FRANKFURT/LONDON (Reuters) - Germany's Adidas said on Thursday it would cut the number of its Reebok stores in India by about one-third as it tackles "commercial irregularities" at the unit, an issue that has clouded a strong start to a bumper sports year.
Chief Executive Herbert Hainer said Adidas, the world's second biggest sporting goods firm, had set a "blistering pace" in the first quarter, leaving it well placed to benefit from the Euro 2012 soccer tournament and Olympic Games in London.
While the Adidas group as a whole surpassed expectations for first-quarter results, its Reebok brand saw sales in the first three months down 7 percent on a currency neutral basis.
"Although Reebok has some challenges to overcome in Western Europe this year and as retailers currently focus on the major sporting events, we nevertheless continue to see good progress in most other regions," Hainer said.
The problems in India could lead to further charges of up to 70 million euros, Hainer confirmed. The company has around 1,000 Reebok franchise stores in India.
"There is definitely no further restructuring necessary as we do believe the underlying business is good, going in the right direction," Hainer told reporters on a conference call, stressing that the problems were limited to India.
The company said it hoped to release further information on the issue at the time of half year results in August.
Shares in Adidas have hit record highs after the company raised its outlook for 2012 on Monday and announced that first quarter earnings surpassed expectations with sales of 3.8 billion euros and operating profit of 409 million.
Its shares were up 1.0 percent at 63.77 euros at 1003 GMT.
The company, famous for its three-stripe brand, has been outperforming larger rival Nike (NKE.N) and neighbour Puma in the key Chinese market.
"We definitely do believe that our momentum in China is great, that it will continue and we foresee double digit sales growth for the years to come," he told reporters.
Hainer said he was convinced that sales from soccer would beat his annual target of 1.5 billion euros.
Adidas is kit supplier to both Bayern Munich and Chelsea -- who meet in the Champions' League final in Munich on May 19.
Soccer will remain centre stage in June when Poland and Ukraine host the Euro 2012 tournament for national teams.
Hainer refused to be drawn into a row over Ukraine's human rights record which has led some European politicians to say they will boycott matches.
Sales in Poland were up 35 percent on a currency-neutral basis, and by 19 percent in Olympic host Britain.
Adidas is a major sponsor of the Games, supplying kit for officials and the British team.
"Our Olympic related product is also doing very well, with the Team GB offering designed together with Stella McCartney exceeding all of our expectations," he said.
The Team GB kit got a lukewarm response in the British media, with critics saying it had too much blue and not enough red for their liking.
Reporting by Victoria Bryan in Frankfurt and Keith Weir in London; Editing by Mike Nesbit