Annual Report 2022


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Management Assessment of Performance, Risks and Opportunities, and Outlook

Assessment of performance versus targets

We communicate our financial targets on an annual basis. We also provide updates throughout the year as appropriate. In 2022, financial results were impacted by the war in Ukraine as well as heightened macroeconomic challenges such as supply chain constraints, increasing inflation, tightened monetary policy as well as declining consumer sentiment. Additionally, economic activity as well as our business in Greater China were still severely impacted by the coronavirus pandemic. Growth in all other markets could only partly mitigate these challenges. The decision to terminate the Yeezy partnership also significantly weighed on the company’s top- and bottom-line development in 2022. Given all of these macroeconomic as well as company-specific challenges, we had to adjust our guidance three times in 2022. As a result, we delivered top- and bottom-line results significantly below the initial guidance provided at the beginning of the year, but in line with the adjusted guidance provided in November 2022.  SEE ECONOMIC AND SECTOR DEVELOPMENT

Company targets versus actual key metrics



2021 Results1


2022 Initial Targets1,2


2022 Updated Targets1,3


2022 Results (vs. prior year)1


2023 Outlook

Currency-neutral sales development




to increase at a rate between 11% and 13%


to increase at a low-single-digit rate




to decline at a high-single-digit rate

Gross margin




to increase to a level of between 51.5% and 52.0%


to reach a level of around 47.0%





Operating margin/ operating profit/loss




to increase to a level of between 10.5% and 11.0%


to reach a level of around 2.5%




operating loss of € 700 million

Net income from continuing operations (€ in millions)




to increase to a level of between € 1,800 million and € 1,900 million


to reach a level of around € 250 million





Average operating working capital in % of net sales4




to decrease to a level below 20%


to increase to a level of above 20%




to reach a level of between 25% and 26%

Capital expenditure (€ in millions)4,5




to increase to a level of up to € 900 million


to increase to a level of up to € 700 million




to reach a level of around € 600 million


Figures reflect continuing operations as a result of the reclassification of the Reebok business to discontinued operations.


As published on March 9, 2022.


As published on November 9, 2022. For average working capital and capital expenditure as of August 4, 2022.


2021 figures reflect the reclassification of the Reebok business to assets or liabilities held for sale.


Excluding acquisitions and leases.

In 2022, revenues increased 1% on a currency-neutral basis. The development reflects increases in all market segments except Greater China where sales declined strong double-digits. While sales in EMEA and Asia-Pacific grew in line with the guidance provided in November 2022, the revenue development in North America fell slightly short of our projections. At the same time, revenues in Latin America exceeded our expectations. Gross margin ended the year at 47.3%, reflecting a decrease of 3.4 percentage points versus the prior year level, but in line with the guidance provided in November 2022. 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 higher discounts, especially in the second half of the year. Moreover, a less favorable market and channel mix as well as unfavorable currency developments weighed on the gross margin development in 2022. Our operating margin decreased 6.4 percentage points to 3.0%, somewhat ahead of our guidance provided in November. This operating margin decline mainly reflects the gross margin decrease, increasing operating overhead and marketing and point-of-sale expenses as well as unfavorable currency developments. In addition, the decision to terminate the Yeezy partnership at the end of October 2022 also had a significant adverse impact on our profitability. Net income from continuing operations decreased 83% to € 254 million and came in in-line with the November guidance. This development was impacted by several one-offs that occurred in the second half of 2022 in the amount of € 350 million. These one-off costs are related to our decision to wind down our business in Russia, a settled legal dispute, higher provisions for customs-related risks, cash-pooling in high inflationary countries as well as to restructuring costs as part of the company’s business improvement program. SEE INCOME STATEMENT

Average operating working capital as a percentage of sales ended the year 2022 at a level of 24.0%. While this is directionally in line with the guided level of above 20.0%, the increase was significantly higher than initially expected. The year-over-year increase was 4.0 percentage points. This increase mainly reflects the slower recovery in Greater China, the significant inventory increase, which is mainly the result of higher product and freight costs, an increased sourcing volume, a different ordering pattern given longer transportation lead times, the termination of the Yeezy partnership as well as lower prior year comparables due to the prior year’s impact from the factory lockdowns in Vietnam. Capital expenditure increased 4% to € 695 million in 2022 in line with our latest guidance. More than 70% of these investments were spent on controlled space initiatives as well as on Digital and IT activities. Controlled space initiatives comprise investments in new or remodeled own retail or franchise stores as well as in shop-in-shop presentations of our products in our customers’ stores. sEE STATEMENT OF FINANCIAL POSITION AND STATEMENT OF CASH FLOWS


Beyond our financial performance, we also actively monitor other KPIs. These other KPIs include the number of members in our membership program, the share of our sustainable article offering as well as the share of women in management positions in our organization.  SEE INTERNAL MANAGEMENT SYSTEM

Overview of current status and objectives for selected other KPIs





Objective 2025

Member base in membership program


303 million members


to increase to around 500 million members

Sustainable article offering1




9 out of 10 articles to be sustainable

Share of women in management positions




to increase to more than 40%


Meaning that they are – to a significant degree – made with environmentally preferred materials.

Assessment of overall risks and opportunities

Our Risk Management team aggregates all risks and opportunities identified through the half-yearly risk and opportunity assessment process to determine the company’s risk and opportunity portfolio (i.e., the company’s aggregated risk position). Results from this process are analyzed and reported to the Executive Board accordingly. The Executive Board discusses and assesses risks and opportunities on a regular basis and takes into account the relationship between risk and opportunity portfolio (i.e., the company’s aggregated risk position) and risk appetite as well as risk capacity in its decision-making. Compared to the prior year, our assessment of certain risks and opportunities has changed in terms of likelihood of occurrence and/or potential financial impact. Our risk and opportunity aggregation using a Monte-Carlo simulation determined that the company’s aggregated risk does not exceed the company’s risk capacity threshold with a likelihood of at least 99%. Therefore, we do not foresee any material jeopardy to the viability of the company as a going concern.  SEE RISK AND OPPORTUNITY REPORT

Assessment of financial outlook

Since the creation and launch of our ‘Own the Game’ strategy, the economic and political environment we operate in has significantly changed. Macroeconomic challenges as well as geopolitical tensions have had an adverse impact on our business, our consumers, and business partners. Paving the way for a restart, Bjørn Gulden joined adidas as new CEO in January 2023. In this context, we are currently conducting a thorough strategic review, which also includes the financial ambition for 2025. We will provide an update on the outcome of this review in the course of the second half of 2023 and, in the meantime, continue to diligently execute our functional priorities.

In 2023, we expect our revenue development to be impacted by macroeconomic challenges and geopolitical tensions which continue to dampen consumer sentiment, elevated recession risks in Europe and North America as well as uncertainty around the speed and extent of the recovery in Greater China. In addition, company-specific challenges such as the high inventory levels and the termination of the Yeezy partnership are forecast to weigh on the company’s operational and financial performance. While we continue to review future options for the utilization of our Yeezy inventory, our FY 2023 guidance already accounts for the significant adverse impact from not selling the existing stock. Compared to the prior year, this would lower revenues by around € 1,200 million and operating profit by around € 500 million in 2023. Should we irrevocably decide not to repurpose any of the existing Yeezy product, this would result in the write-off of the existing Yeezy inventory as of February 2023 and would lower the operating profit by an additional around € 500 million this year. In addition, we expect one-off costs of up to € 200 million in 2023 which are part of the strategic review the company is currently conducting aimed at reigniting profitable growth as of 2024. Against this background, we project currency-neutral sales to decline at a high-single-digit rate and expect to report an operating loss of € 700 million in 2023. SEE OUTLOOK

We believe our outlook for 2023 realistically describes the underlying development of the company. However, the outlook for 2023 as outlined in this report is subject to change depending on further developments related to the coronavirus pandemic. In addition, ongoing uncertainties regarding macroeconomic challenges, the impact from geopolitical conflicts and consumer sentiment in both advanced and developing economies as well as re-escalating trade tensions represent risks to the achievement of our stated financial goals and aspirations. No other material event between the end of 2022 and the publication of this report has altered our view.  SEE OUTLOOK

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Controlled space
Includes own-retail business, mono-branded franchise stores, shop-in-shops, joint ventures with retail partners and co-branded stores. Controlled space offers a high level of brand control and ensures optimal product offering and presentation according to brand requirements.
Under the ‘Performance’ category, we subsume all footwear, apparel and ‘accessories and gear’ products which are of a more technical nature, built for sport and worn for sport. These are, among others, products from our most important sport categories: Football, Training, Running, and Outdoor.
This Group Management Report is a combined management report. It contains the Group Management Report of the adidas Group and the Management Report of adidas AG.
The Declaration on Corporate Governance is part of the Annual Report.
Declaration on Corporate Governance