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Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Redistribution or reproduction is prohibited without written permission. Copyright © 2020 CFRA. This document is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek independent financial advice regarding the suitability and/or appropriateness of making an investment or implementing the investment strategies discussed in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such investments, if any, may fluctuate and that the value of such investments may rise or fall. Accordingly, investors may receive back less than they originally invested. Investors should seek advice concerning any impact this investment may have on their personal tax position from their own tax advisor. Please note the publication date of this document. It may contain specific information that is no longer current and should not be used to make an investment decision. Unless otherwise indicated, there is no intention to update this document.

Analyst's Risk Assessment

LOW MEDIUM HIGH

Our risk assessment balances the slower economic growth in Europe, with defensive features in the group's outsourced production (low fix cost base) as well as greater potential than peers for cost-cutting in opex.

Revenue/Earnings Data

Revenue (Million EUR) 1Q 2Q 3Q 4Q Year

2021 -- -- -- -- E 24,000 2020 -- -- -- -- E 19,000 2019 5,883 5,509 6,410 5,838 23,640 2018 5,548 5,261 5,873 5,233 21,915 2017 5,447 5,038 5,677 5,056 21,218 2016 4,562 4,199 5,222 4,500 18,483

Earnings Per Share (EUR) 1Q 2Q 3Q 4Q Year

2021 -- -- -- -- E 9.50 2020 -- -- -- -- E 3.00 2019 3.17 2.33 3.26 0.93 9.97 2018 2.65 2.05 3.26 0.47 8.45 2017 2.26 1.71 2.68 -0.02 6.62 2016 1.80 1.47 1.98 0.02 5.29

Fiscal Year ended Dec 31. EPS Estimates based on CFRA's Operating Earnings; historical GAAP earnings are as reported in Company reports.

Dividend Data

Amount (EUR)

Date Decl.

Ex-Div. Date

Stk. of Record

Payment Date

3.35 Mar 13 May 10 May 13 May 14 '19 2.60 Mar 14 May 10 May 11 May 15 '18 2.00 Mar 08 May 12 May 15 May 16 '17 1.60 Mar 03 May 13 May 12 May 13 '16 1.50 Mar 05 May 08 May 07 May 08 '15 1.50 Mar 05 May 09 May 08 May 09 '14

Dividends have been paid since 2003. Source: Company reports Past performance is not an indication of future performance and should not be relied as such. Forecasts are not reliable indicator of future performance.

Highlights

u Adidas constant exchange rate (CER) revenues declined by 19% to EUR4,753 million in Q1 2020 (-19% in EUR terms) with a 20% decline at brand adidas and a 12% decline in Reebok. Revenues in Asia Pacific (-45%) declined the most with store closures since the end of January in Greater China, Japan, and South Korea; followed by Emerging Markets (-11%), and Europe (-8%) as these regions were affected in March. Latin America (flat), North America (+1%), and Russia/CIS (+9%) were less affected as these regions locked-down later in the quarter.

u Q1 2020 gross margin declined 4.2%-pts to 49.3% with a less favorable regional mix on the huge sales decline in Greater China, negative currency developments, and costs related to order cancellations. EBIT plunged 93% to EUR65 million with a 13.5%-pts decline in operating margin as Adidas retained most of its marketing expenses in the quarter and other operating overheads including bad debt allowances did not fall as much as sales.

u Q1 2020 diluted EPS from continuing operations came in at EUR0.13 down 96% on the steep EBIT decline. We lower our 2020 EPS estimate to EUR3.0 (EUR8.5) and our 2021 EPS estimate to EUR9.5 (EUR11.5).

Investment Rationale/Risk

u Our recommendation is 3-STARS (Hold). After a disappointing 2014, Adidas delivered strong sales and earnings recovery from 2015 to 2019 driven by accelerated revenue growth in North America, Western Europe and most emerging markets including Greater China. For the full year 2020, management retracted their guidance as the impact of Covid-19 remains unpredictable. Sales in Greater China accelerated 55% in the first 3 week of April but revenue is significantly impacted in other regions. Consequently, Adidas’ top- and bottom-lines are expected to decline more significantly Q2. We stay neutral as we think other regions have the potential to rebound as it did in Greater China.

u Key downside risks that may prompt us to lower our target price and/or recommendation include: (i) an overly-aggressive expansion of its retail operations, (ii) geopolitical crisis in its regions, and (iii) prolonged Covid-19 health crisis.

u Our 12-month target price of EUR230 represents 2021 P/E of 24x, which is comparable to its 5-year average forward P/E of c.25x. We think Adidas should not be trading at a significant discount as the underlying business remains strong and can rebound strongly post-crisis.

Price Performance

30-Week Mov. Avg. 10-Week Mov. Avg. GAAP Earnings vs. Previous Year Volume Above Avg. STARS

12-Mo. Target Price Up Down No Change Below Avg.

Source: CFRA, S&P Global Market Intelligence Past performance is not an indication of future performance and should not be relied upon as such. Analysis prepared by Adrian Ng, CFA on Apr 28, 2020 07:20 PM, when the stock traded at EUR 206.80.

Recommendation HOLD « « « « « Price 12-Mo. Target Price Report Currency EUR 206.80 (as of Apr 27, 2020 12:00 AM ET) EUR 230.00 EUR

Equity Analyst Adrian Ng, CFA

GICS Sector Consumer Discretionary Summary Adidas is the 2nd largest player in the global athletic footwear and apparel market after Nike. Sub-Industry Apparel, Accessories and Luxury Goods

Key Stock Statistics (Source: CFRA, S&P Global Market Intelligence (SPGMI), Company Reports)

52-Wk Range EUR 316.05 - 166.92 Oper.EPS2020E EUR 3.00 Market Capitalization[B] EUR 40.33 Beta 0.75 Trailing 12-Month EPS EUR 9.7 Oper.EPS2021E EUR 9.50 Yield [%] 1.97 3-yr Proj. EPS CAGR[%] Trailing 12-Month P/E 21.32 P/E on Oper.EPS2020E 68.93 Dividend Rate/Share EUR 3.85 SPGMI's Quality Ranking A $10K Invested 5 Yrs Ago N/A Common Shares Outstg.[M] 196.00 Institutional Ownership [%] 44.0

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Business Summary April 28, 2020

CORPORATE OVERVIEW: Germany-based Adidas AG, founded in 1949, is a global manufacturer of sporting goods, clothing, shoes and accessories. The company acquired the Salomon Group in December 1997 and, in May 2005, Adidas divested Salomon. It was formerly known as adidas-Salomon AG and changed its name to Adidas AG in June 2006 after the disposal. In 2006, it acquired Reebok International Ltd for EUR3.7 billion. The acquisition provided Adidas with estimated sales of EUR9.5 billion (USD11.8 billion), creating the second-largest competitor in the global athletic footwear and apparel market, after Nike.

MARKET PROFILE: In 2019, 26% of total revenues was generated in Europe, 23% in North America, 34% in Asia Pacific, 3% in Russia/CIS, 7% in Latin America, and 6% in Emerging Markets. The group is subdivided into two core brands. (i) The Adidas brand (91% of group net sales in 2019) offers a collection of technically engineered footwear and sports clothing. It is structured into two product categories: Sport Performance globally offers athletics products in several categories including football, basketball, tennis, and training, while Sport Inspired offers trendsetting street wear to sports/lifestyle consumers and; (ii) the Reebok brand (8%) is a leading worldwide designer, developer and marketer of sports, fitness and casual footwear, apparel and hardware products with strong positioning in the North American market, home to about half of the global sporting goods market.

CORPORATE STRATEGY: The Adidas Group strives to inspire and enable people to harness the power of sport in their lives. Sport is its very purpose. The following strategic pillars reflect its values rooted in sport: (i) Portfolio of authentic sports brands, (ii) Developing a team grounded in its heritage in sport, (iii) Investments focused on highest-potential markets and channels, (iv) Creating a flexible supply chain, (v) Innovation, (vi) Focusing on sustainability and (vii) Creating long-term shareholder value.

CORE STRENGTHS: One of the core strengths of the group is its well-positioned and strong brand image. The Adidas brand in particular has been successfully associated with technical and performance-oriented products as well as leisure and fashion-oriented sportswear, two co-existing markets which are both enjoying meaningful growth rates and are driven by a different customer base. With increasing consumer interest in life-style- and leisure-oriented collections, driven among other factors by growing female participation in the sportswear market, the group’s Reebok brand is performing satisfactorily in most geographic markets, we believe. Adidas competes with a variety of sporting apparel companies, including Nike and Puma. Nike, unlike Adidas, has less developed leisure product lines, which we believe leaves Adidas better positioned to exploit the growing female demand.

FINANCIAL TRENDS: Adidas grew constant exchange rate (CER) revenues by 6% to EUR23,640 million in 2019 (+8% in EUR terms) thanks to strong growth in the adidas brand (CER: +7%) and continued growth in the Reebok brand (CER: +2%). Revenues in Emerging Markets grew the most (CER: +13%) followed by Asia Pacific (CER: +10% with 15% growth in China), Russia/CIS (CER: +8%), North America (CER: +8%), and Latin America (CER: +7%) while revenues in Europe (+3%) returned to growth. 2019 gross margin increased 0.2%-pts to 52.0% with higher air freight costs and a less favorable pricing mix partly offset by a more positive channel mix. EBIT remained stable at EUR2,660 million while margin improved 0.4%-pts to 11.3%, at the lower end of guidance. For 2020, Adidas retracted its full year guidance as the Covid-19 pandemic brought about great uncertainty and unpredictability.

Corporate information

Investor contact S. Steffen (49 91 32 84 0)

Office Adi-Dassler-Strasse 1, Herzogenaurach, Bavaria, 91074

Telephone 49 91 32 84 0

Fax 49 91 32 84 22 41

Website www.adidas-group.com

Officers CEO & Member of Executive Board K. B. Rorsted

Head of Global Operations & Member of Executive Board M. Shankland

CFO, Labor Director & Member of Executive Board H. Ohlmeyer

Board Members B. K. Uebber

B. Rohrig

F. Scheiderer

G. Weigl

H. Kauffmann

I. Landau

J. Ulrich

K. Menges

M. Storl

N. N. Sawiris

P. Auerbacher

R. Hermann

R. Nosko

T. Rabe

U. Müller

Domicile Germany

Founded 1920

Employees 53,218

Stockholders 90,000

Auditor KPMG LLP - Klynveld Peat Marwick Goerdeler

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Quantitative Evaluations

Fair Value Rank NR 1 2 3 4 5 Lowest Highest Based on CFRA's proprietary quantitative model, stocks are ranked from most overvalued (1) to most undervalued (5).

Fair Value Calculation

N/A

Volatility LOW AVERAGE HIGH

Technical Evaluation

NEUTRAL Since March, 2020, the technical indicators for ADS GY have been NEUTRAL"

Insider Activity NA UNFAVORABLE NEUTRAL FAVORABLE

Expanded Ratio Analysis

2019 2018 2017 2016 Price/Sales 2.42 1.68 1.61 1.67 Price/EBITDA 17.98 13.06 13.99 17.43 Price/Pretax Income 22.38 15.49 16.88 20.16 P/E Ratio 29.88 21.59 25.23 28.37 Avg. Diluted Shares Outstg. (M) 197.61 202.04 204.24 206.15

Figures based on fiscal year-end price

Key Growth Rates and Averages

Past Growth Rate (%) 1 Year 3 Years 5 Years Net Income 16.10 24.78 32.17 Sales 7.87 8.55 10.22

Ratio Analysis (Annual Avg.) Net Margin (%) 8.36 7.10 6.11 % LT Debt to Capitalization 33.77 22.79 20.04 Return on Equity (%) 28.60 25.98 21.60

Company Financials Fiscal year ending Dec 31

Per Share Data (EUR) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Tangible Book Value 22.32 20.55 18.90 15.95 12.28 14.00 12.91 11.34 9.18 7.11 Free Cash Flow 10.68 9.82 4.43 3.53 2.86 0.74 0.77 2.43 2.06 3.07 Earnings 9.70 8.45 6.62 5.29 3.37 2.67 3.68 2.51 2.93 2.71 Earnings (Normalized) 8.04 7.29 6.16 4.38 3.35 2.75 3.48 3.35 2.54 2.40 Dividends 3.85 3.35 2.60 2.00 1.60 1.50 1.50 1.35 1.00 0.80 Payout Ratio (%) 34 31 37 31 48 64 36 40 27 13 Prices: High 296.35 216.00 199.95 159.50 93.41 92.92 92.64 69.12 57.42 51.48 Prices: Low 183.95 166.40 143.80 83.45 54.61 53.89 66.28 51.42 43.22 35.00 P/E Ratio: High 30.6 25.6 30.2 30.1 27.7 34.8 25.2 27.5 19.6 19.0 P/E Ratio: Low 19.0 19.7 21.7 15.8 16.2 20.2 18.0 20.5 14.7 12.9

Income Statement Analysis (Million EUR) Revenue 23,640 21,915 21,218 18,483 16,915 14,534 14,203 14,883 13,322 11,990 Operating Income 2,646 2,351 2,066 1,489 1,110 975 1,234 1,187 925 892 Depreciation + Amortization N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Interest Expense N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Pretax Income 2,559 2,379 2,022 1,535 1,039 835 1,113 851 869 806 Effective Tax Rate 25.0 28.1 33.0 29.6 34.0 32.5 30.5 38.4 30.0 29.5 Net Income 1,976 1,702 1,097 1,017 634 490 787 526 613 567 Net Income (Normalized) 1,588.6 1,473.9 1,258.2 902.4 675.2 574.6 727.6 701.4 530.6 501.5

Balance Sheet and Other Financial Data (Million EUR) Cash 2,654 2,719 1,811 1,703 1,463 1,752 1,689 1,984 1,423 1,453 Current Assets 10,934 9,813 8,645 8,886 7,497 7,347 6,857 6,877 6,328 5,880 Total Assets 20,680.0 15,612.0 14,019.0 15,176.0 13,343.0 12,417.0 11,599.0 11,651.0 11,237.0 10,618.0 Current Liabilities 8,754 6,834 6,291 6,765 5,364 4,378 4,732 4,374 4,338 3,908 Long Term Debt 1,595 1,609 983 982 1,463 1,584 653 1,207 991 1,342 Total Capital 11,827 8,130 7,140 8,080 7,486 7,499 6,828 6,796 6,419 6,244 Capital Expenditures 598 611 678 578 464 499 422 376 318 227 Cash from Operations 2,819 2,686 1,648 1,348 1,090 701 634 942 807 894 Current Ratio 1.25 1.44 1.37 1.31 1.40 1.68 1.45 1.57 1.46 1.50 % Long Term Debt of Capitalization 33.8 20.8 13.8 12.2 19.6 21.2 9.7 18.0 15.5 21.5 % Net Income of Revenue 8.4 7.8 5.2 5.5 3.7 3.4 5.5 3.5 4.6 4.7 % Return on Assets 9.11 9.92 8.85 6.53 5.39 5.07 6.63 6.48 5.29 5.72 % Return on Equity 28.6 27.6 21.7 17.9 12.2 10.2 14.4 10.1 12.5 13.5

Source: S&P Global Market Intelligence. Data may be preliminary or restated; before results of discontinued operations/special items. Per share data adjusted for stock dividends; EPS diluted. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. UR-Under Review.

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Sub-Industry: Apparel, Accessories and Luxury Goods Peer Group*: Apparel, Accessories and Luxury Goods

Peer Group Stock

Symbol Exchange Currency

Recent Stock Price

Stk. Mkt. Cap. (M)

30-Day Price

Chg. (%)

1-Year Price

Chg. (%) P/E

Ratio

Fair Value Calc.

Yield (%)

Return on Equity

(%) LTD to

Cap (%)

Adidas AG ADS GY XTRA EUR 206.80 40,329.0 -1.0 -9.8 10.0 N/A 2.0 28.6 33.8 Nike Inc. NKE XTRA EUR 89.37 138,973.0 7.4 1.2 2.0 N/A 1.1 42.7 28.0

Puma AG PUM XTRA EUR 55.12 8,270.0 -1.7 2.4 NM N/A N/A 17.0 26.9

*For Peer Groups with more than 10 companies or stocks, selection of issues is based on market capitalization. NA-Not Available; NM-Not Meaningful. Note: Peers are selected based on Global Industry Classification Standards and market capitalization. The peer group list includes companies with similar characteristics, but may not include all the companies within the same industry and/or that engage in the same line of business.

Industry Outlook

The Consumer Discretionary sector comprises industries which supply a range of consumer goods (excluding FMCG - fast moving consumer goods) and consumer-facing services. These industries include Automobiles & Components, Consumer Durables & Apparel, Consumer Services, and Retailing.

The Automobiles & Components industry includes many of the world's largest car makers such as BMW and Volkswagen and tire makers such as Michelin and Continental. Car manufacturing is highly sensitive to general economic growth and consumer confidence, given its relatively high operating leverage and low average margins.

We remain negative on the Automobiles & Components industry. The industry is very heavily impacted by the trade disputes given the global nature of its supply/manufacturing chain and markets. With the continuing back and forth between truce and escalation in the global trade dispute, we believe the industry share prices and financial results will remain volatile in the near future.

The Consumer Durables & Apparel industry includes luxury goods and the homebuilding industry.

Luxury goods, consisting of designers, manufacturers and retailers of high-end products and includes Burberry, Hermes and LVMH. With manufacturing often based in developed markets and emerging markets a key source of sales, currency fluctuations are an important factor in profitability.

Companies in the homebuilding industry develop and sell a variety of residential accommodation units. Key drives of this industry are availability of credit, mortgage rates, house price affordability, demand and supply. In the U.K. this industry is exposed to government policies which influence affordability and supply. We are positive on the

long-term outlook of this sector but closely monitor short term developments during a phase of political uncertainty and issues on Brexit.

We are slightly positive on the outlook of the Consumer Durables & Apparel industry currently as we think the inelasticity of demand for luxury goods is balanced by stretched valuations, the increasing threat of substitutions and continuing concerns over the impact of Brexit.

The Consumer Services industry (which includes hotels, restaurants, cruise lines and other leisure services) is very dependent on discretionary consumer spending with capacity variations and occupancy rates being important profit determinants.

We are somewhat negative on the Consumer Services industry given recent social unrest globally, unpredictable weather patterns and uncertainties arising from Brexit.

Retailing includes manufacturers and retailers of mass-market clothing as well as DIY formats. This includes departmental stores such as Next and Marks & Spencer's as well as more mass-market fast-fashion retailers such as Inditex and H&M.

We have a slightly negative view on Retailing given the economic uncertainty arising from fears of a hard Brexit and slower real wages growth dampening consumer spending, somewhat offset by improving executions of online strategies.

Overall, we are neutral on the Consumer Discretionary sector as we think the sticky nature of luxury goods is counteracted by geopolitical events like Brexit affecting consumer sentiment.

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Analyst Research Notes and other Company News

April 28, 2020 08:15 AM ET... CFRA Maintains Hold Position on Shares of Adidas (ADS GY 205.40***): We maintain our Hold call on Adidas with a higher 12-month target price of EUR230 (EUR190) which represents 2021 P/E of 24x, which is comparable to its 5-year average forward P/E of c.25x. We think Adidas should not be trading at a significant discount as the underlying business remains strong and can rebound strongly post- crisis. We lower our 2020 EPS estimate to EUR3.0 (EUR8.5) and our 2021 EPS estimate to EUR9.5 (EUR11.5). Q1 2020 revenue declined 19% to EUR4,753 million on both constant currency and EUR terms led by a 45% decline in Asia Pacific due to store closures on Covid-19. EBIT plunged 93% to EUR65 million with a 13.5%-pts decline in operating margin while EPS from continuing operations declined 96% to EUR0.13 as Adidas retained most of its marketing expenses in the quarter and other operating overheads including bad debt allowances did not fall as much as sales. Management retracted their 2020 guidance as the impact of Covid-19 remains unpredictable. / Adrian Ng, CFA

March 13, 2020 11:00 AM ET... CFRA Maintains Hold Position on Shares of Adidas (ADS GY 173.88***): We maintain our Hold call on Adidas with a lower 12-month target price of EUR190 (EUR270) which represents 2020 P/E of 22x, which is a discount to its 5-year average forward P/E of c.25x. We think Adidas should be trading at a discount now despite its strength as a major player in the sports and athleisure industry given the weak environment. We lower our 2020 EPS estimate to EUR8.5 (EUR11). Adidas grew constant exchange rate (CER) revenues by 6% in 2019, which was at the lower end of its 5% to 8% guidance range. EBIT remained stable while margin improved 0.4%-pts to 11.3%, at the lower end of guidance. For 2020, management is guiding for 6% to 8% revenue growth, slight decline in gross margin, and EBIT margin growth of 0.2%-pts to 0.5%-pts. However, these do not include the impact of Covid- 19, which we expect to be significant. The company guided that there would be an EUR1 billion impact to revenue from Greater China in Q1 2020 alone. / Adrian Ng, CFA

November 07, 2019 09:04 AM ET... CFRA Maintains Hold Position on Adidas (ADS GY 281.35***): We maintain our Hold call on Adidas with 12-month target price of EUR270 which represents 2020 P/E of 24.5x, which is similar to its 5-year average forward P/E of c.25.1x. We think Adidas deserves to trade around its historical multiples as it consistently held its position as a major player in the sports and athleisure industry. Adidas’s Q3 2019 revenue grew 6% at constant exchange rates to EUR6,410 million vs. the S&P Capital IQ consensus estimate of EUR6,313 million. EBIT remained stable at EUR897 million (vs. consensus estimate of EUR886 million) while margin declined 1.3%-pts to 14.0%, with higher freight costs, a less favorable pricing mix and certain operating expenses being moved from Q4 to Q3. Q3 2019 diluted EPS from continuing operations came in at EUR3.26, ahead of the consensus estimate of EUR3.15. We remain neutral on Adidas despite the relatively strong result given that the competitive pricing environment eating into margins. / Adrian Ng, CFA

August 09, 2019 02:04 PM ET... CFRA Maintains Hold Position on Adidas - Q2 2019 Results Beat Estimates except for Revenues (ADS GY 267.45***): We maintain our Hold call on Adidas with a higher 12-month target price of EUR270 (EUR250) which represents a 2019 P/E of 27.5x, which is similar to its 3-year average forward P/E of c.26.8x. We think Adidas deserves to trade around its historical multiples as it consistently held its position as a major player in the sports and athleisure industry. Adidas's Q2 2019 revenue grew 4% at constant exchange rates to EUR5,509 million vs. the S&P Capital IQ consensus estimate of EUR5,542 million. EBIT rose 13% to EUR1,518 million (vs. consensus estimate of EUR1,506 million) while margin expanded 0.9%-pts to 13.3%, with higher freight costs offset by the gross margin expansion. Q2 2019 diluted EPS from continuing operations came in at EUR2.33 (+13%), ahead of the consensus estimate of EUR2.30. We remain neutral on Adidas despite the relatively strong result given the continuing supply chain issue which appears to be affecting revenue growth. / Adrian Ng, CFA

May 06, 2019 07:38 PM ET... CFRA Lowers Adidas to Hold from Buy - Results Remain Strong Despite Supply Chain Disruption (ADS GY 249.80***):

We lower our call on Adidas to Hold from Buy with a higher 12-month target price of EUR250 (EUR240) which represents 2019 P/E of 25.5x, which is a similar to peers at c.24.4x. We think Adidas deserves a similar multiple to peers as it is a major player in the sports and athleisure industry. Adidas grew constant exchange rate (CER) revenues by 4% in 1Q 2019 (6% in EUR terms) thanks to strong growth in the adidas brand (CER: +5%) and the Russia/CIS (CER: +22%) and Asia Pacific (CER: +12%, driven by a 16% growth in Greater China) regions. 1Q 2019 gross margin rose 2.5%- pts leading to a 17% increase in EBIT and 1.4%-pts increase in EBIT margin. 1Q 2019 basic EPS was EUR3.17 (up 19%), ahead of S&P Capital IQ consensus estimate of EUR2.86. Adidas maintained its guidance for the full year 2019, saying that the supply chain issues will only be overcome in the second half of the year. We lower to Hold given the recent run-up in share price and the continuing supply chain issue. / Adrian Ng, CFA

March 15, 2019 07:48 AM ET... CFRA Maintains Buy Opinion on Adidas - Strong 2018 Results, but 2019 Guidance Weaker due to Supply Chain Issues (ADS GY 211.60****): We maintain our Buy call on Adidas with the same 12-month target price of EUR240 which represents a 2019 P/E of 24.5x, which is a similar to peers at c.23.4x. We think Adidas deserves a similar multiple to peers as it is a major player in the sports and athleisure industry. Adidas grew constant exchange rate (CER) revenues by 8% in 2018 (3% in EUR terms) with strong growth in Greater China (CER: +23%) and online sales (+36%). 2018 gross margin rose 1.4%-pts to 51.8% million while EBIT margin expanded 1.1%-pts to 10.8%, in line with management guidance. For 2019, management expects revenue growth between 5% and 8%, EBIT margin to increase to between 11.3% and 11.5%, and net income growth of 10%-14%. We maintain our 2019 EPS estimate at EUR9.80 and introduce a 2020 estimate of EUR11.00. The growth guidance is slower than the one in the previous year as Adidas is facing issues with a supply chain shortage. We maintain positive given that demand remains strong. / Adrian Ng, CFA

November 08, 2018 02:08 PM ET... CFRA MAINTAINS BUY OPINION ON ADIDAS - STRONG EARNINGS, GUIDANCE UPGRADED EVEN AS WESTERN EUROPE SALES SLOWER THAN EXPECTED (ADS GY 198.60****): We maintain our Buy call on Adidas with the same 12-month target price of EUR240 which represents a 2019 P/E of 24.5x, which is a similar to peers at c.24.1x. We think Adidas deserves a similar multiple to peers as it is a major player in the sports and athleisure industry. We increase our 2018 and 2019 estimates to EUR8.45 (EUR8.13) and EUR9.80 (EUR9.11) respectively given the strong results. Adidas' constant exchange rate (CER) revenues grew 8% in 3Q 2018 (3% in EUR terms). Gross margin rose 1.4%-pts to 51.8% while EBIT margin expanded 1.3%-pts to 15.3%, lifting 3Q 2018 EBIT up 13% to EUR901 million. 3Q 2018 EPS came in at EUR3.26 (up 21%), well ahead of S&P Capital IQ consensus estimate of EUR3.03. Management upgraded their guidance for EBIT margin growth to +1.0%-pt (from +0.5%-pts to 0.7%-pts)and EPS growth to 16%-20% (from 13%-17%), but downgraded revenue growth guidance to 8%-9% (from c.10%) on a slow Western Europe. Maintain Buy on strong result. / Adrian Ng, CFA

Note: Research notes reflect CFRA's published opinions and analysis on the stock at the time the note was published. The note reflects the views of the equity analyst as of the date and time indicated in the note, and may not reflect CFRA's current view on the company.

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Analysts Recommendations

Monthly Average Trend Buy Buy/Hold Hold Weak Hold Sell GOLD Ticker B BH H WH S

No. of Recommendations

% of Total

1 Mo.Prior

3 Mos.Prior

Buy 12 32 11 0 Buy/Hold 4 11 4 0 Hold 18 47 19 2 Weak hold 2 5 1 0 Sell 2 5 3 0 No Opinion 0 0 0 0 Total 38 100 38 2

Wall Street Consensus Estimates

Estimates Previous Year Current Year Next Year Actual (Normalized Diluted)

Fiscal Year Avg Est. High Est. Low Est. # of Est. Est. P/E 2021 9.54 12.78 6.80 33 21.68 2020 3.72 4.55 2.75 11 55.54 2021 vs. 2020 p 156% p 181% p 147% p 200% q -61%

Q1'21 2.14 2.53 1.93 4 96.41 Q1'20 0.72 1.25 0.41 12 287.33 Q1'21 vs. Q1'20 p 198% p 102% p 371% q -67% q -66%

Wall Street Consensus Opinion

NO_MATCH

Wall Street Consensus vs. Performance

NO_MATCH

Forecasts are not reliable indicator of future performance. Note: A company's earnings outlook plays a major part in any investment decision. S&P Global Market Intelligence organizes the earnings estimates of over 2,300 Wall Street analysts, and provides their consensus of earnings over the next two years, as well as how those earnings estimates have changed over time. Note that the information provided in relation to consensus estimates is not intended to predict actual results and should not be taken as a reliable indicator of future performance. Note: For all tables, graphs and charts in this report that do not cite any reference or source, the source is S&P Global Market Intelligence.

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Glossary

STARS Since January 1, 1987, CFRA Equity and Fund Research Services, and its predecessor S&P Capital IQ Equity Research has ranked a universe of U.S. common stocks, ADRs (American Depositary Receipts), and ADSs (American Depositary Shares) based on a given equity's potential for future performance. Similarly, we have ranked Asian and European equities since June 30, 2002. Under proprietary STARS (Stock Appreciation Ranking System), equity analysts rank equities according to their individual forecast of an equity's future total return potential versus the expected total return of a relevant benchmark (e.g., a regional index (MSCI AC Asia Pacific Index, MSCI AC Europe Index or S&P 500® Index)), based on a 12-month time horizon. STARS was designed to meet the needs of investors looking to put their investment decisions in perspective. Data used to assist in determining the STARS ranking may be the result of the analyst's own models as well as internal proprietary models resulting from dynamic data inputs.

S&P Global Market Intelligence's Quality Ranking (also known as S&P Capital IQ Earnings & Dividend Rankings) - Growth and S&P Capital IQ Earnings & Dividend Rankings stability of earnings and dividends are deemed key elements in establishing S&P Global Market Intelligence's earnings and dividend rankings for common stocks, which are designed to capsulize the nature of this record in a single symbol. It should be noted, however, that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings. The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks. The range of scores in the array of this sample has been aligned with the following ladder of rankings:

A+ Highest B Below Average A High B- Lower A Above C Lowest B+ Average D In Reorganization NC Not Ranked

EPS Estimates CFRA's earnings per share (EPS) estimates reflect analyst projections of future EPS from continuing operations, and generally exclude various items that are viewed as special, non-recurring, or extraordinary. Also, EPS estimates reflect either forecasts of equity analysts; or, the consensus (average) EPS estimate, which are independently compiled by S&P Global Market Intelligence, a data provider to CFRA. Among the items typically excluded from EPS estimates are asset sale gains; impairment, restructuring or merger-related charges; legal and insurance settlements; in process research and development expenses; gains or losses on the extinguishment of debt; the cumulative effect of accounting changes; and earnings related to operations that have been classified by the company as discontinued. The inclusion of some items, such as stock option expense and recurring types of other charges, may vary, and depend on such factors as industry practice, analyst judgment, and the extent to which some types of data is disclosed by companies.

12-Month Target Price The equity analyst's projection of the market price a given security will command 12 months hence, based on a combination of intrinsic, relative, and private market valuation metrics, including Fair Value.

CFRA Equity Research CFRA Equity Research is produced and distributed by Accounting Research & Analytics, LLC d/b/a CFRA ("CFRA US"; together with its affiliates and subsidiaries, "CFRA"). Certain research is produced and distributed by CFRA MY Sdn Bhd (Company No. 683377-A) (formerly known as Standard & Poor's Malaysia Sdn Bhd) ("CFRA Malaysia"). Certain research is distributed by CFRA UK Limited ("CFRA UK"). CFRA UK and CFRA Malaysia are wholly-owned subsidiaries of CFRA US.

Abbreviations Used in Equity Research Reports CAGR - Compound Annual Growth Rate CAPEX - Capital Expenditures CY - Calendar Year DCF - Discounted Cash Flow DDM - Dividend Discount Model EBIT - Earnings Before Interest and Taxes EBITDA - Earnings Before Interest, Taxes, Depreciation & Amortization EPS - Earnings Per Share EV - Enterprise Value FCF - Free Cash Flow FFO - Funds From Operations FY - Fiscal Year P/E - Price/Earnings P/NAV - Price to Net Asset Value PEG Ratio - P/E-to-Growth Ratio PV - Present Value R&D - Research & Development ROCE - Return on Capital Employed ROE Return on Equity ROI - Return on Investment ROIC - Return on Invested Capital ROA - Return on Assets SG&A - Selling, General & Administrative Expenses SOTP - Sum-of-The-Parts WACC - Weighted Average Cost of Capital

Dividends on American Depository Receipts (ADRs) and American Depository Shares (ADSs) are net of taxes (paid in the country of origin).

Qualitative Risk Assessment Reflects an equity analyst's view of a given company's operational risk, or the risk of a firm's ability to continue as an ongoing concern. The Qualitative Risk Assessment is a relative ranking to the U.S. STARS universe, and should be reflective of risk factors related to a company's operations, as opposed to risk and volatility measures associated with share prices. For an ETF this reflects on a capitalization-weighted basis, the average qualitative risk assessment assigned to holdings of the fund.

STARS Ranking system and definition:

««««« 5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a notable margin over the coming 12 months, with shares rising in price on an absolute basis.

««««« 4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis.

««««« 3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis.

««««« 2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain.

««««« 1-STAR (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a notable margin over the coming 12 months, with shares falling in price on an absolute basis.

Relevant benchmarks: In North America, the relevant benchmark is the S&P 500 Index, in Europe and in Asia, the relevant benchmarks are the MSCI AC Europe Index and the MSCI AC Asia Pacific Index, respectively.

Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

Disclosures

S&P GLOBAL™ is used under license. The owner of this trademark is S&P Global Inc. or its affiliate, which are not affiliated with CFRA Research or the author of this content. Stocks are ranked in accordance with the following ranking methodologies:

STARS Stock Reports: Qualitative STARS recommendations are determined and assigned by equity analysts. For reports containing STARS recommendations refer to the Glossary section of the report for detailed methodology and the definition of STARS rankings.

Quantitative Stock Reports: Quantitative recommendations are determined by ranking a universe of common stocks based on 5 measures or model categories: Valuation, Quality, Growth, Street Sentiment, and Price Momentum. In the U.S., a sixth sub-category for Financial Health will also be displayed. Percentile scores are used to compare each company to all other companies in the same universe for each model category. The five (six) model category scores are then weighted and rolled up into a single percentile ranking for that company. For reports containing quantitative recommendations refer to the Glossary section of the report for detailed methodology and the definition of Quantitative rankings.

STARS Stock Reports and Quantitative Stock Reports: The methodologies used in STARS Stock Reports and Quantitative Stock Reports (collectively, the "Research Reports") reflect different criteria, assumptions and analytical methods and may have differing recommendations. The methodologies and data used to generate the different types of Research Reports are believed by the author and distributor reasonable and appropriate. Generally, CFRA does not generate reports with different ranking methodologies for the same issuer. However, in the event that different methodologies or data are used on the analysis of an issuer, the methodologies may lead to different views or recommendations on the issuer, which may at times result in contradicting assessments of an issuer. CFRA reserves the right to alter, replace or vary models, methodologies or assumptions from time to time and without notice to clients.

STARS Stock Reports: Global STARS Distribution as of June 28, 2019

Ranking North America Europe Asia Global Buy 34.4% 29.0% 41.1% 33.5% Hold 56.1% 54.8% 46.4% 54.6% Sell 10.5% 16.2% 12.5% 11.9%

Total 100.0% 100.0% 100.0% 100.0%

Analyst Certification: STARS Stock Reports are prepared by the equity research analysts of CFRA and its affiliates and subsidiaries. Quantitative Stock Reports are prepared by CFRA. All of the views expressed in STARS Stock Reports accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers; all of the views expressed in the Quantitative Stock Reports accurately reflect the output of CFRA's algorithms and programs. Analysts generally update STARS Stock Reports at least four times each year. Quantitative Stock Reports are generally updated weekly. No part of analyst, CFRA, CFRA affiliate, or CFRA subsidiary compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in any Stock Report.

About CFRA Equity Research's Distributors: This Research Report is published and originally distributed by Accounting Research & Analytics, LLC d/b/a CFRA ("CFRA US"), with the following exceptions: In the UK/EU/EEA, it is published and originally distributed by CFRA UK Limited ("CFRA UK"), which is regulated by the Financial Conduct Authority (No. 775151), and in Malaysia by CFRA MY Sdn Bhd (Company No. 683377-A) (formerly known as Standard & Poor's Malaysia Sdn Bhd) ("CFRA Malaysia") , which is regulated by Securities Commission Malaysia, (No. CMSL/A0181/2007) under license from CFRA US. These parties and their subsidiaries maintain no responsibility for reports redistributed by third parties such as brokers or financial advisors.

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Stock Report | April 28, 2020 | XTRA Symbol: ADS GY

adidas AG

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