INDIA: Adidas to accelerate Reebok India restructure
Sportswear giant Adidas has confirmed it will accelerate the restructuring of its Reebok business in India in order to set the unit up for a "fresh start" in 2013 - including the integration of local sourcing activities.
A spokesperson told just-style that it is working to establish a profitable business model for both business partners/franchisees and Reebok India. It expects to implement the changes in the coming months .
Adidas reiterated it may have to close a third of its 900 Reebok India stores.
The announcement follows a warning last month that "accounting irregularities" of up to EUR125m had been discovered in its Indian operations. The company appointed a new local leadership team in the country at the end of March.
The company is working with its franchise partners to discuss revised business terms to help drive profitability. However it estimates around one-third of the stores may not be in a position to transfer over to the new business model.
The Adidas spokesperson said the group is in discussions with affected employees at Reebok India, who will be given the option to take part in a Voluntary Retirement Scheme (VRS).
"Under VRS, employees will be offered career support and severance packages based on the time frame of their association with the organisation," the spokesperson said.
As part of the revamp, local sourcing activities will also be integrated into the retailer's global operations.
"This will allow us to be faster, have greater efficiency across our supply chain, provide more transparency into our sourcing activities, and to ensure greater consistency in compliance with workplace standards at the supplier side," the spokesperson added.
Earlier this year, Adidas revealed that financial irregularities discovered at Reebok India could result in a hit of up to EUR125m (US$154m) and a negative impact of up to EUR70m in 2012 group operating profit. Following the discovery, it appointed a new local management team in March.
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