Sportswear major Adidas today said global sales of its Reebok brand declined by 26 per cent in the April-June quarter on a ‘currency-neutral basis’, mainly due to the impact from Reebok India Company, which filed a police complaint for an alleged Rs 870-crore fraud.

The group also said it expects a hit of 70-million euro in its global operating profit in 2012 on account of “irregularities” in Reebok India.

“Reebok sales declined 26 per cent on a currency-neutral basis, largely as a result of negative impacts from Reebok India Company and the non-recurrence of prior-year licence sales,” the German Group said in a statement in its Web site.

The Reebok brand’s revenue in the quarter was at 336 million euro as against 427 million euro in the year-ago period.

Talking about its other major brands, the group said sales of Adidas increased by 11 per cent during the second quarter of this year, while the TaylorMade-adidas Golf segment grew 25 per cent on a currency-neutral basis.

Adidas, however, said: “Currency translation effects had a positive impact on sales in euro terms.”

On the fraudulent practices in India, the Group said it expects a “projected negative impact of up to 70 million euro on group operating profit related to the reorganisation and changes to commercial activities at Reebok India Company” during the current year.

However, the operating margin for the Adidas Group is expected to increase to about 8 per cent in 2012 as against 7.6 per cent in 2011 on account of lower other operating expenses as a percentage of sales, it added.

Giving an outlook, Adidas said wholesale revenues are now projected to increase at a “mid single digit rate” compared to the previously estimated “mid to high single digit rate“.

“The lower growth expectation reflects the negative impact from the commercial irregularities discovered at Reebok India Company,” it added.

The retail segment’s sales are also projected to grow at a “low-teens rate” in 2012, Adidas said.

The net income attributable to shareholders is projected to increase at 15-17 per cent to up to 785 million euro as against earlier growth projections of 12-17 per cent.

In the April-June quarter in 2012, the Adidas Group’s net income attributable to shareholders grew by 18 per cent to 165 million euro from 140 million euro in the year-ago period. Its revenue went up by 15 per cent to 3.517 billion euro from 3.064 billion euro in the same period last year.

In May this year, Reebok India had filed an FIR, alleging that its former Managing Director Subhinder Singh Prem and Chief Operating Officer Vishnu Bhagat were involved in a Rs 870-crore fraud by indulging in “criminal conspiracy” and “fraudulent” practices over a period of time.

Currently, the Serious Fraud Investigation Office and the Income Tax Department are probing the alleged financial irregularities in Reebok India Company.

(This article was published on August 2, 2012)
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