German sports goods company adidas made efforts yesterday (11 April) to quell worries it will struggle to take the recently acquired Reebok brand into its fold.

The group, which gave a presentation in London, upped its expected yearly cost synergies to EUR175m (US$212m) from EUR125m as initially estimated.

adidas predicts double-digit earnings growth every year for the next three years, earmarking a meaty 20% minimum jump in profit during 2007.

Net profit will come close to EUR500m this year, compared to EUR383m last year.

The company, which paid $3.8bn for Reebok, also says it eyes an extra EUR500m in annual sales from 2009 onward.
 
Critics have suggested adidas could be faltering at its first post-acquisition hurdle as Reebok's orders plummeted at the end of 2006.

CEO Herbert Hainer, however, is resolutely optimistic. "We are showing terrific progress in the continued integration of Reebok."

He admitted: "Reebok has its challenges, and these need to be fixed, and fixed quickly. However, the growth and cost synergies we saw when we acquired Reebok are even greater than we originally anticipated, and we are moving fast to grasp these.''

adidas is confident it can pour its existing expertise into reviving the areas of the Reebok brand that are lacking. Hainer says the group plans to pull in Reebok's traditionally outsourced design and development, using "adidas' existing know-how".

As adidas has suggested before, Reebok's challenge will be to strengthen its credentials in sports performance while also keeping its prestige within the sports lifestyle segment. President and CEO Paul Harrington said it wanted long-term growth in apparel, running, women's, and the US sports leagues, basketball and football.

The company also eyes distributor and joint venture buyouts in the style of adidas' purchase of its Japan subsidiary, which pushed the brand into the number one spot in that market - the second largest sports goods market in the world.

Hainer said if negotiations with owners prove to be successful, the company is "confident it can seamlessly take over Reebok businesses".

Reebok can learn a lot from adidas' experience of branded sports apparel, Hainer said, currently offering five times more than Reebok does. Reebok, adidas hopes, will follow adidas' lead in conquering the European and Asian markets, in the way it hopes to leap on to the back of Reebok's US market strength.

Hainer also detailed growth prospects for the rest of the adidas group, predicting
a strong boost from this year's football World Cup in Germany, which traditionally offers a chance for sports firms to boost their earnings from lucrative sponsorships and world-cup related merchandise.

It admitted "scale is not enough" and said: "consumers want to see us as ahead of trends." Technical innovation and designs will run alongside forays into the fashion arena - a focus already illustrated by the partnership with high-profile designer Stella McCartney.
adidas plans to incorporate more style elements under the Stella flagship, upping its standing in the sportslifestyle sector that smaller rival Puma has done well pursuing.

President and CEO of the adidas brand, Erich Stamminger, said his business would concentrate expansion efforts on basketball, football, running and sub-brand adidas Originals. Stamminger also confirmed adidas would post record football-related sales in 2006, with revenue increasing year-over-year by at least 20% to surpass € 1bn.

TaylorMade-adidas Golf president and CEO Mark King said the Taylormade division planned to become the leading metalwood supplier and also to boost sales to more than EUR1bn.

Hainer commented: "Our mission at the adidas Group is to be the global leader in the sports industry, with brands built on a passion for sports and a sporting lifestyle. We are organised around our biggest brands - adidas, Reebok and TaylorMade-adidas Golf, all of which are performance leaders in the global sporting goods industry. Today, we increased both revenue and earnings targets, in line with our consistent record of achieving strong financial results for shareholders."

By Rebecca Danton.