UPDATE 3-Adidas sees strong orders despite weak Reebok

(New throughout with share price, analyst and CEO comment)

By Rajiv Sekhri

HERZOGENAURACH, Germany, March 5 (Reuters) - Adidas AG's (ADSG.DE) fourth-quarter net income rose sharply but missed expectations, and weak U.S. prospects for Reebok overshadowed strong orders for brand adidas, pushing the shares lower.

Adidas, the world's second-biggest sports goods maker after Nike (NKE.N), assured investors on Wednesday that sales at Reebok, about a fifth of group revenue, would increase in 2008.

Chief Executive Herbert Hainer said lower sales to U.S. athletic retailers was behind a decline in Reebok sales in 2007, adding, "We expect this trend to persist for the next six to nine months."

The adidas-brand order backlog -- a key indicator of future sales for retailers -- was up 17 percent on a currency-adjusted basis at the end of 2007, thanks in part to the Euro 2008 soccer championship and Beijing Olympics this year.

But Reebok's order backlog was down 8 percent, Adidas said. It was down 20 percent in North America.

"Order backlog of brand adidas was excellent," said Ingbert Faust, an analyst at Equinet. "Reebok order backlog is even worse than expected. Overall, we stick to our positive view on Adidas with Reebok remaining the key question mark as regards the mid-term development."

Adidas bought Reebok in 2006 to complement its strength in classic sportswear such as soccer boots and to compete against Nike. It has since been trying to integrate the company.

RISING NET

Herzogenaurach-based Adidas, known for its three stripes logo, said net income attributable to shareholders was 21 million euros ($32 million), up 63 percent, for the quarter ended December. Analysts had on average forecast net income of 25 million euros in a Reuters poll.

Sales rose 7.6 percent to 2.42 billion euros, above the average analyst forecast of 2.36 billion euros.

The company reiterated that it expects net income to rise at least 15 percent in 2008 and sales to grow by a high single-digit percentage. Net income for 2007 rose 14 percent to 551 million euros.

Adidas shares were down 0.7 percent at 41.15 euros by 1027 GMT, having climbed to 42.94 euros earlier. The shares had opened lower on worries about Reebok's order backlog.

At about 13 times 2008 earnings, Adidas shares trade at a discount to Nike. Some analysts say investors place too much emphasis on Reebok, adding that Adidas' high-margin and growing business in Europe, Asia and Latin America is more important.