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We'll cover the financials first. Sales were up 8% for the quarter compared with a year ago, and up 6% in constant dollars. Gross margin rose 150 basis points, allowing the company to increase SG&A spending by 10%; Reebok rolled out its largest marketing and advertising campaign in the last 10 years. Despite that extra expenditure, operating margins still increased by 70 basis points, indicating that the dollars were spent Foolishly.
On a constant-dollar basis, Reebok brand sales increased 7%, with an impressive 24% leap by the Reebok Performance group. Rockport brand sales fell 4%, while the Greg Norman unit increased sales by 12.5%. Not a bad quarter at all.
I especially liked seeing gross margins and operating margins increasing. Fatter margins give the company more flexibility in allocating its dollars. It still has to be diligent, but more money to generate sales via advertising or new products is always a good thing.
Speaking of new products, let's turn to the future: Reebok's Pump 2.0. When you're competing against the likes of Nike
If the company wants to reap the full benefit from its new products, it needs to manage working capital a bit better. Days sales outstanding increased as inventory turnover decreased. Unfortunately, those numbers are headed in the wrong directions, lengthening the cash conversion cycle. I think the company still needs time to integrate its Hockey Company acquisition; all in all, it appears that Reebok is ready to pump up the volume.
We've laced up further Foolishness:
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