Adidas to Cut Reebok Store Base in India World’s second biggest sporting goods firm to slash India stores by one-third OUR BUREAU & AGENCIES NEW DELHI | FRANKFURT German sportswear maker Adidas has said it will shut about onethird of Reebok brand stores in India as part of a restructuring after discovering ‘commercial irregularities’ at the Indian unit. Adidas Chief Executive Herbert Hainer on Thursday said the problems in India could lead to further charges of up to € 70 million (approx. 491 crore) for the world's second biggest sporting goods firm, on top of € 125-million (. 870 crore) impact on global profits. On a conference call, Hainer told reporters that the problems were limited to India, and announced results for first quarter of 2012 that beat market expectations. There are more than 900 Reebok stores in India, but many of them are not making money, a company insider said. The company will down shutters on some 300 such shops. The company also plans to do away with the ‘minimum guarantee’ model for all its stores. Under this model, the firm paid franchisees a guaranteed sum irrespective of their financial performance. Since last year, the company has been withdrawing this model, replacing it with a cash-and-carry model where it sells products to franchisees without taking back any unsold inventory. Some 500 stores still enjoy ‘minimum guarantee’ benefit that Adidas plans to stop now. A company insider said the decision to shut several Reebok shops were taken last year because rentals and other costs are very high. Reebok had gone on an expansion spree in India, growing from some 100 stores in 2003 to more than 900stores in 2012. But its profitability was hit. The Indian trouble has clouded Adidas’ strong start to a bumper sports year with the Euro soccer tournament and Olympic Games in London. Adidas reported a 17% increase in its first quarter sales at € 3.8 billion (approx . 26,650 crore), while its operating profit increased 30% to € 409 million (. 2,868 crore). The company had raised its outlook for 2012 on Monday. The Reebok brand’s sales in the first three months, however, were down 7%. CHINA, CHAMPIONS LEAGUE Shares in Adidas have hit record highs after the company raised its outlook for 2012 on Monday and announced that first quarter earnings surpassed expectationswith sales of € 3.8 billion and operating profit of 409 million. The company, famous for its three-stripe brand, has been outperforming larger rival Nike and neighbour Puma in the key Chinese market. “We definitely do believe that our momentum in China is great, that it will continue and we foresee double digit sales growth for the years to come,” he told reporters. Hainer said he was convinced that sales from soccer would beat his annual target of 1.5 billion euros. Adidas is kit supplier to both Bayern Munich and Chelsea — who meet in the Champions' League final in Munich on May 19. Soccer will remain centre stage in June when Poland and Ukraine host the Euro 2012. Hainer refused to be drawn into a row over Ukraine's human rights record which has led some European politicians to say they will boycott matches. Sales in Poland were up 35% on a currency-neutral basis, and by 19% in Britain. STO RY S O FA R ADIDAS ON Monday announced ‘financial irregularities’ in Indian unitGERMAN FIRM sacked the entire mgmt including MD Subhinder Singh Prem PREM ON Wed said he has sued his former employee for 15 cr in damages PREM HAS been working with Reebok for over 15 years HE WAS named MD after Indian operations of Adidas and Reebok were merged last year MIRANDA KERR Australian model, Brand Ambassador for Reebok
"Adidas and Reebok's Business"