Introduction 250
Financial Performance using Ratio Analysis 1000
Adidas is a German athletic footwear and apparel brand established in 1949 and it operates business all over the world. On the other hand, the chosen competitor organisation for this study is also a Jaaneman based multinational corporation that manufactures casual and athletic footwear and it was established in 1948. It is clear that both companies belong to the same country of origin and the same industry. Adidas operates its business in more than 160 countries and Puma also operates its business in more than 120 countries. Sales of Adidas in the year 2023 was approximately 21427 million euro on the other hand Puma made only 8602 million euro in the year 2023. Adidas has made a net loss of 58 million euros in 2023 whereas Puma has made 305 million euros net profit in the year 2023. Total asset of Puma in 2023 is around 6640 million euros in the year 2023 whereas Adidas has maintained a total asset of 18020 million euros in 2023. Origin and operation activities of both the companies are almost similar for that reason these two organisations are chosen for this study and the financial performance of these organisations analysed below.
Liquidity Ratio
Current ratio is around 1.27 in 2022 which has decreased to 1.22 in 2023 on the other hand current ratio of Puma is 1.66 in 2022 and it has decreased to 1.55 in 2023. Acid test ratio of Adidas is around 0.62 in 2022 and around 0.66 in 2023. Acid test ratio of Puma is around 0.77 which has increased to 0.84 in 2023. From this financial data entry it is clear that both the companies have the ability to pay all its current liabilities using all the current assets, however the working capital maintaining ability of Puma is higher than Adidas. Inventory for both the companies has been decreased in 2023 for that reason the quick ratio of both the companies has been increased. It can be said that the liquidity of Puma is better than Adidas.
Liquidity Ratio Adidas All numbers in EUR thousands Puma All values EUR Millions.
Current Asset 9,809 11,730 3,931 4,200
Current liabilities 8,043 9,257 2,537 2,537
Inventory 4,525 5973.00 1,804 2,245
Current Ratio 1.22 1.27 1.55 1.66
Acid test ratio 0.66 0.62 0.84 0.77
Working Capital Cycle
Working capital cycle of Adidas in 2022 is around 135 days and approximately 105 days in 2023. On the other hand, the working capital cycle of Puma is around 239 days in 2022 which will decrease to 198 days in 2023. From this ratio it is that the ability to manage current assets is higher for Adidas whereas Puma suffers a lot in maintaining a balanced working capital cycle and rotating their current assets. Inventory turnover of Adidas is very high and can be reduced to adjust the working capital cycle and become more efficient that can satisfy potential stakeholders.
working capital cycle Adidas All values EUR Millions. Puma All values EUR Millions.
2023 2022 2023 2022
Account Payable 2,276 2,908 1,500 1,735
Accounts receivable 1,906 2,529 4,131 4,667
Inventories 4,525 5,973.00 1,804 2,245
Cost of Goods Sold 11,243 11,867 4,967 4,895
Sales 21,427 22,511 8,602 8,465
Accounts payable days 74 89 110 129
Accounts payable days 32 41 175 201
Inventory turnover days 147 184 133 167
Working capital cycle 105 135 198 239
From the profitability ratio analysis it is found that the gross profit margin of Adidas is around 47.28% in 2022 and 47.53% in 2023 whereas Puma has been denoted around 42% of gross margin in 2022 and 42.26% in 2023. From this data it is clear that both the companies have a consistent gross margin. However, 4.18% in 2022 and 3.5% in 2023 net profit margin has been seen for Puma. On the other hand Adidas has made a net profit margin of 1.13% which has decreased to a net loss of 0.27% in 2023 which indicates poor profitability of Adidas.
profitability Adidas All values EUR Millions. Puma All values EUR Millions.
2023 2022 2023 2022
Sales 21,427 22,511 8,602 8,465
Gross Profit 10,184 10,644 3,635 3,570
Net profit -58 254 305 354
Gross profit margin 47.53% 47.28% 42.26% 42%
net profit margin -0.27% 1.13% 3.55% 4.18%
Debt to equity ratio of Puma is around 0.53 in 2022 and 0.62 in 2023 which indicates they have a well maintained capital structure. However, the capital structure of Adidas is highly dependent on its debt capital for that reason its debt to equity ratio is around 1.29 in 2022 and 1.21 in 2023.
leverage Adidas All values EUR Millions. Puma All values EUR Millions.
2023 2022 2023 2022
Total Debt 5563 6459 1592 1358
Total Equity 4,580 4,991 2,582 2,539
Short term debt 146 76
Long term debt 1,446 1,282
Debt to Equity ratio 1.21 1.29 0.62 0.53
Price To earning ratio of Puma is approximately 45.61 and 28.05 in 2022 and 2023 respectively. However Adidas has made a price earning ratio -615.48 in 2022 and -123.40 in 2023. This financial data indicates that investing in Adidas is not beneficial and its return is very low compared to Puma.
valuation ratios Adidas All values EUR Millions. Puma All values EUR Millions.
2023 2022 2023 2022
Market value per share 128.34 258.5 56.94 107.65
EPS -1.04 -0.42 2.03 2.36
Price earning ratio -123.40 -615.48 28.05 45.61
Balanced Scorecard 1000
Integrated Reporting 1000
Conclusions 250