adidas AG
Q4 2021 Earnings Call Transcript

Published: 9 Mar 2022

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the adidas AG Full Year 2021 Conference Call. Throughout today’s recorded presentation all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. . I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead.

[Sebastian Steffen:]

Thanks very much, Nairobi and good evening, good afternoon, good morning, everyone, wherever you are joining us virtually today, and welcome to our full year 2021 results conference call. Our presenters today are our CEO, Kasper Rorsted; and our CFO, Harm Ohlmeyer. We will kick it off in a second as always with their prepared remarks, and we will have enough time afterwards for your questions. As always, I would like to ask you that during the Q&A session, you limit your initial questions to two in order to allow as many people as possible to ask questions. And now, without any further ado, over to you, Kasper.

[Kasper Rorsted:]

Thank you very much, Sebastian. Also from my side, I welcome everyone to our full year 2021 presentation. Before I start with the actual presentation, I'd like to address a topic, which is on everyone's mind right now and that is, of course, the current war in Ukraine. As I'm sure all of you I've been watching the events in Ukraine with great concern and dismay. My thoughts are with the people who are suffering and I'm joining all those calling for peace. Main our concern is particularly for employees in the region, their protection and safety are our highest priority. In addition, we provide immediate humanitarian aid to other people and communities on the ground who are in need of support. To provide help, we made a total donation of 1 million to refugees and children's charities. We've also donated clothing to distribute to our people in need. Many of our employees are contributing as well as we as a company made the donation. It's hard to switch topics, but now let's turn to how the first year of our Own the Game strategy went. I can confidently say that 2021 was a much better year than 2020. On the back of successful vaccination campaigns around the globe, the worldwide economy started to recover. Sport returned to the global stage, creating huge excitement around the world. And that said, the COVID-19 pandemic continued to impact lives and businesses across the globe. At adidas we delivered strong results despite heavy disruption in supply and demand that you'll hear more about during the presentation. But let me stay on the topic of sport because that's what adidas is all about. Sports defined our past, present, and the future. I'd like to mention three personal highlights. For us, it was a great pleasure to host the German National Team in a newly built home ground at our headquarters in Herzo in Germany. Hosting a world-class team on our premises during such a tournament was an industry first. I was happy to see our long-term partner and best football on the planet, Lionel Messi, finally winning a title with the Argentinian National Team at Copa America. And finally, we had a fantastic year in running with more wins, more world records, and more podiums at major road races than all our other brands, all other brands combined. We continue to win consumers around the world with innovation -- with innovative new products, exciting new store concepts, and great experiences. Again, let me just mention a couple of highlights. Building on the success of the initial franchise, we launched the NMDs 1, a new key lifestyle product exclusively on our Confirmed App and achieved 100% sell-through with a demand ratio of 1

[Harm Ohlmeyer:]

Thank you, Kasper and also a warm welcome from my side. As always, we start with the market segments. Our top line development in fiscal year 2021 was still impacted by COVID-19 and heavy disruptions in global supply and demand. But this impact was different between the regions. You have heard it from Kasper, wherever markets operate without major disruptions, we have experienced strong top line momentum. This is reflected in high double-digit growth rates in Western part of the world. So again, 70% of our markets grew 23%. EMEA, North America, and Latin America grew 24%, 17% and 47%, respectively, driven by strong double-digit increases in both D2C and wholesale despite the negative impact -- effect from significant longer lead times about which I'm going to talk about in a moment. Furthermore, all of these markets just mentioned, recorded an operating margin close to or above 20%. Particularly in the case of North America, this is a major achievement and the result of a dedicated effort to drive profitability in the market in 2021 to compensate the profit shortfall from China. Sales in Asia Pacific were up 8%, reflecting the negative impact on demand from the extensive lockdowns in the region. In Greater China, the geopolitical situation, resurgence of COVID-19 related lockdowns as well as natural disasters weighed on the top and bottom line. Given the situation, I'd like to give you some more information about Russia CIS. Of course, all our offices and stores in the Ukraine are closed, and we do our utmost to ensure the safety of our employees. Kasper already mentioned our humanitarian aid. When it comes to Russia, we fully support and strictly follow all sanctions imposed by the German and European government. We decided to suspend our own retail and e-com operations and stopped shipping goods to Russia. We suspended our relationship with the Russian Football Federation. We also removed the Ball of the UEFA Champions League Final that was supposed to be held in St. Petersburg from competition and stopped selling the ball. With revenues of around €500 million, the entire market represented around 2% of total revenues in 2021. 75% of these revenues are generated through our own D2C business, the 500 owned stores that we operate in the region as well through our own digital platforms. While D2C tends to be less flexible and more fixed costs heavy in general, the situation is actually quite different in Russia. In fact, the share of variable cost is fairly high as most of the existing lease arrangements are linked to the revenue development. In addition, lease agreements in Russia are much more flexible and usually allow a termination within only a few months. One of the big benefits of operating a large D2C business is the flexibility when it comes to pricing. We can adjust prices quickly on a weekly basis and we have already made use of this flexibility and increased our prices by more than 20% over the past two weeks to at least partly compensate the strong devaluation of the Ruble. In addition, a relatively high share of D2C comes along with the limited risk related to receivables. The overall setup means that we can limit the impact on our profitability from the significant revenue decline we are assuming. Let's now turn to the company P&L. You have heard it, the challenging market environment in China, COVID-19-related restrictions, and supply chain challenges reduced our top line for more than 1.5 billion in 2021. However, we were still able to increase revenues by 16% currency neutral. Our gross margin increased by 70 basis points to 50.7%, I will come to the details in just a second. Other operating expenses increased 4% to 8.9 billion in 2021, driven by higher marketing investments mainly in EMEA and North America. We leverage sport events to drive brand heat and in addition, we supported the introduction of new products and drove consumer experience, both online and offline. Operating overheads increased slightly by 2%, but would have been down if adjusted for the more than €220 million stranded cost related to the divestiture of the Reebok business. Our operating profit increased more than 160% to around 2 billion as a result of the strong top line increase in combination with improved gross margin and lower operating expenses as a percentage of sales. Consequently, the operating margin increased 5.3 percentage points to 9.4. Our net income from continuing operations improved by more than €1 billion in 2021, also supported by a tax benefit in the fourth quarter related to the Reebok divestiture. I'm now going to take a closer look at the gross margin development in 2021. I would like to discuss the main factors in the composition of our gross margin development. First, in terms of pricing impact, higher full price sales, and selected price increases already in 2021 had a significant positive effect on our gross margin. Second, better inventory management and the non-recurrence of last year’s purchase order cancellation costs impacted the gross margin development positively. On the negative side, we saw a normalization of the market and channel mix compared to 2020 with an overall lower contribution from China and e-commerce. Moreover, we experienced a significant increase in sourcing and freight costs that pose a headwind of around 1 percentage point to our gross margin in 2021. In terms of currency development, the significant negative impact continued in 2021 and remained a drag on our gross margin. Due to our hedging practices, this effect will only turn into a tailwind in 2022. Now talking about 2022, let's now take a closer look at the expected gross margin development this year. Starting from 50.7%, we expect gross margin to reach a level of between 51.5% and 52%. As you know, higher supply chain costs have weighed and will continue to weigh on our gross margin and post a drag on the development also in 2022. The total cost per piece is expected to double in 2022 compared to last year. Moreover, air freight costs will further increase despite a significant reduction in our overall volumes. In order to compensate these higher costs, we are implementing significant price increases as we speak. In the first half of the year, these will be more limited to D2C exclusive products. The second half, we're increasing prices broadly by a mid- to high single-digit percentage on average. In total, we expect this to largely compensate the headwinds from higher supply chain costs. On top of these developments and improving channel mix as we continue to focus on driving our D2C business in general and e-com, in particular, as well as the positive FX impact will drive significant gross margin improvement this year. I would now like to talk about our investments in 2021. Overall, we spent 2.5 billion on marketing, the largest portion is spent on our unique portfolio of brand partners. With our partners, we employ an open-source mindset to inspire fresh perspectives, and we amplify our credibility by leveraging the power, authenticity, and reach of our partnerships. To drive brand heat and create consumer excitement, we successfully launched several campaigns in 2021. Impossible is Nothing which was rolled out in more than 50 countries, campaigns around the major sporting events as well as campaigns focusing especially on women like Stay and Play or Watch Us Move. Overhead expenses amounted to €6.3 billion in 2021, with the biggest portion being spent on D2C to elevate the consumer experience across all of our touch points. And of course, a significant part of our operating overhead expenses went into logistics in order to fulfill consumers and customers' needs when it comes to the timeliness and reliability of delivering our products. Now turning to the balance sheet, inventories were down 12% currency-neutral. This development mainly reflects the divestiture of the Reebok business. The strong sell-through of our product, successful inventory management, as well as the impact from industry-wide supply chain challenges also contributed to the decline. Receivables increased 6% currency neutral at the end of December 2021, reflecting our strong top line growth. Payables were down 6% current neutral, mainly due to the normalization of payment terms as well as the divestiture of the Reebok business. Overall, average operating working capital decreased 5.3 percentage points to 20% for the full year versus 25.3% in 2020. Let's spend a minute to look at our inventory composition in a bit more detail. Due to the supply chain challenges in the last year, we saw a clear increase in lead times. At the end of December 2021, only around 60% of all goods where goods on hand the rest was in transit. Comparing these numbers to the prior year, you clearly see a difference. At the end of 2020 more than 70% of goods on hand and less than 30% in transit. In markets that are particularly impacted by the supply chain constraints such as North America and EMEA, goods on hand were even as low as 50%. You can clearly see how much these two markets have been impacted by the lack of product. We expect the situation to improve significantly during the first quarter, and as a result, don't foresee any major impact from last year's lockdown anymore beyond the first quarter. We talked about the importance of investment into the brand and marketing before now I would like to focus on our capital expenditure. In 2021, CAPEX increased more than 50% to 667 million. Investments in new or remodeled-owned retail stores, our e-commerce business as well as the broader IT infrastructure represented once again the majority of the expenditure. This is in line with our company strategy Own the Game according to which we will focus on D2C and digital to ensure a seamless consumer experience. Another important part of our Own the Game are shareholder returns. Until 2025, we plan to return between €8 billion to €9 billion to our shareholders via regular dividend payments and share buyback programs. These €8 billion and €9 billion will be complemented by the returns from Reebok proceeds. Let us go through this piece by piece. In 2021, we already returned €1 billion to our shareholders via share buybacks and 600 million via the dividend payment, resulting in a total payout of €1.6 billion. Going into 2022, we already completed another tranche of our share buyback program in the amount of €1 billion in January and February. In addition, the dividend payout we announced today will add another €600 million. On top of that, we announced last week the launch of an additional share buyback program of up to €1.5 billion in Q2 and Q3 to return the cash proceeds from the Reebok divestiture to our shareholders following the successful closing of the transaction. Again, this amount comes on top of the €8 billion to €9 billion from Own the Game. So in total, we will be returning up to €3.1 billion to our shareholders just in 2022. I mentioned the dividend proposal for 2021 already. We will recommend paying a dividend of €3.3 per dividend entitled share to shareholders at this year's AGM. This represents an increase of 10% compared to the prior year dividend where we paid €3 per share. And with that, I would like to hand over to Kasper for the outlook for year.

[Kasper Rorsted:]

Thank you very much, Harm. And talking about 2022, I'll remind everybody that we still operate in a very dynamic environment and heightened uncertainty. The war in Ukraine and continued challenging market environment in Greater China, COVID-related restrictions and supply chain challenges and inflationary pressures will be leaving a mark on our business also in 2022. Together with our committed team of employees around the world we will continue to tackle these challenges in a decisive manner. As a result, we will drive double-digit top and bottom line improvements also this year, and we remain optimistic about our long-term growth opportunities. In addition, our accelerating brand momentum as well as our strong product innovation lineup will help us gain market share. And let me now tell you how we'll get there. I have mentioned it before Own the Game is a growth and investment strategy. So our focus in 2022 is exactly that, investing into double-digit growth. This year, we'll invest close to 3 billion into our brand campaigns, into our most important product launches, and into new partners, both in sport and lifestyle to accelerate our brand momentum. We doubled down on further growth in our two largest markets, EMEA and North America and we have a plan in place to accelerate our growth in China, and we'll continue to build direct relationships with our consumers through digital and our owned stores. In 2022, sport is back on the biggest stage with the FIFA World Cup, the UEFA Women's Euro, and the Winter Olympics that closed three weeks ago, and adidas was and is front and center at all big sports events and moments this year. Our pipeline of new innovative products is full and will be rolled out on a weekly basis throughout the entire year. Our focus is on our five categories that I'll speak about in just a second. We are leveraging our 5,000 brand partners across broadened lifestyle to showcase our products, our brand, and our attitude Impossible is Nothing. We will launch four key chapters of our long -- our year-long brand campaign, Impossible is Nothing featuring women, sustainability, adidas Originals and football. And last but not least, I'm happy to share that we have appointed Alasdhair Willis as adidas new Chief Creative Officer last week. In his role, Alasdhair will lead our design community to shape, define, and shepherd the future creative direction of the brand across performance, originals, and sportswear. Alasdhair is an icon of the industry with a long-standing connection to adidas that dates back to 2005, most notably through his role in the concept and development of adidas by Stella McCartney in partnership with Stella McCartney. In terms of our brand momentum, we are off to a great start in 2022. We started the year with our biggest women's campaign ever, I'm Possible. It's running in all markets globally and has already reached more than 0.5 billion of consumers in the first three weeks since its launch. Our woman’s campaign came on the back of an already highly successful campaign to launch our new innovative sports bras collection that offers the right bra for all women and all types of sport activities. This campaign alone generated more than 1,000 pieces of social media coverage and reached almost 90% positive sentiment across the entire social media ecosystem. We have clearly defined our most important categories, football, running, training, outdoor, and lifestyle. And we just talked about training with our women's campaign in our bra revolution. Let's now look one by one into some of the highlights in the other categories. And we'll start with outdoor because our Terex outdoor range was front and center of the Winter Olympics in Beijing. We kitted out the entire German team that came second in the middle count. We continue to see huge opportunity in this space for us and more and more consumers worldwide enjoy outdoor activities to stay fit and stay healthy. In the first part of the presentation, I've called out that our successful Adizero Adios Pro franchise is driving credibility by securing marathon wins at the top of the pinnacle. At the same time, we're making running accessible by diversifying and scaling our offer to every runner at more commercial price points. Our latest solar glide is available for €140 and just the first of many product introductions across all price points. 2022 will be a great year for football with the Women's European Championship being played in England this summer and the FIFA World Cup in Qatar at the end of the year. And this comes on top of the excitement around the UEFA Champions League and the various national leagues. Our portfolio of federations clubs and players is by far the best in the industry. Just think of national teams like Germany, Spain, or Argentina, the clubs of Real Madrid, Bayern Munich, Juventus, Arsenal, Manchester United to mention only very few. Messi I could go on forever. We'll leverage this competitive advantage all year long by launching innovative new football products and activations and activating our clubs and our players. Next on the list is the launch of the official World Cup match ball at the end of this month. But I have more exciting football news to share with you. Today, we are proud to announce that adidas and the Italian Football Federation will start working together as of January 2023. We are happy about this new partnership, and we are very much looking forward towards the current European Champion and adidas can achieve together. Without any doubt, this partnership makes our leading football portfolio even stronger for the years to come. Now let's switch gears and talk about our lifestyle segment. Here I'm equally excited about the leading portfolio of partners we can bring to the table. Yohji Yamamoto with Y3, adidas and Prada, Kanye West and Yeezy , Beyonce and Ivy, no other brand can draw on such a list of renewed partners that bring a unique proposition to our consumers worldwide. And we'll not stop there and we'll expand into new exciting collaborations in this space. Last year, we announced a partnership with Jerry Lorenzo. Under the leadership of Jerry we will disrupt the basketball category. In the meantime, Jerry and his team have joined our hub in our key city LA and worked on the first products. In January, in Shanghai, which is China's biggest street wear fair, Jerry provided Chinese consumers with the first glimpse into how the product will look like. Long lines were building quickly in front of the exhibition as the excitement in anticipation of the launch of first products during the summer. 12 days ago, we launched our newest partnership at Milan Fashion Week, adidas and Gucci. Gucci and adidas Originals are joining forces in a new collaboration, which combines the heritage and the creative codes of both brands. At the Gucci Runway Show, the adidas gazelle model and our famous three stripes trademark were front and center and the talk of the entire fashion world. Media around the world picked up the news and called this collaboration, the most exciting collaboration of the year. On the day itself, we recorded the highest number of sign-ups for Confirmed App and recorded the most successful Instagram post ever. Our intent is very clear, as stated one year ago at our strategy launch, we want to premiumize adidas Originals. And it is collaborations with some of the hottest brands in fashion such as Gucci or Prada that will get us there. By extending adidas Originals in to the premium segment and at the same time, sharpening the edges of adidas in sport, we created a space in the middle for a completely new consumer proposition, adidas sportswear. This summer we launched the first adidas sportswear collection perfectly catering to the GenZ consumer. With adidas sportswear, we are perfectly addressing the growing relevance of At Leisure trend towards sport-inspired leisure wear, and we will be able to capture the huge opportunity it presents. We are very confident about our innovation pipeline. And let me show you that there's much more that -- there is much more that's yet to come. In less than two weeks, we're opening to host our Innovation Day and cannot wait to welcome you here at our unique World of Sport. And let me remind you that this event will be a physical attendance only due to the confidentiality of products that will be displayed. We're not only going to provide an exclusive and comprehensive preview of 2022 product highlights across our strategic growth categories, but we will also offer a preview of our Spring/Summer 2023 collection. Finally, you can look forward to multiple opportunities to engage with inspiring special guests and brand partners throughout the course of the event. We definitely hope to welcome many of you here in two weeks' time. Our strong and comprehensive innovation pipeline will also fuel the acceleration of our top line momentum in strategic growth markets in 2022. And let's take a closer look. EMEA operated without major disruption in 2021, and we experienced an acceleration of our top line momentum. We've been on this momentum across channels and categories and expect mid -- and expect mid-teens growth in EMEA in fiscal year 2022. We'll drive an expansion of our membership program and market share gains with key alliance accounts. Building on our Impossible campaign and our broad revolution, we will particularly increase the market share of our women's business by winning with key items and bringing the premium offer to life. In football, we'll leverage the major upcoming events, the Women's European Championship, the FIFA World Cup, etcetera, introducing key footwear innovations and new approach to team wear. And in lifestyle we will strengthen momentum by scaling key franchises in originals and with the help of Jerry in basketball. North America is a second strategic growth market where we can build on a strong top line momentum from last year. For 2022, we once again expect mid to high teens growth driven by both D2C and wholesale. In e-com, we'll drive personalization, scale membership, and leverage high products while only retail will see an improved consumer experience through increased investments into the store fleet as well open new halo stores in New York and L.A. In wholesale, we'll significantly increase our market share with key alliance accounts in the market and look forward to continuing driving our business, in particular with Foot Locker Dicks, J.D. Cost and Nordstrom. In lifestyle, our collaboration with Jerry Lorenzo will leave its mark as we premiumize originals and reignite basketball. I will not -- it will not surprise you that we see a huge opportunity in the ball and the timing here could not be any better given the recent announcement. Now let's turn to Greater China. We continue to focus on things we can control as we are still operating in a challenging market environment. We developed a detailed action plan, which is thoroughly executed and that's why we're confident to achieve mid-single-digit growth in Greater China. And let me give you the details. We have strengthened brand heat and signed several new athletes to our roster partners, such as Su Yiming just before the start of the Winter Olympics. She's the first Asian snowboard medalist in Winter Olympic history. New athletes like Su are also part of our localized Chinese New Year campaign that created more than 1 billion impressions and views. But this was not the only campaign in China year-to-date. We invested in double-digit €1 million amount and we had a total of three campaigns in the first two months, allowing us to connect with the Chinese consumer in unprecedented way and sparking their excitement around the brand. This is complemented by a significant ramp-up for China for China product creation. More than 30% of products will be Chinese-specific in 2022, which will lead to more commercial impact. And as a result, we've already achieved a markdown reduction of 15 percentage points in e-com in Q4. Our investment in digital capabilities start to pay off as we improved our range and activation plans and realized exceptional sell-through of new hyper leases. When the product is telling a story, it works extremely well with Chinese consumers. And there is many stories that can be told around Jerry Lorenzo, Gucci, just to name a few. Ultimately, we're making strong progress in transferring significant product volume into other markets to make sure that we're well prepared to start growing again in Q2. Of course, as I said, we are aiming to achieve mid-single growth in 2022 after growing 3% in 2021. We're excited that our team in Shanghai will be led by Adrian Siu who have been appointed as Managing Director of adidas Greater China. Adrian succeed Jason, who assumed the new role of Senior Vice President of Global franchise. Adrian has a long and successful track record with adidas. He joined Adidas back in 2002, as Sales Director at Hong Kong and later assumed the role as Managing Director. Until 2019, Adrian was our Senior Vice President for Commercial for Greater China being based in Shanghai. And since September 2019, Adrian has been successfully leading the transformation of a local apparel brand, CosmoLady as CEO based in Shenzhen. We're convinced that Adrian together with the Chinese team will ensure we return to growth in the short term and leverage the attractive opportunity this market provides in the long term. And it's particularly important to mention that Jason not only knows the market well, our team well, but of course, all our customers extremely well in China. We will also continue to double down on D2C in digital, bringing the consumer experience to the next level. We have more than 20 halo store openings planned for 2022. Halo stores are top of our retail pyramid. These stores are true brand builder, thanks to exclusive products, enhanced consumer experiences, and members-only areas. They also help us understand what resonates best with consumers in our global key cities. The creation of seamless enhanced consumer experiences is central to how we approach D2C, and we invest into the next generation of concepts and digital capabilities across our entire retail store fleet. This consumer-first mindset also extends to the online space and membership continues to be a strategic priority. Going forward, we are rebranding our membership program to expand the adidas value proposition. AddiClub will mark the next step of this journey. We'll introduce new program mechanism to unlock even higher consumer lifestyle value as members will be able to redeem points for exclusive jobs and special events in the future, another industry first. Summing all of this up, we have four strong growth drivers in place to continue growing both our top and bottom line at a double-digit growth amid heightened uncertainty in 2022. And let's now turn to the financial outlook for 2022. Currency-neutral revenues are projected to increase at a rate between 11% and 13%. This growth assumption reflects a risk of up to €250 million or around 1 percentage point of growth in our Russia CIS business due to the war in Ukraine and reflects the suspension of our retail income operations in Russia. Our gross margin, you've heard from Harm, is expected to continue to increase and reach a level between 51.5% and 52%. Our operating margin is expected to increase significantly to a level between 10.5% and 11%. And in addition to the higher gross margin, lower operating expenses and percentage of sales will benefit the company operating margin in 2022. This development will be supported by the non-recurring of approximately 7% of Reebok-related strainer costs, which accounted for more than 220 million in 2021. Driven by the strong top line growth in combination with the marketing improvements, net income from continuing operations is projected to increase to a level between €1.8 billion and €1.9 billion in 2022. Let me provide you with additional detail regarding the quarterly phasing of our top line guidance. While we continue to experience very strong demand in EMEA, North America, and Latin America, these markets will be impacted by the even more pronounced supply shortage in Q1, approximately 600 million in Q1 versus the €400 million we saw in Q4 last year. As of Q2, we do not expect any significant supply shortages to weigh on our business in these markets anymore. So while we expect first quarter revenue to be down mid-single digits, a supply shortage will reduce our growth by more than 10 percentage points, we project a significant acceleration in the second -- in Q2. This growth expectation is backed by an extraordinary strong order book even if adjusted for more aggressive ordering patterns, we have seen from wholesales in light of the current supply shortages. To sum things up, we performed well in a challenging market environment in 2021 and delivered a successful first year of our new strategic cycle. We added almost 3 billion to our top line. We invested almost 10 billion into OPEX and CAPEX to drive brand heat, appropriate loyalties digital D2C. In 2022, we'll build on this momentum and continue to grow our top line by around 2.5 billion and will return up to 3.1 billion to shareholders via dividend payments and share buyback throughout the course of the year. Own the Game is a growth and investment strategy fully executed across the entire company. I look forward to successfully -- to successful 2022 as we will drive continued top and bottom line growth together with our more than 60,000 employees. As I mentioned at the beginning of this presentation, the health and safety of our employees is and always will be our first priority in these unsettling times. Now let's take your questions.

[Operator:]

. The first question is from the line of Graham Renwick from Berenberg. Please go ahead.

[Graham Renwick:]

Hello, good afternoon. Thanks for taking my two questions. Just firstly on North America. I just wonder what your view is on the general health of the U.S. consumer so far this year and also looking ahead across 2022 there have been some concerns on U.S. consumer spending this year, particularly given the tough comparatives due to stimulus last year, sharply rising inflation, etcetera, the U.S. sports retailers have been a bit more cautious on 2022 recently, all guiding to like-for-like sales declines, whereas you have a much more encouraging guidance of mid to high-teens growth. So, I just wanted to understand what's bridging that gap and what is giving you the confidence in the U.S. against that tougher backdrop? And then secondly, just on the supply disruption from the Vietnam closures and the impact of sales. Of the 1 billion net sales impact in Q4 and Q1, should we be thinking that those sales have essentially just remained on order books and are delayed into Q2 and beyond when supply normalizes and wholesale partners restock. So we've had 400 million of sales that has been carried over from 2021 into 2022 and then there'll be a 600 million shortfall in Q1, but that's going to be made up later in the year. Or those of 1 billion sales, are they largely lost sales and adidas could have delivered even higher revenue this year if it wasn't for those Vietnam issues. So just trying to get a better understanding of those dynamics? Thank you.

[Kasper Rorsted:]

Hi Graham, this is Kasper. I'll take the first question, and Harm will take the second. So let's start with North America. We see a huge opportunity for market share grab in the U.S. this year and the years to come. In the past two years, we are focused on getting a more balanced position between growth and profitability. And remember back, we had a profitability around 6% in North America, now it's 20%. And this year, clearly, we're going to start accelerating our revenue and capture market share. We do not see a big setback from a consumer standpoint at all. We think that the consumer demand has been outweighing the supply and you've seen the supply chain issues that we've had, and I think that has had a very negative impact, particularly in the Q4 revenue numbers. We're very bullish on that. And if you look upon the portfolio of partners, we have now lined up in the U.S., the latest one being Jerry on the best ball side, of course, Gucci on the fashion side we're quite bullish in North America, and that's why we're guiding the way we are and heading around with the right balance between profit and top line. I think you'll see a strong opportunity for us in North America in 2022. And that's why we're very bullish around it. And then maybe lastly, I think we have a big opportunity with key wholesale partners in the U.S. Right now, we've been the fastest-growing brand with Coles. But as I said in my presentation, whether it's JD or Dick's or Foot Locker, huge opportunity and we'll push that very aggressively. Harm?

[Harm Ohlmeyer:]

Yes. And Graham, on your second question, very straightforward answer. You can largely assume that the 1 billion that we lost is really lost it's not shifting into the next quarter or whatever. So everything that we're seeing in Q2 and forward is a fresh order book. This is not a delay from Q4, Q1. It's really a fresh order book with fresh products. So unfortunately, that sales is lost as the factories couldn't compensate it for the future. We are running at full capacity. So it's a fresh order book going forward.

[Graham Renwick:]

That’s very clear. Great, thank you very much.

[Kasper Rorsted:]

Thanks Graham.

[Operator:]

The next question is from the line of Piral Dadhania from RBC Capital Markets. Please go ahead.

[Piral Dadhania:]

Hi, good afternoon. Thank you for taking my questions as well. I'll stick to two. The first is just on price increases. You guys have flagged for a number of months that you'll be taking mid- to high single-digit pricing for autumn/winter 2022, which you're confirming again today. I just wanted to understand, it's been many years since we've seen this level of pricing in this industry. What gives you confidence that the volumes will remain where they are, how do you think about the demand elasticity for footwear, in particular, in this industry, in this kind of consumer environment, if you're going to push pricing that high, do you expect to see any volume drop off and sort of what sort of feedback are you getting from your wholesale partners as you present these higher price points to them? And secondly, I just wanted to ask on sort of the guidance -- revenue growth guidance for the year, 11% to 13%. A few questions we've been getting today, it's fairly ambitious and confident in its sort of pitch, if you like, but to what extent does it factor in any slowdown in the macro wall consumer environment, particularly as we progress through 2022? At worst-case scenario -- well, a negative scenario, if things are not perhaps as supportive as they are today, could you still feel confident you can land towards the lower end of that guidance range, just wanted to understand the sort of the flex within that and how confident you are that you'll be able to deliver that in the context of the macro going forward? Thank you.

[Harm Ohlmeyer:]

Yes, Piral, let me tackle the first question, then Kasper will answer the second question. So on the price increase, you're absolutely right. I mean it's mid to high single digit in the second half of the year. And we really believe we are confident about it and we really believe that the consumer on the one is ready for it. Inflation is here to stay longer than we probably would have anticipated. So that's why we believe the consumer is ready for that. We have a clear strategy of premiumization, as you saw with our collaboration with Gucci and other partners, that we have that opportunity. And quite honestly, we have a lot of experience with that one, whether it's in Argentina or Turkey or what we're doing in Russia right now with the flexible pricing that we execute there. So we are definitely confident that this will not lead to volume reductions. This is a true price increase that will compensate the product cost increase that we have and the freight increase that we are seeing.

[Kasper Rorsted:]

When it comes to guidance, of course, we have taken this very, very serious. Starting off we still think it's a hugely attractive industry. And if you take 2021 into account where a lot of regions and countries have actively impacted and slowed down the growth, we managed to grow 23% and 7% of the market. So very strong growth. We think that the underlying demand for our products remain high. Number one, we have great innovation coming into the market point. Two, and I do want to remind us that sometimes we need to look upon the assets and liabilities at the same time. I don't think anybody would have said that we could grow 47% in Latin America last year, and we did so. So we think it's an appropriate guidance of this year. And you should also remember that the vast, vast majority of our products are sold in the price range between $50 and $200. It is an affordable luxury that people can get access to. So we -- at this stage, we remain -- we're very confident that this is the appropriate and correct guidance for the year and getting all regions to continue to grow, albeit at a lower level than 2021. In 2021, we grew 16% and we think that this is an appropriate and also guidance within the current context.

[Piral Dadhania:]

Okay, thank you very much.

[Kasper Rorsted:]

Thanks Piral.

[Operator:]

The next question is from the line of Warwick Okines from BNP Paribas. Please go ahead.

[Warwick Okines:]

Yeah, good afternoon. Thanks for taking my questions. My first question is on visibility of the order book. How far do you have visibility into H2 and when you talk about the order book, are you also including orders that should have been delivered Q4, Q1, but have not yet arrived? And my second question is on China. Could perhaps you give a bit more detail about your consumer campaigns and what sort of customer reaction are you seeing and what are the green lights you'd need to see before you start to use influencers again? Thank you.

[Kasper Rorsted:]

Let me start with China, and then I'll hand over. The influencers have moved from entertainment to sport, and that's what we're doing. So we're continuing to change the portfolio of influencers from entertainment to sport because that is where the direction is. Of course, when we look upon the reaction over the campaigns, it's number of use, it's reactions that we're looking at we grew, as you know, 3% last year. So it was not an environment that we didn't grow. And we did increase the number of sports partners by 30% compared to the 12 months ago, and we continue to invest very heavily into the market. We think that the opportunity remained unchanged high, and we also believe that over time, you will have a more normalized market environment. But I do want to remind everybody, we're actually growing the market and will continue to grow. I think getting back to a double-digit growth is a long-term ambition for us, which we've stated in our strategy. But we're getting a stability in and making certain we continue to grow in the second, third and fourth quarter after a negative first quarter, which I said, I think is the important part of we're quite confident that's going to happen. And we think also the market sentiment will, over time, probably be more changed moderately. It might take longer than we thought, but we think that will happen because the demand for Western products in all other categories, and sport right now remains extremely high, whether it's automotive, electronics, or luxury goods.

[Harm Ohlmeyer:]

So what we have done to the order book visibility, of course, we have solid visibility into Q4. There are some assumptions on -- in Q2. There's some assumptions on reorder business in Q2 as well. And we have partly visibility into Q3 especially when it comes to back-to-school in North America. That's why I believe the visibility is pretty good. Do not expect there's a lot of phasing happening from Q4 into Q1 and that there are delayed orders. Most of these orders have been phased into the right quarter, so that's part of it. And we have also cleansed the order book to what we believe is a reasonable order book because we all talked about that retailers might order too much but we definitely looked at every account and what should be the right order book. And based on the cleansing effect we're still very confident on the order book that we are seeing. And then, of course, when you go into Q3, a lot of customers have not seen what we're doing with -- what we're doing with sportswear, what the impact of Gucci will be. So there's a lot of fresh product coming that many retailers haven't seen yet. So that is also an additional opportunity in the second half that we're looking into. So it's not just the order book and wholesale, it's all the momentum that we want to drive in our D2C business that comes on top of it.

[Warwick Okines:]

Great, thank you.

[Operator:]

Next question is from the line of Jurgen Kolb from Kepler Cheuvreux. Please go ahead.

[Jurgen Kolb:]

Yes, thank you very much. First of all, thanks guys for such a precise guidance, given the challenging environment and it has even gotten more difficult compared with 2020 as it feels at least. So thanks for that. First question on China, you mentioned that now 30% of the products are done and designed by the local team, where do you think that can go, how far of this autonomy of this specific market can you give to the team around Adrian going forward? And secondly, all the new products you're launching with Lorenzo, with Gucci, hype drops, but also the new co-operations and collaborations, how much sales contribution will that or might that actually have in 2022? Thank you.

[Kasper Rorsted:]

So on the China side, I think the important part is we need to find the right balance between being a global brand and of course, a superstar remains a superstar or and the same with in DS1. You might have Chinese iterations of it, but it is important that we really get the strength of being a global company come to fruition. I very often say, if you work for BMW, you sell the 3, the 5, and 7 series across the world. So that will remain, I would say, the majority of it. But we will still have -- and right now, we have around 30% and whether that slightly increase is to be seen. But we need to make certain that particularly in markets where you might have cultural differences, that we have the relevant markets, not only in the product but in the storytelling. So what you can envision is global products, you might have a more relevant local product storytelling. And we're not trying to put a, I would say, lid on and say you can't do more than the 30%. I think the important part is that we leverage our global franchises because a lot of the marketing is global. When a Kanye or when a Jerry does something in LA, it does resonate in Shanghai. And we to make certain we have that on our side because if we only try to do Chinese products in China, then we become 100% competitive to the local Chinese, and we don't have the global scale, the global benefit that we have as our company. So we think probably staying in the balance we have right now, whether it's 30% or 35% does make a difference is the right one. The important part is we win with the consumer in product and storytelling.

[Harm Ohlmeyer:]

Yes. Jurgen to your question on Jerry and Gucci and all the other collabs that we have, of course, we want to build them for the long term. And this is not just one season. They will be meaningful in the second half, but this is not like Kanye we have today or half of our growth or whatsoever. But it will contribute to the growth in the second half and more importantly, this will pay into the brand, especially when you look at Gucci or Jerry Lorenzo, these are definitely things that will generate brand heat for us, not just now, but also in the second half. And then, of course, you want to scale that into 2023, they want to grow again significantly as part of our Own the Game strategy. And again, on Jerry Lorenzo, we will not disrupt the basketball business in the first season, right. But it's -- we want to leave a dent in the second half of the year and then build on this one, and that is really the strategy. So it will be meaningful, but it's not defining our growth pattern in the second half.

[Jurgen Kolb:]

Very good, thank you. And all the best.

[Operator:]

The next question is from the line Geoff Lowery from Redburn. Please go ahead.

[Geoff Lowery:]

Yeah, hi team. Just one question really, please, and it's a slightly bigger picture one. Sitting here a year ago, your EBIT margin expectations for 2021 were probably quite similar, give or take a bit to what you delivered. And yet at that time, logically, you wouldn't have had the China situation in your plan, you wouldn't have had Vietnam closures, you wouldn't have the degree of air freight and distribution costs. And yet, you still delivered at a margin level very similar to where we probably were. I guess my question is, has that required you pulling forward the self-help that you had identified for outer years in the U.S. and Europe. And so now you're more sensitive to market developments or sales developments from here or is it that you have found more in the business by way of sort of long-term opportunity that you've been able to access, but there are still significant opportunities ahead?

[Kasper Rorsted:]

No, we didn't pull anything forward, if you were to say that way. I think what we're doing is we're running a more, I would say, disciplined business model. You can look upon the increase in the margin that we found as we made more progress in the U.S. than we anticipated from a margin standpoint. So I wouldn't say that we feel very confident with the progress we are making, and we need to get the company back to the level it was in 2019, where the margin was 11.3% with a very high marketing spend. So we think we have a scalable business model. We think that the more we drive top line in, the more expansions we will get. But at the same time, there's always room for improvements in every single element of our P&L. And that's, I think, is what you saw last year, that despite certain things that went against us that happened, but I also want to say sometimes things go for you. And we very often look upon all the things that goes against us. Some of the things went also our way, and that's why we are capable of capturing or maintaining the margin guidance that we had despite certain headwinds that we haven't seen. So the important part is to get the right balance between the top line and the margin and not saving ourselves to beauty because our strategy is based on growth, and it's clear to everyone within our company and within the senior leadership, the value creation happens through the top line, but through the top line in a way whereby over time, we also will increase the margin, but it's a top line-driven business that we have.

[Geoff Lowery:]

Answered, thanks very much.

[Kasper Rorsted:]

Thank you.

[Operator:]

The next question is from the line of David Roux from Bank of America. Please go ahead.

[David Roux:]

Good day gentlemen and thanks for taking my question. My question relates to the gross margin outlook. There's that slide, Slide 29 in the presentation and most notably, the guidance for the sourcing headwind. I just wanted to know whether this estimates on the sourcing headwinds to gross margin assume some sort of normalization of input costs as the year progresses or is it marked against what you see as of today? And then I think just leading on from that, could you also remind me how much forward visibility adidas has in terms of finished goods costs for the year, i.e., how far forward does it order? Thank you.

[Harm Ohlmeyer:]

Yes, we're definitely not assuming that freight costs, first and foremost, will ease in 2022. I believe that is something we're going to wait for in 2023 then. And of course, reflecting some of the raw material increases already in 2022, which we also believe, based on the contracts that we have in place with our suppliers are well planned for 2022. So we do not expect significant easing in 2022, neither on the input cost nor on the freight. And then we have some visibility going into 2023. But in 2023, we have visibility, but there's still flexibility in how we calculate and get our FOBs under contract with our suppliers. So the visibility is there, but we haven't finalized all the agreements yet going into 2023. I would assume that freight rates are to some level normalizing. Otherwise, I wouldn't believe in the market dynamics anymore, but from an inflation and cost pressure point of view on the FOBs, it's probably another year where we'll see some increases there. We need to work through and hopefully continue to work on the price increases as well. And if you look at the price increases, what we do in the second half 2022 will of course, benefit the first half of 2023 as well because we haven't done that in spring summer 2023. So that's really how we should look at the gross margin. And it needs to be managed in a volatile environment. There's no question.

[David Roux:]

Okay, thank you very much.

[Kasper Rorsted:]

Thanks David.

[Operator:]

The next question is from the line of Elena Mariani from Morgan Stanley. Please go ahead.

[Elena Mariani:]

Hi, good afternoon. Thanks for taking my questions. I have two as well. The first one is on your gross margin development. So it was very useful to have all the buckets that you have provided. But there are two that I haven't seen in the gross margin progression into 2022. So I just wanted to ask you about these factors. So the first one is about a potential return of some broad base discounting activities. I mean 2021 has been a very special year and many of your peers, but even tons of retailers have seen peak reordering happening and they've talked about the likelihood of a more promotional environment. So how do you think about this and could this be another negative for your gross margin? And also as part of this question also, can you comment about the geographical mix and the effect that we might see? And the second question is a more generic one on the guidance, so back in -- top line guidance, back in Q3 2021, you had given a sort of preliminary outlook talking about 8% to 10% growth for 2022. Now if you exclude Russia and I think about what you were supposed to guide before conflict emerged it's about a 12% to 14% growth. So what explains the delta between the preliminary outlook of 8% to 10% and the new 12% to 14%. Is it about the product innovation, your confidence on that, is it about you having more visibility on the order book, so understanding this would be very helpful? Thank you.

[Sebastian Steffen:]

Elena, let me -- this is Sebastian speaking. Let me take the second question here because I want to be very clear that what we did provide in November was not a guidance, and what we actually said is that we expect at least 8% to 10% growth. So already back then, we were expecting growth that will be higher than the 8% to 10%. We just didn't quantify what it exactly is. And yes, we -- with more -- 4 more -- 5 more months under the belt, we're clearly even more confident in our top line development in 2022. But it's not like our assumption would have been 8% to 10% in November, and it would have immediately changed to 12% to 14% in March. Just to clarify that, and now I'll hand over to Harm for the gross margin portion.

[Elena Mariani:]

Thank you, very clear.

[Harm Ohlmeyer:]

Yes, on the gross margin, I mean, very clear that the first half is still short of for in the market. So we are very confident that the first half is a non-promotional environment. We also said that we have cleansed the order book to be reasonable in what we are shipping in based on the sell-through that we are seeing and the inventory that our accounts are carrying. And then, of course, in the second half and the combination of having enough supply again, and raising prices, we are not assuming that the industry is necessarily getting smarter. I said that many times. So there will be enough product, and we now got to stay disciplined on sell-through, staying in a pull model, and not moving in a push model. And it's important that we stick to our strategy as well to have a higher share of D2C, where we have a better grip on the prices and a better control on the pricing mechanism in the market as well. And that is really important. But there will be some markets or some accounts that will potentially not win in the second half or in the fourth quarter towards the holidays, and there might be some promotions going on. So that's something we got to manage and stay disciplined. And again, pushing our D2C strategy is the right thing to do to get the right control over our pricing for the benefit of the long term.

[Elena Mariani:]

Thank you.

[Kasper Rorsted:]

Thank you Elena.

[Operator:]

The next question is from the line of Cedric Lecasble from Stifel. Please go ahead.

[Cedric Lecasble:]

Cedric Lecasble from Stifel. Thank you very much for taking my questions. I have two. The first one is a follow-up on China. Could you maybe comment on the underlying trends at market level you are seeing in China? And regarding your guidance, does it imply that you regain some market share versus local competitors in particular or stabilization of market share, how do you see the market going with the macro, which has been pretty weak over the last few quarters? And the second one is on the last problems you might have in terms of disruptions. You are saying Vietnam is easing, everything is going more smoothly except in Russia. How do you see Asia Pacific going on and how do you see the COVID situation evolving, do you expect anything more positive on run? Thank you very much.

[Kasper Rorsted:]

So on the China situation or the China market, there's -- the guidance we've given, we believe that, that growth will probably be more or less in line with the Western competitors in the market. We still think that the local Chinese competitors will grow at a higher rate than that. And that's, of course, over time, while we have to make certain that we are perceived more as in China for China relevant brand. So with this, we foresee that the local competitors with, I would say, the market forces right now in China will still favor the local competitors, and they will grow at a higher rate. Of course so compared to those, we will lose market share. But of course, over time, it is our very outspoken and explicit desire to regain market share and the market under more normal market circumstances. But we're first stabilizing and getting back to a more stabilized growth following the 3% growth in 2021 and a bit higher growth in 2022. Harm, regarding the remaining part of Asia?

[Harm Ohlmeyer:]

Yes. On Asia Pacific, it's a good point. First and foremost, we are starting with pretty low base, given all the restrictions in 2021. We are still in a restrictive environment in Asia Pacific, but we believe it's easing to some degree in the second half. But we're also not counting that tourists are coming back significantly. And we all know that in key cities in Tokyo and Seoul, it's the majority of the sales in these markets, whether it's in Japan or in Korea. So it's still -- given the relative low base, and some opening up and easing in the second half gives us confidence that also Asia Pacific will contribute to our growth profile in 2022. But again, they are somewhat behind the Western markets, I would say, from an opening point of view and from COVID-19 restrictions, but second half should look much better.

[Cedric Lecasble:]

Thank you.

[Operator:]

Next question is from the line of Grace Smalley from J.P. Morgan. Please go ahead.

[Grace Smalley:]

Hi, thank you. Two questions for me, please, both on China. So firstly, on the guidance for mid-single-digit growth this year, how should we think about the shape of growth and in particular, in the first quarter, should we still expect double-digit revenue declines similar to what we've seen in the back half of last year? And then more broadly, on the competition, do you attribute sort of the market share losses you've seen towards the local brands solely due to kind of the consumer trend and the local price trend or do you think also the local brands have improved their product innovation and product quality and that's a structural improvement in the market? Thank you.

[Kasper Rorsted:]

Thank you very much. You've seen the guidance that for the year, we expect double-digit decline in the first quarter, and then we expect the normalized growth coming up over the coming quarters that will get us to the guidance. There's no doubt that we see very strong growth opportunities, particularly with entry into basketball around Jerry. So we feel confident around the position in China and also the store fleet we have, and I've seen recent videos for obvious reasons, I can't be in China. And I see the quality of the store fleet is exceptionally high. I will say in a political correct tone, that the competitive environment in China is different to others, which is favoring local competitors versus Western competitors. And we assume over time that consumer trends will revert to a more normalized environment, like it has done in all other industries in China, whether it's phones or cars or luxury, as I said, or clothing. And I think that will then normalize the competitive environment. But you can also see with the guidance we are giving, we're not anticipating that, that will be the full case throughout the entire year.

[Grace Smalley:]

Thank you.

[Operator:]

Next question is from the line of James Grzinic from Jefferies International. Please go ahead.

[James Grzinic:]

Yes, good evening. Thank you. I have two quick questions. First one, perhaps can you just remind us of what sort of U.S. dollar tailwind you've locked in contractually for gross margins in 2022, what sort of basis points lets you get from that? And secondly, Kasper, I guess, more broadly, when you look at D2C shifts, would you expect perhaps the U.S. to be different in the coming year, feels like Colombia wholesale customers will be in need of more products given what Nike is doing, are you seeing that as an opportunity to step into that or not? That would be very helpful to hear your thoughts on that. Thank you.

[Kasper Rorsted:]

Thank you very much. I'll take the second part. There's no doubt that our D2C strategy is a universal one that we will implement. But there's also no doubt that particularly with some very high-quality partners in the U.S. like a Footlocker, DSG or Cole’s or J.D. we do see opportunities to drive growth with those quality partners. So you might see a "abnormal development" in the U.S. in the, I would say, shorter to medium term. It doesn't change the overall direction. I think what you're going to see is you're going to see a consolidation or increased consolidation around the high-quality partners in the U.S., which offers an opportunity for us this year and probably the years to come. But that is not in contradiction to our D2C strategy, but it is an opportunity. Harm?

[Harm Ohlmeyer:]

Yes. Just on our hedges, of course, we're not going to disclose the details of our hedging positions but rest assured, that it's better than 2021 that's why after two years of headwind, we finally have tailwind going into 2022. Also assume it's significantly better what the current spot rate is. And then thirdly, of course, that's why we are so confident about our gross margin will improve the gross margin over 2021 and the hedging position, primarily, of course, in Europe -- U.S. dollar to the Euro, will contribute to the gross margin improvement. That's where we are.

[James Grzinic:]

Thank you. Harm, can I push you on that point, am I crazy, I'm thinking 100 basis points?

[Kasper Rorsted:]

You can clearly try to push us, James, but we're not getting pushed here, but it's also not necessarily overly concerned if you mentioned numbers like that.

[Harm Ohlmeyer:]

And again, the point is it's a positive element in 2022, but we're also running a company for a longer time, right. So it's something we've got to manage. We're not going to on these things. And again, there's also a hedging position in 2023 and 2024 again right, but let's enjoy what we have in 2022.

[James Grzinic:]

Alright, great. Thank you.

[Sebastian Steffen:]

Thanks James. Nairobi, we have time for one final question, please.

[Operator:]

And our last question is from the line of Anne-Laure Bismuth from HSBC. Please go ahead.

[Anne-Laure Bismuth:]

Yes, hi. Thank you for taking my question. Not sure -- I have 2. The first one is, can you provide us some indication about some to the increase in oil derivatives on your gross margin, which is most likely to impact 2022, but it would be great to have that kind of sensitivity? And my second question is about the impact from the World Cup that is embedded in the top line growth guide for this year. Would it be fair to assume that it would account for 2 percentage points or is it -- yes, if you can provide some details on that? Thank you very much.

[Sebastian Steffen:]

Laure, this is Sebastian speaking. So I'll take the second question again. I think we've spoken about the importance of events quite frequently in the past. And that's quite different when it comes to the commercial relevance compared to 10 years ago, where we were a completely different company. So these kind of platforms are clearly important for us to present ourselves as a brand. And there will be quarters where we will introduce the jerseys where it will also have a meaningful impact on our top line development. But the assumption that you were just describing is definitely overemphasizing the importance in commercial terms of what the World Cup could make up for.

[Harm Ohlmeyer:]

And if I understood your question correctly, it was the question around oil price increases into our FOBs material cost in 2022. And I mean, the increase that we're seeing are more on other materials, whether it's cotton or some of the sustainability efforts that we're doing to replace some materials with more sustainable materials, that's where the increases are coming from. When it comes to oil prices, that is more something that we look into for 2023, if these would stay were, but definitely for 2022, that is not a not a significant impact for our FOBs.

[Sebastian Steffen:]

Alright. Thanks very much. And Laura, thanks very much. Nairobi, thanks very much, Kasper and Harm. And also thanks back to all of you. Ladies and gentlemen, this concludes our full year results conference call. As always, if you have any further questions, I'm sure there's going to be still a few, be it today over the next couple of weeks. Please feel free to reach out to any member of the IR team or myself. Actually, we're looking very much forward to meeting with some of you over the next couple of weeks during our upcoming road shows, be it virtual or be it physical. This is clearly not the only thing that we are excited about and looking forward to, as you've heard from Kasper, our Innovation Day is just around the corner and we are thrilled to welcome many of you. We have already almost 100 people signed up. And we've talked quite a bit today about what is going to drive the growth in 2022. So I can only tell you if you're interested in that question, come to Herzo and experience it yourself. And with that, thanks very much for your participation. Have a good remainder of the day. Stay safe. All the best. Bye-bye.

[Operator:]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.