Sunday, 6 May 2012

Adidas to slash Reebok store base in India


The Adidas group is suffering from a Rs 1,350 crore rupee shoe-bite from Reebok India. CNBC-TV18's Sajeet Manghat and Animesh Das report that the sporting goods giant will shut down 33% of its Reebok stores in India.
Adidas Group is in clean-up mode here in India. This, after it fired the top management team at Reebok India in March following the unearthing of commercial irregularities that hit the company to the tune of 125 million euros. This clean-up involves shutting down one-third of the 1000-odd Reebok franchises in India, and re-organising its commercial contracts with its Indian retail partners. Compensating for this restructuring will cost the company an additional 70 million euros.
This alone planned action could lead to additional one time charges in the remaining quarters of 2012 at an estimated amount of (E)70 m. Rest assured our goal is to begin 2013 with a clean sheet in this market.
Herbert Hainer, CEO, Adidas Group says “This alone planned action could lead to additional one time charges in the remaining quarters of 2012 at an estimated amount of 70 million euros. Rest assured out goal is to begin 2013 with a clean sheet in this market.”
Adidas adds that this does not mean its focus on the Reebok brand in India will cool down.
The situation in India although unfortunate will now allow us to accelerate the specific and performing part of our business which was already part of the group's profit enhancing initiative. And the new leadership team which was announced in the end of March will now accelerate to restructure the business activities in India, including significant changes to commercial business practices.
Herbert Hainer, CEO, Adidas Group says “The situation in India although unfortunate will now allow us to accelerate the specific and performing part of our buisiness which was already part of the group's profit enhancing initiative. And the new leadership team which was announced in the end of March will now accelerate to restructure the business activities in India, including significant changes to commercial business practices.”
While Adidas remains non-commital on the exact irregularities, it did say that it is putting new commercial practices in place in India. It is also in talks with its retail partners for a second innings.

Hainer says "We obviously will talk all our plans through first with the retail partners in India but the objective is quite clear we want to have a sustainable, healthy, profitable business for both our retail partners and ourselves and our plan is to first discuss with our retail partners and then give you more details than we have given you already."
Adidas is also rigorously pursuing a legal course of action against the malpractice. It hopes the ongoing investigation on the commercial irregularities will be complete by August this year. The company is also quick to point out that the Reebok India operations are not even among the top 3 in Asia, and so will not have any significant material impact on its quarterly performance.
http://www.moneycontrol.com/news/cnbc-tv18-comments/adidas-to-slash-reebok-store-baseindia_699876.html

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