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TaylorMade-adidas Golf Business Performance

In 2006, the TaylorMade-adidas Golf segment performed well above Management’s initial expectations. Sales for the segment in 2006 grew 22% on a currency-neutral basis, above Management’s initial expectations of a mid-single-digit increase. Growth was driven by strong sales increases in North America and Asia and the inclusion of the Greg Norman apparel business. In euro terms, this represents an improvement of 21% to € 856 million in 2006 from € 709 million in 2005. TaylorMade-adidas Golf gross margin declined 0.1 percentage points to 43.9% in 2006 from 44.0% in 2005. This development was due to the inclusion of the lower-margin Greg Norman apparel business, which was largely offset by improvements in other product categories. As a result of the strong sales development, gross profit grew 21% to € 376 million in 2006 from € 312 million in 2005. Operating margin increased 1.4 percentage points to 8.5% in 2006 from 7.1% in 2005 due to strong operating expense leverage which more than offset the gross margin decline. As a result, operating profit increased 44% to € 73 million from € 50 million in 2005.

 

TaylorMade-adidas Golf at a Glance¹⁾ € in millions 

	2006	2005	Change
Net sales	856	709	21%
Gross Profit	376	312	21%
Gross Margin	43.9%	44.0%	(0.1pp)
Operating Profit	73	50	44%
Operating Margin	8.5%	7.1%	1.4pp
1) Including Greg Norman apparel business from February 1, 2006 to November 30, 2006. Excluding Greg Norman wholesale business from December 1, 2006.

   

TaylorMade-adidas Golf Net Sales by Quarter¹⁾ € in millions 

 

TaylorMade-adidas Golf Net Sales by Product¹⁾

Divestiture of Greg Norman Wholesale Business
As part of the Reebok acquisition, the Greg Norman Collection (GNC) apparel business was transferred from the Reebok to the TaylorMade-adidas Golf segment effective February 1, 2006. On October 24, 2006, the adidas Group announced the divestiture of the GNC wholesale business to MacGregor Golf Company which was completed on November 21, 2006. As a result, the GNC wholesale business was consolidated within the TaylorMade-adidas Golf segment until the end of November. To increase transparency of the underlying business development, segment sales are also provided excluding the GNC business. 

Currency-Neutral Segment Sales Up 22%
Currency-neutral sales at TaylorMade-adidas Golf increased 22% in 2006. This strong performance was driven by solid revenue growth in nearly all major categories, in particular irons and adidas Golf footwear and apparel. In addition, the GNC apparel business contributed sales of € 63 million. In euro terms, revenues grew 21% to € 856 million in 2006 from € 709 million in 2005. Sales for the TaylorMade-adidas Golf segment excluding the GNC apparel business increased 13% on a currency-neutral basis and 12% in euro terms to € 793 million in 2006 (2005: € 709 million). 

Currency-Neutral Sales in Europe Decrease 9%
On a regional basis, currency-neutral sales in Europe decreased 9%, mainly as a result of declines in the UK. In euro terms, European sales decreased 10% to € 92 million (2005: € 102 million). Currency-neutral sales for the segment excluding the GNC apparel business decreased 13%. In euro terms, sales declined by 13% to € 89 million from € 102 million in 2005.