Adidas 2002 Annual Report Download - page 87

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STRONG PUTTER AND GOLF APPAREL DEVELOPMENT ///
Putter sales at TaylorMade-adidas Golf were strong in
2002, following the very successful introduction of the new
Rossa putter line. As a result, putter sales grew 60% from
€ 11 million to € 18 million. Golf apparel, marketed under
the adidas Golf and TaylorMade brands, also grew 10%
from € 39 million to € 43 million as a result of continued
expansion of distribution throughout the golf market.
Declines in other categories were driven by lower sales in
North America, as a result of the highly promotional golf
market and flat participation rates.
HIGHEST SALES GROWTH IN NORTH AMERICA REFLECTS
STRONG UNION WITH MAXFLI /// On a regional basis, the
largest revenue growth in 2002 came from North America,
where currency-neutral sales grew 39%. In euros, this
increase was 32% growing from € 289 million in 2001 to
€ 382 million in 2002. These gains were largely driven by the
first-time inclusion of sales from Maxfli and Slazenger Golf,
which are positioned most strongly in North America. As a
result of this strong addition, the Group decided to purchase
the Maxfli brand at the end of 2002. Organic sales from
TaylorMade-adidas Golf grew 3% (+9% currency-neutral),
largely as a result of the strong uptake of the R500 Series
drivers following their introduction in the second half of the
year.
DOUBLE-DIGIT SALES GROWTH CONTINUES IN EUROPE AND
ASIA /// In addition to its strong showing in North America,
TaylorMade-adidas Golf grew solidly in Europe and Asia. In
Europe, sales grew 34% (+35% currency-neutral) from
€ 83 million in 2001 to € 111 million in 2002. This reflects
the positive response to the R500 Series drivers and the
expanding putters category, which made major advances this
year with the introduction of the Rossa putter. In Asia, sales
grew 24% (+32% currency-neutral) from € 172 million to
€ 214 million reflecting particularly strong performance in
South Korea.
GROSS PROFIT AT RECORD LEVEL /// TaylorMade-adidas Golf
gross profit increased 23% to surpass € 300 million for the
first time ever. 2002 gross profit was € 345 million versus
€ 281 million in the prior year. The gross margin was 48.8%,
down 2.7 percentage points versus the record level of 51.5%
in 2001. This decline reflects lower margins in North America,
which resulted from the very promotional golf market. In
addition, the new golf ball business introduced with Maxfli
and Slazenger Golf carries a lower margin than the overall
TaylorMade-adidas Golf business.
OPERATING PROFIT GROWS 19% /// Operating profit for
TaylorMade-adidas Golf increased 19% from € 63 million in
2001 to € 74 million in 2002. This occurred despite additional
expenses associated with the launch of the R500 Series
drivers and marketing activities to support the Maxfli and
Slazenger Golf brands.
SALES AND PROFITABILITY GROWTH EXPECTED AGAIN
IN 2003 /// In late 2002, adidas-Salomon purchased the
Maxfli golf brand but chose not to exercise an option for the
Slazenger Golf brand. Elimination of the Slazenger business
from 2003 TaylorMade-adidas Golf sales will reduce revenues
by approximately € 25 million and have a short-term dampen-
ing effect on growth prospects for the family of golf brands.
In spite of the elimination of Slazenger, we are confident that
sales for the other brands in the golf division will continue
to develop positively. Although backlogs are measured very
differently in golf, making them a less reliable indicator than
in other sports categories, the Group remains confident that
sales will develop positively. adidas Golf and the TaylorMade
irons category, in particular, are expected to grow strongly.
Operating profits will also rise as a result of improved gross
margins coupled with lower operating expenses as a percent-
age of net sales.
adidas GOLF /// TOUR
PERFORMANCE STRIPE
GOLF SHOE