Adidas Opens Fraud Probe in China After Whistleblower Letter

The German sportswear firm is working with exterior authorized counsel after receiving the letter on June 7, it mentioned in an emailed assertion.

It’s the most recent blow for Adidas, which has needed to take care of a number of crises in the previous few years, together with shopper boycotts in China and a major hit to gross sales after severing ties with the rapper Ye. Chief govt officer Bjorn Gulden, who joined final 12 months and visited China in September, is within the midst of working to revive Adidas’s fortunes.

The nameless letter briefly appeared on the Chinese language social media platform Xiaohongshu earlier this month, the Monetary Occasions reported over the weekend. The letter, which claims to have been written by “workers from Adidas China,” named a number of Chinese language workers, together with a senior supervisor concerned with Adidas’s advertising price range within the nation.

The letter, primarily based on screenshots that circulated on social media and information web sites in China, claimed that Adidas workers acquired kickbacks from exterior service suppliers, with one other senior supervisor having probably acquired “tens of millions of money” from suppliers and bodily objects equivalent to actual property.

Adidas mentioned it couldn’t present additional info. The corporate takes the allegations very severely, it mentioned. The shares fell 1.4 % in early Frankfurt buying and selling. They’ve gained about 21 % to this point this 12 months.

China was a development engine for Adidas earlier than the pandemic, however demand dried up as buyers there started boycotting Western manufacturers.

The boycotts occurred in 2021 after a variety of overseas manufacturers, together with Adidas and rival Nike Inc., denounced the usage of cotton from Xinjiang, the province the place China is accused of human-rights violations in opposition to the Uighur minority. The boycotts pared gross sales and allowed home rivals like Anta Sports activities Merchandise Ltd. to achieve market share.

Since final 12 months, Adidas has returned to development within the nation, albeit from a smaller base, after giving its Chinese language workers extra autonomy to create merchandise for his or her house market and because the advertising restrictions eased.

Adidas reported elevated profitability within the first quarter, boosted by demand for traditional sneakers just like the Samba and inventories which are coming all the way down to more healthy ranges. Gross sales rose 8 % in Larger China, Adidas mentioned in April.

By Tim Loh

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