German sportswear giant adidas is investigating potential misconduct in its China operations after receiving a whistleblower complaint alleging large-scale bribery by senior staff, the Financial Times (FT) reported.

The anonymous letter, reportedly penned by 'employees of adidas China', accuses several high-level figures, including a manager overseeing the company's significant annual marketing budget, of receiving kickbacks from partnered service providers.

According to the FT, even more serious allegations involve a separate senior manager who is said to have benefited from “millions in cash from suppliers, and physical items such as real estate”.

adidas acknowledges receipt of the whistleblower report on 7 June 2024, emphasising its commitment to ethical conduct and legal compliance in all markets.

The FT noted the company has engaged external legal counsel for a thorough investigation.

No personnel have been suspended as of yet.

This news comes amidst adidas' ongoing recovery efforts in China, a previously booming market that suffered a significant downturn due to Covid-19 lockdowns and consumer backlash against Western brands over Xinjiang cotton sourcing concerns.

These factors contributed to the departure of the company's former CEO Kasper Rørsted, replaced by Bjørn Gulden in 2023.

Adrian Siu, adidas' new China CEO appointed in 2022, has set out to regain consumer trust through patriotic clothing lines and a blend of “traditional Chinese elements with international product design”.

The company anticipates a double-digit sales increase in China for 2024, following a positive fourth-quarter (Q4) 2023 performance.

While the whistleblower report lacks concrete evidence, its detailed nature regarding confidential matters raises concerns.

The investigation's outcome will be crucial for adidas as it navigates the path towards market recovery in China.

In May this year, adidas reported a net income from continuing operations of €171m ($182m) in Q1 2024, compared to a net loss of €24m in Q1 2023.