Preliminary sell-out data indicate that the retailers affiliated with Intersport International Corporation enjoyed an overall sales increase of more than 5 percent in 2010, mainly driven a strong double-digit increase for IIC's expanding private label program. Major progress was recorded in Germany, Austria, Canada, France, Slovenia, Croatia and the Scandinavian countries. Major gains were realized in categories such as football, outdoor, running, fitness and winter sports. Total retail sales within the group reached a record of between €9.7 billion and €9.8 billion including sales taxes.
The World Cup of football and the recent cold weather spell throughout Europe played a strong role. Football sales rose by 12 percent from 2009 and reached a new record, which can now be estimated at around € 880 million for the year, overtaking the levels achieved two and four years ago and confirming Intersport's leadership in the sector.
Sales of outdoor products continued to rise at a double-digit rate in most countries, with Intersport's exclusive McKinley brand remaining the star in its private label program, yet also strong brands like The North Face, Salomon, Lowa, Jack Wolfskin or Mammut raised their sales within Intersport's stores. But the final big kick came from snow sports in the last few months. Huge sales increases in this segment boosted the overall average monthly gains to about 11 percent in November and 13 percent in December as compared to the same months a year earlier, leading Franz Julen, CEO of IIC, to call it the best winter start for Intersport in Europe in at least 40 years.
Sales of winter products were so strong that retailers have already begun to experience shortages of products such as cross-country skis, sledges, children's ski pants, gloves or headwear, possibly compromising sales during the balance of the winter season. The situation is more critical for some highly demanded items, such as black ski pants, that cannot be reordered because they are sourced in the Far East. Due in part to admittedly prudent buying policies, inventories of all kinds of ski hardware are at very low levels now.
On the other hand, sales of ski helmets have been more or less flat, indicating that the peak in consumption is now over. Also alpine skis, bindings and shoes achieved double-digit growth rates as compared to November and December 2009 and Intersport officials expect that, for the first time ever, there will be more skis boots sold than skis during the Winter 2010/11 season because of the still very trendy and popular rental business.
Julen said that IIC's investments in private label were mainly a reaction to the establishment of more and more single-brand shops by the major sports brands. Nevertheless, he stressed that good relations with key brands remain the most important aspect of Intersport's strategy and these brands still represent more than 80 percent of Intersport's total retail sales. Criticizing some buying groups which, he said, are only looking for better margins for their affiliated retailers, Julen stated that Intersport was pursuing a real partnership with the brands, ensuring marketing support and retail execution in exchange for better conditions, the early introduction of new products and the development of special make-ups.
In the last few months, IIC has signed new long-term contracts with Adidas and Reebok, Puma, Nike and Amer Sports through 2015 or 2017 that take care of these and other aspects of the relationship. Furthermore, the group will make some choices in the next couple of months about the brands on which it is going to focus in certain specific categories. This is part of a new ?Intersport category alignment program? decided last October, which calls for specific new product, marketing and retail initiatives in the stores.
Intersport officials share the opinion that its private label business may have benefited in part from the fact that many customers preferred to buy private label products to save money. Besides McKinley, other exclusive brands within IIC's growing range of private label products such as Energetics and Pro Touch rose substantially in the past year. Among the various product categories, Julen mentioned in particular winter textiles and hardware, running and outdoor apparel as well as shoes.
The Intersport retailers' strong sales of private label items were aided by major investments recently made by IIC in the development of better products and in its own Chinese procurement facilities. While many brands delivered their products late due to labor shortages and limited capacities in China, Intersport placed early orders with its Chinese suppliers for Fall 2010, so that more than 80 percent of its private label merchandise reached the stores in time or no more than 14 days late.
Julen declared himself optimistic about spring/summer 2011 deliveries, noting that 60 percent of Intersport's private label products have already left the Far East and predicting that 90 percent of them would be on their way over before the Chinese New Year. He was less optimistic about the subsequent seasons, considering the mounting sourcing problems that everyone is facing in China because of trends in the cost and availability of local labor, exchange rates and environmental restrictions.
Therefore, IIC has made a strategic decision to cut from 75 percent to less than 50 percent the portion of private label items sourced in China. IIC has set up procurement offices in Bangladesh and India and begun scouting for new sources of production in Eastern Europe. The shortages in China will inevitably contribute to a concentration in the offer of branded products, Julen surmised but also agreed that even though retailers will become more selective in their choice of suppliers, good and innovative niche brands should continue to play an important role in the more specialized stores.
