take 28 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. I hope you can be patient and let us at least work through some months and show you that we're on the right track, and then we can, you know, formalize, I would say, a new strategy and tell you where that will bring us from an EBIT level. 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're not doing a good job. We need to get there first, or 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 are 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, you know, post things that are more like marketing, that there's no storm being generated, and that suddenly we can be back again where, you know, 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. There's no limitation on their, what should I say, creativity and investment level when things are possible again. Right now, there's kind of a touch and go. You saw, hopefully, in the presentation that we are, for example, spending money on pop-up stores, you know, to actually attract, you know, consumers. We have celebrities then coming into these stores. Without doing something which you call marketing, they are then visible in our business. And that's kind of sneaking, I would say marketing into our business again. 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? Again, we are really, what should I say? Touching the market in a way that our local people are leading. 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 product for 2024. First time that they traveled to Europe in 3 years. It's so nice to be back in the normal world again when it gets to what we used to do. There's so much energy in the Chinese team because remember, they have basically been in and out of isolation for the last 2 years. I would say there's quite some optimism. Again, don't get carried away and then, you know, put your spreadsheet up at 100% growth, because that will not come. I think there's some light at the end of the tunnel. All right. You know, we just heard that there's no 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, Franci. Thanks very much, Bjørn 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. Feel free to reach out to any member of the IR team or myself if you have any questions. You know, we're all very much looking forward to seeing some of you over the next couple of weeks as, you know, we're traveling the world. 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 product. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you very much for joining.