Adidas : FY 2019 Results Presentation

Herzogenaurach, March 11, 2020

AGENDA

1. STRATEGIC UPDATE
2. BUSINESS UPDATE
3. FINANCIAL UPDATE
4. OUTLOOK

4

STRATEGIC UPDATE

KASPER RORSTED

CEO

'CREATING THE NEW'

WE ARE IN THE LAST YEAR OF OUR CURRENT STRATEGIC CYCLE

CULTURE

OPEN SOURCE

	TOP LINE &
	MARKET SHARE
BRAND	GROWTH
GROSS MARGIN
DESIRE
	EXPANSION
	OPERATING
	LEVERAGE

6

CULTURE

OUR FOUNDATION TO DRIVE VALUE CREATION

LIVING A PERFORMANCE CULTURE

New company-wide performance management system well established

ACTIVATING LEADERSHIP GROUPS

Further improved cross-functional collaboration, decision making and succession planning

ALIGNING WITH SHAREHOLDER INTERESTS

Through transparent, equity-based compensation for Executive Board and >3,000 leaders

VALUING AND PROMOTING DIVERSITY

Continuously increased the share of females in leadership positions to 34% in 2019

7

STRATEGIC CHOICES

EXECUTION DRIVES FURTHER PROGRESS IN 2019

BN	M
	>

Net sales share of speed-enabled products	Revenues across the six global key cities	Made more than eleven million pairs of
at 47% across all categories and markets	reached a level of € 1.7 billion	shoes containing Parley Ocean Plastic

8

'ACCELERATION PLAN'

EXECUTION DRIVES FURTHER PROGRESS IN 2019

	BN	~	K	+
+
Reebok with 12% revenue growth	adidas North America revenues	Global business services organization	adidas app live in more
in its home market North America	reached a level of € 4.8 billion	grew to almost 1,000 employees	than 30 countries

9

BUSINESS UPDATE

KASPER RORSTED

CEO

STRENGTHS & WEAKNESSES

2019 ANOTHER RECORD YEAR DESPITE SOME CHALLENGES

	CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS		SUPPLY CHAIN SHORTAGES WITH EXPECTED IMPACT
+	−
	Greater China and e-com up double-digits		Weighing on both growth and profitability
	TOP LINE DRIVEN BY ALL MARKET SEGMENTS		MUTED GROWTH IN WHOLESALE
+	−
	Revenue increases in all regions with Europe returning to growth		Less commercial traction than in DTC channels
	FURTHER STRONG PROFITABILITY IMPROVEMENT		GROSS MARGIN TURNING NEGATIVE IN H2
+	−
	Continuation of double-digitbottom-line growth		As fading FX tailwind no longer compensates underlying decline
	ATTRACTIVE CASH RETURNS TO SHAREHOLDERS		LIMITED OPERATING LEVERAGE
+	−
	Again € 1.5 billion returned through dividend and share buyback		Due to strong DTC growth and investments into the business model

11

P&L HIGHLIGHTS

DELIVERED ON 2019 GUIDANCE

Net sales*

Gross margin

Operating margin

Net income from continuing operations

Basic EPS from continuing operations

Outlook 2019		Results 2019
Increase of 5% - 8%	Increase of 6%
Increase to around 52.0%	Increase to 52.0%
Increase of 0.5pp - 0.7pp to 11.3% - 11.5%	Increase to 11.3%
Increase of 8% - 12% to€ 1.845 - € 1.915 billion	Increase of 12% to € 1.918 billion
-		Increase of 15% to € 9.70

* Currency-neutral.

Guidance as published on March 13, 2019; both outlook and result for net income as well as basic EPS from continuing operations including negative impact from first-time application of IFRS 16.	12

CONTINUED PROGRESS IN STRATEGIC GROWTH AREAS

GREATER CHINA AND E-COM UP DOUBLE-DIGITS IN 2019

ADIDAS NORTH AMERICA

Added more than € 2.5 billion since 2015

GREATER CHINA

Added more than € 2.7 billion since 2015

E-COMMERCE

Added more than € 2.1 billion since 2015

Currency-neutral.	13

ADIDAS BRAND GROWS IN ALL MARKETS

DOUBLE-DIGIT INCREASES IN ASIA-PACIFIC AND EMERGING MARKETS

%

SPORT PERFORMANCE INCREASES 5%

Training, outdoor and basketball grow at double-digit rates

SPORT INSPIRED GROWS 8%

Originals the biggest growth contributor

BALANCED GROWTH

Footwear growing mid-single-digits and apparel growing high-single-digits

Currency-neutral.	14

PROFITABLE TOP-LINE GROWTH AT REEBOK

DRIVEN BY ITS HOME MARKET NORTH AMERICA

%

REEBOK REVENUES INCREASE 2%

Double-digit growth in North America, Emerging Markets and Russia/CIS

CLASSICS GROWS LOW-SINGLE-DIGITS

Driven by increases in both footwear and apparel

SPORT RECORDS MODERATE DECLINE

Strong growth in apparel offset by footwear

Currency-neutral.	15

ANOTHER YEAR OF EXCEPTIONAL E-COMMERCE GROWTH

E-COM NOW REPRESENTS ALMOST € 3 BILLION OF OUR BUSINESS

%

E-COMMERCE REVENUES GROW 34%

Greater China the biggest growth contributor

CREATORS CLUB GAINING TRACTION WITH CONSUMERS

Member sales account for more than half of e-com revenues across US and Europe

INTEGRATION OF RUNTASTIC INTO DIGITAL ECOSYSTEM COMPLETED

Running and Training apps successfully rebranded to adidas by Runtastic

Currency-neutral.	16

2019 IN REVIEW

SUCCESSFULLY TACKLED OUR 2019 FOCUS AREAS

Leveraging multiple dimensions of innovation

To drive top- and bottom-line growth

Continuing to invest with impact

Into brand desire and scalable business model

Delivering overproportionate net income growth

On the back of sustainable operating margin expansion

Addressing challenges decisively

Return Europe to growth and mitigate supply shortages

17

FINANCIAL UPDATE

HARM OHLMEYER

CFO

REVENUE GROWTH BY MARKET SEGMENT

ALL REGIONS RECORDING SALES INCREASES IN 2019

		+8%
	+3%	Operating margin: 25.4% (+0.8pp)
+8%
Operating margin: 23.2% (+3.2pp)
Operating margin: 13.5% (-1.4pp)		+10%

Operating margin: 33.7% (+0.9pp)

+7%	+13%
Operating margin: 28.2% (+0.4pp)

Operating margin: 17.8% (+0.7pp)

Currency-neutral.	19

GROWTH BY MARKET SEGMENT

NORTH AMERICA, ASIA-PACIFIC AND EUROPE

Supply chain shortages weighing on growth and profitability in North America

Asia-Pacific up double-digits driven by 15% growth in Greater China

Europe returns to growth as initiatives and reinvestments show planned effects

adidas brand revenues +7%	adidas brand revenues +11%	adidas brand revenues +4%
Reebok brand revenues +12%	Reebok brand revenues -15%	Reebok brand revenues -2%
Gross margin at 40.0% (-1.2pp)	Gross margin at 57.0% (+0.8pp)	Gross margin at 51.5% (+3.9pp)

Currency-neutral.	20

GROWTH BY MARKET SEGMENT

EMERGING MARKETS, LATIN AMERICA AND RUSSIA/CIS

Double-digit sales growth despite	Profitable growth despite challenging	Significant sales growth despite tough
geopolitical tensions in several countries	macroeconomic environment	prior year World Cup comparison base
adidas brand revenues +12%	adidas brand revenues +8%	adidas brand revenues +7%
Reebok brand revenues +14%	Reebok brand revenues +3%	Reebok brand revenues +11%
Gross margin at 52.3% (-0.5pp)	Gross margin at 44.5% (-0.4pp)	Gross margin at 61.7% (-4.2pp)

Currency-neutral.	21

P&L OVERVIEW

2019 RESULTS

(€ in millions)

NET SALES

GROSS MARGIN

OTHER OPERATING EXPENSES

OTHER OPERATING EXPENSES in % of sales

OPERATING PROFIT

OPERATING MARGIN

NET INCOMEfrom continuing operations

BASIC EPSfrom continuing operations (€)

FY 2019

FY 2018

Y-O-Y

23,640 21,915+8%

52.0% 51.8%+0.2pp

9,843 9,172+7%

41.6% 41.9%-0.2pp

2,660 2,368+12%

11.3% 10.8%+0.4pp

1,918 1,709+12%

9.70 8.46+15%

+15%

to € 1,972 million

excl. IFRS 16

+18%

to € 9.97

excl. IFRS 16

First-time application of IFRS 16 as of January 1, 2019. Prior year figures are not restated.	22

GROSS MARGIN DEVELOPMENT SINCE 2015

ACHIEVED INDUSTRY-LEADING GROSS MARGIN LEVEL

Gross margin up 0.2pp to 52.0% in 2019

Supported by favorable FX development

Increase of 3.7pp compared to 2015 level

Due to execution of 'Creating the New'

Only slight decrease expected in 2020

Despite significant adverse FX impact

"slight decrease"

			51.8%	52.0%
		50.4%
	49.2%
48.3%
2015	2016	2017	2018	2019	2020E

2015 figure still includes the TaylorMade, Adams Golf, Ashworth and CCM Hockey businesses, which have been reported as discontinued operations since 2016.

Outlook 2020 without impact from coronavirus outbreak.	23

OTHER OPERATING EXPENSES

DTC-DRIVEN OPERATING OVERHEAD GROWTH IN 2019

(€ in millions)

OTHER OPERATING EXPENSES

FY 2019

FY 2018

Y-O-Y

9,843 9,172+7%

(in % of sales)	41.6%	41.9%	-0.2pp
	3,042	3,001	+1%
MARKETING AND POINT-OF-SALE EXPENSES
	12.9%	13.7%	-0.8pp
(in % of sales)
	6,801	6,171	+10%
OPERATING OVERHEAD EXPENSES
	28.8%	28.2%	+0.6pp
(in % of sales)

DISTRIBUTION AND SELLING

EXPENSES: +12% (+0.8pp)

Driven by 18% currency-neutral sales growth in DTC channel

GENERAL AND ADMINISTRATION EXPENSES: +5%(-0.2pp)

Leverage despite continued investments into scalability

First-time application of IFRS 16 as of January 1, 2019. Prior year figures are not restated.	24

AVERAGE OPERATING WORKING CAPITAL

FURTHER DECLINE TO 18.1%

Inventories up 18% c.n.

Due to low comparison base and Chinese New Year

Receivables up 8% c.n.

Representing healthy development

Payables up 17% c.n.

Due to improved terms with vendors

	21.1%
20.5%		20.4%		-0.9PP
			19.0%
				18.1%
2015	2016	2017	2018	2019

Average operating working capital = sum of operating working capital at quarter-end / 4.

2015 figure still includes the TaylorMade, Adams Golf, Ashworth and CCM Hockey businesses, which have been reported as discontinued operations since 2016.	25

NET CASH AND EQUITY POSITION

EQUITY RATIO DECREASES DUE TO IFRS 16

Net cash position

At € 873 million

Equity position

Increases € 420 million year-on-year

Equity ratio

Down 8.0pp year-on-year due to IFRS 16

				-86
			959	873
		484
	-103
-460
2015	2016	2017	2018	2019

Net cash/(net borrowings) at year-end, € in millions.

2015 figure still includes the TaylorMade, Adams Golf, Ashworth and CCM Hockey businesses, which have been reported as discontinued operations since 2016.	26

ATTRACTIVE CASH RETURNS TO SHAREHOLDERS

DIVIDEND INCREASE OF 15% TO € 3.85 PROPOSED FOR 2019

	2018	2019	2020		TOTAL
Dividend
€ 0.5 billion		€ 0.7 billion		€ 0.8 billion*		€ 2.0 billion
paid
Share
				up to		up to
buyback	€ 1.0 billion		€ 0.8 billion
		€ 1.0 billion		€ 2.8 billion
volume
Total cash
€ 1.5 billion		€ 1.5 billion		up to		up to
return to
		€ 1.8 billion		€ 4.8 billion
shareholders

Buyback started on March 22, 2018 and ends latest on May 11, 2021.

* Dividend for 2019 subject to Annual General Meeting approval; payout based on number of shares outstanding as at February 25, 2020.	27

OUTLOOK

KASPER RORSTED

CEO

2020 FOCUS AREAS

COMMITTED TO BRINGING 'CREATING THE NEW' HOME

Leverage major launches and sports events in 2020

Driving product activation and consumer engagement

Deliver double-digitbottom-line growth

Continuing to sustainably balance sales growth and margins

Bring 'Creating the New' home

Remaining focused on execution all the way to the finish line

Manage impact from coronavirus outbreak

Protecting our people and the business

29

Products created	Products designed
using recycled materials	to have multiple lifecycles

Products created using

natural materials

30

PARLEY31

FUTURECRAFT LOOP

32

BIOFABRIC TENNIS DRESS

33

EURO 2020

34

TOKYO OLYMPICS 2020

35

GMR

36

4D

37

ADIZERO PRO	38

SL20

UB20	39

RDY

40

SUPERSTAR

41

BEYONCÉ 42

YEEZY

43

REEBOK44

OUTLOOK 2020

WITHOUT IMPACT OF CORONAVIRUS OUTBREAK

	Outlook 2020
Net sales*
Increase of 6% - 8%
Gross margin	Slight decrease compared
to prior year level of 52.0%
Operating margin	Increase of 0.2pp - 0.5pp
to 11.5% - 11.8%
Net income from	Increase of 10% - 13%
continuing operations	to € 2.100 - € 2.160 billion

* Currency-neutral.

Outlook 2020 without impact from coronavirus outbreak.	45

ON TRACK TO ACHIEVE 'CREATING THE NEW'TARGETS

AS IMPLIED BY OUTLOOK 2020

	'CTN' Targets 2020		Implied by
	March 2015	March 2017	March 2018	Outlook 2020
Net sales growth
high-single-digit	10% - 12%	10% - 12%	~11%
CAGR 2015-2020 c.n.
Net income	~15%	20% - 22%	22% - 24%	24% - 25%
CAGR 2015-2020
Net sales	~22	25 - 27	25 - 27	-
(€ in billions)
E-commerce	2	4	4	-
(€ in billions)
Operating margin	~9.9%	11%	up to 11.5%	11.5% - 11.8%

Figures reflect continuing operations as a result of the divestiture of the Rockport, TaylorMade, Adams Golf, Ashworth and CCM Hockey businesses.

Outlook 2020 without impact of coronavirus outbreak.	46

MEASURES IMPLEMENTED IN RESPONSE TO CORONAVIRUS

HEALTH AND SAFETY OF OUR PEOPLE REMAINS TOP PRIORITY

Dedicated task force team in place

Temporary closure of office locations and stores

Restricting international business travel

Ongoing guidance and support for employees

47

CONTINUING TO EXECUTE IN THE REST OF THE WORLD DESPITE CORONAVIRUS

WHILE MANAGING THE IMPACT IN GREATER CHINA

Greater China

Asia-Pacific(excl. Greater China)

North America

6%-8%Europe

Russia/CIS

Latin America

Emerging Markets

6%-8%

GLOBAL		GREATER CHINA		REST OF WORLD

Outlook 2020 without impact of coronavirus outbreak; 6%-8% referring to currency-neutral net sales increase.	48

ASSESSMENT OF CORONAVIRUS DEVELOPMENTS

AND THE IMPACT ON OUR BUSINESS

		WHAT WE KNOW			WHAT WE DON'T KNOW
Jan 1	Jan 25	Feb 29	End of Q1	WHAT WE DON'T KNOW
Chinese New Year	Remainder of 2020

▪Strong development in	▪Greater China revenues	▪Slight improvement in
Greater China	down around 80%	Greater China but
		potentialsignificant
		takebacks
		▪No major impact on
		global supply as factories
		largely operational again

• Recoveryin Greater China and extent of spilloverinto other countries
• Availability ofraw materials

Q1 2020 expected impact:	FY 2020 expected impact:
Net sales in Greater China € 0.8 - 1.0 billion below prior year level	Not quantifiable
Operating profit in Greater China € 0.4 - 0.5 billion below prior level

49

ASSESSMENT OF CORONAVIRUS IMPACT IN THE FIRST QUARTER

COMPANY'S NET SALES EXPECTED TO BE MORE THAN 10% BELOW PRIOR YEAR LEVEL IN Q1

Q1 company net sales >10% below prior year

Asia-Pacific

		Rest of World
€ 5.9 billion
Greater China	Rest of World
Net sales	to grow 6% - 8%
€ 0.8 - 1.0 billion
	currency-neutral
	below prior year

Japan & South Korea

~€ 0.1 billion below prior year

Q1 2019

Q1 2020E

50

GREATER CHINA GROWTH TRAJECTORY

CORONAVIRUS EXPECTED TO ONLY CAUSE A TEMPORARY DIP IN 2020

Double-digittop-line growth

Return to growth path

Dip due to coronavirus

2015-2019		2020		2021+

51

'CREATING THE NEW' HAS MADE US STRONGER

HEALTHY FUNDAMENTALS ENSURE THAT FUTURE PROSPECTS REMAIN INTACT

Record profit and cash generation

Stronger-than-ever balance sheet

Resilient business model

Proven ability to take the right decisions for long-term success

A leading player in an attractive industry

52

'CREATING THE NEW' HAS MADE US STRONGER

HEALTHY FUNDAMENTALS ENSURE THAT FUTURE PROSPECTS REMAIN INTACT

ATHLEISURE IS HERE TO STAY

Sportswear a permanent component of fashion landscape

STRUCTURAL SHIFT IN CONSUMER MINDSET

Rising sports participation rates as well as awareness for health and sustainability

DIRECT-TO-CONSUMER RELATIONSHIP

Targeted storytelling and leveraging first-hand consumer insights

SPORTING EVENTS AS GLOBAL STAGES

Frequent opportunities to make our athletes, brands and products shine

SUPPLY CHAIN UPSIDE

Scope to increase industry's speed-to-market

A leading player in an attractive industry

53

SUMMARY

1. Proved resilience in 2019 and again delivereddouble-digit earnings growth
2. Shareholders participating in the company's ongoing success
3. Investing back into brands and business for future profitable growth
4. Leverage company's strength to manage impact from coronavirus outbreak
5. Focused on bringing 'Creating the New' home

54

FOUR YEARS INTO 'CREATING THE NEW'

WE KEEP DELIVERING ON OUR PROMISES

Annual Outlook	2016	2017	2018	2019	SINCE START
OF 'CTN'

Net sales

Operating margin

Net income

2019 compared to 2015; figures reflect continuing operations as a result of the divestiture of the Rockport, TaylorMade, Adams Golf, Ashworth and CCM Hockey businesses..	55

UPCOMING EVENTS

May 8, 2020

Q1 2020 Results Release

May 14, 2020

Annual General Meeting

August 6, 2020

Q2 2020 Results Release

NEW DATE: November 10, 2020

Q3 2020 Results Release & Investor and Media Day

56

Q&A