Net profit fell to €245 million, a statement said, sending the group's share price plunging in early Frankfurt trading.
In the fourth quarter of the year, a traditionally weak period, net profit fell by 64 percent to €19 million, the company added, well below an average analyst forecast of €25 million compiled by Dow Jones Newswires.
"Without question, 2009 was the most difficult year since I became CEO of the group," chief executive Herbert Hainer was quoted as saying, with the results demonstrating once again tough conditions faced by global retailers.
Adidas said sales this year were expected to gain between one and six percent however, owing to the 2010 World Cup in South Africa and increasing demand in emerging markets.
Group sales, including the Adidas, Reebok, Rockport and TaylorMade-Adidas Golf brands, lost four percent last year to €10.381 billion, and fell by five percent in the fourth quarter to €2.458 billion.
Analysts had expected a slightly smaller decline in fourth quarter sales to €2.51 billion.
The results were also hit by higher marketing expenses in the run-up to the World Cup.
All the news was not bad however, as the group's struggling Reebok brand managed to increase North American sales by four percent in the last three months of the year.
Although Adidas expects only a slow turnaround in consumer demand this year, it said that the 2010 World Cup, "high exposure to fast-growing emerging markets" and improvements at Reebok should offset that enough to push sales up.
Management will propose a dividend of €0.35 per share, down from €0.50 in 2008, the statement said.
Shares in Adidas plummeted by 5.32 percent to €36 in early trading, while the DAX index of leading German stocks was 0.06 percent lower overall.