Adidas 2000 Annual Report Download - page 34

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30
Gross Margin Maintained at 43.3% Despite Currency
Pressure
The gross margin for the Group was maintained at an industry-
leading 43.3%, despite the negative effects of a strong US
dollar. This was above the target range of 41 to 43%, which
Management had communicated as an ongoing target for
the
Group. As a result, gross profit increased 7% to c2.5 billion,
nearly matching sales growth, despite increasing product
purchase prices due to currency effects.
These currency effects were compensated for by an increasing
percentage of higher-margin own-retail sales and an improved
product mix at brand adidas. Salomon contributed a significantly
higher margin as a result of new high-technology products
and improved production efficiencies. TaylorMade-adidas Golf
increased its already very high margin with the successful market-
ing of new product introductions. Higher sales at adidas Japan,
which achieved an above-average margin, also contributed.
Operating Profit Impacted by Growth and
Efficiency Program
Operating profit declined by 9% to c437 million in 2000.
This mirrored the adidas brand operating profit development,
which also declined 9%. Salomon and TaylorMade-adidas Golf
delivered strong improvements, up 82% and 46% respectively.
Detailed information on sales and operational performance of
the individual brands is presented in the segmental reporting.
Operating expenses, which comprise selling, general and admin-
istrative expenses (SG&A) and depreciation and amortization
(excluding goodwill), increased by a total of 12% to c2.1 billion
in 2000. As a percentage of net sales, this represents an increase
of 0.9 percentage points to 35.8%. Drivers of this increase
included spending associated with the Growth and Efficiency
Program as well as increased marketing spend for major
sporting events in 2000.
The Growth and Efficiency Program, which streamlined our
organization, was completed within the targeted spending
of approximately c38 million. Advertising and promotional
expenses represented 13.7% of net sales (compared to 13.5%
in 1999). Marketing and promotion costs associated with the
Summer Olympics in Sydney and the EURO 2000TM soccer
championships were the biggest expenditures. Currency also
played a negative role in the development as expenses in US
dollar-denominated contracts increased due to the continued
weakening of the euro throughout the year.
Amortization of Goodwill Unchanged
Amortization of the goodwill relating to the acquisition of the
Salomon group remained unchanged at c29 million, thus
representing the largest part of goodwill amortization, which
totaled c40 million.
Gross Profit by Brand
(euros in millions) 2000 % of Total
adidas 1,907 75
Salomon 276 11
TaylorMade-adidas Golf 221 9
Mavic 20 1
Total* 2,528 100
* Difference in total due to HQ/Consolidation
Gross Profit
(euros in millions)
2000
1999
1998
1997
1996
0 500 1,000 1,500 2,000 2,500 3,000
Gross Margin
(in %)
2000
1999
1998
1997
1996
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