Adidas raises goals despite investigation Adidas surpassed expectations with strong first-quarter earnings and raised its profit goals for 2012, sending shares higher in spite of warning of costs to come from problems at an Indian subsidiary. The sports goods maker, owner of brands including Reebok and TaylorMade, said it was investigating "commercial irregularities" at Reebok India, which could lead to a restatement of past accounts with an impact of up to €125m. Adidas will restructure its business in India at a one-off cost of up to €70m this year. IN Personal & Household Goods The German group has been combining the operations of its Reebok and Adidas businesses around the world, with the group's operations in India among the last to be merged. Adidas said it had installed new management in India at the end of March and planned to make "significant changes to its commercial business practices" in the country, where it says Reebok is the market-leading sports brand. "Due to the sensitivity of the ongoing investigation, specific details will be disclosed as appropriate in due course," Adidas said. Disclosure of the probe in India came as Adidas posted first-quarter results that surpassed analysts" estimates, with sales in euro terms rising 17 per cent to €3.8bn. The quarter was Adidas's fifth in a row of double-digit sales increases. Net income rose 38 per cent to €289m, Adidas said, helped by lower borrowing requirements and a lower tax rate. Herbert Hainer, chief executive, said investments were "yielding an unprecedented period of growth" for the group, which already expected a bumper sales year because of exposure at this year's London Olympics and the European football championships. Adidas said full-year sales should now increase by almost 10 per cent, stripping out currency effects, with an increase in net income of between 12 per cent and 15 per cent. Previously Adidas had been forecasting a rise in net income of between 10 per cent and 15 per cent. The latest forecasts include the potential impact from the Indian restructuring. "The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific underperforming part of our business," Mr Hainer said. Looking at the bigger picture, we are right where we want to be. The group's gross margin fell in the quarter but the operating margin improved by 1.1 percentage points to 10.7 per cent. Operating cost savings surprised positively. This is attributable to operating leverage but also somewhat lower marketing costs than expected," said Andreas Riemann, analyst at Commerzbank. The biggest sales increase in percentage terms in the quarter was in TaylorMade-Adidas golf, where sales rose 32 per cent. Adidas shares rose 5 per cent to €62.96.