Income Statement

The income statement for the financial year 2019 reflects the first-time application of IFRS 16. Prior year figures are not restated, leading to limited comparability of certain items.

ADIDAS DELIVERS STRONG PERFORMANCE IN 2019

In 2019, revenues increased 6% on a currency-neutral basis. In euro terms, revenues grew 8% to € 23.640 billion from € 21.915 billion in 2018. From a market perspective, revenues increased in all segments. Currency-neutral sales were up at double-digit rates in Asia-Pacific and Emerging Markets, while increasing at high-single-digit rates in North America, Russia/CIS and Latin America. Currency-neutral sales in Europe grew at a low-single-digit rate. see Business Performance by Segment

Net sales

+ 6%

C.N.

€ 23.640 bn

Net sales¹ € in millions

ADIDAS BRAND REVENUES GROW AT A HIGH-SINGLE-DIGIT RATE

Currency-neutral revenues for the adidas brand increased 7%, with high-single-digit sales growth in Sport Inspired as well as a mid-single-digit gain in Sport Performance. In euro terms, adidas brand revenues grew 8% to € 21.505 billion compared to € 19.851 billion in 2018. Currency-neutral Reebok brand sales were up 2% versus the prior year, as a decline in Sport was more than offset by low-single-digit sales growth in Classics. In euro terms, Reebok sales increased 4% to € 1.748 billion (2018: € 1.687 billion).

adidas brand net sales

+ 7%

C.N.

€ 21.505 bn

Reebok brand net sales

+ 2%

C.N.

€ 1.748 bn

Net sales by segment in % of net sales

SALES GROW IN FOOTWEAR AND APPAREL

Currency-neutral footwear sales grew 4% in 2019 as a result of mid-single-digit sales growth in both Sport Inspired and Sport Performance. Apparel revenues grew 7% on a currency-neutral basis reflecting double-digit increases in Sport Inspired and high-single-digit sales growth in Sport Performance. Currency-neutral hardware sales were up 25%. 

Net sales by product category in % of net sales

COST OF SALES INCREASES IN LINE WITH NET SALES

Cost of sales is defined as the amount we pay to third parties for expenses associated with producing and delivering our products. In addition, own-production expenses are also included in the cost of sales. However, these expenses represent only a very small portion of total cost of sales. In 2019, cost of sales was € 11.347 billion, representing an increase of 8% compared to the prior year level of € 10.552 billion. This development mainly reflects the growth of our business.

GROSS MARGIN IMPROVES 0.2 PERCENTAGE POINTS

In 2019, gross profit increased 8% to € 12.293 billion from € 11.363 billion in 2018, representing a gross margin increase of 0.2 percentage points to 52.0% (2018: 51.8%). Higher air freight costs to mitigate the supply chain shortages and a less favorable pricing mix were more than offset by positive effects from lower sourcing costs, positive currency developments as well as a better product and channel mix.

Gross margin^1,2 in %

ROYALTY AND COMMISSION INCOME AND OTHER OPERATING INCOME INCREASE

In 2019, royalty and commission income increased 19% to € 154 million (2018: € 129 million). Other operating income was up 17% to € 56 million from € 48 million in 2018.

OTHER OPERATING EXPENSES AS A PERCENTAGE OF SALES Down 0.2 PERCENTAGE POINTS

Other operating expenses, including depreciation and amortization, mainly consist of marketing and point-of-sale, distribution and selling as well as general and administration expenses. In 2019, other operating expenses were up 7% to € 9.843 billion (2018: € 9.172 billion). See note 32 As a percentage of sales, other operating expenses decreased 0.2 percentage points to 41.6% from 41.9% in 2018. Marketing and point-of-sale expenses amounted to € 3.042 billion in 2019 compared to € 3.001 billion in the prior year, representing an increase of 1% compared to the 2018 level. As a percentage of sales, marketing and point-of-sale expenses decreased 0.8 percentage points to 12.9% (2018: 13.7%). Distribution and selling expenses increased 12% to € 4.997 billion in 2019 from € 4.450 billion in the prior year, driven by overproportionate growth in the direct-to-consumer channel. As a percentage of sales, distribution and selling expenses increased 0.8 percentage points to 21.1% from 20.3% in 2018. General and administration expenses were up 5% to € 1.652 billion (2018: € 1.576 billion), as the positive effects of overheads cost control were more than offset by continued investments into the scalability of the company’s business model. As a percentage of sales, general and administration expenses decreased 0.2 percentage points to 7.0% (2018: 7.2%).

Other operating expenses^1,2 in % of net sales

Marketing and point-of-sale expenses^1,2 in % of net sales

EBITDA INCREASES 33%

Earnings before interest, taxes, depreciation and amortization as well as impairment losses/reversal of impairment losses on property, plant and equipment, right-of-use and intangible assets (EBITDA) increased 33% to € 3.845 billion in 2019 versus € 2.882 billion in 2018. Total depreciation and amortization as well as impairment losses/reversal of impairment losses for tangible and intangible assets increased 142% to € 1.177 billion in 2019 (2018: € 486 million). This development is mainly due to the depreciation of right-of-use assets related to the first-time application of IFRS 16 in the amount of € 664 million.

EBITDA^1,2,3 € in millions

OPERATING MARGIN INCREASES to 11.3%

Operating profit grew 12% to € 2.660 billion in 2019 versus € 2.368 billion in 2018.The first-time application of IFRS 16 had a positive impact on operating profit of € 24 million. The operating margin increased 0.4 percentage points to 11.3% compared to the prior year level of 10.8%. This development was due to the gross margin increase and the decrease in other operating expenses as a percentage of sales.

Operating margin

11.3%

+ 0.4 PP

Operating profit^1,2,3 € in millions

Operating margin^1,2,3,4 in %

NET FINANCIAL Result DeCREASEs

Financial income increased 11% to € 64 million in 2019 (2018: € 57 million), while financial expenses were up 253% to € 166 million compared to € 47 million in 2018. This development was mainly due to higher interest expenses related to the first-time application of IFRS 16. As a result, the company recorded a net financial result of negative € 102 million, compared to positive € 10 million in 2018.  see Note 34

Net financial result¹ € in millions

TAX RATE DECREASES 3.1 PERCENTAGE POINTS TO 25.0%

The company’s tax rate decreased 3.1 percentage points to 25.0% in 2019 (2018: 28.1%). See note 36

NET INCOME FROM CONTINUING OPERATIONS UP 12% TO € 1.918 BILLION

Including the negative impact from the first-time application of IFRS 16 in the amount of € 54 million, net income from continuing operations increased 12% to € 1.918 billion versus € 1.709 billion in the prior year. Basic earnings per share (EPS) from continuing operations increased 15% to € 9.70 from € 8.46 in 2018. Diluted EPS from continuing operations was up 15% to € 9.70 in 2019 (2018: € 8.45). The adoption of IFRS 16 reduced year-over-year net income and EPS growth by approximately 3 percentage points in 2019.

Net income from continuing operations

+ 12%

€ 1.918 bn

Net income from continuing operations^1,2,3 € in millions

Basic earnings per share ^1,2,3,4 in €

The total number of shares outstanding decreased by 3,201,958 shares to 195,969,387 at the end of 2019. This development was a result of shares repurchased as part of the company’s share buyback program. see Table ‘Financial Highlights’ Consequently, the average number of shares used in the calculation of basic earnings per share (EPS) was 197,606,107 (2018: 201,759,012).

GAINS FROM DISCONTINUED OPERATIONS AMOUNT TO € 59 MILLION

In 2019, adidas incurred gains from discontinued operations of € 59 million, net of tax, mainly related to the remeasurement of outstanding earn-out components in connection with the divestiture of the TaylorMade business in 2017 (2018: losses of € 5 million).

NET INCOME ATTRIBUTABLE TO SHAREHOLDERS INCREASES 16% TO € 1.976 BILLION

The company’s net income attributable to shareholders, which in addition to net income from continuing operations includes the gains from discontinued operations, grew 16% to € 1.976 billion (2018: € 1.702 billion). As a result, basic EPS from continuing and discontinued operations increased 19% to € 10.00 versus € 8.44 in 2018. Diluted EPS from continuing and discontinued operations grew 19% to € 10.00 (2018: € 8.42).