Income Statement Information

Revenue growth in western markets in 2022

In 2022, revenues increased 1% on a currency-neutral basis. In euro terms, revenues were up 6% to € 22,511 million from € 21,234 million in 2021. From a market perspective, currency-neutral sales increased in all segments except Greater China where sales declined double-digits. While revenues in both North America and Latin America grew at a double-digit rate, sales in EMEA were up in the high-single-digits. Currency-neutral sales in Asia-Pacific grew mid-single-digits. SEE BUSINESS PERFORMANCE BY SEGMENT

Revenue development driven by strong double-digit growth in performance

From a category perspective, currency-neutral revenues in Performance grew at a strong double-digit rate, mainly driven by an exceptional increase in Football as well as strong double-digit growth in Running and Outdoor. While currency-neutral net sales declined in Lifestyle overall, Basketball revenues grew at a strong double-digit rate.

Net sales¹ € in millions

Net sales by segment in %¹

Footwear drives sales growth in 2022

Currency-neutral footwear sales were up 3% in 2022 as a result of a double-digit increase in Performance. Apparel revenues were down 5% on a currency-neutral basis despite double-digit growth in Performance. Currency-neutral accessories and gear sales were up 19%, mainly reflecting increased demand in Football driven by the FIFA World Cup Qatar 2022.

Net sales by product category in %¹

Cost of sales increase driven by higher supply chain costs

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 2022, cost of sales was € 11,867 million, representing an increase of 13 % compared to the prior year level of € 10,469 million. This development mainly reflects higher supply chain costs as well as an increased sourcing volume.

Gross margin at 47.3%

In 2022, gross profit decreased 1% to € 10,644 million from € 10,765 million in 2021, representing a gross margin decrease of 3.4 percentage points to 47.3% (2021: 50.7%). Broad-based price increases were more than offset by the strong increase in supply chain costs, reflecting increased product costs and freight expenses, as well as by higher discounts, particularly in the second half of the year. In addition, a less favorable market, category and channel mix, negative currency developments as well as one-off costs in the amount of more than € 50 million, reflecting the company’s decision to wind down its business in Russia as well as higher provisions for customs-related risks, weighed on the gross margin development in 2022.

Gross margin^1,2 in %

Royalty and commission income and other operating income increase

In 2022, royalty and commission income increased 31% to € 112 million (2021: € 86 million) due to an increase in licensing income. Other operating income was up 529% to € 173 million from € 28 million in 2021, mainly reflecting income from post-closing agreements with Authentic Brands Group from the Reebok divestiture.

Other operating expenses as a percentage of sales up 3.7 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 2022, other operating expenses were up 15% to € 10,260 million, also reflecting unfavorable currency developments (2021: € 8,892 million). As a percentage of sales, other operating expenses increased 3.7 percentage points to 45.6% from 41.9% in 2021. In 2022, marketing and point-of-sale expenses increased 8% to € 2,763 million (2021: € 2,547 million) as the company continued to invest into the launch of campaigns, especially around important sport events such as the 2022 Beijing Winter Olympics, the UEFA Women’s Euro 2022, as well as the FIFA World Cup Qatar 2022. In addition, adidas invested into the launch of new products such as the Adizero Adios Pro 3, the adidas x Gucci collection, and the federation kits for the FIFA World Cup Qatar 2022, as well as into an enhanced consumer experience across both its digital and physical platforms. As a percentage of sales, marketing and point-of-sale expenses increased 0.3 percentage points to 12.3% (2021: 12.0%). Distribution and selling expenses increased 17% to 5,601 million in 2022 from € 4,782 million in the prior year, mainly reflecting higher personnel and logistic costs. As a percentage of sales, distribution and selling expenses increased 2.4 percentage points to 24.9% from 22.5% in 2021. General and administration expenses were up 11% to € 1,651 million (2021: € 1,481 million), mainly driven by higher professional fees and facility expenses. As a percentage of sales, general and administration expenses were up 0.4 percentage points to 7.3% (2021: 7.0%). In total, operating overhead expenses increased 18% to € 7,498 million (2021: € 6,345 million), driven by investments into DTC and infrastructure. Operating overhead expenses further include more than € 250 million one-off costs related to the company’s decision to wind down its business in Russia, a settled legal dispute, as well as restructuring costs as part of the company’s business improvement program. As a percentage of sales, operating overhead expenses increased 3.4 percentage points to 33.3% from 29.9% in 2021. SEE NOTE 31

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

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

EBITDA decreases 39%

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 39% to € 1,874 million in 2022 versus € 3,066 million in 2021. Total depreciation and amortization as well as impairment losses/reversal of impairment losses for tangible and intangible assets increased 23% to € 1,371 million in 2022 (2021: € 1,115 million).

EBITDA^1,2,3 € in millions

Operating margin decreases to 3.0%

Operating profit decreased 66% to € 669 million in 2022 versus € 1,986 million in 2021. The operating margin decreased 6.4 percentage points to 3.0% compared to the prior year level of 9.4%. This development mainly reflects the gross margin decrease, the increase in other operating expenses as a percentage of sales, as well as one-off costs of more than € 300 million in 2022 related to the company’s decision to wind down its business in Russia, a settled legal dispute, higher provisions for customs-related risks as well as restructuring costs as part of the company’s business improvement program.

Operating profit^1,2 € in millions

Operating margin^1,2,3 in %

Net financial result decreases

Financial income increased 102% to € 39 million in 2022 (2021: € 19 million), while financial expenses were up 110 % to € 320 million compared to € 153 million in 2021 mainly driven by increasing interest rates as well as currency effects. Net financial expenses were further impacted by one-off costs of more than € 50 million related to cash-pooling in high inflationary countries. As a result, the company recorded a net financial result of negative € 281 million, compared to negative € 133 million in 2021. SEE NOTE 33

Tax rate increases to 34.5%

The company’s tax rate increased 15.0 percentage points to 34.5% in 2022, mainly driven by non-deductible expenses in Russia as well as by the derecognition of deferred tax assets (2021: 19.4%). SEE NOTE 35

Net income from continuing operations of € 254 million

Net income from continuing operations decreased 83% to € 254 million versus € 1,492 million in the prior year. This decline was partly related to one-off costs in the amount of € 350 million. These one-off costs reflect the company’s decision to wind down its business in Russia, a settled legal dispute, higher provisions for customs-related risks, cash-pooling in high inflationary countries as well as restructuring costs as part of the company’s business improvement program. Basic earnings per share (EPS) from continuing operations decreased 83% to € 1.25 from € 7.47 in 2021. Diluted EPS from continuing operations also decreased 83% to € 1.25 in 2022 (2021: € 7.47).

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

Basic earnings per share^1,2 in €

The total number of shares outstanding decreased by 13,057,657 shares to 178,537,198 at the end of 2022. This development was a result of shares repurchased as part of the company’s share buyback activities as well as the cancellation of repurchased shares. Consequently, the average number of shares used in the calculation of basic earnings per share (EPS) was 183,263,629 (2021: 194,172,984).

Gains from discontinued operations amount to € 384 million

In 2022, adidas incurred gains from discontinued operations of € 384 million, net of tax, related to the Reebok divestiture (2021: gain of € 666 million). SEE NOTE 03

Net income attributable to shareholders of € 612 million

The company’s net income attributable to shareholders, which in addition to net income from continuing operations includes the gains from discontinued operations, decreased 71% to € 612 million (2021: € 2,116 million). As a result, basic EPS from continuing and discontinued operations decreased 69% to € 3.34 versus € 10.90 in 2021. Diluted EPS from continuing and discontinued operations also decreased 69% to € 3.34 (2021: € 10.90).