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TaylorMade adidas Golf Business Performance In sales


									TaylorMade-adidas Golf Business                     TaylorMade-adidas Golf at a glance                                                          Maxfli divestiture impacts reported results
Performance                                         € in millions
                                                                                                                                                Compared to the prior year, financial results of the TaylorMade-
                                                                                                                                                adidas Golf segment in 2008 do not include the results of the
In 2008, sales growth in the TaylorMade-adidas                                                         2008            2007            Change
                                                                                                                                                Maxfli business. This reflects the divestiture of the Maxfli brand
Golf segment exceeded Management’s initial                                                                                                      on February 11, 2008. Maxfli was divested to improve the focus
                                                    Net sales                                         812             804               1%      of the segment’s golf ball business under the TaylorMade
expectations. Profitability developed in line with                                                                                               brand. The operating profit of the TaylorMade-adidas Golf
                                                    Gross profit                                       359             360             (0%)
expectations. TaylorMade-adidas Golf revenues       Gross margin                                    44.3%           44.7%          (0.5pp)      segment was positively impacted by a one-time book gain of
increased 7% on a currency-neutral basis. In        Operating profit                                     78              65            20%       € 5 million.
                                                    Operating margin                                 9.6%            8.1%            1.5pp
euro terms, segment sales increased 1% to                                                                                                       Acquisition of Ashworth has no significant impact
€ 812 million in 2008 from € 804 million in                                                                                                     on sales in 2008
2007. The segment’s gross margin decreased          TaylorMade-adidas Golf net sales by quarter                                                 In November 2008, the TaylorMade-adidas Golf segment
                                                                                                                                                acquired Ashworth, Inc., a leader in cotton casual golf apparel.
0.5 percentage points to 44.3% (2007: 44.7%).       € in millions                                                                               The Ashworth consolidation did not have a significant impact
This was mainly a result of lower margins in                                                                                                    on the segment’s sales. This transaction positively impacted
                                                    Q1 2007                                                       180
metalwoods. Gross profit remained almost                                                                                                         the operating profit of the TaylorMade-adidas Golf segment
                                                    Q1 2008                                                          191
                                                                                                                                                due to a one-time book gain of € 21 million. However, this
stable at € 359 million (2007: € 360 million).                                                                                                  was partially offset by restructuring costs and other one-time
                                                    Q2 2007                                                                        239
The segment’s operating margin increased            Q2 2008                                                                      226            expenses of € 7 million.
1.5 percentage points to 9.6% (2007: 8.1%). This
                                                    Q3 2007                                                          190                        Currency-neutral sales increase 7%
was due to lower net other operating expenses       Q3 2008                                                             197                     In 2008, currency-neutral sales at TaylorMade-adidas Golf
and income as a percentage of sales which                                                                                                       increased 7%. This development exceeded Management’s
                                                    Q4 2007                                                            195
more than offset the decrease in gross margin.                                                                                                  initial expectations of mid-single-digit growth. Double-digit
                                                    Q4 2008                                                             198                     growth in adidas Golf and categories such as golf balls and
As a result, operating profit increased 20% to                                                                                                   putters more than offset a decline in metalwoods. Currency
€ 78 million from € 65 million in 2007.                                                                                                         translation effects negatively impacted segment revenues
                                                                                                                                                in euro terms. Segment sales in euro terms increased 1% to
                                                    2008 TaylorMade-adidas Golf net sales by product                                            € 812 million in 2008 from € 804 million in 2007.

                                                    Metalwoods      38%                                                Footwear           9%

                                                                                                                       Apparel           20%
                                                    hardware 1)     33%

                                                    1) Includes irons, putters, golf balls, golf bags, gloves and other accessories.

                                                                                                                                                                              adidas Group   Annual Report 2008   105
Currency-neutral revenues grow at double-digit                              2008 TaylorMade-adidas Golf net sales by region                                      Royalty and commission expenses increase 13%
rates in almost all regions                                                                                                                                      Royalty and commission expenses at TaylorMade-adidas Golf
TaylorMade-adidas Golf currency-neutral sales grew in all                                                                                                        increased 13% to € 20 million in 2008 (2007: € 18 million). This
regions in 2008. Sales in Europe increased 17% on a currency-                                                                         Latin America         1%
                                                                                                                                                                 development was driven by higher adidas Golf sales, which
neutral basis, driven by double-digit growth in all major coun-             North America 50%                                                                    generated higher intra-Group royalties paid to the adidas
tries, in particular in the UK. In North America, sales increased                                                                                                segment.
3% on a currency-neutral basis, due to growth in both the USA                                                                         Europe              12%
and Canada. TaylorMade-adidas Golf sales in Asia increased                                                                                                       Net other operating expenses and income decrease
10% on a currency-neutral basis, driven by double-digit growth                                                                                                   Net other operating expenses and income as a percentage of
in Japan, China and South Korea. In Latin America, currency-                                                                                                     sales at TaylorMade-adidas Golf decreased 2.3 percentage
neutral sales grew 38%, driven by double-digit growth in all                                                                                                     points to 32.1% in 2008 from 34.4% in 2007. This improvement
major countries.                                                                                                                      Asia                37%
                                                                                                                                                                 was mainly due to one-time book gains of € 21 million from
                                                                                                                                                                 the acquisition of Ashworth and € 5 million from the divestiture
Currency translation effects negatively impacted segment rev-                                                                                                    of the Maxfli business. In absolute terms, net other operating
enues in euro terms. In euro terms, sales in Europe remained                                                                                                     expenses and income decreased 6% to € 261 million in 2008
stable at € 95 million (2007: € 95 million). Revenues in North                                                                                                   from € 277 million in 2007.
America decreased 4% to € 405 million in 2008 from € 422 mil-               TaylorMade-adidas Golf gross margin by quarter
lion in 2007. In Asia, sales grew 8% to € 305 million in 2008                                                                                                    Operating margin expands by 1.5 percentage points
                                                                            in %
(2007: € 282 million), and in Latin America revenues increased                                                                                                   The TaylorMade-adidas Golf operating margin increased
28% to € 7 million in 2008 (2007: € 6 million).                                                                                                                  1.5 percentage points to 9.6% in 2008 from 8.1% in 2007. This
                                                                            Q1 2007                                                               43.9
                                                                                                                                                                 development was in line with Management’s initial expectation
                                                                            Q1 2008                                                                  46.6
Gross margin decreases to 44.3%                                                                                                                                  of an operating margin improvement. This is mainly a result
TaylorMade-adidas Golf gross margin decreased 0.5 percent-                  Q2 2007                                                               44.7           of lower net other operating expenses and income as a per-
age points to 44.3% in 2008 (2007: 44.7%). This development                 Q2 2008                                                                  46.4        centage of sales which more than compensated for the gross
was below Management’s initial expectation of a gross margin                                                                                                     margin decline. Consequently, operating profit for TaylorMade-
improvement. The decrease was mainly due to lower metal-                    Q3 2007                                                               44.3           adidas Golf increased 20% to € 78 million in 2008 versus
wood margins as a result of the promotional environment                     Q3 2008                                                           42.9               € 65 million in 2007.
in this category, in particular in the second half of the year.
                                                                            Q4 2007                                                                 46.0
However, this was partly offset by a strong increase in golf ball
                                                                            Q4 2008                                                       41.0
margins. Gross profit remained almost stable at € 359 million
(2007: € 360 million).

                                                                            TaylorMade-adidas Golf operating profit by quarter
                                                                            € in millions

                                                                            Q1 2007     (1)
                                                                            Q1 2008                                                      23

                                                                            Q2 2007                                                                  27
                                                                            Q2 2008                                             19

                                                                            Q3 2007                                     15
                                                                            Q3 2008                             11

                                                                            Q4 2007                                                          24
                                                                            Q4 2008                                                          24

106   Group Management Report – Our Financial Year   Business Performance by Segment — TaylorMade-adidas Golf Business Performance — Risk and Opportunity Report

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