Adidas Investigates Allegations of Bribery in China — Update

By Andrea Figueras

Adidas said it is investigating potential compliance violations in China after an anonymous letter alleged senior executives in the country received millions of euros in kickbacks.

The probe comes as the German sportswear and sneaker company seeks a turnaround in the key China business as part of its efforts to reinvigorate the brand globally.

"Adidas takes allegations of possible compliance violations very seriously and is clearly committed to complying with legal and internal regulations and ethical standards in all markets where we operate," a spokesperson said Monday.

Adidas on June 7 received the letter flagging potential compliance violations in the country and it is currently intensively investigating the matter together with external legal counsel, the spokesperson said.

A letter circulating on Chinese social media accused senior Adidas executives of corruption and embezzling of funds. The authors of the letter claim to be longtime Adidas employees in China.

The Financial Times first reported that Adidas was probing allegations related to large-scale bribery.

The news sent Adidas's shares lower, with the stock falling 4% in midday European trading.

The company has struggled in China since 2020, following the outbreak of the pandemic, as extensive lockdowns and store closures resulted in significant sales declines.

Adidas's position in the country weakened in 2021 when it joined other Western companies, including H&M Hennes & Mauritz and Nike, in pledging not to use cotton sourced from Xinjiang, a region in China's far West where the U.S. and other Western governments say authorities have detained millions of Uyghur and other minority people and subjected many of them to forced labor.

Last year, Adidas's sales in the greater China region--which includes Hong Kong and Taiwan--increased 8% on a currency-neutral basis to 3.19 billion euros ($3.41 billion), accounting for roughly 15% of the group's total.

For 2024, Adidas anticipates double-digit growth in underlying sales in greater China, although it noted that downside risks persist due to weaker-than-expected momentum in the region.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

June 17, 2024 07:12 ET (11:12 GMT)

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