Gross Margin Improves to 46.2%
The adidas gross margin increased by 0.9 percentage points to 46.2% in 2006 from 45.3% in 2005. This represents the segment’s highest gross margin since the IPO. The improvement was largely driven by increased own-retail activities and a favorable product mix. As a result of these developments, adidas gross profit grew 15% to € 3.059 billion in 2006 from € 2.654 billion in 2005.
Royalty and Commission Income Grows Strongly
In 2006, royalty and commission income at brand adidas grew by 24% to € 74 million from € 59 million in 2005. This increase was driven by both an increased number of units sold and higher average royalty rates as well as higher intra-Group royalties received from the TaylorMade-adidas Golf segment.
adidas Gross Margin by Quarter in %
adidas Operating Profit by Quarter € in millions
Operating Expenses Increase
adidas operating expenses as a percentage of sales increased 0.9 percentage points to 35.4% in 2006 (2005: 34.5%). This increase primarily reflects higher marketing expenditures associated with the 2006 FIFA World Cup™ as well as the continued expansion of adidas own-retail activities. In absolute terms, operating expenses grew 16% to € 2.345 billion in 2006 from € 2.020 billion in 2005.
Operating Profit Reaches € 788 million
In 2006, the adidas operating margin improved by 0.1 percentage points to 11.9% from 11.8% in 2005. This was a result of higher sales and the improved gross margin, which more than offset higher operating expenses as a percentage of sales. Own-retail activities contributed overproportionately to operating profit due to a higher gross margin which more than compensated higher operating expenses as a percentage of sales compared to adidas’ wholesale operations. Operating profit for the adidas segment increased 14% to € 788 million from € 693 million in 2005.
Related Links:
Group Business Performance
Reebok Business Performance
TaylorMade-adidas Golf Business Performance
