Reebok 2007 Annual Report Download - page 107

103
ANNUAL REPORT 2007 --- adidas Group
03
CURRENCY-NEUTRAL REVENUES GROW IN NEARLY ALL
REGIONS TaylorMade-adidas Golf currency-neutral sales grew
in all regions except North America in 2007. Sales in Europe
increased 5 % on a currency-neutral basis, driven by strong
growth in the UK. In North America, sales declined 9 % on a
currency-neutral basis. While revenues in Canada increased,
declines in the USA resulting from the divestiture of the GNC
wholesale business could not be offset by underlying sales
increases. TaylorMade-adidas Golf sales in Asia increased 20 %
on a currency-neutral basis, driven by strong double-digit
growth in Japan and South Korea. In Latin America, currency-
neutral sales grew 32 %. Revenue increases were driven by
strong growth in Argentina and Mexico.
Currency translation effects negatively impacted segment rev-
enues in euro terms. In euro terms, sales in Europe increased
3 % to € 95 million in 2007 from € 92 million in 2006. Revenues
in North America decreased 16 % to € 422 million in 2007 from
€ 505 million in 2006. In Asia, sales grew 11 % to € 282 million
in 2007 (2006: € 254 million), and in Latin America revenues
increased 20 % to € 6 million in 2007 (2006: € 5 million). On
a like-for-like basis, excluding the impact from the GNC dives-
titure, sales increased by double-digit rates in Asia and Latin
America. In Europe, like-for-like revenues grew at a high-single-
digit rate. Like-for-like sales in North America increased at
a low-single-digit rate.
GROSS MARGIN INCREASES TO 44.7 % TaylorMade-adidas Golf
gross margin increased 0.8 percentage points to 44.7 % in 2007
(2006: 43.9 %). This development was in line with Management’s
initial expectation of a gross margin improvement. The increase
was due to higher margins in the metalwoods and irons cate-
gories. The GNC divestiture also had a positive impact on the
segment’s gross margin development. Gross profi t, however,
decreased by 4 % to € 360 million in 2007 versus € 376 million
in 2006.
ADIDAS GOLF SALES GROWTH DRIVES ROYALTY AND
COMMIS SION EXPENSE INCREASE Royalty and commission
expenses at TaylorMade-adidas Golf increased 10 % to € 18 mil-
lion in 2007 (2006: € 16 million). This development was driven
by signifi cantly higher adidas Golf sales, which generated
higher intra-Group royalties paid to the adidas segment.
OPERATING EXPENSES AS A PERCENTAGE OF SALES INCREASE
Operating expenses as a percentage of sales at TaylorMade-
adidas Golf increased 0.9 percentage points to 34.4 % in 2007
from 33.5 % in 2006. A main reason for this increase was the
divestiture of the GNC wholesale business, which had lower
marketing expenditures as a percentage of sales. Operating
overhead expenses as a percentage of sales were almost stable
compared to the prior year. In absolute terms, operating
expenses decreased 3 % to € 277 million in 2007 from € 287 mil-
lion in 2006.
OPERATING PROFIT DECLINES The TaylorMade-adidas Golf
operating margin decreased 0.4 percentage points to 8.1 %
in 2007 from 8.5 % in 2006. This development was in line with
Management’s initial expectation. The higher gross margin was
unable to offset higher operating expenses as a percentage
of sales. Operating profi t for TaylorMade-adidas Golf declined
10 % to € 65 million in 2007 versus € 73 million in 2006.
TAYLORMADE-ADIDAS GOLF GROSS MARGIN BY QUARTER 1)
in
%
TAYLORMADE-ADIDAS GOLF OPERATING PROFIT BY QUARTER 1)
€ in million
s
Q1 2006
Q
1 200
7
Q2 2006
Q2
2007
Q3 2006
Q
3 200
7
Q4 2006
Q
4 200
7
1)
Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.
Q1 2006
Q
1
2007
Q2 2006
Q2
2007
Q3 2006
Q
3 200
7
Q4 2006
Q
4
2007
1
) Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.
44.
3
15
43.7
15
4
4.7
27
45.0
33
43.
9
(
1
)
42.9
2
46.
0
24
43.7
22
TAYLORMADE-ADIDAS GOLF 2007 NET SALES BY REGION
Latin America
1
%
Europe 12 %
Asia
3
5
%
5
2
%
North America