Adidas 2001 Annual Report Download - page 57

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52 MD&A
TaylorMade-adidas Golf Will Again Lead
Group Sales Growth
In 2002, double-digit sales increases at TaylorMade-
adidas Golf will continue. The largest factor in this
growth will be increased golf ball and apparel sales,
as the result of adidas-Salomon’s new distribution
and marketing rights for the Maxfli and Slazenger
golf brands. With increased marketing and sales
support to target the premium golfer, adidas-Salomon
anticipates solid growth for TaylorMade-adidas Golf
in all the major golf markets. Other products to
watch include the 300 Series and 200 Steel metal-
woods as well as the Rossa putters and the new
performance wedge line.
Stable Gross Margins Despite External Pressure
The adidas-Salomon Group anticipates keeping gross
margins in a range of 41 to 43% during 2002. However,
there are two factors which will continue to adversely
affect margins. The continued weakness of the euro
will lead to increased product purchasing costs, putting
pressure on margins of products in the Group’s largest
market, Europe. Additionally, heavy promotional
pressure in the United States is likely to impact the
prices of adidas-Salomon products, thereby putting
continued pressure on margins. On the positive side,
increasing adidas own-retail activities and a better
product mix at all brands as a result of the Group’s new
technology and design initiatives should support high-
level margins. As a result, adidas-Salomon is now
targeting near stable gross margins in 2002.
Increasing Expenses to Support World Cup and
adidas Own-Retail Activities
Following strong improvements in 2001, operating
expenses are expected to increase in 2002. Marketing
and other expenses associated with the 2002 FIFA
World Cup™ in Japan and Korea will be one driver
of this increase. Additionally, continued growth of
high-margin adidas own-retail activities will also con-
tribute to higher operating expenses. Lastly, to ensure
the long-term profitability of the now fully-owned
adidas Italy and the newly purchased Arc’Teryx,
higher marketing expenses and infrastructure
improvements will be necessary in 2002. Increased