Adidas running towards profitability

German sporting goods manufacturer Adidas AG (FRA:ADS) posted a whopping 52% jump in revenue for FY 2006 to $13.23 billion (over 10 billion euros), the first time Adidas has broken the 10 billion euro threshhold. The increase was fueled mainly as a result of tremendous sports clothing sales for the 2006 World Cup played on its home country turf and by the acquisition of sport shoemaker Reebok. 4Q earnings topped $17 million versus $4 million in losses in 4Q 2005. 4Q sales were up 48% to just under $3 billion. FY 2006 earnings were $649.76 million.

Adidas has ambitious plans for Reebok, the official sponsor for the National Football League. Reebok has lost market share in recent quarters, posting weak sales and small profit margins.The order backlog at Adidas fell 4% in 2006, and a much larger 18% for Reebok, meaning that production has consistently outstripped demand. Adidas bought Reebok in order to compete more effectively against Nike and Puma in the American market.

Adidas executives continue to be optimistic, forecasting 2007 sales to increase modestly, gross margins to increase 45-47%, and net income growing at 15%.