By  on November 4, 2005

PARIS — Adidas Group raised its annual earnings and sales forecast for 2005, citing a surge in demand in the U.S. and strong orders for new products in the run-up to next year's soccer World Cup in Germany.

The company expects that net income for Adidas, which includes the TaylorMade-Adidas golf business, will grow at least 20 percent in 2005. For the third quarter, net income (attributable to shareholders) from continuing and discontinued operations, rose 20.3 percent to 215 million euros, or $262 million at average exchange, beating analysts' estimates.

"Adidas is moving with great vigor toward the World Cup," said Herbert Hainer, chief executive officer of Adidas, during a conference call with analysts Thursday. "We are ready to take on the next big challenge, the integration of the Reebok group."

Adidas, the second-largest activewear firm in the world after Nike, is in the process of purchasing Reebok International Ltd. to double its share of the U.S. market and narrow the gap with its biggest competitor. Despite Reebok's slumping sales in the third quarter and decreasing orders from retailers such as Foot Locker, Hainer expressed confidence that the Reebok acquisition would boost earnings.

"Clearly, there are challenges that Reebok will solve, but these were not unknown when we made our offer in August and we remain fully confident in the synergies and financial targets," Hainer said. The deal should be concluded in the first half of 2006, following European antitrust approval.

In the three-month period ended Sept. 30, net income from continuing operations increased 28.1 percent over the prior year to 209 million euros, or $255 million, on a sales gain of 9.4 percent to 1.92 billion euros, or $2.35 billion.

The company said third-quarter operating profits jumped 12.3 percent to 315 million euros, or $384.3 million.

By region, European sales were flat due to the general economic malaise. The region "continues to be the biggest challenge," Hainer said. Still, he expects demand to gain momentum into next year especially as World Cup products enter the market. Team jerseys from France, Germany, Japan and Argentina, for example, are expected to hit stores this month. Apart from World Cup products, Hainer said demand for running shoes and apparel is on the rebound in Europe.North American sales jumped 15.8 percent to 446 million euros, or $544.2 million. "Our key region, North America, is stronger than ever, so we have raised our group sales and earnings expectations for the year," said Hainer. Meanwhile, sales in Asia jumped 21.6 percent while sales in Latin America soared 46.2 percent.

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