Reebok 2006 Annual Report Download - page 99
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095
North America Sales Up 32% on a Currency-Neutral Basis
Sales in North America were up 32% on a currency-neutral
basis due to double-digit growth in the USA and Canada. This
marks the highest growth in the region in four years. In euro
terms, sales in North America increased 32% to € 505 mil-
lion in 2006 from € 383 million in the prior year. Excluding the
GNC apparel business, sales increased 17% on a currency-
neutral basis. In euro terms, this represents an increase of
17% to € 446 million from € 383 million in the prior year.
Asian Sales Increase 18% on a Currency-Neutral Basis
In Asia, currency-neutral sales increased 18%, driven by
strong growth in Korea and Japan. Asian revenues in euro
terms increased 15% to € 254 million in 2006 versus € 221 mil-
lion in the prior year. Sales for the TaylorMade-adidas Golf
segment excluding the GNC apparel business increased 18%
on a currency-neutral basis. This development represents an
increase of 15% in euro terms to € 253 million in 2006 from
€ 221 million in the prior year.
Currency-Neutral Sales in Latin America Up 47%
In Latin America, currency-neutral sales of TaylorMade-
adidas Golf increased 47%, albeit from a small base, driven
by vigorous growth in Argentina. Sales increased 45% in euro
terms to € 5 million (2005: € 3 million). Currency-neutral
sales for the TaylorMade-adidas Golf segment excluding the
GNC apparel business increased 38% on a currency-neutral
basis. In euro terms, sales grew 35% to € 4 million from
€ 3 million in 2005.
Gross Margin Declines Slightly
TaylorMade-adidas Golf gross margin decreased 0.1 per-
centage points to 43.9% in 2006 from 44.0% in the prior year
due to the inclusion of the lower-margin GNC apparel busi-
ness. This effect was largely offset by improvements in the
golf balls, putters and adidas Golf footwear business. Driven
by strong sales improvement, gross profit increased 21% to
€ 376 million in 2006 from € 312 million in 2005. Excluding
the GNC apparel business, gross margin increased 0.2 per-
centage points to 44.2% (2005: 44.0%). Gross profit increased
13% to € 351 million (2005: € 312 million).
Royalty and Commission Income Decreases
Royalty and commission income at TaylorMade-adidas Golf
declined 14% to negative € 16 million in 2006 (2005: nega-
tive € 15 million). This development was driven by higher
intra-Group royalties paid to the adidas segment as a result
of increased sales at adidas Golf, which are recorded in the
TaylorMade-adidas Golf segment. In the adidas segment,
these intra-Group royalties are correspondingly shown as
part of royalty and commission income. The increase in intra-
Group royalties paid to the adidas segment was partly offset
by an increase in income, which was primarily related to bags
and accessories.
Operating Expenses as a Percentage of Sales Decline
Operating expenses at TaylorMade-adidas Golf increased
16% to € 287 million in 2006 from € 247 million in the prior
year. As a percentage of sales, however, operating expenses
declined strongly in 2006, decreasing 1.3 percentage points
to 33.5% (2005: 34.8%). This reflects lower marketing expen-
ditures as a percentage of sales due to the outstanding sales
growth during the year.
Operating Profit Grows 44%
The TaylorMade-adidas Golf operating margin increased
1.4 percentage points to 8.5% in 2006 from 7.1% in 2005.
This development was a result of the strong sales growth
and significantly improved operating expense leverage,
which more than offset the lower gross margin. Operating
profit for TaylorMade-adidas Golf increased 44% to € 73 mil-
lion in 2006 from € 50 million in 2005. The operating margin
of TaylorMade-adidas Golf excluding the GNC apparel busi-
ness increased 1.3 percentage points to 8.4% in 2006 (2005:
7.1%), while operating profit grew 32% to € 67 million (2005:
€ 50 million).
TaylorMade-adidas Golf Net Sales by Region1)
Latin America <1% North America 59%
1) Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.
Excluding Greg Norman wholesale business from December 1, 2006.
Europe 11%
Asia 30%
TaylorMade-adidas Golf Operating Profit by Quarter1)
€ in millions
Q1 2005
Q1 2006
Q2 2005
Q2 2006
Q3 2005
Q3 2006
Q4 2005
Q4 2006
(1)
2)
30)
33)
9)
15)
11)
22)
1) Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.
Excluding Greg Norman wholesale business from December 1, 2006.
TaylorMade-adidas Golf Gross Margin by Quarter1) in %
Q1 2005
Q1 2006
Q2 2005
Q2 2006
Q3 2005
Q3 2006
Q4 2005
Q4 2006
42.7
42.9
49.5
45.0
43.9
43.7
39.0
43.7
1) Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.
Excluding Greg Norman wholesale business from December 1, 2006.
» TaylorMade-adidas Golf Business Performance
Development by Segment ›