Adidas, the world’s second-largest sportswear maker, saw its shares decline on Monday amidst allegations of corruption in China.
The German footwear giant announced it was investigating claims of bribery involving senior employees accused of misappropriating millions of dollars.
This development deals another setback to Adidas, which had pinned hopes on a robust business performance in China this year following the turbulent end of its profitable collaboration with rapper Kanye West.
The bribery allegations surfaced over the weekend when the Financial Times reported on an anonymous letter purportedly authored by “employees of Adidas China,” identifying several Chinese staff members.
In response, Adidas acknowledged receiving an anonymous letter in June highlighting potential compliance breaches in China. The company emphasized its serious approach to such allegations, reaffirming its commitment to adhering to legal, internal regulations, and ethical standards across all its markets.
Adidas stated it was currently conducting a thorough investigation with external legal advisors.
The news triggered a more than four percent drop in Adidas shares on Frankfurt’s blue-chip DAX index, though they partially recovered to end the day down by 2.6 percent.
According to the Financial Times, the accused individuals reportedly include a senior executive responsible for Adidas’s marketing budget in China, valued at $268 million annually.
Another Adidas manager in China allegedly received substantial amounts of cash and physical assets such as real estate from suppliers.
While the original letter, initially posted on the Chinese social media platform Xiaohongshu, was no longer visible over the weekend, copies claiming authenticity were circulated across various accounts, although their validity remains unverified by AFP.
China has traditionally been a crucial market for Adidas, but the company faced significant challenges there during prolonged COVID-19 lockdowns. Despite this, Adidas’s Greater China sales showed a strong recovery with an eight percent growth last year, and the company anticipated double-digit growth in 2024.
However, analysts warn that these corruption allegations could jeopardize Adidas’s efforts to regain solid ground in China after several years of setbacks.
Adidas had been looking to bounce back following its 2022 decision to terminate its profitable collaboration with Kanye West amid controversy over his anti-Semitic remarks.
This move contributed to Adidas reporting its first annual loss in over three decades in 2023.
Despite these challenges, Adidas has shown signs of financial improvement in recent months.
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