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Adidas Stumbles as Reebok Struggles

CNBC.com with contributions from Reuters

Shares in Adidas edged lower in Frankfurt on Wednesday after the company posted full-year earnings slightly below analysts' expectations and the order backlog at its Reebok business also disappointed investors.

Adidas, the world's second-biggest sport goods maker, posted a 52% jump in 2006 sales on Wednesday to a record 10.08 billion euros ($13.23 billion) after enjoying a boom in replica shirt sales from the World Cup on its home turf.

But earnings before interest and tax (EBIT) of 881 million euros ($1.16 billion), were shy of analysts forecasts' or 897 million euros.

“The surprise is that order books are coming continuously under pressure not only for Reebok but also for Adidas,” Hans-Peter Wodniok, analyst at Fairesearch told “Worldwide Exchange.".

Adidas Results
Adidas Results

Reebok's prices are lower than Adidas', which led to the group's 2006 gross margin declining 3.6% to 44.6%.

“The problems for Reebok result from higher competition, Nike is trying to fight back,” Wodniok said “With the acquisition of Reebok, Adidas has gone into Nike’s territory.”

The U.S. and the U.K. are "the two biggest markets for Reebok. Unfortunately these two markets are tough at the moment,” Adidas CEO Herbert Hainer told "Power Lunch Europe."

Adidas CEO on Results
Adidas CEO on Results

Hainer expects net income in the first quarter to be below last year's level as the world's second-biggest sport goods maker spends more on advertising and has no major sporting event like the World Cup.

But the 2008 Olympics should boost growth again.

“The Olympics 2008 in Beijing should have a positive impact for the entire industry and for Adidas as well,” Wodniok said. "And also 2008 we have the European soccer championship again. This event should help Adidas to a certain degree in Europe.”