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Adidas raises profit forecast despite Indian subidiary 'irregularities'

Adidas posted strong first quarter turnover and raised its profit forecasts for 2012 despite issues with costs at an Indian subsidiary.

For the first three months of the year sales rose 17% to €3.8bn (£3.1bn) with net profits rising 38% to €289m (£237m). The sportswear giant forecast that full-year sales would increase by almost 10% with a net income increase between 12% to 17%. It has previously forecast sales to grow by between 5% and 9%.

As a result of the news shares in the company climbed to a record high, with shares jumping nearly 5.3% to close at €63 (£52).

Chief executive Herbert Hainer said the group expects to see a boost this year from exposure at the Olympics and the European football championships.

The sportswear brand was yesterday investigating “commercial irregularities” at its Indian Reebok subsidiary. The company would not provide details about the problems but Adidas said as a result of the situation it could face a probe into a re-instatement of profits and reorganisation fees, which could cost around €200m (£162m) .

Adidas put a new Indian management team in place at the end of March and said it would make “significant changes to its commercial business practices”.

Hainer said: “The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific, under-performing part of our business.”

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