Reebok 2006 Annual Report Download - page 92
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› Group Business PerformanceGroup Management Report ›
088 ANNUAL REPORT 2006 › adidas Group ›
adidas Business
Performance
In 2006 the adidas segment performed above Manage-
ment’s initial expectations. Growth was broad-based, with
particular strength in the Sport Performance football
category, which benefited from adidas’ role as Official
Sponsor, Supplier and Licensee of the 2006 FIFA World
Cup™. Currency-neutral sales in the adidas segment,
which initially were expected to grow by high-single-digit
rates, increased 14%. This is the highest growth rate for
the brand in eight years. All regions delivered double-digit
revenue growth except Europe, where sales increased at
a high-single-digit rate. In euro terms, sales grew 13% to
€ 6.626 billion in 2006 from € 5.861 billion in 2005. Gross
margin increased by 0.9 percentage points to 46.2% in 2006
(2005: 45.3%), mainly driven by increased own-retail activi-
ties and a favorable product mix. Gross profit grew by 15%
to € 3.059 billion in 2006 from € 2.654 billion in 2005. As a
result of the strong top-line and gross margin develop-
ment, which more than offset higher operating expenses as
a percentage of sales, operating margin improved 0.1 per-
centage points to 11.9% (2005: 11.8%). Operating profit
grew 14% to € 788 million in 2006 versus € 693 million in
the prior year.
Currency-Neutral Segment Sales Up 14%
Sales for the adidas segment in 2006 grew 14% on a currency-
neutral basis, with double-digit increases coming from all
regions except Europe, where sales grew at a high-single-
digit rate. This is the highest growth rate for the brand in eight
years. In euro terms, sales grew 13% to € 6.626 billion in 2006
from € 5.861 billion in 2005.
Sport Performance Up 13% on a Currency-Neutral Basis
adidas Sport Performance is the largest division within the
segment, comprising 78% of brand adidas revenues (2005:
78%). Sales in this division grew 13% on a currency-neutral
basis in 2006. This positive development was driven by strong
growth in footwear, apparel and hardware. Sales increased in
nearly all major product categories. Football in particular, but
also tennis and training, contributed to this strong improve-
ment. In the football category, sales were positively impacted
by adidas’ role as Official Sponsor, Supplier and Licensee of
the 2006 FIFA World Cup™ and the brand’s sponsorship of six
participating teams. In euro terms, Sport Performance sales
improved 12% in 2006 to € 5.100 billion from € 4.545 billion in
the prior year.
Sport Heritage Grows 13% on a Currency-Neutral Basis
The Sport Heritage division contributed 22% to brand adidas
sales (2005: 22%). Currency-neutral sales in the division grew
13% in 2006, representing the third consecutive year in which
the division grew by double-digit rates. This increase was
driven by double-digit growth rates in footwear, apparel and
accessories. In euro terms, Sport Heritage sales increased
12% to € 1.444 billion in 2006 from € 1.290 billion in 2005.
Sport Style Grows 37% on a Currency-Neutral Basis
As a result of the division’s well-received product offering,
the Sport Style division delivered strong sales growth in 2006.
Revenues increased 37% both on a currency-neutral basis
and in euro terms to € 26 million in 2006 (2005: € 19 million),
again representing less than 1% of brand adidas sales.
2006 2005 Change
Net sales 6,626 5,861 13%
Gross profit 3,059 2,654 15%
Gross margin 46.2% 45.3% 0.9pp
Operating profit 788 693 14%
Operating margin 11.9% 11.8% 0.1pp
adidas at a Glance € in millions
adidas Net Sales by Division
Sport Style <1% Sport Performance 78%
Sport Heritage 22%
adidas Net Sales by Quarter € in millions
Q1 2005
Q1 2006
Q2 2005
Q2 2006
Q3 2005
Q3 2006
Q4 2005
Q4 2006
1,512
1,776
1,304
1,532
1,729
1,941
1,316
1,378