2015 Adidas Group Annual

MASTER

BEAUTY & PERFORMANCE BE DESIRED.

A D IDAS G ROU P A N N UA L R EPORT 2015

2015

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TO BE A STYLE ICON or TO BE A HIGH SCORER THAT WAS THE QUESTION...

Until now. Here at Adidas Group we do not believe that you should chose between being a style trendsetter off the court or a record breaker on the court. You are BOTH. Fashion and Athletics have been thought of in two seperate lanes by or competitors but we believe our customers are one in the same. From shooting a three pointer on the court in your jersey to walking out of the locker room in your hoodie, the brands of Adidas Group make you the one to be desired. This is where style meets performance.

ABOUT

ADIDAS GROUP The brands of the Adidas Group complement each other in a unique way to help athletes perform better, play better, feel better. Our products break records, set trends, make history. Every day. All over the world. Welcome to the adidas Group.

It is not only about faster shoes and fashion statements. Just as a shoe is more than padding and foam, there is more to us than just the product.

Everything we do is bound by one simple thought: we strive to help you perform at your best. Your success is our ambition.

Your defeat spurs us on to be better.

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ABOUT ADIDAS GROUP

6

CONTENTS

7

FINANCIAL HIGHLIGHTS

8

LETTER FROM CEO

12

YEAR AT A GLANCE

14

BRANDS

18

ADIDAS REEBOK TAYLORMADE PARTNERSHIPS

30

FINANCIAL

33

FINANCIAL HIGHLIGHTS 2015

2014

Change

14,534

14,203

2.3%

1,283

1,496

-14.3%

Operating Profit

961

1,233

22.1%

Net Income attributable to shareholders

568

839

32.2%

Gross Margin

47.6%

49.3%

1.7pp

Operating expenses in % of net sales

42.7%

42.3%

0.3pp

Operating Margin

6.6%

8.7%

2.1pp

Effective Tax Rate

29.7%

29.2%

0.5pp

3.9%

5.9%

2.0pp

22.4%

21.3%

1.0pp

0.1

0.2

n.a.

Financial Leverage

3.3%

5.4%

8.7pp

Return on Equity

8.7%

14.3%

5.6pp

OPERATING HIGHLIGHTS (in millions) Net Sales EBITDA

KEY RATIOS

Average operating working capital in % Equity Ratio Net Borrowings/EBITDA

9

DESIREABLE

QUALITY G

ENDURING

ADIDAS

E BRANDS=

GROWTH=

G SUCCESS=

S GROUP

A LETTER FROM

HERBERT HAINER ADIDAS GROUP, CEO.

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We are competitive. You have to be

No matter whether you are an athlete,

and provide responsive services. Only

if you want to be successful in the

a fashionista, a (potential) employee

then will we be rewarded with top

long run – in any game. It is fair to say

or any other stakeholder, we strive to

results and a leading position in our

that we are playing in the sporting

create value for you.

industry. We know very well, that – at

goods industry’s Champions League.

the end of the day – these top results

High league, high stakes. At the

When it comes down to it, we strive

are also tied to the substantial value we

adidas Group, all of us put our entire

to be the global leader in the sporting

want to provide our shareholders with.

dedication and brainpower into our

goods industry because we want to

mission of making the adidas

help athletes achieve their personal

Group the global leader in the sporting

best. We want to ensure we have the

goods industry. Why? Because we

most desirable brands and satisfied

want to create as much value for all

consumers and, for this, we need to

our stakeholders as possible.

develop premium products Herbert Hainer

YEAR AT A GLANCE

14,534 NET SALES

Employing more than 53,731 people in over 160 countries, we produce more than 660 million product units every year and generate sales of â‚Ź 14.5 billion (all figures relate to 2014). These numbers alone can easily suggest that our Group is quite a complex organisation. True. But we keep things simple, lean and fast. And we will use this approach now to tell you what our company is all about.

Ready ... set, go .

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Creating long-term value for our shareholders through strong and consistent operating cash flow generation drives our overall decision-making process. Therefore, we are focused on rigorously managing those factors under our control, making strategic choices that will drive sustainable revenue and earnings growth, and ultimately

2.72

BASIC EARNINGS PER SHARE OF COMMON STOCK

operating cash flow. Across our operations, we pursue in particular the avenues for growth which we expect to be most value-enhancing, with particular emphasis on improving brand strength and Group profitability. In addition, rigorously managing working capital and optimising our capital structure remain key priorities for us. Furthermore, we are committed to increasing returns to shareholders with above-industryaverage share price performance and dividends.

YEAR AT A GLANCE CONTINUED In 2015, despite a high

most notably the US dollar

timing and magnitude of

degree of economic

and the Chinese renminbi,

tightening by the US Federal

uncertainty in Russia/CIS

currency translation is

Reserve are also projected

and the Middle East, we

expected to have a positive

to weigh on the global

expect global economic

impact on our top-line

outlook. At 1.8%, developed

growth to increase. This

development in reported

economies are expected

will be supported by a more

terms. Group gross margin

to grow slightly faster than

favourable labour market

is forecasted to be at a level

last year, supported by

development as well as low

between 48.0% and 48.5%

improving labour markets,

financing and energy costs,

and the Group’s operating

growing consumer spending,

which are forecasted to

margin excluding goodwill

low inflation rates and lower

positively impact consumer

impairment is expected to be

oil prices. At 3.9%, growth

spending, providing a

at a level between 6.5% and

in developing countries

12,417 TOTAL ASSETS

positive backdrop for the

7.0%. As a result, we project

continued growth, building

net income from continuing

and expansion of the

operations excluding

sporting goods industry.

goodwill impairment

should benefit from the accelerated recovery in high-income markets, the continued support from accommodative monetary policy stances as well as lower inflationary pressures.

to increase at a rate INNOVATION

of around 10%.

Through our extensive pipeline of new and

Global GDP is projected to

innovative products and

increase by 2.4% in 2015.

the positive effects from

Growth is forecasted to be

increased brand-building

stronger in 2015 relative

activities, tight control of

to 2014 in developed

inventory levels and strict

economies, but weaker in

cost management, we

emerging markets,

project top- and bottom-

reflecting more subdued

line improvements in our

prospects for large emerging

Group’s financial results

market economies

in 2015. We now forecast

and oil exporters.

adidas Group sales to increase at a high-single-digit

THE FUTURE

rate on a currency-neutral

Concerns about future

basis, driven by the strong

demand as a result of

momentum at both adidas

the expected slowdown

and Reebok. Given the

of the Chinese economy

continuous strength of major

as well as ongoing

currencies versus the euro,

uncertainties over the

5,624

SHAREHOLDER’S EQUITY

17

45.3%

OPERATING PROFIT

OUR BR

RANDS

Adidas Sport Performance is mainly targeting competitive sports. The division’s focus is primarily on innovation and technology. Target consumers range from sports participants at the highest level to those inspired by sport. Everything at adidas reflects the spirit of our founder Adi Dassler. His main objective back in those days already was to make athletes better, with innovation at the heart of all adidas Sport Performance products.

To underline our credibility as the multi-sport specialist and leverage

brand strength, there is hardly any category that we don’t produce products for. adidas is everywhere where the best meet the best, such as the FIFA World Cup™ or the Olympic Games, but also everywhere else around the globe where sports are simply played, watched, enjoyed and celebrated.

However, we are not just designing products for all kinds of sports.

We are designing products for athletes. Athletes always strive for their personal best. Athletes find inspiration in sports no matter what they do. We help them to achieve their peak performance by making them faster, stronger, smarter and cooler.

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WE ARE THE BADGE OF SPORT

989 34.8%

FINANCIAL HIGHLIGHTS

ADIDAS

EBIDTA

1,033 EQUITY RATIO

OPERATING PROFIT Teens and ‘digital natives’ live for the now. They are ready to go, discover their own way and style and NEO is all about their lives. The adidas NEO label is the sports fashion lifestyle label enabling teens to live their style.

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Employing more than 53,731 people in over 160 countries, we produce more than 660 million product units every year and generate sales of ₏ 14.5 billion (all figures relate to 2014). These numbers alone can easily suggest that our Group is quite a complex organisation. True. But we keep things simple, lean and fast. And we will use this approach now to tell you what our company is all about. Ready ... set, go. NEO is all about being open and engaged with teenage consumers, letting them enjoy experiences that only NEO can provide – this could be styling an outfit for Selena Gomez or being a part of the NEO collection created especially for the New York Fashion Week.

Reebok is an American-inspired sports brand with the clear objective to become the leading fitness brand in the world. Not an easy mission.

However, if there is a brand that can make it happen, it is Reebok, the brand that was fundamentally part of a fitness movement that would change the way we look at spandex and headbands. Sure, this is not the 1980s anymore, the world has changed. But so has Reebok. And today, not many have the experience and knowledge to understand the important and evolving role of fitness in society. Fitness is more than a chore. It is a lifestyle choice.

It is core to people discovering each and every day how much more they are capable of.

This is why Reebok set itself the mission to empower you to be “fit for life”. Reebok helps you to stay excited about your fitness activities.

The “House of Fitness” addresses the diversity that fitness brings, from activity to lifestyle: Fitness Training, Studio, Classics, Fitness Running and Walking. No matter what type of fitness activity you are into, Reebok will support you. With knowledge and experience that is second to none.

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PERFORMANCE THAT MAKES YOU FIT FOR LIFE

The Reebok brand, which Adidas

a fitness brand. With newly aquired

bought for â‚Ź3 billion in 2006, posted

CrossFit, Reebox has seen a tremdous

another quarter of sales growth, up

growth as compared to previou syears

a currency-neutral 9% on the year.

before the brand was purchased my

Although struggling to monetize the

adidas. Reebok with this partnership

Reebok acquisition at first, Adidas

continues to be an industry leader in

has repositioned the former National

fashion and training.

Football League and NBA sponsor as

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FINANCIAL HIGHLIGHTS

REEBOK

47.6%

29.7% GROSS MARGIN

EFFECTIVE TAX RATE

2,970

WORKING CAPITAL

12,417

TOTAL ASSETS

FINANCIAL HIGHLIGHTS

TAYLORMADE

TaylorMade pioneered the metalwood

The game-enhancing performance and

in 1979 with a driver so dramatically

fashion-forward style of adidas Golf

superior to wooden woods in terms

footwear and apparel appeal widely to

of distance, accuracy, and forgiveness

tour pros and recreational golfers alike.

that metal rapidly overtook wood as

Across the globe, the world-renowned

the driver material of choice among

3-Stripes are worn by an ever-growing

both tour professionals and amateurs.

legion of athletes, making adidas Golf

Since then, the determination to create

the fastest-growing golf footwear and

innovative golf club designs has led us

apparel brand in the world.

to create numerous metal woods, irons,

Ashworth is an authentic golf apparel

wedges, putters, and balls throughout

brand recognized across the world for

the past three decades that appeal to

quality, comfort, and distinctive design

the specific needs of all types of golfers,

that moves effortlessly from the course

from tour pros to skilled amateurs to

to the clubhouse and all points beyond.

handicap golfers.

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TaylorMade-adidas Golf covers four

The four sub-brands that make up

well-defined golf brands under one

TMaG provide a wide variety of

roof: TaylorMade, adidas Golf, Adams

products for an ever wider variety

Golf and Ashworth. Each brand aims

of players. Find out which brand is

to provide you with advanced products

right for you. Young guns and lower-

at a faster pace than any other brand.

handicap golfers who are in search

So when Justin Rose tees off or Martin

of cutting-edge metalwoods or irons

Kaymer putts an eagle, you can be sure

already know who the

they do it with TMaG products.

market leader is - TaylorMade.

1,762

WORKING CAPITAL

21.5% EFFECTIVE TAX RATE

42.5% GROSS MARGIN

Active-wear brands have been spotted

features a slew of sweaters, jogging

on fashion industry radar during recent

suit separates, sports bras and

seasons and celebs are looking to make

accessories such as a beanie and jersey

a profit out of the trend. Selena Gomez’s

tote. Incorporating dark navy with light

latest Adidas Neo collection for fall has

pink colors give the active wear line a

launched, and it’s looking like a good

sporty yet trendy vibe, appropriate for

one. The Selena Gomez Adidas Neo

going hard at the gym or

collection is sure to be a hit, having

on-the-go comfort.

SELENA GOMEZ

strategically launched in the midst of back-to-school shopping. The line

2015

PARTNERSHIPS NATIONAL HOCKEY LEAGUE

A seven-year partnership in which

outfitter of both authentic and replica

adidas will become the authentic

jerseys for the eight-team tournament

outfitter of on-ice uniforms as well as

next September. The 2016 World Cup of

an official supplier of licensed apparel

Hockey will be played at the Air Canada

and headwear for the League starting

Centre in Toronto from Sept. 17 to

with the 2017-18 season was announced

Oct. 1, 2016 and be comprised of eight

this year. Adidas Group-owned CCM

teams – Team Canada, Team Czech

will remain an official on-ice equipment

Republic, Team Finland, Team Russia,

supplier, delivering world-class product

Team Sweden, Team USA, Team Europe

for NHL players, including sticks, skates,

and Team North America.

helmets, gloves and goaltending gear.

More than 150 NHL players will

The National Hockey League Players’

compete in a best-on-best international

Association (NHLPA), NHL and adidas

hockey championship.

today also announced a partnership for the 2016 World Cup of Hockey in which adidas becomes the exclusive

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This year we made great advancements

using technology not implemented into

is targeting our younger consumers as

other sneakers made my the group.

well as our hip hop loving consumers.

In September of 2015, Kanye West

We partnered with none other than

was honored and given an award for

Kanye West to create his line of

sneaker of the year out selling all other

sneakers called YEEZY. In their first few

sneaker partnerships with celebrities

months of launching, these sneakers

versus our competitors.

have boosted group sales by a 20% causing production to increase. These sneakers are the leader in their category

YEEZY

CONSOLIDATED FINANCIAL STATEMENT

2015

33

2015

2014

Change

14,534

14,203

2.3%

1,283

1,496

-14.3%

Operating Profit

961

1,233

22.1%

Net Income attributable to shareholders

568

839

32.2%

Gross Margin

47.6%

49.3%

1.7pp

Operating expenses in % of net sales

42.7%

42.3%

0.3pp

Operating Margin

6.6%

8.7%

2.1pp

Effective Tax Rate

29.7%

29.2%

0.5pp

3.9%

5.9%

2.0pp

22.4%

21.3%

1.0pp

0.1

0.2

n.a.

Financial Leverage

3.3%

5.4%

8.7pp

Return on Equity

8.7%

14.3%

5.6pp

Cash and cash equivalents Short-term

1,683

1,587

6.0

5

41

(87.6)

1,946

1,809

7.6

398

183

117.9

2,526

2,634

(4.1)

92

86

7.3

425

506

(15.9)

272

11

2,289.5

Net Sales EBITDA

KEY RATIOS

Average operating working capital in % Equity Ratio Net Borrowings/EBITDA

financial assets Accounts receivable Other current financial assets Inventories Income tax receivables Other current assets Assets classifed as held for sale

29.4 Percent profit growth since 2014 76.3 Percent profit growth since 2013 83.2 Percent profit growth since 2012