Financial Accounting Report: Adidas and Puma Performance Analysis

This report provides a comprehensive financial analysis of Adidas and Puma, two prominent companies in the footwear and accessories industry. The analysis employs the CORE approach, examining the external and internal environments of both businesses, and evaluating their financial positions and performance using ratio analysis. The report assesses revenue trends, balance sheet data, and key financial metrics to compare the efficiency and performance of Adidas and Puma. The findings indicate that Adidas demonstrates more appreciable performance than Puma, making it a potentially more attractive investment option. The report includes detailed financial data and calculations in the appendices, supporting the conclusions drawn from the analysis. The report also covers the industry context, risks, and the companies' strategies, providing a well-rounded perspective on their financial health and future prospects.

Running head: FINANCIAL ACCOUNTING
Financial accounting
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Author Note

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Executive Summery
This report is prepared to analyze two companies that is Adidas and Puma in order to arrive
at a better investment decision. The approach used for studying and evaluating the overall
business and performance of both the companies includes the CORE Approach. Every
calculation can be found in the appendices section. The result drawn from the approach says
that the performance of Adidas is more appreciable than Puma. As a result, it will be
advisable to add Adidas in the investment portfolio.

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Table of Contents
Introduction................................................................................................................................3
Core Analysis of Adidas and Puma...........................................................................................3
Stage-1 (Context)...................................................................................................................3
Stage-2 (Overview)................................................................................................................6
Stage-3 (Ratios)....................................................................................................................14
Stage-4 (Evaluation).............................................................................................................17
Conclusion................................................................................................................................17
References................................................................................................................................18
Appendix..................................................................................................................................20

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Introduction
In today’s scenario making an investment decision has become a very crucial as well
as a complicated task. Companies have enough funds but where to invest the available funds
becomes a big question mark. In this report we had studied the business of two very famous
companies that is ADIDAS and PUMA for which we used the CORE approach. With the
help of this approach we tried to analyze the external and internal environment of both the
business and had even studied the financial position of both the companies. The ratio analysis
is also conducted to evaluate the efficiency of both the companies in order to draw a better
conclusion for decision making.
Core Analysis of Adidas and Puma
Stage-1 (Context)
Context: External Profile
The Footwear & Accessories industry is comprised of the companies who actually
deal in the products like clothes for men, women, children, jackets, gloves, shoes, socks, and
accessories like belt, bag, purse, watches, umbrellas etc. The companies like Puma and
Adidas operates in the Footwear & Accessories industry under the consumer cyclical sector
(Fidelity, N.D.). At the time of recession, the people of the economy usually try to cut their
discretionary expenses as a result of lower disposable income and at the time of boom the
sale of such goods take a good fly. In 2015 Adidas and Puma are the companies who deal
majorly in sporting goods and as per the last year Annual report of Adidas, the global
sporting goods industry has shown an upward trend in 2018. This growth was the result of the
rising participation in sports, increasing health consciousness, better e-commerce platforms,
motivating theme of social fitness etc. The FIFA WORLD CUP 2018 had also proved to be a
major factor behind the success of the industry. Now if we consider the success of sporting
and other fashion accessories in which companies like Adidas and Puma are engaged then

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this category did not see a very bright result but at the same time it didn’t even report a fall.
For this category 2018 was a mixed year. The risks like trade protectionism and geopolitical
tensions had increased in the year 2018 for sporting goods. In 2017, the sports shoes and
apparel industry had noticed a very quick growth. A rise of two per cent was seen in the
footwear industry in United States. The sports leisure category of athletic footwear had seen a
growth of seventeen per cent. The top sellers in sports leisure in United States were Nike,
Skechers, Under Armour and Adidas. In 2017, Adidas’ revenue went up by fifty per cent
(Johnson, Neugent and Granack, 2010).
In the world of digitalization there are many concerns which relate to the security
issues. (Puma, 2018)In order to meet the rising securities concern Puma had invested a good
amount on maintaining IT infrastructure where main attention is given to business
intelligence.
Overall, the footwear & Accessories industry is performing well as a result of
increased health consciousness, improved channels of e-commerce etc. whereas the factors
like trade protectionism, labor cost etc. may affect the performance of the industry.
Context: Internal Profile
Adidas started its journey in the year 1924 which was established by two brothers,
Rudolf and Adolf Dassler and it was founded in the year 1949. At present the company
carries out its operations in ten segments which include Europe, North America Adidas, Asia-
Pacific, North America Reebok, Latin America, Emerging Markets, Russia/CIS, Adidas Golf,
Runtastic, and other centrally managed businesses. The company deals in apparel, footwear
and accessories fitness equipment, golf clubs and hockey sticks etc.
Adidas is following Brand Leadership as their operating model which focuses on
building a consumer obsessed organizational structure which performs with good speed,

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agility as well as empowerment. From 2015 ADIDAS is using Net Promoter Score (NPS) in
order to get an idea about the perception of consumers relating to brand and the factors which
motivate them to recommend the brand to their friends and relatives (Annual Report, 2018).
In 1948 the two brothers got separated and Rudolf dassler started a new company
named as PUMA Schuhfabrik Rudolf Dassler. Though the company was new but its success
remained remarkable. Their first football boot was a great hit. As a result in 1950 many of the
members of West Germany national team wore them in the football match which was to be
played against Switzerland, the first match after the war.
The designers of Puma design create the most desirable products that set the trend for
future and all these are carried out under the guidance of Torsten Hochstetter who is the
PUMA’s Global Creative Director. Puma has partnered with the elite ambassadors like Lewis
Hamilton, Bryson DeChambeau, Sergio Agüero, Antoine Griezmann, Borussia Dortmund,
Olympique de Marseille and AC Milan which has strengthen its position as a sport brand.
The company had also made connection with the women by signing Adriana Lima, a
supermodel as an ambassador for women’s training.
Stage-2 (Overview)
Now if we look at the revenue figure or the net sales of Adidas and Puma then in
Figure A we could easily identify that Adidas had always enjoyed a supreme position over
Puma in the past 12 years (2006-2018).

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Sou
rce: (Statista, 2019)
Fig A. Revenue during 2006-2018
In Europe, Adidas stands as the largest sportswear manufacturer whereas in the whole
world it enjoys the second position. Puma does not enjoys first, second or third position but
still it is also one of the leading brands in the world and it operates with the aim of becoming
the most desirable sports lifestyle company. Around seventy-five per cent of Puma’s sales
come from Europe and America. In the year 2018, with the motive of broadening the market
share Puma collaborated with Ergio Rossi, singer Rihanna and Alexander McQueen (Statista,
2019).
Source
: (Puma Annual Report, 2015)

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Fig: B Number of Employees in Puma
Table- A
Source: (Annual Reports, N.D.)
Now if we analyze the decrease or increase in number of employees the two
companies had hired then in case of Puma the number had increased by ten per cent and in
case of Adidas it had increased by 18.6%. So here too we could easily interpret that the
business of Adidas has expanded more over the period of five years than Puma.
2014 2015 2016 2017 2018
0
50
100
150
200
250
Puma Revenue ( € million)
Revenue ( € million)
Graph 1: Changes in revenue over the years (PUMA)

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2014 2015 2016 2017 2018
0
200
400
600
800
1000
1200
1400
1600
1800
Adidas Revenue ( € million)
Revenue ( € million)
Graph 2: Changes in revenue over the years (ADIDAS)
Every business except the Non-profit organizations, they all work with the motive of
increasing revenue over the years. Let us consider the revenue of Adidas and Puma in order
to check whether they had seen an increase or decrease in their revenues during the last five
years that is 2014-2018. In case of Puma the revenue had increased by one hundred seventy
one per cent during the past five years whereas the revenue of Adidas in the past five years
had increased by two hundred forty four per cent.

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Table- B

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Table- C
On looking at the financial position of Adidas we can see that the company’s current
as well as non-current assets have gone up which indicates the company’s efficiency in
meeting its long term and short term obligations (Rodriguez, Kaczmarek and Depew, 2016).
On coming to the liability side of Adidas, we could notice that company had actually avoided
the option of short term borrowings as a result of which the short term borrowings had come
down by a good percentage that is 77%. In case of Puma too the asset side had shown an
increasing trend over the five years period however, where the other non-current assets of
Adidas witness a fall of just 10% the Puma witnessed the same of 73%. This shows the
efficiency of Adidas in paying off its creditors over Puma.
Table- D

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Table- E