Reebok 2007 Annual Report Download - page 88

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084
ANNUAL REPORT 2007 --- adidas Group GROUP MANAGEMENT REPORT – OUR FINANCIAL YEAR -- Group Business Performance - Income Statement
HIGHER EXPENSES AT REEBOK DRIVE OPERATING EXPENSE
INCREASE Operating expenses include marketing working
budget and operating overhead costs as well as depreciation
and amortization. Operating expenses as a percentage of sales
increased by 2.5 percentage points to 39.2 % in 2007 from
36.7 % in 2006. This increase primarily refl ects one-time costs
related to the integration of Reebok into the adidas Group as
well as higher expenses in the Reebok segment for advertising,
product development and initiatives to grow the brand in
emerging markets. In absolute terms, operating expenses for
the adidas Group increased by 9 % to € 4.035 billion in 2007
from € 3.704 billion in the prior year.
MARKETING WORKING BUDGET INCREASES AS A PERCENT-
AGE OF SALES Almost half of our Group’s marketing working
budget is variable to increase the fl exibility of our Group. The
variable portion primarily includes expenses for advertising,
retail presentation and public relations, whereas the fi xed por-
tion consists mainly of expenses for promotion partnerships.
Marketing working budget as a percentage of sales increased
0.5 percent age points to 13.4 % in 2007 (2006: 12.9 %). adidas
marketing working budget as a percentage of sales remained
stable. Reebok’s marketing working budget as a percentage of
sales increased to support the revitalization of the brand.
However, Reebok’s marketing working budget continues to be
below the Group average. Marketing expenditure as a percent-
age of sales at TaylorMade- adidas Golf grew compared to the
prior year as a result of the divestiture of the GNC wholesale
business, which had lower marketing expenditures as a per-
centage of sales.
OPERATING EXPENSES
€
in millions
OPERATING EXPENSES
i
n
%
of net sales
MARKETING WORKING BUDGET
in
%
of net sale
s
2003
2004 1)
2005 1)
2006 2)
200
7
1
) Figures refl ect continuing operations as a result of the divestiture of the Salomo
n
business se
g
ment.
2)
Includin
g
Reebok business se
g
ment from February 1, 2006 onwards.
Including Greg Norman apparel business from February 1, 2006 to November 30, 2006
.
2003
2004 1)
2005 1)
2006 2)
2
00
7
1)
Fi
g
ures refl ect continuin
g
operations as a result of the divestiture of the Salomo
n
bus
i
ness segment.
2
) Including Reebok business segment from February 1, 2006 onwards.
Includin
g
Gre
g
Norman apparel business from February 1, 2006 to November
3
0, 2006
.
2003
2004 1)
2005 1)
2006 2)
2007
1)
Fi
g
ures refl ect continuin
g
operations as a result of the divestiture of the Salomon
b
us
i
ness segment
.
2) Including Reebok business segment from February 1, 2006 onwards.
I
ncluding Greg Norman apparel business from February 1, 2006 to November
3
0, 2006.
2,236
38.2
14.2
2,537
38.2
14.2
3,704
36.7
12.9
4
,
035
3
9.
2
13
.4
2,324
37.1
12.9
200
7 20061)
Tota
l
4
,0
35
3,704
1
) Includin
g
Reebok business se
g
ment from February 1, 2006 onwards.
I
ncludin
g
Gre
g
Norman apparel business from February 1, 2006 to November
3
0, 2006.
M
arketing working budget 1
,
378
Marketing overhead 322
S
ales force 1,03
7
Logistics 529
R
esearch and development
8
4
Central fi nance and administration 685 619
1
,3
0
1
291
904
491
98
OPERATING EXPENSES BY FUNCTION
€
in millions