Adidas: three stripes and it's out The thinnest of margins can make all the difference between glory and heartbreak for top athletes. Investors in Adidas, one of the big suppliers of their kit, may empathise. The German sportswear manufacturer fell marginally short of expectations when reporting 2011 earnings on Wednesday - and was rewarded with a 3 per cent slip in its share price. There is little wrong with a company which pushes annual sales up 13 per cent - led, geographically, by China but with solid double-digit advances in the core western Europe and US markets - while holding operating margins at 7.6 per cent. But higher raw material prices and wage inflation caused gross margins to ease to 47.5 per cent in the full year - and slip from 46.5 to 45.6 per cent (year-on-year) in the seasonally weak final quarter. Moreover, the group is relatively conservative about 2012 sales, forecasting only single-digit growth in the 5-9 per cent range, in spite of the sports-heavy year (Olympics, European Football Championship) - although Adidas does tend to be cautious. And input and wage cost pressures are once again creeping upwards, although lower expenses elsewhere should still allow operating margins this year to approach 8 per cent. In short, investors may wonder whether Adidas is turning from a sprinter into a middle-distance runner. Its shares have risen almost 60 per cent in the last two years, and now trade on a 16 times forward multiple - the top of their range historically. That remains cheaper than rival Nike, which has precisely matched Adidas" share price performance over the same period, but a premium to Puma. Adidas has a heady €17bn sales target for 2015, but its goal of an 11 per cent operating margin, by the same date, may be the bigger challenge. Until investors are clearer on how that will be achieved, the shares could be due for a breather.