• Group sales increase 6% currency-neutral in first nine months
• Strong momentum in Latin America, European Emerging Markets and Greater China, with currency-neutral revenues up 22%, 20% and 10%, respectively
• Operating margin decreases 2.2pp to 8.3%
• Basic and diluted earnings per share decrease 21% to € 3.01
• Inventories increase 7% currency-neutral
• Management confirms full year guidance

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adidas Group currency-neutral sales increase 9% in the third quarter of 2014

During the third quarter of 2014, the adidas Group continued to deliver robust top-line results. Group revenues increased 9% on a currency-neutral basis, driven by a double-digit sales increase in Retail and a high-single-digit revenue growth in Wholesale. All regions, except North America, contributed to the currency-neutral revenue growth. Western Europe increased 10%, mainly as a result of strong sales increases in Germany, France, Spain and the UK. In European Emerging Markets, currency-neutral revenues were up 19%, driven by double-digit growth in Russia/CIS. Group sales in North America decreased 1% on a currency-neutral basis, as mid-single-digit sales growth at adidas was more than offset by declines at TaylorMade-adidas Golf and Reebok. In Greater China, Group sales were up 13% on a currency-neutral basis, due to continued momentum across all channels. Currency-neutral revenues in Other Asian Markets grew 6% driven by double-digit sales increases in South Korea and India. In Latin America, currency-neutral sales grew 16%, with double-digit increases in most markets, in particular Argentina, Brazil and Mexico.

From a brand perspective, the strong top-line momentum at both adidas and Reebok continued during the quarter. Third quarter sales at adidas increased 12% on a currency-neutral basis, driven by double-digit sales growth in the Sport Performance football and running categories, as well as at adidas Originals & Sport Style. Sales at Reebok grew 7% on a currency-neutral basis, driven by sales momentum in the fitness training, walking and fitness running categories. Revenues in the TaylorMade-adidas Golf segment declined 36% on a currency-neutral basis, as a result of the continued weakness in the golf market as well as TaylorMade-adidas Golf’s ongoing efforts to clean retail inventories and the timing of new product introductions compared to the prior year period. Revenues at Reebok-CCM Hockey increased 15% on a currency-neutral basis mainly due to growth in key categories such as skates and protective equipment as well as in hockey apparel. Rockport sales increased 5% currency-neutral. Currency translation effects had a negative impact on sales in euro terms. Group revenues increased 6% to € 4.118 billion in the third quarter of 2014 from € 3.879 billion in 2013.

Third quarter gross margin declines 1.9 percentage points

The Group’s gross margin decreased 1.9 percentage points to 47.4% (2013: 49.3%) in the third quarter, mainly due to higher input costs as well as negative currency effects. In addition, increased clearance activities, in particular in Russia/CIS, contributed to the gross margin decline. Group gross profit increased 2% to € 1.952 billion (2013: € 1.913 billion). Other operating expenses as a percentage of sales decreased 0.9 percentage points to 38.7% compared to 39.6% the prior year. In euro terms, other operating expenses increased 4% to
€ 1.594 billion, mainly as a result of higher marketing working budget expenditure. In addition, higher expenditure related to the expansion of the Group’s own-retail activities contributed to the increase in other operating expenses. The Group’s operating profit declined 13% to € 405 million (2013: € 463 million) in the third quarter. The operating margin decreased 2.1 percentage points to 9.8% from 11.9% in 2013. Basic and diluted earnings per share for the third quarter decreased 11% to € 1.35 (2013: € 1.51).

adidas Group currency-neutral sales increase 6% in the first nine months of 2014

In the first nine months of 2014, Group revenues increased 6% on a currency-neutral basis, driven by sales increases in Wholesale and Retail. Currency translation effects had a negative impact on sales in euro terms. Group revenues grew 1% to € 11.116 billion in the first nine months of 2014 from € 11.013 billion in 2013.

Nine months Group sales increase driven by growth in Wholesale and Retail

In the first nine months of 2014, currency-neutral Wholesale revenues increased 6%, due to sales growth at both adidas and Reebok. Currency-neutral Retail sales were up 21% versus the prior year as a result of double-digit sales increases at adidas and Reebok. Revenues in Other Businesses were down 17% on a currency-neutral basis, due to double-digit sales declines at TaylorMade-adidas Golf. Currency translation effects had a negative impact on segmental sales in euro terms.

By brand, revenues at adidas grew 11% on a currency-neutral basis, driven by double-digit sales growth in the Sport Performance football and running categories, as well as at adidas NEO. Sales at Reebok grew 6% on a currency-neutral basis, driven by double-digit increases in the fitness training, walking and studio categories as well as at Classics. Revenues in the TaylorMade-adidas Golf segment declined 29% on a currency-neutral basis.

Nine months net sales development by segment

1) Rounding differences may arise in totals.

Currency-neutral sales grow in nearly all regions

In the first nine months of 2014, currency-neutral adidas Group sales grew in all regions except North America. Revenues in Western Europe increased 7% on a currency-neutral basis, driven by sales increases in Germany, France, Spain, the UK and Poland. In European Emerging Markets, Group sales were up 20% on a currency-neutral basis, with double-digit sales increases in all of the region’s major markets. Currency-neutral sales for the adidas Group in North America decreased 7%, mainly due to sales declines in the USA. Sales in Greater China increased 10% on a currency-neutral basis. Currency-neutral revenues in Other Asian Markets grew 2%, driven by sales increases in South Korea and India. In Latin America, sales grew 22% on a currency-neutral basis, with double-digit increases in most markets, in particular Argentina, Brazil, Mexico and Colombia. Currency translation effects had a mixed impact on regional sales in euro terms.

Nine months net sales development by region

¹⁾ Rounding differences may arise in totals.

Group gross margin declines 1.3 percentage points

The gross margin of the adidas Group decreased 1.3 percentage points to 48.5% in the first nine months of 2014 (2013: 49.8%). This development was mainly due to negative currency effects as well as higher input costs. In addition, increased clearance activities, in particular in Russia/CIS, as well as lower margins at TaylorMade-adidas Golf contributed to the gross margin decline. Gross profit for the adidas Group decreased 2% in the first nine months of 2014 to € 5.392 billion versus € 5.488 billion in the prior year.

Operating margin decreases to 8.3%

Group operating profit declined 20% to € 927 million in the first nine months of 2014 versus
€ 1.157 billion in 2013. The operating margin of the adidas Group decreased 2.2 percentage points to 8.3% (2013: 10.5%). This development was primarily due to the negative effects from the lower gross margin as well as higher other operating expenses as a percentage of sales. In euro terms, other operating expenses increased 3% to € 4.647 billion (2013: € 4.515 billion), as a result of higher expenditure related to the expansion of the Group’s own-retail activities as well as an increase in sales and marketing working budget expenditure. Sales and marketing working budget expenditure increased 8% to € 1.441 billion (2013: € 1.336 billion), driven by increased marketing expenditure at brand adidas related to the 2014 FIFA World Cup™.

Financial income down 5%

Financial income declined 5% to € 14 million in the first nine months of 2014 from € 15 million in the prior year, due to a decrease in interest income.

Financial expenses down 25%

Financial expenses decreased 25% to € 50 million in the first nine months of 2014 (2013: € 67 million). This development was the result of a decrease in both negative exchange rate effects as well as interest expenses.

Income before taxes declines 19%

In the first nine months of 2014, income before taxes (IBT) for the adidas Group decreased 19% to € 892 million from € 1.105 billion in 2013. IBT as a percentage of sales declined 2.0 percentage points to 8.0% in the first nine months of 2014 (2013: 10.0%), as a result of the Group’s lower operating margin.

Net income attributable to shareholders down 21%

The Group’s net income attributable to shareholders decreased to € 630 million in the first nine months of 2014 from € 796 million in 2013. This represents a decline of 21% versus the prior year level. The Group’s tax rate increased 1.1 percentage points to 28.8% in the first nine months of 2014 (2013: 27.7%), mainly due to a less favourable earnings mix.

Basic and diluted earnings per share decrease to € 3.01

In the first nine months of 2014, basic and diluted earnings per share decreased 21% to € 3.01 versus € 3.81 in the prior year. The weighted average number of shares used in the calculation of both basic and diluted earnings per share was 209,216,186 (2013 average: 209,216,186) as there were no potential dilutive shares at the end of the first nine months.

Group inventories increase 7% currency-neutral

Group inventories increased 5% to € 2.647 billion at the end of September 2014 versus € 2.513 billion in 2013. On a currency-neutral basis, inventories were up 7%, as a result of the Group’s expectations for growth in the coming quarters as well as higher inventories at TaylorMade-adidas Golf.

Accounts receivable up 7% currency-neutral

Group receivables increased 8% to € 2.322 billion at the end of September 2014 (2013: € 2.156 billion). On a currency-neutral basis, receivables were up 7%.

Net borrowings increase to € 543 million

Net borrowings at September 30, 2014 amounted to € 543 million, compared to net borrowings of € 180 million in 2013, representing an increase of € 363 million. This increase is mainly a result of higher capital expenditure during the first nine months of 2014. Currency translation had a positive effect of € 12 million on net borrowings. The Group’s ratio of net borrowings over EBITDA amounted to 0.4 at the end of September 2014 (2013: 0.1).

adidas Group confirms guidance for the full year 2014

Management expects adidas Group sales to increase at a mid- to high-single-digit rate on a currency-neutral basis in 2014. In particular the adidas brand will benefit from the 2014 FIFA World Cup™, where Management expects record sales of € 2 billion in the football category. Group sales development will also be favourably impacted by the Group‘s high exposure to fast-growing emerging markets as well as the further expansion of Retail. Currency translation is expected to negatively impact the Group‘s top-line development in reported terms.

In 2014, the adidas Group gross margin is forecasted to decrease to a level between 48.0% and 48.5% (previously: between 48.5% and 49.0%) compared to 49.3% in 2013. Management expects the operating margin for the adidas Group to be at a level between 6.5% and 7.0% compared to 8.7% in 2013 excluding goodwill impairment losses. Net income attributable to shareholders is expected to be at a level of around € 650 million compared to the 2013 net income attributable to shareholders, excluding goodwill impairment losses, of € 839 million. This represents basic earnings per share of around € 3.10.