Reebok 2006 Annual Report Download - page 114

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Group Management Report ›› Subsequent Events and Outlook
Modest Sales Growth Expected for Reebok Segment
Reported sales are expected to grow at low-single-digit rates,
positively impacted by the consolidation of one extra month in
2007 (low-single-digit percentage point impact), compared to
the prior year, and the inclusion of GNC-related retail opera-
tions which were reported as part of TaylorMade-adidas Golf
in 2006. Our focus on improving Reebok’s position in perfor-
mance sports will be driven by several product launches in
both footwear and apparel. Running will be a key focus with
the launch of our “Run Easy” marketing campaign and new
products such as the Trinity KFS II, PUMP Paris Trainer and
HATANA (see Campaigns and Products, p. 117). In apparel, we
plan several performance launches in American sports such
as the NFL Zero Degrees collection and the Rbk EDGE Uni-
form System™, which has been designed in collaboration with
NHL players. Our efforts to broaden our Lifestyle offering will
also become more visible with the launch of Scarlett “Hearts”
Rbk as well as the 25th anniversary of our famous Freestyle
workout shoe. We also expect a positive sales development at
Rockport, supported by the first product lines to incorporate
adidas TORSION® technology that will be launched during the
second half of 2007. For 2007, we expect the Reebok brand to
continue to show solid gains in emerging markets, particu-
larly in Asia. We also anticipate a positive sales development
in Europe and Latin America, which will be largely offset by
weakness in North America.
Group Gross Margin to Improve Strongly
In 2007, the adidas Group gross margin is expected to increase
strongly and be in a range of between 45 and 47%, driven by
improvements in all three brand segments. In particular,
we will realize a significant positive impact on gross margin
at brand Reebok, due to the non-recurrence of accounting
effects related to purchase price allocation (see Group Busi-
ness Performance, p. 72). In 2006, this non-cash accounting
charge negatively impacted Reebok’s gross profit by € 76 mil-
lion. On a like-for-like basis, we also expect an improvement
in gross margin at Reebok due to lower clearance activities
and an improving product mix. In 2007, we do not expect sig-
nificant effects on our gross margin from higher input prices
or currency movements. Increases in raw material and labor
costs will be offset by efficiency gains in production and
higher volumes. Due to our hedging policy, currency is likely
to have a modestly negative impact on gross margin in the
first six months, offset by more favorable hedging rates over
the balance of the year. Finally, Group gross margin will con-
tinue to be negatively affected by our cooperation agreement
with Amer Sports Corporation.
Mid-Single-Digit Sales Growth for TaylorMade-adidas Golf
As a result of our strong product pipeline, we are confident
that in 2007, currency-neutral TaylorMade-adidas Golf sales
will grow at mid-single-digit rates on a like-for-like basis.
However, due to the divestiture of the GNC wholesale busi-
ness at the end of November and the transfer of the remain-
ing GNC-related retail operations to Reebok effective Janu-
ary 1, 2007, reported sales for TaylorMade-adidas Golf may
decline in 2007 compared to the prior year. Growth will mainly
be driven by new products such as the r7® SuperQuad driv-
ers, plus the new Burner® family of metalwoods. At adidas
Golf, we expect solid growth rates to continue with strong
new concepts in both footwear and apparel. In footwear, we
are launching a new performance shoe, POWERBAND, which
incorporates three sophisticated adidas Golf technologies
and the Tour 360 II, a new version of the enormously success-
ful Tour 360. The Clima® concept will be further extended to
shorts and pants in adidas Golf apparel as well as several
launches in the women’s segment. New product extensions
and marketing initiatives are also planned in the golf ball cat-
egory particularly at Maxfli, where we will launch the Maxfli
Tour Fire and Maxfli Fire golf balls.
110 ANNUAL REPORT 2006 › adidas Group ›