Income Statement

FOCUS ON CONTINUING OPERATIONS

Due to the expected divestiture of the Reebok business, all related income and expenses are reported as discontinued operations at the end of December 2021. All P&L-related figures for the 2020 financial year in this report refer to the company’s continuing operations unless otherwise stated.

2021 MARKS SUCCESSFUL FIRST YEAR OF THE NEW STRATEGIC CYCLE

In 2021, revenues increased 16% on a currency-neutral basis. In euro terms, revenues were up 15% to € 21.234 billion from € 18.435 billion in 2020. From a market perspective, currency-neutral sales increased in all segments with EMEA, North America, and Latin America posting strong double-digit improvements. Currency-neutral sales in Asia-Pacific and Greater China were up by high-single- and low-single-digit rates, respectively. See Business Performance by Segment

Net sales

+16%

C.N.

€ 21.234 bn

REVENUE DEVELOPMENT DRIVEN BY ALL CATEGORIES

From a category perspective, currency-neutral revenues in Performance grew in the strong double-digits, driven by double-digit improvements in all key categories. In addition, Lifestyle also grew at a double-digit rate.

Net sales¹ € in millions

Net sales by segment¹ in % of net sales

SALES GROWTH IN ALL PRODUCT CATEGORIES

Currency-neutral footwear sales were up 13% in 2021 as a result of a double-digit sales increase in Performance as well as a high-single-digit improvement in Lifestyle. Apparel revenues were up 20% on a currency-neutral basis reflecting double-digit sales increases in both Performance and Lifestyle. Currency-neutral accessories and gear sales were up 22%.

Net sales by product category¹ 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 2021, cost of sales was € 10.469 billion, representing an increase of 14% compared to the prior year level of € 9.213 billion. This development mainly reflects the increase in revenue.

GROSS MARGIN UP 0.7 PERCENTAGE POINTS

In 2021, gross profit increased 17% to € 10.765 billion from € 9.222 billion in 2020, representing a gross margin increase of 0.7 percentage points to 50.7% (2020: 50.0%). While negative currency developments, higher supply chain costs and a less favorable channel and market mix weighed on the development in 2021, higher full-price sales and lower inventory allowances as well as the non-recurrence of last year’s purchase order cancellation costs were able to overcompensate the negative effects.

Gross margin^{1, 2} in %

ROYALTY AND COMMISSION INCOME INCREASES WHILE OTHER OPERATING INCOME DECREASES

In 2021, royalty and commission income increased 41% to € 86 million (2020: € 61 million) reflecting the comparably low licensing income in 2020 due to the coronavirus pandemic. Other operating income was down 35% to € 28 million from € 42 million in 2020.

OTHER OPERATING EXPENSES AS A PERCENTAGE OF SALES DOWN 4.7 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 2021, other operating expenses were up 4% to € 8.892 billion (2020: € 8.580 billion). As a percentage of sales, other operating expenses decreased 4.7 percentage points to 41.9% from 46.5% in 2020. In 2021, marketing and point-of-sale expenses were up 7% to € 2.547 billion (2020: € 2.373 billion) as the company increased brand investments to support the introduction of new products and to drive consumer experience across both digital and physical platforms. As a percentage of sales, marketing and point-of-sale expenses decreased 0.9 percentage points to 12.0% (2020: 12.9%). Distribution and selling expenses increased 4% to € 4.782 billion in 2021 from € 4.601 billion in the prior year, mainly reflecting fewer coronavirus-related store closures compared to 2020. As a percentage of sales, distribution and selling expenses decreased 2.4 percentage points to 22.5% from 25.0% in 2020. General and administration expenses were up 7% to € 1.481 billion (2020: € 1.379 billion), mainly due to higher personnel costs. As a percentage of sales, general and administration expenses decreased 0.5 percentage points to 7.0% (2020: 7.5%). In total, operating overhead expenses increased 2% to € 6.345 billion (2020: € 6.207 billion) including more than € 220 million stranded costs related to the expected divestiture of the Reebok business. As a percentage of sales, operating overhead expenses decreased 3.8 percentage points to 29.9% from 33.7% in 2020. See Note 30

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

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

EBITDA INCREASES 56%

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 56% to € 3.066 billion in 2021 versus € 1.967 billion in 2020. Total depreciation and amortization as well as impairment losses/reversal of impairment losses for tangible and intangible assets decreased 11% to € 1.115 billion in 2021 (2020: € 1.257 billion).

EBITDA^{1, 2, 3} € in millions

OPERATING MARGIN INCREASES TO 9.4%

Operating profit increased 166% to € 1.986 billion in 2021 versus € 746 million in 2020. The operating margin increased 5.3 percentage points to 9.4% compared to the prior year level of 4.0%. This development was due to the gross margin increase and the decrease in other operating expenses as a percentage of sales.

Operating margin

9.4%

+5.3 PP

Operating profit^{1, 2} € in millions

Operating margin^{1, 2, 3} in %

NET FINANCIAL RESULT DECREASES

Financial income decreased 32% to € 19 million in 2021 (2020: € 29 million), while financial expenses were down 22% to € 153 million compared to € 196 million in 2020. As a result, the company recorded a net financial result of negative € 133 million, compared to negative € 167 million in 2020. See Note 32

TAX RATE DECREASES 0.8 PERCENTAGE POINTS TO 19.4%

The company’s tax rate decreased 0.8 percentage points to 19.4% in 2021 (2020: 20.2%). See Note 34

NET INCOME FROM CONTINUING OPERATIONS UP 223% TO € 1.492 BILLION

Net income from continuing operations increased 223% to € 1.492 billion versus € 461 million in the prior year. Basic earnings per share (EPS) from continuing operations increased 223% to € 7.47 from € 2.31 in 2020. Diluted EPS from continuing operations was also up 223% to € 7.47 in 2021 (2020: € 2.31).

Net income from
continuing operations

+223%

€ 1.492 bn

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

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

The total number of shares outstanding decreased by 3,471,205 shares to 191,594,855 at the end of 2021. 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 194,172,984 (2020: 195,155,924).

GAINS FROM DISCONTINUED OPERATIONS AMOUNT TO € 666 MILLION

In 2021, adidas incurred gains from discontinued operations of € 666 million, net of tax, mainly related to a write-up of the previously impaired Reebok trademark in an amount of € 549 million and deferred tax expenses thereon in the amount of € 143 million within discontinued operations (2020: loss of € 19 million). SEE NOTE 03

NET INCOME ATTRIBUTABLE TO SHAREHOLDERS INCREASES 390% TO € 2.116 BILLION

The company’s net income attributable to shareholders, which in addition to net income from continuing operations includes the gains from discontinued operations, increased 390% to € 2.116 billion (2020: € 432 million). As a result, basic EPS from continuing and discontinued operations increased 392% to € 10.90 versus € 2.21 in 2020. Diluted EPS from continuing and discontinued operations also increased 392% to € 10.90 (2020: € 2.21).