First Quarter Report 2010

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First Quarter Report 2010

adidas Group

EvEry Product tElls a story

Q2 Q3

Q1

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adidas Group FiRst QuaRteR RepoRt 2010 2

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N°- FiRst QuaRteR Results at a Glance € IN MIllIoNs First quarter 2010 First quarter 2009 change Wholesale Net sales 1,898 1,874 1.3% Gross profit 818 798 2.5% Gross margin 43.1% 42.6% 0.5pp segmental operating profit 626 614 2.0% segmental operating margin 33.0% 32.8% 0.2pp Retail Net sales 459 400 14.9% Gross profit 267 218 22.7% Gross margin 58.2% 54.5% 3.7pp segmental operating profit 52 15 256.5% segmental operating margin 11.3% 3.6% 7.6pp other Businesses Net sales 316 295 7.0% Gross profit 142 116 22.4% Gross margin 45.0% 39.4% 5.7pp segmental operating profit 92 43 112.2% segmental operating margin 29.0% 14.6% 14.4pp Group Net sales 2,674 2,577 3.7% Gross profit 1,300 1,164 11.7% Gross margin 48.6% 45.2% 3.5pp operating profit 260 58 349.0% operating margin 9.7% 2.2% 7.5pp sales by Brand adidas 1,998 1,917 4.2% reebok 376 374 0.5% taylorMade-adidas Golf 223 194 14.9% rockport 56 60 (6.9%) reebok-ccM Hockey 21 24 (14.4%) rounding differences may arise in percentages and totals.

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N°- Financial hiGhliGhts (iFRs)

First quarter 2010 First quarter 2009 change operating highlights (€ in millions)

Net sales 2,674 2,577 3.7%

operating profit 260 58 349.0%

Net income attributable to shareholders 168 5 3,385.1%

Key Ratios (%)

Gross margin 48.6% 45.2% 3.5pp

operating expenses as a percentage of net sales 41.5% 44.7% (3.3pp)

operating margin 9.7% 2.2% 7.5pp

Effective tax rate 30.5% 51.7% (21.2pp)

Net income attributable to shareholders as a percentage of net sales 6.3% 0.2% 6.1pp

operating working capital as a percentage of net sales¹⁾ 22.9% 25.6% (2.7pp)

Equity ratio 44.6% 35.6% 9.0pp

Financial leverage 31.9% 81.8% (49.8pp)

Balance sheet and cash Flow data (€ in millions)

total assets 9,531 9,904 (3.8%)

Inventories 1,680 2,016 (16.7%)

receivables and other current assets 2,673 2,733 (2.2%)

Working capital 1,896 1,977 (4.1%)

Net borrowings 1,359 2,883 (52.9%)

shareholders’ equity 4,254 3,525 20.7%

capital expenditure 26 56 (53.9%)

Net cash used in operating activities (430) (617) 30.2%

per share of common stock (€)

Basic earnings 0.80 0.02 3,123.5%

diluted earnings 0.80 0.04 1,967.1%

operating cash flow (2.06) (3.19) 35.5%

share price at end of period 39.60 25.06 58.0%

other (at end of period)

Number of employees 39,155 38,227 2.4%

Number of shares outstanding 209,216,186 193,515,512 8.1%

average number of shares 209,216,186 193,515,512 8.1% rounding differences may arise in percentages and totals.

all Group figures comprise the brand segments and HQ/consolidation.

1) twelve-month trailing average.

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N°- FiRst QuaRteR net sales

€ IN MIllIoNs 2006 2007 2008 2009 2010

2,459 2,538

2,621 2,577

2,674

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N°- FiRst QuaRteR net income attRiButaBle to shaReholdeRs € IN MIllIoNs

2006 2007 2008 2009 2010

144 128

169 5

168

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adidas Group FiRst QuaRteR RepoRt 2010 4 to ouR shaReholdeRs operational and sporting Highlights

operational and sporting highlights

FiRst QuaRteR 2010

05.02. reebok Global ambassadors thierry Henry and lewis Hamilton present reebok’s revolutionary training shoe Zigtech™.

06.02. reebok launches its “reefreshed” website www.reebok.com as part of the brand’s new “ree” marketing platform. to kick off the “ree” campaign, the brand has created tv spots highlighting the two key products, Easytone™ and Zigtech™. 08.02. adidas and tennis ace ana Ivanovic announce the long-term extension of their partnership. 12.02. olympic and World champion gold medallist and former canadian women’s ice-hockey captain cassie campbell will act as a rockport Brand ambassador going forward.

22.02. adidas Golf presents PoWErBaNd 3.0, the first golf shoe in the customisable mi adidas product family picture 05. 25. 02. reebok and cirque du soleil launch JuKarI Fit to Flex™, the second innovative workout to come out of the groundbreaking partnership picture 06. 28.02. the vancouver 2010 olympic Games are a huge success for the adidas Group with 42 medals (16 gold, 14 silver, 12 bronze) won by adidas Group athletes out of a possible 108 medals.

07.01. adidas unveils the new micoach, a digital coach and interactive training service developed to motivate runners and enable them to reach their individual training goals picture 01. 12.01. adidas originals launches its new star Wars™ collection consisting of footwear, apparel and accessories for men, women and kids picture 02. 12.01. reebok announces its partnership with the successful tv show “Germany’s next topmodel” which will be used to promote reebok’s groundbreaking shoe Easytone™.

14.01. taylorMade introduces the Burner^® superFast driver and fairway woods. the driver weighs an amazingly light 284 grams, promoting faster swing speed and more distance picture 03. 15.01. Giorgio armani s.p.a. and reebok announce a global alliance to create a special collection, combining active style with sport and technology picture 04. 28.01. reinhold Messner and adidas outdoor announce their renewed partnership and introduce the latest version of the legendary suPEr trEKKING boot.

09.03. adidas presents the “Finale Madrid“, the official match ball for the uEFa champions league Final in Madrid. 10.03. lewis Hamilton and reebok unveil the alternate reality game “lewis Hamilton: secret life” in which lewis features as the central character. 18.03. adidas originals launches its new tv campaign,

“the street where originality lives”, where icons like david Beckham and snoop dogg show their individual appreciation of originality.

23.03. adidas and yohji yamamoto present their spring/ summer 2010 collection, with a star-studded event at the K11 art Mall, tsimshatsui, y-3’s new Hong Kong retail destination. 24.03. adidas and the National Basketball association (NBa) announce the extension of their global partnership giving adidas exclusive rights to all NBa apparel in Europe beginning with the 2010/11 NBa season. 26.03. taylorMade is the dominating brand at the Golf- Magazin awards 2010, taking the honours for best driver, best hybrid and best golf footwear.

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adidas Group FiRst QuaRteR RepoRt 2010 5 to ouR shaReholdeRs Interview with the cEo

interview with the ceo

the adidas Group has had a strong start in the first quarter, generating record sales and achieving a significant improvement in profitability compared to the prior year. as key brand initiatives continue to gain momentum and with the excitement of the FiFa World cup™ just weeks away, the Group has a solid foundation from which to achieve its 2010 targets.

in the following interview, herbert hainer, adidas Group ceo, reviews the first quarter of 2010 and discusses the Group’s strategic and financial outlook.

heRBeRt haineR

We began the year with confidence that our product and marketing strategies for 2010 could make a real difference in an improving economic environment.

and the results speak for themselves. We achieved record first quarter sales of

€ 2.7 billion, an increase of 4% currency-neutral, driven by growth in all segments.

More importantly, our profitability improved substantially, with a healthy gross margin improvement of 3.5 percentage points to 48.6% due to lower input costs, a larger share of retail sales, less clearance sales as well as positive currency effects related to the appreciation of the russian rouble compared to the prior year. this, combined with operating expense leverage and supported by the cost-saving initiatives put in place last year, helped first quarter net income jump to € 168 million from € 5 million in the prior year. and, on top of that, we have kept a close eye on maintaining a healthy balance sheet with net debt down 53%

compared to a year ago and average operating working capital as a percentage of sales at an all-time low of 22.9%.

Question

Herbert, you have had very positive first quarter results. can you describe how the year started from a financial perspective?

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heRBeRt haineR

the recovery in consumer spending that gained traction in many regions as the quarter progressed into February and March was definitely a nice surprise. and this is really visible in our retail segment’s performance. sales were up 16%

currency-neutral, with both adidas and reebok posting double-digit growth rates.

comparative store sales increased 7%, which is certainly better than we had anticipated. North america and European Emerging Markets grew 15% and 26%

respectively and were particularly strong as the consumer recovery in the usa and russia gathered pace. on a store format basis, we saw big improvements in our concept stores and other retail formats. comparable concept store sales increased 12% and other retail formats, which include e-commerce, grew 43%, with online sales almost doubling. this translated into a significant profitability increase as the retail segment’s operating margin expanded 7.6 percentage points over the prior year. this demonstrates the leverage we have in our retail operations. and taking this together with the work we are doing this year in the retail segment to create greater efficiency and improve our retail competency, I am convinced we will be able to continue to drive higher returns on our retail investments over the medium term.

heRBeRt haineR

the first quarter has seen genuine global growth. However, there is still a lot of divergence regionally. North america is probably the one market that stands out at the moment. We had a particularly strong first quarter with sales up 14% currency- neutral. While the magnitude of the increase was partly timing-related, retailers in general have been enjoying a good start to the year, driven by increasing consumer confidence and of course the incredible growth of the toning market. In Europe, we’ve seen more of a mixed picture. countries like the uK and Germany are doing very well for our Group, which is a trend I expect to continue. Nonetheless, other markets such as France, Italy and several of the region’s emerging markets have not seen a material change in trading conditions. Nonetheless, the football category will certainly provide a boost over the coming months in the region. In asia, there are different dynamics at play. In china, we are seeing improvements in underlying conditions which, together with our strategy to run down inventory at retail in the first half, will allow us a very definite return to growth in the second half of 2010.

Japan, however, is still rather depressed and is likely to remain challenging for the coming quarters. Finally, in latin america, sales growth continues to be robust, driven by most major markets. In summary, looking at the global environment, while I agree there is some merit for higher optimism, at the same time we are still in the early days of economic recovery and it is still rather fragile. so I am sure there will still be some challenges ahead.

Question

Was there anything in this performance that particularly surprised you?

Question

Many observers are getting more bullish on underlying market trends.

do you share these views?

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heRBeRt haineR

the adidas brand revenues grew 4% currency-neutral in the first quarter, with football and adidas sport style propelling the brand forwards. In football, we picked up just where we left off in 2009, leveraging our involvement with the FIFa World cup 2010™ and utilising our convincing portfolio of products to incredible success.

so much so, we generated record first quarter sales in the football category with growth of 26% currency-neutral. and we still have plenty more in the pipeline with the highly anticipated launch of the new F50 football boot due next week. While adidas is passionate about football and no event is bigger and more anticipated than the FIFa World cup™, there was still a lot more to the brand’s performance in the first quarter typified by the adidas sport style division. It is our goal to continuously engage the consumer with unique and creative concepts that keep them coming back to adidas day after day, year after year. collections such as star Wars™, originals by originals and a.039 drove sales growth of 22% in the quarter, our highest growth rate in almost three years.

heRBeRt haineR

the reebok turnaround is gathering pace and I am delighted to report that we saw positive sales growth of 1% currency-neutral in the first quarter. Momentum continues to build in North america as sales in the region increased 6% currency- neutral driven by the toning category. We are well on track to selling at least five million pairs of toning footwear in the us alone this year. But we are not stopping there, and our second major product innovation is already proving to be a winner.

on March 11, we launched the Zigtech™ training shoe at retail in the us, supported by an aggressive marketing campaign including tv, print and digital communi- cation. sell-through rates have been so strong that I believe we will easily sell over one million pairs of the shoe in the us in 2010. these great products give a clear demonstration of our intention with reebok to secure our territory and lead in fitness and training. It is with confidence that I can say today that reebok will grow at a double-digit rate in North america this year. and with such premium products becoming a bigger piece of our sales, this is starting to have a major impact on brand profit ability. In the first quarter, reebok gross margins increased almost 900 basis points. as growth rates accelerate in North america, and as we also start intensifying our efforts internationally, I am particularly excited about the prospects for the brand and its impact on our Group in the coming years.

Question

can you talk about the adidas brand performance in the first quarter? Was growth primarily driven by football?

Question

there is growing confidence in the investor community on reebok’s turnaround. can you give an update on recent developments?

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heRBeRt haineR

similar to last year, the golf industry is off to a weak start in 2010, with most major markets around the world contracting at a high-single-digit rate. However, with our strength in innovation and dominating positions in several golf categories, particularly metalwoods, we are in a fortunate position with taylorMade-adidas Golf, which is now the largest golf company in the world. In the first quarter, we led the industry with currency-neutral revenue growth of 16%. this was driven by strong double-digit increases in metalwoods, footwear and irons. and in golf balls we are really starting to challenge the premium end of the market with growth of over 50% in the first quarter. our Penta tP ball ranked number three in tour ball sales in the usa during the month of March. visibility for taylorMade also remains very high across the important tour events where taylorMade was the No. 1 driver brand at every event on the us and European PGa tours during the first quarter, driven by the popularity of the r9™ supertri and Burner^® superFast drivers. While all of this is encouraging, I do believe there are still some challenges ahead for the golf industry, and the second quarter is likely to dictate the direction for the year. However, I remain confident we will again achieve important market share wins in several categories this year as we continue to dominate the premium end of the sport.

heRBeRt haineR

our performance in the first quarter and the good visibility we now have into the important third quarter allow us to increase our guidance for the full year. We forecast that full year sales will increase at a mid-single-digit rate currency-neutral due to a stronger than expected performance in both the Wholesale and retail segments, which we now project to grow at a low- to mid-single-digit rate and a low-double-digit rate, respectively. Gross margin will improve to a range of between 46.5% and 47.5%, and operating margin will be around 7.0%. this translates into earnings per share of € 2.05 to € 2.30 compared to our original expectations of

€ 1.90 to € 2.15. this still gives us the flexibility we need to carry out the marketing investments I outlined in detail earlier this year to accelerate our momentum if opportunities arise. looking out to the coming quarters, we certainly have many reasons to be optimistic and plenty to look forward to. as the reebok turnaround gathers pace and with the FIFa World cup™ kicking off in just a few weeks, we have a great platform to build brand momentum for the remainder of the year.

Question

In other Businesses, taylorMade- adidas Golf has had a strong quarter.

What drove this development and what are your expectations for the golf industry this year?

Question

Finally, you have increased your guidance for the full year. What are your new expectations and the main drivers for this change?

Herbert, thank you for this interview.

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adidas Group FiRst QuaRteR RepoRt 2010 9 to ouR shaReholdeRs our share

our share

in the first quarter of 2010, international stock markets increased, maintaining the positive momentum from previous quarters.

the continuation of liberal monetary policies adopted by many central banks, positive news flow during the 2009 full year earnings season and growing confidence in an economic upturn drove this development. as a result, the daX-30 gained 3% compared to the end of december 2009. the adidas aG share outperformed the index over the three-month period and rose by 5%.

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N°- the adidas aG shaRe

Number of shares outstanding

First quarter average 209,216,186

at March 31¹⁾ 209,216,186

type of share No-par-value share

Free float 100%

Initial Public offering November 17, 1995 share split June 6, 2006 (in a ratio of 1: 4) stock exchange all German stock exchanges stock registration number (IsIN) dE0005003404

stock symbol ads, adsG.dE

Important indices daX-30

MscI World textiles, apparel & luxury Goods deutsche Börse Prime consumer dow Jones stoXX

dow Jones Euro stoXX dow Jones sustainability FtsE4Good Europe

Ethibel Index Excellence Europe asPI Eurozone Index

EcPI Ethical Index EMu 1) all shares carry full dividend rights.

Global stock markets rise in the first quarter

after a weak start to the new year, international stock markets improved over the course of the first quarter.

during the first weeks of 2010, concerns over the Euro Zone’s peripheral countries’ sovereign debt weighed on investor sentiment. In addition, worries about increasing governmental regulation for financial institutions and china’s surprising move to increase reserve requirements for banks contributed to lacklustre stock market performance. From mid-February onwards, however, international equity markets recovered, fuelled by the continuation of liberal monetary policies adopted by the Fed and the EcB and positive news flow during the 2009 full year earnings season. In addition, more and more indicators signalled that most economies have finally turned towards a sustainable recovery, which positively contributed to investor confidence. as a result, many international stock indices climbed to 18-month highs.

the daX-30 increased 3% and closed the first quarter at 6,154 points. the MscI World textiles, apparel & luxury Goods Index, which comprises the Group’s main competitors, gained 9% during the same period supported by the high share of luxury goods companies in the index, which on average outperformed sporting goods companies.

adidas aG share price outperforms daX-30

the adidas aG share price gained strongly and outperformed its peers and the general market at the beginning of January as investor confidence in the successful turnaround of the reebok brand increased. However, in line with overall market trends, our share price declined from mid-January onwards.

In February, the adidas aG share traded sideways in anticipation of the publication of full year results. Within the results, the Group’s net debt reduction and the progress in operating working capital management significantly exceeded the expectations of analysts and investors.

Nevertheless, the 2010 profit outlook resulted in share price declines on the day of the earnings release. In line with rising equity markets, and with positive analyst commentary adding to improving sentiment, the adidas aG share regained momentum towards the end of the first quarter.

the results release of one of our competitors in the second half of March also contributed positively to this development. accordingly, the adidas aG share finished the three-month period at € 39.60, representing an increase of 5% compared to the end of december 2009 and thereby outperforming the daX-30 see 06.

number of adRs increases

the number of level 1 adrs (american depository receipts) increased during the three-month period compared to the end of 2009, underlining improving North american investor sentiment.

at March 31, 2010, 5.5 million adrs were outstanding (december 31, 2009: 5.4 million). Nevertheless, this represents a decline compared to March 31, 2009, when 8.9 million adrs were outstanding. the level 1 adr closed the quarter at us$ 26.70, reflecting a 2% decrease compared to the end of december 2009. the decrease, which compares to an ordinary share price increase, was due to the appreciation of the us dollar during the first quarter.

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N°- histoRical peRFoRmance oF adidas aG shaRe¹⁾ aNd IMPortaNt INdIcEs at MarcH 31, 2010 IN %

ytd 1 year 3 years 5 years since IPo

adidas aG 5 58 (3) 29 310

daX-30 3 51 (11) 42 180

MscI World textiles,

apparel & luxury Goods 9 85 (1) 50 160

1) source: Bloomberg.

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adidas Group FiRst QuaRteR RepoRt 2010 10 to ouR shaReholdeRs our share

dividend proposal of € 0.35 per share the adidas aG Executive and supervisory Boards will recommend paying a dividend of € 0.35 per share for the financial year 2009 (2008: € 0.50). subject to approval by our shareholders at the annual General Meeting on May 6, 2010, the dividend will be paid on May 7, 2010.

as a result of the decline in the Group’s net income attributable to shareholders in 2009, Management has taken the decision to lower the dividend amount.

However, in light of the strong cash flow generation in 2009 and the significantly reduced level of net borrowings, Management has decided to change its dividend policy and increase the payout ratio. Going forward, we intend to pay out between 20% and 40% of net income attributable to shareholders (previously:

15% to 25%). the total payout of

€ 73 million (2008: € 97 million) reflects an increase of our payout ratio to 30% of net income compared to 15% in the prior year.

changes in shareholder base In the first quarter of 2010, the Group received ten voting rights notifications according to article 21, section 1 of the German securities trading act (Wertpapierhandelsgesetz – WpHG)

see 07. all voting rights notifications received in the first quarter of 2010 and thereafter can be viewed on our corporate website www.adidas-Group.com/

voting_rights_notifications. directors’ dealings reported on corporate website

the purchase or sale of adidas aG shares (IsIN dE0005003404) or related financial instruments, as defined by article 15a WpHG, conducted by members of our Executive or supervisory Boards, by key executives or by any person in close relationship with these persons, is reported on our website www.adidas- Group.com/directors_dealings. In the first quarter of 2010, adidas aG received notification that christian tourres, member of the adidas aG supervisory Board, had sold 100,000 shares on January 6, 2010.

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N°- shaReholdeR RiGhts notiFications ReceiVed in Q1 2010

date of

notification Notifying

party threshold

crossed voting rights of total shares

outstanding date of

change

Jan. 5, 2010 Blackrock, Inc. >5% 10,521,736

(5.03%) dec. 9, 2009

Jan. 28, 2010 Blackrock, Inc. <5% 10,458,560

(4.99%) Jan. 25, 2010 Feb. 5, 2010 the Bank of New york

Mellon corporation <3% 6,260,660

(2.99%) Feb. 3, 2010 Feb. 12, 2010 the Bank of New york

Mellon corporation >3% 6,284,824

(3.004%) Feb. 9, 2010 Feb. 23, 2010 the Bank of New york

(2.996%) Feb. 22, 2010 Mar. 4, 2010 the Bank of New york

(3.0004%) Mar. 2, 2010 Mar. 5, 2010 the Bank of New york

(2.9938%) Mar. 4, 2010 Mar. 15, 2010 the Bank of New york

(3.0745%) Mar. 12, 2010 Mar. 16, 2010 Blackrock, Inc. and others >5% 10,904,232 and 10,533,558, resp.

(5.21% and 5.03%, resp.) Mar. 12, 2010

Mar. 19, 2010 Euro Pacific Growth Fund <5% 10,157,771

(4.86%) Mar. 16, 2010

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N°- shaRe pRice deVelopment in 2010¹⁾

dec. 31, 2009 Mar. 31, 2010

110 105 100 95 90

— adidas aG — daX-30 — MscI World textiles, apparel & luxury Goods Index 1) Index: december 31, 2009 = 100.

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adidas Group FiRst QuaRteR RepoRt 2010 11 inteRim GRoup manaGement RepoRt Group Business Performance Economic and sector development

Group Business performance

in the first quarter of 2010, the adidas Group results improved strongly compared to the prior year period. currency-neutral Group sales increased 4% as a result of growth in the Wholesale and Retail segments as well as in other Businesses. in euro terms, adidas Group revenues grew 4% to € 2.674 billion from € 2.577 billion in 2009. the Group’s gross margin increased 3.5 percentage points to 48.6% (2009: 45.2%), supported by lower input costs, a larger share of higher-margin Retail sales, less clearance sales and positive currency effects. consequently, the Group’s gross profit increased 12% to € 1.300 billion in the first quarter of 2010 versus € 1.164 billion in 2009. the Group’s operating margin increased 7.5 percentage points to 9.7% from 2.2% in 2009, primarily due to the higher gross margin as well as lower other operating expenses as a percentage of sales. the Group’s operating profit grew to € 260 million in the first quarter of 2010 versus € 58 million in 2009. the Group’s net income attributable to shareholders increased to € 168 million from € 5 million in 2009. diluted earnings per share grew to € 0.80 in the first quarter of 2010 versus € 0.04 in 2009.

economic and sector development

Global economic recovery in the first quarter of 2010

In the first quarter of 2010, the global economic environment improved, spurred by increasingly stabilising unemployment rates and rising consumer confidence in most parts of the world. In Western Europe, industrial output grew in the first quarter. this was due to low inflationary pressures, the depreciation of the euro and low interest rates. European emerging markets such as russia benefited from increasing commodity prices although consumer spending in the region remained lacklustre in light of the high levels of unemployment. In the usa, encouraging signs from the financial sector as well as increasing private investment and consumer spending indicated a steady recovery of the economy.

In china, economic expansion advanced in the first months of 2010. However, increasing inflation and soaring real estate prices raised concerns about a potential overheating of the chinese economy. In the other asian markets, most countries posted healthy GdP growth except Japan, where economic improvement was modest. In latin america, the increasing global demand for commodities had a positive effect on overall economic development.

positive trends in the global sporting goods industry

In the first quarter of 2010, the global sporting goods industry returned to growth in most regions, helped by lean inventories and considerably less promotional activity compared to the same period in the prior year.

Nevertheless, consumers remained relatively cautious and continued to demand value for money.

From a category perspective, the emerging toning category was one of the main contributors to improving sporting goods sales. In Western Europe, sales related to the 2010 FIFa World cup™

supported modest growth. In European emerging markets, sporting goods sales were challenging. In North america, the sporting goods industry benefited from strong growth rates in the emerging toning category. In china, sporting goods sales improved compared to the prior year although inventory levels remained high. In Japan, the sporting goods industry remained depressed, however most other asian economies performed well in the first quarter. latin america again outperformed the overall industry average, which was in part also attributable to the relatively strong importance of the Football World cup in this region.

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N°- QuaRteRly consumeR conFidence

deVelopment By rEGIoN

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010

usa¹⁾ 26.9 49.3 53.4 53.6 52.2

Euro Zone²⁾ (34) (25) (19) (16) (17)

Japan³⁾ 29.6 38.1 40.7 37.9 41.0

1) source: conference Board.

2) source: European commission.

3) source: Economic and social research Institute, Government of Japan.

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N°- eXchanGe Rate deVelopment¹⁾

€ 1 EQuals average

rate 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 average rate 2010 usd 1.3932 1.4134 1.4643 1.4406 1.3479 1.3856 GBP 0.8912 0.8521 0.9093 0.8881 0.8898 0.8867 JPy 130.23 135.51 131.07 133.16 125.93 125.64 1) spot rates at quarter-end.

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adidas Group FiRst QuaRteR RepoRt 2010 12 inteRim GRoup manaGement RepoRt Group Business Performance Income statement

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N°- FiRst QuaRteR net sales

€ IN MIllIoNs 2006 2007 2008 2009 2010

2,459 2,538

2,621 2,577

2,674

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N°- FiRst QuaRteR net sales By seGment¹⁾

12% other Businesses 17% retail

71% Wholesale

1) HQ/consolidation accounts for less than 1% of sales.

income statement

segmental reporting comparatives updated

Following minor changes to the adidas Group’s organisational structure in the first quarter of 2010, the assignment of certain functions has been changed compared to the Group’s prior year annual financial statements. this development has a limited effect on the Group segmental structure. to ensure full comparability of Group financial results in 2010, the Group has decided to adjust the segmental reporting for 2009 retrospectively. While these adjustments have no effect on total Group financial results, first quarter 2009 Wholesale revenues now amount to € 1.874 billion (instead of € 1.876 billion reported).

sales of other Businesses amount to

€ 295 million (instead of € 294 million reported). 2009 retail revenues now amount to € 400 million (instead of

€ 399 million reported). First quarter operating profit for 2009 now amounts to

€ 614 million in the Wholesale segment (instead of € 615 million reported) and € 15 million in the retail segment (instead of € 17 million reported).

operating profit of other Businesses remains unchanged. In the financial statements for the first quarter of 2010, these adjustments have already been reflected in the 2009 comparison base.

adidas Group currency-neutral sales increase 4% in the first quarter of 2010 In the first quarter of 2010, Group revenues increased 4% on a currency- neutral basis as a result of growth in the Wholesale and retail segments as well as sales increases in other Businesses.

currency translation effects did not have a significant impact on sales in euro terms. Group revenues grew 4% to

€ 2.674 billion in the first quarter of 2010 from € 2.577 billion in 2009 see 11. Group sales increase driven by Retail segment

the adidas Group’s sales increase in the first quarter of 2010 was driven by double-digit growth in the retail segment as well as higher sales in the Wholesale segment and other Businesses.

currency-neutral Wholesale revenues increased 1% during the period due to higher adidas sales. currency-neutral retail sales increased 16% versus the prior year as a result of double- digit adidas and reebok sales growth.

revenues in other Businesses increased 8% on a currency-neutral basis as a result of double-digit sales growth at taylorMade-adidas Golf.

currency translation effects only had a minor impact on segmental sales in euro terms. Wholesale revenues increased 1%

to € 1.898 billion in the first quarter of 2010 from € 1.874 billion in 2009. retail sales increased 15% to € 459 million versus € 400 million in the prior year.

sales in other Businesses grew 7% to

€ 316 million in the first quarter of 2010 (2009: € 295 million).

currency-neutral sales increase in nearly all regions

In the first quarter of 2010, currency- neutral adidas Group sales increased in all regions except Greater china and other asian Markets. revenues in Western Europe increased 4% primarily as a result of higher sales in the uK and Germany. In European Emerging Markets, Group sales increased 1% on a currency-neutral basis due to growth in most of the region’s markets. sales for the adidas Group in North america increased 14% on a currency-neutral basis due to increases in both the usa and canada. sales in Greater china decreased 15% on a currency-neutral basis. revenues in other asian Markets declined 3% primarily as a result of decreases in Japan. In latin america, sales grew 18% on a currency-neutral basis, with increases in most of the region’s major markets see 13.

(13)

13

N°-

14

^N°-

FiRst QuaRteR net sales GRoWth¹⁾ (currENcy- NEutral) By sEGMENt aNd rEGIoN IN %

FiRst QuaRteR net sales GRoWth¹⁾ (IN €) By sEGMENt aNd rEGIoN IN %

Wholesale retail other

Businesses total

Western Europe 4 4 0 4

European Emerging

Markets (19) 26 0 1

North america 16 15 11 14

Greater china (22) 53 20 (15)

other asian Markets (5) (3) 6 (3)

latin america 16 39 21 18

total 1 16 8 4

1) versus the prior year.

Wholesale retail other

Businesses total

Western Europe 5 5 1 5

European Emerging

Markets (19) 21 2 (1)

North america 11 10 8 10

Greater china (26) 46 14 (20)

other asian Markets (1) 0 9 1

latin america 22 47 17 24

total 1 15 7 4

1) versus the prior year.

1) Excluding HQ/consolidation.

15

N°- FiRst QuaRteR net sales By ReGion¹⁾

10% latin america

14% other asian Markets 7% Greater china

22% North america 36% Western Europe

11% European Emerging Markets currency translation effects had a mixed

impact on regional sales in euro terms.

Group revenues in Western Europe increased 5% to € 945 million in the first quarter of 2010 from € 899 million in 2009. In European Emerging Markets, sales declined 1% to € 290 million in the first quarter of 2010 from € 293 million in 2009. sales in North america increased 10% to € 585 million from € 532 million in 2009. revenues in Greater china decreased 20% to € 198 million in the first quarter of 2010 from € 247 million in 2009. In other asian Markets, sales increased 1% to € 384 million versus € 381 million in the prior year.

revenues in latin america grew 24% to

€ 271 million from € 218 million in the prior year see 14.

Group sales increase in all product categories

In the first quarter of 2010, sales increased in all product categories on a currency-neutral basis. currency- neutral footwear sales increased 2%

during the period. this development was due to increases in retail and other Businesses. Footwear sales in the Wholesale segment were stable compared to the prior year. apparel revenues increased 1% on a currency- neutral basis. double-digit growth in the retail segment was offset by declines in Wholesale and other Businesses.

currency-neutral hardware sales increased 33% compared to the prior year due to double-digit growth in Wholesale and other Businesses which more than compensated for declines in retail.

(14)

currency translation effects only had a minor impact on sales in euro terms.

Footwear sales in euro terms increased 2% to € 1.272 billion in the first quarter of 2010 (2009: € 1.244 billion). apparel sales were virtually stable at € 1.130 billion in the first quarter of 2010 (2009:

€ 1.129 billion). Hardware sales increased 33% to € 272 million in the first quarter of 2010 from € 205 million in 2009.

Gross margin increases 3.5 percentage points

the gross margin of the adidas Group increased 3.5 percentage points to 48.6% in the first quarter of 2010 (2009:

45.2%) see 17. this development was mainly due to lower input costs, a larger share of higher-margin retail sales, less clearance sales as well as positive currency effects related to the appreciation of the russian rouble compared to the prior year. these positive effects more than offset negative impacts from the increase of import duties in latin america. as a result, gross profit for the adidas Group grew 12% in the first quarter of 2010 to € 1.300 billion versus € 1.164 billion in the prior year

see 16.

currency-neutral royalty and commission income grows royalty and commission income for the adidas Group increased 7% to

€ 22 million in the first quarter of 2010 from € 20 million in the prior year. on a currency-neutral basis, royalty and commission income increased 10% as a result of higher licensee sales as well as higher average royalty rates.

other operating income increases other operating income includes items such as releases of accruals and provisions and gains from the disposal of fixed assets. other operating income increased 75% to € 47 million in the first quarter of 2010 from € 27 million in 2009. this development was mainly due to the settlement of a lawsuit and the divestiture of a trademark, each of which had a positive low-double-digit million euro impact on the Group’s financial results.

other operating expenses decline as a percentage of sales

other operating expenses, including depreciation and amortisation, consist of items such as sales working budget, marketing working budget and operating overhead costs. other operating expenses as a percentage of sales decreased 3.3 percentage points to 41.5% in the first quarter of 2010 from 44.7% in 2009. In absolute terms, other operating expenses decreased 4% to

€ 1.109 billion in the first quarter of 2010 (2009: € 1.153 billion) see 18. thereof, sales and marketing working budget expenditures amounted to

€ 333 million, which represents an increase of 3% versus the prior year level (2009: € 324 million). the increase was primarily related to higher expenditures for the reebok brand. as a result of the higher Group sales base, however, sales and marketing working budget expenditures as a percentage of sales decreased 0.1 percentage points to 12.4%

from 12.6% in the prior year.

number of Group employees increases 2%

at the end of the first quarter of 2010, the Group employed 39,155 people. this represents an increase of 2% versus the prior year level of 38,227. New hirings related to the expansion of the Group’s own-retail store base were the main driver of this development. these more than offset declines due to reorganisation initiatives and a hiring freeze the Group implemented for all non-retail-related functions. on a full-time equivalent basis, the number of employees also increased 2% to 33,963 at the end of the first quarter of 2010 (2009: 33,291).

operating margin increases 7.5 percentage points

the operating margin of the adidas Group increased 7.5 percentage points to 9.7%

in the first quarter of 2010 (2009: 2.2%)

see 20. the operating margin increase was primarily due to the higher gross margin as well as lower other operating expenses as a percentage of sales. as a result, Group operating profit increased 349% to € 260 million versus € 58 million in 2009 see 19.

18

N°-

19

N°-

20

N°- FiRst QuaRteR otheR opeRatinG eXpenses

€ IN MIllIoNs

FiRst QuaRteR opeRatinG pRoFit

€ IN MIllIoNs

FiRst QuaRteR opeRatinG maRGin IN %

2009 2010

1,153 1,109

58

260

2.2

9.7

16

N°-

17

N°- FiRst QuaRteR GRoss pRoFit

€ IN MIllIoNs

FiRst QuaRteR GRoss maRGin IN %

2009 2010

1,164 1,300

45.2 48.6

(15)

22

N°- FiRst QuaRteR income BeFoRe taXes

€ IN MIllIoNs 2009 2010

9

243

23

N°-

24

N°- FiRst QuaRteR net income attRiButaBle to shaReholdeRs € IN MIllIoNs

FiRst QuaRteR diluted eaRninGs peR shaRe IN €

2006 2007 2008 2009 2010

144 128

169 5

168

0.67 0.60

0.79 0.04

0.80 Financial income up 91%

Financial income increased 91% to

€ 12 million in the first quarter of 2010 from € 6 million in the prior year, mainly due to positive exchange rate effects.

Financial expenses decrease 48%

Financial expenses decreased 48% to

€ 29 million in the first quarter of 2010 (2009: € 56 million) see 21. the non-recurrence of prior year negative exchange rate effects as well as lower interest expenses contributed to the decline.

income before taxes increases strongly Income before taxes (IBt) as a percentage of sales increased 8.8 percentage points to 9.1% in the first quarter of 2010 from 0.3% in 2009. this was primarily a result of the Group’s operating margin increase and lower financial expenses. IBt for the adidas Group increased to € 243 million from € 9 million in 2009 see 22. net income attributable to shareholders reaches € 168 million the Group’s net income attributable to shareholders increased to € 168 million in the first quarter of 2010 from

€ 5 million in 2009 see 23. Higher operating profit was the primary reason for this development. the Group’s tax rate decreased 21.2 percentage points to 30.5% in the first quarter of 2010 (2009:

51.7%), mainly due to a more favourable regional earnings mix compared to the prior year. Net income attributable to non-controlling interests amounted to

€ 1 million in the first quarter of 2010 versus negative € 1 million in 2009.

earnings per share reach € 0.80 Following the full conversion of the Group’s convertible bond in the fourth quarter of 2009, the Group has no dilutive potential shares anymore. as a result, diluted earnings per share equal basic earnings per share. In the first quarter of 2010, basic and diluted earnings per share amounted to € 0.80 see 24. In the prior year period, basic earnings per share amounted to € 0.02 and diluted earnings per share to € 0.04.

the weighted average number of shares used in the calculation was 209,216,186 in the first quarter of 2010. In the prior year period, the number amounted to 193,515,512 for the calculation of basic earnings per share and 209,260,662 for the calculation of diluted earnings per share.

21

N°- FiRst QuaRteR Financial eXpenses

56 29

(16)

adidas Group FiRst QuaRteR RepoRt 2010 16 inteRim GRoup manaGement RepoRt Group Business Performance Balance sheet and cash Flow statement

25

N°-

26

N°- Balance sheet stRuctuRe¹⁾

IN % oF total assEts

Balance sheet stRuctuRe¹⁾ IN % oF total lIaBIlItIEs aNd EQuIty

assets March 31, 2010 March 31, 2009

total assets

(€ in millions) 9,531 9,904

1) For absolute figures see consolidated Balance sheet (IFrs), p. 29.

liabilities and equity March 31, 2010 March 31, 2009

total liabilities and equity

(€ in millions) 9,531 9,904

1) For absolute figures see consolidated Balance sheet (IFrs), p. 29.

cash and cash equivalents ...4.1

short-term borrowings ...3.2

19.0

8.9 2.4

7.4 20.4

25.4 42.3

22.7 15.9

35.6 Fixed assets ...41.9

other liabilities ...24.1 accounts receivable ...20.8

accounts payable ...11.9 other assets ...15.6

total equity ...44.7 Inventories ...17.6

long-term borrowings ...16.1

Balance sheet and cash Flow statement

total assets decrease 4%

at the end of March 2010, total assets decreased 4% to € 9.531 billion versus

€ 9.904 billion in the prior year. this was the result of a decline in both current and non-current assets. compared to december 31, 2009, total assets increased 7%.

Group inventories down 17%

Group inventories decreased 17% to

€ 1.680 billion at the end of March 2010 versus € 2.016 billion in 2009 see 27. on a currency-neutral basis, inventories declined 20%. this was mainly a result of clearance of excess inventories at all our brands throughout the last twelve months.

accounts receivable increase 5%

at the end of March 2010, Group receivables increased 5% to

€ 1.987 billion (2009: € 1.884 billion)

see 28. on a currency-neutral basis, receivables remained stable. this development compares to a currency- neutral Group sales increase of 4%, reflecting our strict discipline in implementing the Group’s trade terms and improved collection of receivables as the economic situation in most markets continued to ease.

other current financial assets down 20%

other current financial assets decreased 20% to € 210 million at the end of March 2010 from € 263 million in 2009. this development was mainly due to the decrease of the fair value of current forward contracts.

other current assets down 21%

other current assets decreased 21% to

€ 401 million at the end of March 2010 from € 508 million in 2009, mainly as a result of a decrease in prepayments.

Fixed assets decline 5%

Fixed assets decreased 5% to

€ 3.995 billion at the end of March 2010 versus € 4.194 billion in 2009.

additions in an amount of € 221 million were mainly related to the continued expansion of our own-retail activities and investment into the Group’s It infrastructure. additions were more than offset by depreciation and amortisation amounting to € 294 million, disposals of € 50 million and a net transfer of fixed assets to assets held-for-sale totalling € 50 million. In addition, negative currency translation effects in an amount of € 25 million on fixed assets denominated in currencies other than the euro impacted this development.

compared to december 31, 2009, fixed assets increased 5%.

assets held-for-sale increase 236%

at the end of March 2010, assets held- for-sale increased 236% to € 77 million compared to € 23 million in 2009, due to additional assets now being in the scope of a sale. assets held-for-sale primarily relate to the planned sale of land and buildings in Herzogenaurach, Germany, as well as certain office buildings and warehouses in various other locations.

other non-current assets decline 6%

other non-current assets decreased 6% to € 122 million at the end of the first quarter of 2010 from € 129 million in 2009, mainly driven by a decline in prepaid promotion contracts.

accounts payable increase 29%

accounts payable were up 29% to

€ 1.133 billion at the end of March 2010 versus € 880 million in 2009 see 29. on a currency-neutral basis, accounts payable increased 25%. this development was mainly attributable to increased production volumes compared to the prior year as well as improved terms with our suppliers.

other current financial liabilities increase 78%

other current financial liabilities increased 78% to € 78 million at the end of March 2010 from € 44 million in 2009, primarily as a result of an increase in the negative fair value of financial instruments.

(17)

adidas Group FiRst QuaRteR RepoRt 2010 17 inteRim GRoup manaGement RepoRt Group Business Performance Balance sheet and cash Flow statement

27

N°-

28

N°-

29

N°-

30

N°-

31

N°- inVentoRies¹⁾

€ IN MIllIoNs

ReceiVaBles¹⁾

€ IN MIllIoNs

accounts payaBle¹⁾

€ IN MIllIoNs

shaReholdeRs’ eQuity¹⁾

€ IN MIllIoNs

net BoRRoWinGs¹⁾

2009 2010

2,016 1,680

1,884 1,987

880

1,133

3,525 4,254

2,883 1,359

1) at March 31.

accrued liabilities increase 6%

accrued liabilities increased 6% to

€ 672 million at the end of the first quarter of 2010 from € 634 million in 2009, mainly due to an increase in accruals for payment of goods and services not yet invoiced.

other current liabilities grow 10%

other current liabilities were up 10% to

€ 265 million at the end of March 2010 from € 241 million in 2009, mainly due to increases in tax liabilities other than income taxes.

equity growth supported by full conversion of convertible bond shareholders’ equity rose 21% to

€ 4.254 billion at the end of March 2010 versus € 3.525 billion in 2009 see 30. the full conversion of our convertible bond and the net income generated during the last twelve months were the main contributors to this development.

currency translation effects positively impacted this development but were partly offset by declines in the fair value of financial instruments and the dividend paid during the period.

cash flow reflects improved Group profitability

In the first quarter of 2010, net cash outflow from operating activities was

€ 430 million (2009: € 617 million).

the decrease in cash used in operating activities compared to the prior year was primarily due to the improved Group profitability. Net cash outflow from investing activities was € 37 million (2009: € 53 million) and was mainly related to spending for property, plant and equipment such as investments in the furnishing and fitting of stores in our retail segment, in new office buildings and in It systems. Net cash inflows from financing activities totalled € 75 million (2009: € 663 million). cash inflows from financing activities were related to an increase in long-term borrowings in an amount of € 225 million, which was partly offset by the repayment of short-term borrowings totalling € 150 million.

Exchange rate effects in an amount of € 5 million positively impacted the Group’s cash position in the first quarter of 2010 (2009: negative € 1 million).

as a result of all these developments, cash and cash equivalents decreased by

€ 387 million to € 388 million at the end of March 2010 compared to € 775 million at the end of december 2009.

net borrowings down € 1.525 billion Net borrowings at March 31, 2010 amounted to € 1.359 billion, which represents a decrease of € 1.525 billion, or 53%, versus € 2.883 billion at the end of March 2009 see 31. lower working capital requirements and the complete conversion of our € 400 million convertible bond in the fourth quarter of 2009 were the main reasons for the net debt decline. these positive effects more than offset negative currency translation effects in an amount of € 5 million.

consequently, the Group’s ratio of net borrowings over 12-month rolling EBItda decreased to 1.4 at the end of March 2010 versus 2.7 in the prior year.

(18)

adidas Group FiRst QuaRteR RepoRt 2010 18 inteRim GRoup manaGement RepoRt Business Performance Wholesale

Business performance Wholesale

the Wholesale segment comprises the adidas and Reebok business activities with retailers. in the first quarter of 2010, currency-neutral sales in the Wholesale segment increased 1%. in euro terms, Wholesale sales improved 1% to €1.898 billion from € 1.874 billion in the prior year. Gross margin increased 0.5 percentage points to 43.1% (2009: 42.6%). this was mainly a result of lower input costs and a higher gross margin at Reebok. Gross profit was up 3% to € 818 million in the first quarter of 2010 from € 798 million in 2009. segmental operating costs as a percentage of sales increased 0.3 percentage points to 10.1% (2009: 9.8%). as a result of the gross margin increase, which more than offset higher segmental operating costs as a percentage of sales, segmental operating margin improved 0.2 percentage points to 33.0% in the first quarter of 2010 versus 32.8% in the prior year. in absolute terms, segmental operating profit grew 2% to € 626 million in the first quarter of 2010 versus € 614 million in 2009.

currency-neutral segmental sales grow 1%

In the first quarter of 2010, revenues for the Wholesale segment increased 1% on a currency-neutral basis. adidas sport Performance and reebok sales declined compared to the prior year while revenues at adidas sport style increased strongly. currency translation effects did not have a significant impact on revenues in euro terms. sales in the Wholesale segment were up 1% to € 1.898 billion in the first quarter of 2010 from

€ 1.874 billion in 2009 see 33. currency-neutral Wholesale sales with mixed regional development

currency-neutral sales for the Wholesale segment recorded a mixed regional development in the first quarter of 2010.

currency-neutral revenues in Western Europe increased 4%, primarily due to sales growth in the uK and Germany, which more than offset declines in other markets.

revenues in European Emerging Markets decreased 19% on a currency- neutral basis due to declines in russia.

currency-neutral Wholesale sales in North america grew 16% due to double- digit growth in both the usa and canada.

revenues in Greater china decreased 22% on a currency-neutral basis. sales in other asian Markets declined 5% on a currency-neutral basis primarily due to decreases in Japan, which more than offset increases in several other markets.

In latin america, currency-neutral sales were up 16%, supported by double-digit increases in most major markets.

currency translation effects had a mixed impact on regional sales in euro terms. sales in Western Europe improved 5% in the first quarter of 2010 to € 797 million (2009: € 756 million).

In European Emerging Markets, sales decreased 19% to € 128 million from

€ 159 million in 2009. revenues in North america increased 11% to € 333 million in the first quarter of 2010 versus

€ 301 million in the prior year.

In Greater china, revenues decreased 26% to € 164 million in the first quarter of 2010 (2009: € 222 million). sales in other asian Markets declined 1%

to € 242 million in the first quarter of 2010 from € 245 million in 2009, while revenues in latin america improved 22%

to € 234 million in the first quarter of 2010 (2009: € 192 million) see 34. currency-neutral adidas sport performance sales decline 6%

In the first quarter of 2010, adidas sport Performance wholesale revenues decreased 6% on a currency-neutral basis. revenues declined in all major categories, except the football category, which was positively impacted by sales related to the 2010 FIFa World cup™.

currency translation had a positive effect on revenues in euro terms. In the first quarter of 2010, adidas sport Performance sales decreased 5% to

€ 1.192 billion from € 1.255 billion in the prior year.

32

N°- Wholesale at a Glance

€ IN MIllIoNs

First quarter

2010 First quarter

2009 change

Net sales 1,898 1,874 1%

Gross profit 818 798 3%

Gross margin 43.1% 42.6% 0.5pp

segmental operating profit 626 614 2%

segmental operating margin 33.0% 32.8% 0.2pp

33

N°- Wholesale FiRst QuaRteR net sales

€ IN MIllIoNs 2008 2009 2010

1,968 1,874

1,898

First Quarter Report 2010