Income Statement

Coronavirus pandemic weighs on adidas’ performance in 2020

In 2020, revenues decreased 14% on a currency-neutral basis. In euro terms, revenues were down 16% to € 19.844 billion from € 23.640 billion in 2019. From a market perspective, currency-neutral sales decreased in all segments except for Russia/CIS, where revenues remained flat. Currency-neutral sales were down at double-digit rates in Europe, Asia-Pacific, Latin America and Emerging Markets, while decreasing at a high-single-digit rate in North America. See Business Performance by Segment

Net sales

–14%

C.N.

€ 19.844 bn

adidas brand revenues decline at a double-digit rate

Currency-neutral revenues for the adidas brand decreased 13%, with double-digit sales declines in both Sport Inspired and Sport Performance. In euro terms, adidas brand revenues were down 16% to € 18.095 billion compared to € 21.505 billion in 2019. Currency-neutral Reebok brand sales decreased 16% versus the prior year, as revenues declined at double-digit rates in both Sport and Classics. In euro terms, Reebok sales decreased 19% to € 1.409 billion (2019: € 1.748 billion).

adidas brand net sales

–13%

C.N.

€ 18.095 bn

Reebok brand net sales

–16%

C.N.

€ 1.409 bn

Net sales € in millions

Net sales by segment in % of net sales

Sales declines in footwear and apparel

Currency-neutral footwear sales were down 15% in 2020 as a result of double-digit sales declines in both Sport Inspired and Sport Performance. Apparel revenues decreased 12% on a currency-neutral basis reflecting double-digit sales declines in both Sport Inspired and Sport Performance. Currency-neutral accessories and gear sales were down 8%.

Net sales by product category in % of net sales

Cost of sales decreases 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 2020, cost of sales was € 9.990 billion, representing a decrease of 12% compared to the prior year level of € 11.347 billion. This development mainly reflects the revenue shortfall due to the coronavirus pandemic.

Gross margin down 2.3 percentage points

In 2020, gross profit decreased 20% to € 9.855 billion from € 12.293 billion in 2019, representing a gross margin decrease of 2.3 percentage points to 49.7% (2019: 52.0%). While a more favorable channel mix due to the exceptional e-commerce growth as well as lower sourcing costs had a positive effect on gross margin, a less favorable pricing mix due to increased promotional activity and negative currency fluctuations weighed on the development in 2020. In addition, an increase in inventory allowances as well as purchase order cancellation costs related to the coronavirus pandemic had a negative impact on the gross margin development.

Gross margin¹ in %

Royalty and commission income and other operating income decrease

In 2020, royalty and commission income decreased 46% to € 83 million (2019: € 154 million). Other operating income was down 25% to € 42 million from € 56 million in 2019.

Other operating expenses as a percentage of sales up 4.9 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 2020, other operating expenses were down 6% to € 9.229 billion (2019: € 9.843 billion). As a percentage of sales, other operating expenses increased 4.9 percentage points to 46.5% from 41.6% in 2019. Marketing and point-of-sale expenses amounted to € 2.573 billion in 2020 compared to € 3.042 billion in the prior year, representing a decrease of 15% compared to the 2019 level. As a percentage of sales, marketing and point-of-sale expenses increased 0.1 percentage points to 13.0% (2019: 12.9%). Distribution and selling expenses decreased 1% to € 4.962 billion in 2020 from € 4.997 billion in the prior year, due to lower personnel costs as a result of temporary store closures, as well as lower travel and entertainment expenses. As a percentage of sales, distribution and selling expenses increased 3.9 percentage points to 25.0% from 21.1% in 2019. General and administration expenses were down 12% to € 1.461 billion (2019: € 1.652 billion), due to lower personnel costs as well as lower software licensing fees. As a percentage of sales, general and administration expenses increased 0.4 percentage points to 7.4% (2019: 7.0%). See Note 32

Other operating expenses¹ in % of net sales

Marketing and point-of-sale expenses¹ in % of net sales

EBITDA decreases 46%

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) decreased 45.9% to € 2.079 billion in 2020 versus € 3.845 billion in 2019. Total depreciation and amortization as well as impairment losses/reversal of impairment losses for tangible and intangible assets increased 15.9% to € 1.364 billion in 2020 (2019: € 1.177 billion). 

EBITDA^{1, 2} € in millions

Operating margin decreases to 3.8%

Operating profit declined 72% to € 751 million in 2020 versus € 2.660 billion in 2019. The operating margin decreased 7.5 percentage points to 3.8% compared to the prior year level of 11.3%. This development was due to the gross margin decrease and the increase in other operating expenses as a percentage of sales.

Operating Margin

3.8%

–7.5 PP

Operating profit¹ € in millions

Operating margin^{1, 2} in %

Net financial result decreases

Financial income decreased 55% to € 29 million in 2020 (2019: € 64 million), while financial expenses were up 23% to € 204 million compared to € 166 million in 2019. As a result, the company recorded a net financial result of negative € 176 million, compared to negative € 102 million in 2019. See Note 34

Net financial result¹ € in millions

Tax rate increases 0.3 percentage points to 25.4%

The company’s tax rate increased 0.3 percentage points to 25.4% in 2020 (2019: 25.0%). See Note 36

Net income from continuing operations down 78% to € 429 million

Net income from continuing operations decreased 78% to € 429 million versus € 1.918 billion in the prior year. Basic earnings per share (EPS) from continuing operations decreased 78% to € 2.15 from € 9.70 in 2019. Diluted EPS from continuing operations was down 78% to € 2.15 in 2020 (2019: € 9.70).

Net income from continuing operations

–78%

€ 429 m

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

Basic earnings per share^{1, 2, 3} in €

The total number of shares outstanding decreased by 903,327 shares to 195,066,060 at the end of 2020. This development was a result of shares repurchased as part of the company’s share buyback program. Consequently, the average number of shares used in the calculation of basic earnings per share (EPS) was 195,155,924 (2019: 197,606,107).

Gains from discontinued operations amount to € 13 million

In 2020, adidas incurred gains from discontinued operations of € 13 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 (2019: gains of € 59 million).

Net income attributable to shareholders decreases 78% to € 432 million

The company’s net income attributable to shareholders, which in addition to net income from continuing operations includes the gains from discontinued operations, declined 78% to € 432 million (2019: € 1.976 billion). As a result, basic EPS from continuing and discontinued operations decreased 78% to € 2.21 versus € 10.00 in 2019. Diluted EPS from continuing and discontinued operations declined 78% to € 2.21 (2019: € 10.00).