Outlook

In 2022, we expect the robust recovery of the global economy and consumer spending to continue. While uncertainty due to prolonged adverse effects of the coronavirus pandemic remains, we anticipate the global sporting goods industry to continue expanding significantly in 2022. The macroeconomic recovery as well as structural industry tailwinds in combination with the execution of our strategy ‘Own the Game’ and our strong product pipeline are forecast to lead to currency-neutral net sales growth between 12% and 14%. Gross margin is expected to increase to a level of between 51.5% and 52.0%. Operating margin is anticipated to go up to a level of between 10.5% and 11.0%. As a result, net income from continuing operations is forecast to increase to a level of between € 1.8 billion and € 1.9 billion. All expectations stated in this outlook are for continuing operations and hence exclude the Reebok business.

FORWARD-LOOKING STATEMENTS

This Management Report contains forward-looking statements that reflect Management’s current view with respect to the future development of our company. The outlook is based on estimates that we have made on the basis of all the information available to us at the time of completion of this Annual Report. In addition, such forward-looking statements are subject to uncertainties which are beyond the control of the company. In case the underlying assumptions turn out to be incorrect or described risks or opportunities materialize, actual results and developments may materially deviate (negatively or positively) from those expressed by such statements. adidas does not assume any obligation to update any forward-looking statements made in this Management Report beyond statutory disclosure obligations. See Risk and Opportunity Report

DIVESTITURE OF REEBOK

As part of the development of its new strategy ‘Own the Game,’ adidas has decided to sell its Reebok business to Authentic Brands Group for a total consideration of up to € 2.1 billion. Closing of the transaction is expected to occur in the first quarter of 2022.

GLOBAL ECONOMIC GROWTH TO STABILIZE IN 2022¹

Global gross domestic product (GDP) is expected to grow 4.1% in 2022 despite continued impact from covid-19, diminishing policy support and lingering supply disruptions. All regions will continue to face downside risks from potential resurgences of covid-19, tightening financial conditions, geopolitical conflicts and extreme weather as well as other natural disasters. Output, consumption, and trade, however, are forecast to improve gradually amid more efficient pandemic management, supported by elevated vaccination rates globally. In addition, differences in the pace of growth between advanced and developing economies affect the global GDP projection. Advanced economies are forecast to see growth of 3.8% with pent-up demand fading and inflation remaining above target levels. Growth in developing economies is projected at 4.6% as vaccination rates steadily increase while monetary policy accommodation is being withdrawn.

SPORTING GOODS INDUSTRY EXPANSION TO CONTINUE IN 2022

In the absence of any delay in pandemic recovery or other macroeconomic shocks, the global sporting goods industry is set to continue its recovery in 2022. Demand is forecast to stay robust amid elevated vaccination rates and less restrictive pandemic management as lockdowns, social distancing measures and store closures have become less likely. In addition, major sports events, such as the Beijing 2022 Olympic Winter Games and the FIFA World Cup Qatar 2022 will support industry growth, as spectators return to larger and smaller stages. Moreover, the sporting goods industry is projected to remain fundamentally attractive in the long-term, as existing global trends such as ‘athleisure,’ increasing sport participation rates and rising health and fitness awareness are further accelerating. In addition, sustainability is expected to further gain in importance amid growing environmental awareness of consumers. The pandemic supports the shift toward online and social media channels as a powerful catalyst, while major industry players leverage this trend by increasing their direct-to-consumer (DTC) efforts. However, the risks of a delayed pandemic recovery and rising geopolitical tensions also continue to exist for the sporting goods industry.

CURRENCY-NEUTRAL SALES TO INCREASE BETWEEN 12% AND 14% IN 2022

After the recovery from the coronavirus pandemic in 2021, we expect strong top-line growth to continue in 2022. Despite covid-19-related challenges in parts of the world, uncertainties regarding the global economic outlook and risks from geopolitical tensions, the company’s sales development will continue to be favorably impacted by long-term industry growth drivers such as increasing sports participation, the growing penetration of sports-inspired apparel and footwear (‘athleisure’) and digitalization. Beyond these structural industry tailwinds, the execution of our strategy ‘Own the Game’ as well as our strong product pipeline are expected to drive double-digit sales growth. Specifically, we expect sales to increase at a rate between 12% and 14% on a currency-neutral basis. This development will be supported by currency tailwinds.

CURRENCY-NEUTRAL REVENUES TO INCREASE IN ALL MARKET SEGMENTS

In 2022, we expect currency-neutral revenues to increase in all market segments. While currency-neutral sales in North America and Latin America are projected to grow at a mid- to high-teens rate, currency-neutral revenues are expected to grow at a rate in the mid-teens in EMEA and Asia-Pacific. Greater China is expected to record growth in the mid-single-digits.

GROSS MARGIN EXPECTED TO EXPAND TO A LEVEL BETWEEN 51.5% AND 52.0%

In 2022, gross margin is expected to continue to recover and reach a level of between 51.5% and 52.0%. A positive channel mix effect, price increases as well as the positive impact from favorable currency developments will drive the gross margin improvement and are expected to outweigh significantly higher supply chain costs.

OPERATING MARGIN TO INCREASE TO A LEVEL OF BETWEEN 10.5% AND 11.0%

In 2022, the operating margin is projected to increase significantly to a level of between 10.5% and 11.0%. In addition to the expected higher gross margin, lower operating expenses as a percentage of sales – also due to the non-recurrence of some of the Reebok-related stranded costs – will contribute to the profitability improvement. Driven by the strong top-line growth in combination with the margin improvements net income from continuing operations is projected to increase to a level of between € 1.8 billion and € 1.9 billion in 2022.

AVERAGE OPERATING WORKING CAPITAL AS A PERCENTAGE OF SALES TO DECREASE

During the coronavirus pandemic, average operating working capital as a percentage of sales increased significantly as a result of prolonged temporary store closures and lower product sell-through. While we were able to normalize inventory levels and significantly improve our working capital position in 2021 already, we will continue this development in 2022 and bring average operating working capital as a percentage of sales back to a level below 20%.

CAPITAL EXPENDITURE TO INCREASE TO UP TO € 900 MILLION

In order to execute our growth strategy, we will continue to invest into our business. Consequently, capital expenditure is expected to increase to a level of up to € 900 million in 2022. Investments into our own retail stores as well as into digital, including e-commerce, will make up the biggest part of capital expenditure.

MANAGEMENT PROPOSES DIVIDEND PAYMENT OF € 3.30 PER SHARE

As a result of the strong operational and financial performance in 2021, the company’s financial position as well as Management’s confidence in our long-term growth aspirations, the adidas AG Executive and Supervisory Boards will recommend paying a dividend of € 3.30 per dividend-entitled share to shareholders at the Annual General Meeting on May 12, 2022. This represents an increase of 10% compared to the prior year dividend (2021: € 3.00) and would result in a total payout of € 632 million (2021: € 585 million). See Our Share