Adidas slashes its Reebok sales target

Adidas slashed its sales target for its struggling Reebok brand to €2 billion from €3 billion after losing a major American football contract and fraud was discovered at its Indian operation.

The German company, the world’s second-largest sports apparel company behind Nike, bought Reebok in August 2005 for $3.8 billion. It enjoyed initial success with a range of toning shoes, but has since struggled to find its feet.

Sales at Reebok slumped 26 per cent in the second quarter and annual revenue is expected to fall from 2011’s €1.96 billion. Its performance contrasts sharply with the rest of the Adidas group, which expects overall sales to rise nearly 10 per cent in 2012.

Adidas chief executive Herbert Hainer has said that Reebok needs to come up with new products and will focus on fitness categories such as keep-fit trend Crossfit, running, gym, yoga and dance.

The company kept an overall target to increase group sales to €17 billion by 2015, with faster than expected growth at its Adidas brand and golf business offsetting the weakness at Reebok.

Sales for the Adidas brand are now expected to reach €12.8 billion in 2015, up five per cent from the previous target of €12.2 billion.

Adidas shares, which have gained 30 per cent this year as it takes market share from rivals, touched a record high of €65.76 last week.

The company announced in April that it had uncovered commercial irregularities at Reebok India and replaced management there. It said the fraud and a subsequent restructuring of Indian operations would cost Adidas almost €200 million. The unit’s two former managers were arrested on Thursday in India on suspicion of fraud.