Nine Months Report 2010

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Nine Months Report 2010

adidas Group

EvEry Product tElls a story

Q1 Q2 Q3

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adidas Group NiNe MoNths RepoRt 2010 2

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N°- NiNe MoNths 2010 Results at a GlaNce € IN MIllIoNs Nine months 2010 Nine months 2009 change third quarter 2010 third quarter 2009 change Wholesale Net sales 6,247 5,516 13.3% 2,421 2,036 18.9% Gross profit 2,622 2,293 14.4% 1,014 859 18.1% Gross margin 42.0% 41.6% 0.4pp 41.9% 42.2% (0.3pp) segmental operating profit 2,047 1,807 13.2% 813 703 15.7% segmental operating margin 32.8% 32.8% (0.0pp) 33.6% 34.5% (0.9pp) Retail Net sales 1,725 1,409 22.4% 665 524 26.9% Gross profit 1,064 815 30.6% 405 302 34.1% Gross margin 61.7% 57.8% 3.8pp 60.9% 57.6% 3.3pp segmental operating profit 348 196 78.1% 149 99 51.6% segmental operating margin 20.2% 13.9% 6.3pp 22.5% 18.8% 3.7pp other Businesses Net sales 1,086 984 10.3% 382 326 17.2% Gross profit 487 379 28.6% 173 123 40.3% Gross margin 44.8% 38.5% 6.4pp 45.3% 37.8% 7.5pp segmental operating profit 307 205 49.7% 110 76 44.2% segmental operating margin 28.3% 20.8% 7.4pp 28.8% 23.4% 5.4pp Group Net sales 9,059 7,923 14.3% 3,468 2,888 20.1% Gross profit 4,368 3,576 22.1% 1,641 1,307 25.5% Gross margin 48.2% 45.1% 3.1pp 47.3% 45.3% 2.1pp operating profit 865 465 85.9% 411 336 22.3% operating margin 9.6% 5.9% 3.7pp 11.8% 11.6% 0.2pp sales by Brand adidas 6,624 5,779 14.6% 2,523 2,111 19.5% reebok 1,396 1,192 17.1% 585 468 25.0% taylorMade-adidas Golf 713 633 12.6% 221 184 19.9% rockport 187 178 4.7% 73 63 15.1% reebok-ccM Hockey 138 127 8.7% 66 59 11.2% rounding differences may arise in percentages and totals.

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N°- fiNaNcial hiGhliGhts (ifRs)

Nine months

2010 Nine months

2009 change third quarter

2010 third quarter

2009 change

operating highlights (€ in millions)

Net sales 9,059 7,923 14.3% 3,468 2,888 20.1%

operating profit 865 465 85.9% 411 336 22.3%

Net income attributable to shareholders 560 226 148.0% 266 213 25.0%

Key Ratios

Gross margin 48.2% 45.1% 3.1pp 47.3% 45.3% 2.1pp

other operating expenses

as a percentage of net sales 40.5% 41.0% (0.5pp) 36.8% 35.1% 1.7pp

operating margin 9.6% 5.9% 3.7pp 11.8% 11.6% 0.2pp

Effective tax rate 29.7% 34.2% (4.5pp) 30.0% 30.3% (0.4pp)

Net income attributable to shareholders

as a percentage of net sales 6.2% 2.9% 3.3pp 7.7% 7.4% 0.3pp

operating working capital

as a percentage of net sales¹⁾ 20.9% 25.6% (4.7pp) 20.9% 25.6% (4.7pp)

Equity ratio 44.5% 35.9% 8.6pp 44.5% 35.9% 8.6pp

Net borrowings/EBItda 0.7 2.8 0.7 2.8

Financial leverage 20.1% 70.2% (50.1pp) 20.1% 70.2% (50.1pp)

Balance sheet and cash flow data (€ in millions)

total assets 10,105 9,105 11.0% 10,105 9,105 11.0%

Inventories 1,926 1,652 16.6% 1,926 1,652 16.6%

receivables and other current assets 2,794 2,544 9.8% 2,794 2,544 9.8%

Working capital 2,050 1,530 34.0% 2,050 1,530 34.0%

Net borrowings 903 2,294 (60.6%) 903 2,294 (60.6%)

shareholders’ equity 4,494 3,268 37.5% 4,494 3,268 37.5%

capital expenditure 133 156 (15.2%) 52 40 30.3%

Net cash from operating activities 174 122 42.6%

per share of common stock (€)

Basic earnings 2.68 1.17 129.4% 1.27 1.10 15.6%

diluted earnings 2.68 1.13 137.4% 1.27 1.03 23.0%

operating cash flow 0.83 0.63 31.9%

share price at end of period 45.41 36.17 25.5%

other (at end of period)

Number of employees 42,659 39,524 7.9% 42,659 39,524 7.9%

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

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

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

1) twelve-month trailing average.

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N°- NiNe MoNths Net iNcoMe attRiButaBle

to shaReholdeRs € IN MIllIoNs 2006

2007 2008 2009 2010

469 530

588 226

560

03

N°- NiNe MoNths Net sales

€ IN MIllIoNs 2006 2007 2008 2009 2010

7,836 7,879 8,225 7,923

9,059

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adidas Group NiNe MoNths RepoRt 2010 4 to ouR shaReholdeRs operational and sporting Highlights

operational and sporting highlights operational and sporting highlights

thiRd QuaRteR 2010

02.08.

02.08. adidas presents the new micoach personal training app picture 02.

10.08.

10.08. adidas and the Mexican Football Federation extend their partnership until 2018.

15.08.

15.08. taylorMade-adidas Golf introduces the Burner^® superlaunch iron and rescue^® set, especially designed for players with slower swing speed, and for women and seniors.

16.08.

16.08. taylorMade tour staff professional Martin Kaymer wins the PGa championship picture 03.

20.08.

20.08. the official adidas match ball torfabrik enters the German Bundesliga, just a few days before adidas launches the official match balls for the uEFa club competitions.

21.08.

21.08. reebok Germany launches Zigtech™ at the urbanathlon in Hamburg picture 04.

30.08.

30.08. adidas and the us soccer league Major league soccer (Mls) extend their partnership.

11.07.

11.07. adidas team spain secure their first World cup title. With the winning team, award-winning players and record sales, adidas is the clear winner of the 2010 FIFa World cup™ picture 01.

18.07.

18.07. reebok’s Nicolas almagro captures his sixth atP World tour title at the swedish open in Bastad. two weeks later, he wins the suisse open in Gstaad.

19.07.

19.07. adidas outdoor wins the outdoor industry award for the tErrEX solo shoe.

22.07.

22.07. adidas presents its FluId traINEr, the new multi-purpose training shoe for men and women.

08.09.

08.09. taylorMade-adidas Golf introduces Burner^® 2.0 irons, engi- neered to combine legendary Burner^® distance with more feel and playability picture 05.

10.09.

10.09. adidas aG is named industry leader in the dow Jones sustainability Index for the eighth time in a row.

14.09.

14.09. y-3 presents its spring/summer 2011 collection in New york.

16.09.

16.09. reebok and Fitness First announce a long-term partnership in Germany.

22.09.

22.09. adidas Basketball unveils the NBa revolution 30 collection, the lightest and most technologically advanced NBa uniforms, at the NBa store in New york city.

26.09.

26.09. adidas athlete Patrick Makau wins the Berlin Marathon.

adidas sponsored aberu Kebede takes the women’s title picture 06. 01

02

03

04

06 05

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adidas Group NiNe MoNths RepoRt 2010 5 to ouR shaReholdeRs Interview with the cEo

interview with the ceo interview with the ceo

the adidas Group has excelled in the first nine months of 2010, achieving record sales and a significant improvement in profitability. double-digit revenue increases year-to-date in football, adidas sport style and Reebok, as well as a resumption of growth in Greater china in the third quarter, all reflect a well executed 2010 strategy. Now firmly on track to achieve all targets for 2010, the Group can turn with confidence to the future. With powerful brands, extensive global presence and commitment to innovation, the Group will employ these key pillars to drive financial performance to new heights.

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

heRBeRt haiNeR

I am pleased to report that the third quarter met our high expectations. all of our key brand initiatives continued to resonate with consumers around the world. sales were up 10%

currency-neutral in the quarter and 8% in the first nine months, achieving record levels of € 3.5 billion and € 9.1 billion respectively. this was driven by adidas and reebok, which grew 10% and 14% currency-neutral in the quarter, while taylorMade-adidas Golf also put in a solid performance and extended its position as the largest golf company in the world, with revenues increasing 4% currency-neutral. another important trend that continued in the quarter was the substantial improvement in profitability compared to the prior year.

Gross margin increased 2.1 percentage points reaching 47.3%, driven by lower input costs, a larger share of higher-margin retail sales and less clearance. In fact, this would have been even better except for a 50 basis point negative impact from less favourable hedging rates compared to the prior year. this solid margin drove net income up 25% in the quarter, meaning that for the first nine months we have generated € 560 million bottom line compared to € 226 million in 2009. and last but not least, when it comes to trends, the strengthening of our balance sheet also continued. Net debt at the end of september was 61% lower than a year ago at € 903 million. operating working capital as a percentage of sales again saw a record low of 20.9%. this type of financial performance is an endorsement of the strategic goals we set ourselves for 2010, and we have every intention of keeping this momentum going as we start turning our attention to the year ahead.

QuestioN

Herbert, after the strong first half growth in sales and profits, you delivered another strong quarter.

What were the key drivers of this performance?

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heRBeRt haiNeR

We are back to winning ways in Greater china. sales increased 9% currency-neutral in the third quarter, with Wholesale revenues turning positive for the first time since 2008. We have worked closely with our key partners throughout the year such that we see a much cleaner and healthier level of inventory in the market today. this has been our achilles heel over the past few quarters, and as the chinese consumer rapidly becomes more affluent and fashion-conscious, it is imperative that we get back to the top of our game at point-of-sale in all channels. I am confident we are now in a position to do just that, through the improvements we have implemented in our merchandising, product offering and operational processes. Here we can definitely take inspiration from our best-in-class own-retail activities where comparable store sales growth continues to be up strongly this year, with the third quarter up almost 20%. as the gap in performance between our Wholesale and retail segments narrows in the coming quarters, Greater china will once again become a growth engine for our business. additionally, we will ensure that our business will be robust for the long term by building deeper and closer ties to our existing franchise partners as we map out our expansion plans across all city tiers. We are also adding new partners to the mix such as taobao, which is the largest e-commerce retail platform in china with over 300 million registered users today. this will allow us to deal in yet another very direct way with the chinese consumer. although the last few quarters have not been our best in china, I believe this market will be a cornerstone for our growth going forward. and with all the initiatives we have implemented this year, we are ready to take full advantage of the significant opportunity it presents.

QuestioN

some market observers were disappointed with your performance in Greater china in the first half. Has the third quarter shown any material improvements? and if so, do you believe they are sustainable?

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heRBeRt haiNeR

absolutely not. there was a slowdown in sales during the summer months, however as the category evolves we have seen just like in other categories that there is a seasonal aspect to it. this stems from the fact that in warmer weather the female consumer places a higher priority on open toe footwear such as sandals and slides. But I also think the slowdown needs to be put into perspective. compared to this time last year when the category first burst on the scene, our retail partners are now selling five times more product. and at least for reebok, they are still doing it at a great margin and solid price point. What you read and see about our competitors vis-à-vis toning only reinforces my belief in reebok’s and indeed our entire Group’s discipline and skill at introducing and building a new category for long-term enduring success. We have built our presence in the right way, taking our time, choosing selectively how and with whom we distribute, and matching demand carefully with supply. and we have also remained committed to our endeavours, making sure we give our partners the right support and drive sales through to the consumer. others have not. and it is no surprise they are struggling. let me assure you, we will use this to our advantage. retailers believe in the longevity of toning and so do we. and reebok is committed to stepping forward and taking leadership of the category for the mutual success of our Group and our customers.

QuestioN

We have heard about a slowdown in the toning category in North america during the summer months and increasing promotional activity by competitors. are you worried about the sustainability of the category?

heRBeRt haiNeR

during the third quarter, adidas continued to do what it does best, inspiring athletes and stylites with leading innovation and cutting-edge design. compared to the first half, what is particularly pleasing this quarter is the composition of the growth. While football and outdoor continued to lead the way with strong double-digit increases, all other key performance categories - running, training and basketball - also grew in the third quarter. From a product perspective, the F50 adiZero has become the preferred football boot of players all around the world. and if you look around, there are plenty of high-profile competitor athletes even switching to this boot. In running, our lightweight adiZero footwear and apparel collections continue to resonate strongly. at the Berlin Marathon, two of our athletes, Patrick Makau and aberu Kebede, stormed home to win the men’s and women’s races, adding further credibility to our position in running. In training, which was one of our weaker categories earlier this year, launches such as the Fluid trainer, offering full foot flexibility and freedom of motion, as well as strong updates to our techFit and clima apparel offerings are driving market share gains in the active sports segment. In basketball, we have one of the strongest fourth quarter launches in our history, including signature shoes such as the adiZero rose and Beast for iconic athletes derrick rose and dwight Howard. last but not least for adidas, I have to mention the continu ation of our momentum in the adidas sport style division, which I introduced at the start of the year as one of our three Group marketing priorities. this division has surpassed all expectations with sales growing 20%

year-to-date. We are without doubt the leader in the sports lifestyle market and I am confident that we will continue to drive excitement in this space going forward through the depth of the product offering we have created.

QuestioN

Fears that the momentum of the adidas brand would stall after the World cup appear to have been misplaced. What has driven the 10%

sales increase in the third quarter?

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heRBeRt haiNeR

First of all, I would like to say that reebok can be very proud of its collaboration with the NFl over the last decade.

In particular, this partnership showcased a true talent of reebok – being responsive, flexible and fast to market. the infrastructure, supplier relationships and knowledge to execute against rapid turnaround products is a competitive advantage the entire adidas Group in North america enjoys and exploits today. although we will lose a specific revenue generator, there is still plenty of opportunity to expand our licensed apparel and team sports activities in North america. don’t forget we have other significant long-term assets such as the NBa, the NHl and the Mls. the latter we actually extended during the summer until 2018. In terms of branding and sponsorship, we have to keep a few important principles in mind – our brand goals and return on investment. the competition for top assets is high and provokes in some cases excessive bids. It is therefore very important to evaluate whether a sponsorship deal makes sense from a business point of view, and if it matches our strategic and financial objectives. this time it didn’t.

First, in relation to reebok, the brand is a very different proposition today from what it was back in 2000, with its focus and energy now squarely on fitness and training. second, in terms of our Group’s ambition to be a force in american football, we remain unwavering in our commitment to serve the football athlete. We have the most advanced products for the sport, whether it is the adiZero scorch, the lightest boot in the game, or the reebok u-Form cleat providing the best in comfort and fit. therefore, rather than wasting valuable resources on an uneconomic structure, we believe we can improve our standing in the game and with the athlete through the best products and by other marketing and sponsorship means such as a deeper connection with individual athletes, colleges and high schools.

heRBeRt haiNeR

reebok’s sales growth of 14% currency-neutral in the third quarter speaks volumes about where the brand is in its resurgence.

With every quarter, the top-line drivers are becoming more broad-based and indeed more international. this is down to reebok’s strategy to innovate globally relevant, credible and scalable product platforms true to the dNa and positioning of the brand. our multi-category toning technology that we just spoke about has been the first of those platforms. It has successfully ignited new brand conversations among customers and consumers alike. our second major platform, Zigtech, which was launched earlier this year in training and running, is also proving to be another game changer. For instance, it was the number one shoe at several major us retailers in the important back-to-school season. and like toning, Zigtech is also a scalable multi-category platform.

the upcoming launch of the Zigtech basketball shoe was top of the charts on several pre-order websites ahead of its November release. and let me assure you, our rich vein of product innovation will continue. Next year, we will add a third technology platform, in addition to revamping our classics business. therefore, I am definitely confident about the continuation of reebok’s turnaround. as we move into 2011 and beyond, the brand’s performance will not depend on any one specific product or on a particular market. looking deeper into our third quarter results, we are already seeing this. While North america, given its size, is still the driver of sales, up 25% in the quarter, important markets for the brand’s future growth including russia, Germany, Korea and Japan are all up at 25% and higher. therefore, I strongly believe that reebok has really only started to bloom.

QuestioN

From april 2012 onwards, reebok will no longer be the official sponsor of the National Football league (NFl).

How will this affect your business and does this indicate a shift in your sponsorship strategy?

QuestioN

What about reebok’s overall turnaround strategy? How do you intend to continue growing the brand? and do you also see good prospects outside of North america?

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heRBeRt haiNeR

We followed a bold strategy this year which I believe will pay dividends for the future and definitely for next year. although it is still a bit early to give you all the granularity of what we expect for 2011, we are confident that we will deliver another successful year of top-line and earnings growth, based on the assumption of further gradual improvements in the consumer environment. While rising input and labour costs as well as currency volatility will be headwinds for the development of Group profitability, nevertheless, earnings per share are forecasted to increase at a rate between 10% and 15%. For the longer term, I believe that the last two years have highlighted if you lack commitment to your brands, you will not create sustainable success. and we are certainly not lacking in commitment. at our Investor day on November 8, we will present the most comprehensive and aligned strategic plan for the next five years that this Group has ever established. With our powerful brands, extensive global presence and our commitment to innovation and the consumer, we will create enduring success for the adidas Group and its stakeholders.

QuestioN

Finally Herbert, how are things shaping up for next year and beyond?

Herbert, thank you for this interview.

heRBeRt haiNeR

We have made an explosive comeback in 2010, and I fully expect us to round off the year on a high.

although the last quarter of the year is a seasonally small one, it is nonetheless an important period for seeding some of the initiatives that will inspire and excite consumers in the year ahead. therefore, we will continue our marketing offensive in the fourth quarter particularly in areas such as basketball where adidas and reebok have significant product launches which we already discussed. as a result, I expect our full year Group sales to increase around 8% on a currency-neutral basis. While we continue to expect Wholesale sales to increase at a mid-single-digit rate, the retail business is now forecasted to be up at a mid-teens rate, which is primarily due to the acceleration of our comparable store sales throughout the first nine months. Group gross margin is likely to come in at a level around 47.5% with visible improvements in all our segments. our operational improvements will be translated into an operating margin of around 7.5%. the slightly higher top-line improvement compared to our august guidance, together with the increase in our operating margin, will result in earnings per share in the range of € 2.68 to € 2.70. this development represents an increase of around 5% versus the previous expectation of € 2.50 to € 2.62.

QuestioN

Following the strong rebound of your financial performance in the first nine months, what is your outlook for the rest of 2010?

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adidas Group NiNe MoNths RepoRt 2010 10 to ouR shaReholdeRs our share

our share our share

in the third quarter of 2010, international stock markets increased markedly, reversing the declines of the prior quarter. strong quarterly earnings announcements, the better than expected outcome of the european bank stress test and signs of a continuation of liberal us federal Reserve policies contributed to this positive development. as a result, the daX-30 rose 4% and the dow Jones 10% compared to the end of June. the adidas aG share outperformed both indices and increased 14% over the three-month period.

05

N°- the adidas aG shaRe

Number of shares outstanding

third quarter average 209,216,186 at september 30¹⁾ 209,216,186

type of share²⁾ registered 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)²⁾ dE000a1EWWW0

stock symbol ads, adsGn.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 asPI Eurozone Index EcPI Ethical Index EMu 1) all shares carry full dividend rights.

2) on october 11, 2010, the no-par-value bearer shares of adidas aG were converted to registered no-par-value shares. since this date, adidas aG registered shares are traded under a new IsIN dE000a1EWWW0 on the stock exchange (previously: dE0005003404).

Global stock markets return to Global stock markets return to growth in the third quarter growth in the third quarter International stock markets gained substantially in the third quarter. In July, easing sovereign debt concerns, strong quarterly earnings announcements and the better than expected outcome of the European bank stress test positively impacted global equity markets.

However, a series of weak economic indicators released during august raised fears over a double-dip recession of the us economy, which weighed on investors’

sentiment. the temporary downward trend was reversed towards the end of the quarter with the Fed signalling a further expansion of its monetary policy to stimulate the us economy and a pick-up in global M&a activity.

accordingly, the daX-30 increased 4%

and closed the third quarter at 6,229 points, with the adidas aG share strongly outperforming the index, gaining 14%

during this period and closing at € 45.41.

the MscI World textiles, apparel &

luxury Goods Index, which comprises the Group’s main competitors, improved 28% during the three-month period. In the first nine months of 2010, the adidas aG share price rose 20%. this compares to a 5% and 29% increase of the daX-30 and the MscI World textiles, apparel &

luxury Goods Index respectively.

adidas aG share increases strongly adidas aG share increases strongly in the third quarter

in the third quarter

In line with the general market

environment, the adidas aG share traded sideways at the beginning of the quarter.

Following the preliminary announcement of better than expected first half year results, the adidas aG share price gained markedly towards the end of July. the favourable momentum was sustained after the final results release and the increased full year outlook at the beginning of august. despite positive comments on the Group’s growth prospects by market partici pants, the adidas aG share traded in line with the market from mid-august to mid-september. However, performance accelerated strongly over the final weeks of the quarter following the earnings release of one of our main competitors.

as a consequence, the adidas aG share increased strongly during the third quarter and closed at € 45.41, which represents a 14% increase compared to the end of June 2010.

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Number of adRs remains stable Number of adRs remains stable the number of level 1 adrs (american depository receipts) remained stable during the three-month period compared to the end of the second quarter. at september 30, 2010, 6.2 million adrs were outstanding (June 30, 2010:

6.2 million). the level 1 adr closed the quarter at us $ 30.92, reflecting an increase of 28% compared to the end of June 2010. the more pronounced increase of the level 1 adr price compared to the increase of the ordinary share price was due to the depreciation of the us dollar during the third quarter.

adidas aG included in dow Jones adidas aG included in dow Jones sustainability index

sustainability index

For the eleventh consecutive time, adidas aG has been selected to join the dow Jones sustainability Indexes (dJsI), the world’s first global sustainability index family tracking the performance of the leading sustainability-driven companies worldwide. In the category “clothing, accessories & Footwear”, adidas aG was rated as industry leader in sustainability issues and corporate responsibility for the eighth time in a row. In addition, adidas aG was again included into the FtsE4Good Index. companies in this index series meet stringent social, ethical and environmental criteria and are positioned to capitalise on the benefits of responsible business practice.

shareholder base shareholder base

In the third quarter of 2010, the Group received one voting rights notification according to article 21, section 1 of the German securities trading act (Wertpapierhandelsgesetz – WpHG) see

06. this voting rights notification and those received thereafter can be viewed on our corporate website www.adidas- Group.com/voting_rights_notifications.

06

N°- shaReholdeR RiGhts NotificatioNs ReceiVed iN Q3 2010

date of

notification Notifying

party threshold

crossed voting rights of total

shares outstanding date of change Jul. 21, 2010 the Bank of New york Mellon

corporation and others >3% 6,628,400 and 6,296,653, resp.

(3.1682% and 3.0096%, resp.) Jun. 25, 2010

07

N°- histoRical peRfoRMaNce of adidas aG shaRe¹⁾ aNd IMPortaNt INdIcEs at sEPtEMBEr 30, 2010 IN %

ytd 1 year 3 years 5 years since IPo

adidas aG 20 26 (1) 26 370

daX-30 5 10 (21) 24 184

MscI World textiles,

apparel & luxury Goods 29 37 11 64 208

1) source: Bloomberg.

08

N°- adidas aG MaRKet capitalisatioN

at yeaR-eNd € IN MIllIoNs 2006

2007 2008 2009 2010¹⁾

7,679

10,438 5,252

7,902 9,501 1) september 30, 2010.

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10

N°-

09

N°- shaRe pRice deVelopMeNt iN 2010¹⁾ adidas aG hiGh aNd loW shaRe pRices

peR MoNth¹⁾

dec. 31, 2009 sep. 30, 2010

130 120 110 100

90

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

Jan. Feb. Mar. apr. May Jun. Jul. aug. sep.

2010 2010 2010 2010 2010 2010 2010 2010 2010 50

45 40 35 30

1) Based on daily closing prices.

source: Bloomberg.

directors’ dealings reported directors’ dealings reported on corporate website on corporate website

the purchase or sale of adidas aG shares (IsIN dE000a1EWWW0)¹⁾ 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 third quarter of 2010, adidas aG received notification that christian tourres, member of the adidas aG supervisory Board, had sold 100,000 shares on september 24, 2010 and 62,551 shares on september 27, 2010.

1) on october 11, 2010, the no-par-value bearer shares of adidas aG were converted to registered no-par-value shares. since this date, adidas aG registered shares are traded under a new IsIN dE000a1EWWW0 on the stock exchange (previously: dE0005003404).

39.85 37.46

40.53

44.86 45.25 43.69

42.56 43.16 46.36

36.29

35.01 36.47 40.14

38.60 39.85

38.68 39.86 41.56

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adidas Group NiNe MoNths RepoRt 2010 13 iNteRiM GRoup MaNaGeMeNt RepoRt Group Business Performance Economic and sector development

Group Business performance Group Business performance

in the first nine months of 2010, the adidas Group results improved significantly compared to the prior year. currency-neutral Group sales increased 8% as a result of growth in the Wholesale and Retail segments as well as in other Businesses. in euro terms, adidas Group revenues grew 14% to € 9.059 billion from € 7.923 billion in 2009. the Group’s gross margin increased 3.1 percentage points to 48.2% (2009: 45.1%), supported by lower input costs, less clearance sales and a larger share of higher-margin Retail sales. consequently, the Group’s gross profit increased 22% to € 4.368 billion in the first nine months of 2010 versus € 3.576 billion in 2009. the Group’s operating margin increased 3.7 percentage points to 9.6% from 5.9% in 2009, primarily due to the higher gross margin as well as lower other operating expenses as a percentage of sales. in absolute terms, the Group’s operating profit grew 86% to € 865 million in the first nine months of 2010 versus € 465 million in 2009. the Group’s net income attributable to shareholders increased 148% to € 560 million from € 226 million in 2009. diluted earnings per share grew 137% to € 2.68 in the first nine months of 2010 versus € 1.13 in 2009.

economic and sector economic and sector development

development

high levels of export activity sustain high levels of export activity sustain global economic momentum global economic momentum In the third quarter of 2010, the global economy continued the positive momentum of the first six months. the development was fuelled by the emerging markets, particularly china, as well as strong export activity and improving consumer spending in some key Western markets. Western European GdP increased, led by Germany and France, with strong exports and an increase in consumer spending contributing to this development. Weakness however persisted in some of the region’s peripheral economies due to austerity measures and high unemployment levels.

European emerging markets continued to show solid GdP expansion in the third quarter.

However, the rate of growth has markedly decelerated in some major regional economies such as russia, turkey and Poland compared to the first half. the us economy saw strong manufacturing output performance in the third quarter, with export growth supported by a weak dollar. this helped keep GdP growth positive, however slow home sales and high unemployment persisted as negative pressures. china continued rapid economic growth during the quarter, despite strict government monetary policies to help control inflation. the continued economic growth helped promote higher wages and increase domestic demand in most sectors of the economy. In Japan, deflationary pressures and weak private consumption tempered GdP growth which was otherwise supported by strong export activity. other emerging asian markets grew strongly in the period, with continued expansion in manufacturing and exports.

Many of the region’s economies also benefited from relatively high commodity prices, which supported an increase in private consumption, investment and capital inflows to the region. latin america saw strong GdP growth, supported by high commodity prices and increasing employment levels, driving healthy public and private spending across the region.

strong back-to-school promotes strong back-to-school promotes positive trends in global sporting goods positive trends in global sporting goods industry in the third quarter

industry in the third quarter the global sporting goods industry had a solid third quarter of 2010, with positive impetus from the summer’s 2010 FIFa World cup™ and good weather conditions across much of the Northern hemisphere. toning and running were key positive sales drivers.

11

N°- QuaRteRly coNsuMeR coNfideNce

deVelopMeNt By rEGIoN

Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010

usa¹⁾ 53.4 53.6 52.3 54.3 48.5

Euro Zone²⁾ (19) (16) (17) (17) (11)

Japan³⁾ 40.7 37.9 41.0 43.6 41.4

china⁴⁾ 102.8 103.9 107.9 108.5 107.3

1) source: conference Board.

2) source: European commission.

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

4) source: National Bureau of statistics of china.

12

N°- eXchaNGe Rate deVelopMeNt¹⁾

€ 1 EQuals average

rate

2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 average

rate 2010²⁾ usd 1.3932 1.4406 1.3479 1.2271 1.3648 1.3171 GBP 0.8912 0.8881 0.8898 0.8175 0.8600 0.8578 JPy 130.23 133.16 125.93 108.79 113.68 117.98 ruB 44.144 43.154 39.695 38.282 41.692 39.822 cNy 9.5148 9.8350 9.2006 8.3269 9.1457 8.9652 1) spot rates at quarter-end.

2) average rate for first nine months.

(14)

adidas Group NiNe MoNths RepoRt 2010 14 iNteRiM GRoup MaNaGeMeNt RepoRt Group Business Performance Income statement

13

N°- NiNe MoNths Net sales

€ IN MIllIoNs 2006 2007 2008 2009 2010

7,836 7,879 8,225 7,923

9,059

14

N°- NiNe MoNths Net sales By seGMeNt¹⁾

12% other Businesses 19% retail

69% Wholesale

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

In Western Europe, the quarter started strongly, particularly in the football category as three out of the four finalist teams at the 2010 FIFa World cup™ came from the region. In addition, running, outdoor and toning also contributed positively to industry growth in the region during the period. In Europe’s emerging markets, consumer confidence and spending tracked the larger macroeconomic trends of the region, while many of the countries dealing with high unemployment saw low spending levels. In North america, the sporting goods industry performed strongly during the back-to-school season, outperforming other retail sectors. running and toning continued their momentum in the quarter, with basketball also rebounding towards the end of the period. In china, the rise in wages and high consumer confidence resulted in increased consumption of sporting goods. the industry also saw further space expansion particularly in the lower-tier cities. In other asian markets, the industry also grew positively, reflecting the region’s overall GdP growth. Japan, however, was an exception to this trend, where continued negative pressures from depressed personal spending on discretionary items weighed on the market. In latin america, industry growth remained strong, driven by momentum from the 2010 FIFa World cup™ coupled with the positive stimulus of high economic growth and healthy consumer confidence levels in the region.

income statement income statement

segmental reporting comparatives segmental reporting comparatives updated

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. these adjustments have no effect on total Group financial results.

details of the adjustments are available in the notes see note 7, p. 40/41. adidas Group currency-neutral sales adidas Group currency-neutral sales increase at double-digit rate in Q3 increase at double-digit rate in Q3 during the third quarter of 2010, Group revenues increased 10% on a currency- neutral basis. currency translation effects had a positive impact on sales in euro terms. Group revenues grew 20% to

€ 3.468 billion in the third quarter of 2010 from € 2.888 billion in 2009.

Wholesale and Retail segments drive Wholesale and Retail segments drive strong sales growth in Q3

strong sales growth in Q3

In the third quarter of 2010, currency- neutral sales increased at a double- digit rate in the Wholesale and retail segments. sales of other Businesses also grew. currency-neutral Wholesale revenues increased 10% during the period due to sales growth at both adidas and reebok. currency-neutral retail sales increased 15% versus the prior year as a result of adidas and reebok sales growth. revenues in other Businesses grew 4% on a currency- neutral basis. sales grew at taylorMade- adidas Golf and rockport. reebok-ccM Hockey sales remained stable. currency translation effects had a positive impact on segmental sales in euro terms.

Wholesale revenues increased 19%

to € 2.421 billion in the third quarter of 2010 from € 2.036 billion in 2009.

retail sales rose 27% to € 665 million versus € 524 million in the prior year.

sales in other Businesses grew 17% to

€ 382 million in the third quarter of 2010 (2009: € 326 million).

adidas Group currency-neutral sales up adidas Group currency-neutral sales up 8% in the first nine months of 2010 8% in the first nine months of 2010 In the first nine months of 2010, Group revenues increased 8% on a currency- neutral basis. currency translation effects had a positive impact on sales in euro terms. Group revenues grew 14% to € 9.059 billion in the first nine months of 2010 from € 7.923 billion in 2009 see 13.

(15)

15

N°-

16

N°- NiNe MoNths Net sales GRoWth¹⁾

(currENcy- NEutral) By sEGMENt aNd rEGIoN IN %

NiNe MoNths Net sales GRoWth¹⁾ (IN €) By sEGMENt aNd rEGIoN IN %

Wholesale retail other

Businesses total

Western Europe 9 4 0 8

European Emerging

Markets 0 26 9 14

North america 18 13 1 12

Greater china (13) 51 25 (7)

other asian Markets 6 (1) 8 5

latin america 15 34 9 17

total 8 16 3 8

1) versus the prior year.

Wholesale retail other

Businesses total

Western Europe 11 5 3 9

European Emerging

Markets 7 32 19 20

North america 23 18 7 18

Greater china (9) 57 30 (3)

other asian Markets 19 12 21 18

latin america 28 49 14 31

total 13 22 10 14

1) versus the prior year.

1) Excluding HQ/consolidation.

17

N°- NiNe MoNths Net sales By ReGioN¹⁾

10% latin america

15% other asian Markets 24% North america 11% European

Emerging Markets first nine months Group sales

first nine months Group sales increase driven by the Wholesale increase driven by the Wholesale and Retail segments

and Retail segments

the adidas Group’s sales increase in the first nine months of 2010 was driven by higher sales in the Wholesale and retail segments as well as in other Businesses. currency-neutral Wholesale revenues increased 8% during the period, driven by higher adidas and reebok 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 3% on a currency- neutral basis due to sales growth at taylorMade-adidas Golf. currency translation effects had a positive impact on segmental sales in euro terms.

Wholesale revenues increased 13% to

€ 6.247 billion in the first nine months of 2010 from € 5.516 billion in 2009.

retail sales rose 22% to € 1.725 billion versus € 1.409 billion in the prior year.

sales in other Businesses grew 10% to

€ 1.086 billion in the first nine months of 2010 (2009: € 984 million).

currency-neutral sales increase currency-neutral sales increase in nearly all regions

in nearly all regions

In the first nine months of 2010, currency-neutral adidas Group sales grew in all regions except Greater china.

revenues in Western Europe increased 8%, primarily as a result of double- digit sales growth in both Germany and the uK. In European Emerging Markets, Group sales increased 14% on a currency-neutral basis due to growth in most of the region’s markets, in particular russia. sales for the adidas Group in North america grew 12% on a currency-neutral basis due to strong increases in both the usa and canada.

sales in Greater china decreased 7% on a currency-neutral basis. currency-neutral revenues in other asian Markets grew 5% due to increases in most markets.

In latin america, sales grew 17% on a currency-neutral basis, with double-digit increases in most of the region’s major markets see 15.

currency translation effects had a positive impact on regional sales in euro terms. Group revenues in Western Europe increased 9% to € 2.875 billion in the first nine months of 2010 from

€ 2.625 billion in 2009. In European Emerging Markets, sales grew 20% to

€ 1.034 billion in the first nine months of 2010 from € 859 million in 2009.

sales in North america increased 18%

to € 2.140 billion from € 1.818 billion in 2009. revenues in Greater china decreased 3% to € 721 million in the first nine months of 2010 from € 742 million in 2009. In other asian Markets, sales increased 18% to € 1.359 billion versus € 1.152 billion in the prior year.

revenues in latin america grew 31% to

€ 931 million from € 713 million in the prior year see 16.

8% Greater china 32% Western Europe

(16)

Group sales increase in all Group sales increase in all product categories product categories

In the first nine months of 2010, sales grew in all product categories on a currency-neutral basis. currency-neutral footwear sales increased 8% during the period. this development was driven by growth in Wholesale and retail as well as in other Businesses. apparel revenues increased 7% on a currency-neutral basis. Growth in the retail and Wholesale segments was partly offset by a decline in other Businesses. currency-neutral hardware sales increased 15% compared to the prior year, primarily due to double- digit growth in both Wholesale and other Businesses.

18

N°- MaJoR pRoduct lauNches iN Q3 2010

Brand Product

adidas FluId traINEr training shoe

adidas official match balls torfabrik (German Bundesliga) and Finale 10 (uEFa champions league) adidas micoach mobile application

adidas NBa revolution 30 basketball uniforms

adidas tErrEX accessories

adidas originals MEGa collection

reebok Ea7 collection

reebok Jumptone™ men’s shoe

taylorMade Burner^® 2.0 irons

taylorMade Burner^® superlaunch iron and rescue^® set adidas Golf adiPurE Z golf footwear

ashworth EZ-tech performance golf apparel ccM Hockey 11K sicKick III ice-hockey stick rockport truWalK men’s and women’s footwear currency translation effects had a

positive impact on sales in euro terms.

Footwear sales in euro terms increased 14% to € 4.177 billion in the first nine months of 2010 (2009: € 3.660 billion).

apparel sales grew 13% to € 3.937 billion in the first nine months of 2010 (2009:

€ 3.498 billion). Hardware sales increased 23% to € 945 million in the first nine months of 2010 from € 766 million in 2009.

New product introductions contributed to the sales growth in all product categories. an overview of major product launches in the third quarter of 2010 is provided in the adjacent table 18.

(17)

Group gross margin improves Group gross margin improves 3.1 percentage points 3.1 percentage points

the gross margin of the adidas Group increased 3.1 percentage points to 48.2%

in the first nine months of 2010 (2009:

45.1%) see 20. this development was mainly due to lower input costs, less clearance sales and a larger share of higher-margin retail sales.

Positive currency effects related to the appreciation of the russian rouble also had a minor effect on Group gross margin. as a result, gross profit for the adidas Group grew 22% in the first nine months of 2010 to € 4.368 billion versus € 3.576 billion in the prior year

see 19.

Royalty and commission income grows Royalty and commission income grows royalty and commission income for the adidas Group increased 14% to

€ 72 million in the first nine months of 2010 from € 63 million in the prior year.

on a currency-neutral basis, royalty and commission income was up 11% as a result of higher licensee sales.

other operating income increases 26%

other operating income includes items such as gains from the disposal of fixed assets and releases of accruals and provisions. In the first nine months of 2010, other operating income increased 26% to € 91 million (2009: € 72 million) mainly due to the settlement of a lawsuit and the divestiture of a trademark.

other operating expenses as other operating expenses as a percentage of sales down a percentage of sales down 0.5 percentage points 0.5 percentage points

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 0.5 percentage points to 40.5%

in the first nine months of 2010 from 41.0% in 2009. In absolute terms, other operating expenses increased 13% to

€ 3.666 billion in the first nine months of 2010 (2009: € 3.246 billion) see 21.

thereof, sales and marketing working budget expenditures amounted to € 1.149 billion, which represents an increase of 24% versus the prior year level (2009: € 923 million). the increase was primarily related to higher expenditures to support adidas presence at the 2010 FIFa World cup™ as well as new product launches of reebok.

sales and marketing working budget expenditures as a percentage of sales increased 1.0 percentage points to 12.7%

(2009: 11.6%).

research and development expenses during the first nine months of 2010 amounted to € 73 million (2009:

€ 63 million).

Number of Group employees Number of Group employees increases 8%

increases 8%

at the end of the first nine months of 2010, the Group employed 42,659 people.

this represents an increase of 8% versus the prior year level of 39,524. New hirings related to the expansion of the Group’s own-retail store base were the main driver of this development. on a full-time equivalent basis, the number of employees increased 8% to 36,348 at the end of the first nine months of 2010 (2009: 33,751).

operating margin improves operating margin improves 3.7 percentage points 3.7 percentage points

the operating margin of the adidas Group increased 3.7 percentage points to 9.6% in the first nine months of 2010 (2009: 5.9%) see 23. the operating margin improvement 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 86%

to € 865 million versus € 465 million in 2009 see 22.

financial income up 43%

Financial income increased 43% to

€ 21 million in the first nine months of 2010 from € 15 million in the prior year, mainly due to an increase in interest income as well as positive currency exchange rate effects.

21

N°-

22

N°-

23

N°- NiNe MoNths otheR opeRatiNG eXpeNses

€ IN MIllIoNs

NiNe MoNths opeRatiNG pRofit

€ IN MIllIoNs

NiNe MoNths opeRatiNG MaRGiN IN %

2009 2010

3,246 3,666

465

865

5.9

9.6

19

N°-

20

N°- NiNe MoNths GRoss pRofit

€ IN MIllIoNs

NiNe MoNths GRoss MaRGiN IN %

2009 2010

3,576 4,368

45.1 48.2

(18)

25

N°- NiNe MoNths iNcoMe BefoRe taXes

€ IN MIllIoNs 2009 2010

343

799

26

N°-

27

N°- NiNe MoNths Net iNcoMe attRiButaBle

to shaReholdeRs € IN MIllIoNs

NiNe MoNths diluted eaRNiNGs peR shaRe IN €

2006 2007 2008 2009 2010

469 530

588 226

560

2.18 2.46

2.78 1.13

2.68 financial expenses decrease 36%

financial expenses decrease 36%

Financial expenses decreased 36% to

€ 87 million in the first nine months of 2010 (2009: € 137 million) see 24. the non-recurrence of prior year negative currency exchange rate effects as well as lower interest expenses contributed to the decline.

income before taxes as a percentage of income before taxes as a percentage of sales increases 4.5 percentage points sales increases 4.5 percentage points Income before taxes (IBt) as a percentage of sales increased 4.5 percentage points to 8.8% in the first nine months of 2010 from 4.3% in 2009. this was primarily a result of the Group’s operating margin increase and lower financial expenses.

IBt for the adidas Group increased 133%

to € 799 million from € 343 million in 2009 see 25.

Net income attributable to Net income attributable to shareholders more than doubles shareholders more than doubles the Group’s net income attributable to shareholders increased to € 560 million in the first nine months of 2010 from

€ 226 million in 2009 see 26. this represents an increase of 148% versus the prior year level. Higher IBt was the primary reason for this development.

the Group’s tax rate decreased 4.5 percentage points to 29.7% in the first nine months of 2010 (2009:

34.2%), 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 nine months of 2010 (2009: negative € 1 million).

earnings per share reach € 2.68 earnings per share reach € 2.68 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 nine months of 2010, basic and diluted earnings per share amounted to € 2.68

see 27. In the prior year period, basic earnings per share amounted to € 1.17 and diluted earnings per share to € 1.13.

the weighted average number of shares used in the calculation was 209,216,186 in the first nine months of 2010. In the prior year period, the number amounted to 193,515,512 for the calculation of basic earnings per share and 209,247,568 for the calculation of diluted earnings per share.

24

N°- NiNe MoNths fiNaNcial eXpeNses

€ IN MIllIoNs 2009 2010

137 87

Nine Months Report 2010