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Adidas is investigating possible compliance violations in China after receiving an anonymous letter accusing top executives of embezzling millions of euros.
The company said it received the letter on June 7 indicating potential compliance violations in China, and that it is currently “intensively investigating” the matter together with external legal counsel.
A spokesperson told Quartz that the company “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.”
Adidas said it could not provide further information on the matter until the investigation is completed.
The anonymous letter, which circulated on Chinese social media platform Xiaohongshu, accused several Adidas employees, including senior managers, of receiving millions in kickbacks from external service providers commissioned by the German sportswear giant, the Financial Times first reported.
Shares of Adidas were down nearly 4% on Monday afternoon on the European markets.
Adidas sales in China slumped during and in the wake of the COVID-19 pandemic. Last year, under the new leadership of CEO and former Puma chief Bjørn Gulden, the company began to mount a turnaround with sales growing 8% in the country. This was punctuated by a 37% rise in sales in the last quarter of 2023.
Gulden said in a call with analysts in March that the success is owing to the fact that the company was able “to do marketing again in an almost normal way, and of course that the Chinese consumer is reacting positively to it.”
Adidas Greater China’s marketing budget totals 250 million euros ($268 million) a year, according to the letter reported by the FT.
The company is expecting to add to this rebound with double-digit growth in sales this year. CFO Harm Ohlmeyer said in March that investors “you can rest assured that we will improve our profitability in China in 2024.”