Business News : Reebok to Shrink and Restructure in India

Adidas Group announced a three-pronged strategy in India that would include the possible closure of nearly a third of its 900 Reebok stores there, a voluntary retirement scheme (VRS) for the approximately 200 Reebok employees and integration of the two brands’ suppliers.

Adidas also indicated that said the financial irregularities discovered for financial year 2011 might have started much earlier and the company would not hesitate to open the accounts of previous years for investigation, if required, according to Business Standard.

Speaking for the first time after the group announced it had taken a hit of Rs 870 crore as a result of alleged financial irregularities committed in Reebok India in 2011, Claus Heckerott, managing director of Adidas, group-market India, said, “We are changing our model from a minimum guarantee scheme (rent plus model) offered to franchisees, which is not sustainable for a cash-and-carry model. One-third of the franchisees are ready to go with this model. The others are not sure or will not go. However, we’ll be happy with 300 outlets, provided they are profitable. We had started slowing down the opening of new stores from 2010.”

The Business Standard noted that the discovery of alleged financial irregularities led the company to sack former Reebok India managing director Subhinder Singh Prem and former chief operating officer Vishnu Bhagat.

(SportsOneSource Media)