Source: AFP
Shares in Adidas fell on Monday as the German sportswear giant said it was investigating alleged bribery in China after senior officials were accused of embezzling huge sums of money.
It is another blow to the group, which has been betting on healthy business in its key China market this year as it tries to recover from the turbulent end of its lucrative relationship with rapper Kanye West.
Allegations of bribery emerged at the weekend when the Financial Times reported that an anonymous letter, allegedly written by “adidas China employees”, named several Chinese staff members.
Adidas said in a statement that in June it “received an anonymous letter indicating possible compliance violations in China.”
The group takes such allegations “very seriously and is clearly committed to complying with legal and internal regulations and ethical standards in all markets where we operate,” it said.
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“Adidas is actively investigating this matter with outside legal counsel.”
Shares in the outfitter fell more than four percent on Frankfurt’s DAX index, before gaining some ground to end the day 2.6 percent lower.
According to the Financial Times, the defendants include one of the company executives involved in Adidas’ China marketing budget, which it said is 250 million euros ($268 million) a year.
Another Adidas manager in China is said to have received “millions in cash from suppliers and physical items such as real estate,” according to the newspaper.
The letter, which was published this month on Chinese social media platform Xiaohongshu, was no longer visible on the site over the weekend, but an alleged copy, the authenticity of which AFP could not verify, was posted on multiple accounts.
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Company executives cited by the newspaper said the letter did not provide evidence for the claims but appeared well briefed on confidential internal matters.
Poor Kanye
China has traditionally been a hugely important market for Adidas, but its operations in the world’s second-largest economy have been hit hard during long-running coronavirus restrictions.
However, the group’s sales in greater China have rebounded strongly, rising eight percent last year, and it forecast double-digit growth in 2024.
But the corruption allegations “could jeopardize the goal of finally regaining a foothold in (China) after the massive decline of the past four years,” warned Juergen Molnar, an analyst at RoboMarkets.
The rebound in China was a much-needed boost after Adidas in 2022 ended its lucrative relationship with West following an outcry over his anti-Semitic comments.
Adidas had developed the popular Yeezy trainer line with West and the end of the partnership contributed to the group reporting its first annual loss in more than 30 years in 2023.
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However, in recent months the company had returned to a better financial footing.
Source: AFP