Reebok's Q2 global sales down 26pc due to India issues: Adidas

The Group also said it expects a hit of 70 million euro in its global operating profit in 2012 on account of "irregularities" in Reebok India.

"Reebok sales declined 26 per cent on a currency-neutral basis, largely as a result of negative impacts from Reebok India Company and the non-recurrence of prior-year licence sales," the German Group said in a statement in its website.

Reebok brand's revenue in the quarter was at 336 million euro as against 427 million euro in the year-ago period.

Talking about its other two major brands, the group said sales of Adidas increased by 11 per cent during the second quarter of this year, while TaylorMade-adidas Golf segment grew 25 per cent on a currency-neutral basis.

Adidas, however, said: "Currency translation effects had a positive impact on sales in euro terms."

On the fraudulent practices in India, the Group said it expects a "projected negative impact of up to 70 million euro on group operating profit related to the reorganisation and changes to commercial activities at Reebok India Company" during the current year.

However, the operating margin for the Adidas Group is expected to increase to about 8 per cent in 2012 as against 7.6 per cent in 2011 on account of lower other operating expenses as a percentage of sales, it added.

Giving an outlook, Adidas said wholesale revenues are now projected to increase at a "mid single digit rate" compared to the previously estimated "mid to high single digit rate".

"The lower growth expectation reflects the negative impact from the commercial irregularities discovered at Reebok India Company," it added.

The retail segment's sales are also projected to grow at a "low-teens rate" in 2012, Adidas said.

The net income attributable to shareholders is projected to increase at a rate of 15-17 per cent to up to 785 million euro as against earlier growth projection of 12-17 per cent.

In the April-June quarter in 2012, Adidas Group's net income attributable to shareholders grew by 18 per cent to 165 million euro from 140 million euro in the year-ago period. Its revenue went up by 15 per cent 3.517 billion euro from 3.064 billion euro in the same period last year.

In May this year, Reebok India had filed an FIR, alleging that its former Managing Director Subhinder Singh Prem and Chief Operating Officer Vishnu Bhagat were involved in a Rs 870-crore fraud by indulging in "criminal conspiracy" and "fraudulent" practices over a period of time.

Currently, Serious Fraud Investigation Office and the Income Tax Department are probing the alleged financial irregularities in Reebok India Company.