Fraud compels Adidas to slash Reebok India’s sales target

Adidas has slashed the 2015 sales target for its

struggling Reebok brand to 2 billion euros (US$2.5 billion/Rs 13,340 crores) from 3 billion euros (US$3.8 billion/Rs 20,276 crores) after losing a major American football contract and alleged Rs 850 crores financial irregularities discovered at Reebok India. The German sportswear major had bought Reebok in August 2005 for $3.8 billion (Rs 20,276 crores). While sales at Reebok declined 26 per cent in the second quarter and annual revenue is expected to fall from 2011’s 1.96 billion euros (US$ 2.5 billion/Rs 13,340 crores). Its performance contrasts sharply with the rest of the Adidas group, which expects overall sales to rise nearly 10 per cent in 2012.

In a statement, Adidas Chief Executive Herbert Hainer has said that Reebok needs to come up with new products and will focus on fitness categories such as keep-fit trend Crossfit, running, gym, yoga and dance. The company had an overall target to increase group sales to 17 billion euros (US$ 21 billion/Rs 1,12,056 crores) by 2015, with faster than expected growth at its Adidas brand and golf business offsetting the weakness at Reebok. Sales for the Adidas brand are now expected to reach 12.8 billion euros (US$ 16.5 billion/ Rs 88,044 crores) in 2015, up 5 per cent from the previous target of 12.2 billion euros (US$15.7 billion/Rs 83,775 crores).

Meanwhile, former MD of Reebok India Subhender Singh Prem and ex-COO Vishnu Bhagat along with five other executives were recently arrested for allegedly causing losses to the tune of Rs 870 crores to the company. The arrests were made by the Special Investigation Team (SIT) of Gurgaon Police.