Post scam, ice-breaking starts at Reebok India
As India operations hit parent Adidas, company goes into overdrive to bring franchisees on board
NEW DELHI: Hundreds of franchisees of sportwear major Reebok India, which is entangled in a financial scam, are scheduled to meet the company management at the corporate office this week to discuss how to give the brand a fresh start in 2013.The meeting is expected to break the ice by bringing a large number of old and new franchisees to the discussion table.
Reebok’s business in India, which is severely impacted by financial irregularities, could result in a negative impact of up to €70 million on the operating profit of the parent group, Germany’s Adidas, in 2012.
Reebok said it has found that a large number of franchisee stores
have been incurring losses. “It’s now clear that Reebok India had been
subsidising a large store base over years, resulting in significant
losses... in future this model won’t be profitable,” the company
spokesperson said.
Reebok will restructure its existing minimum guarantee model to one based on performance. The company has offered VRS to 200 employees.
“The new model is essential ... to ensure profitability in India,” a Reebok official said. Franchisees, however, beg to differ. “The company opened stores, whenever they needed money, so the loss was expected,” the Delhi Franchisees’ Association said.
They have also alleged that the company prevented them from entering the Reebok office, which it has denied.
Estimated size of the alleged scam at sportswear maker Reebok India
Reebok will restructure its existing minimum guarantee model to one based on performance. The company has offered VRS to 200 employees.
“The new model is essential ... to ensure profitability in India,” a Reebok official said. Franchisees, however, beg to differ. “The company opened stores, whenever they needed money, so the loss was expected,” the Delhi Franchisees’ Association said.
They have also alleged that the company prevented them from entering the Reebok office, which it has denied.
26% Decline in Reebok's global sales in AprilJune, mainly due to the Reebok India impact, according to the Adidas group
Rs.870 crore Scam
THE SCAR THAT BITES
In May this year, Reebok India charged its former managing director
Subhinder Singh Prem and chief operating officer Vishnu Bhagat with
"criminal conspiracy" and "fraudulent practices" The officials deny the
charges and say they are being unfairly targeted. Prem has announced
plans to sue Reebok. India’s Serious Frauds Investigation Office (SFIO)
and income tax authorities are investigating the case.
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