Confirming a rumor, but without giving any details, Décathlon admitted that it suffered a drop in the domestic French market on a comparable basis in 2006, probably for the first time since the group was founded 30 years earlier. An unusually laconic press release didn’t provide any insight into Décathlon’s profitability, contrary to previous practice, and followed a report by the French sporting goods retailers association announcing that the French sporting goods market had been virtually flat (see following article). The company had reached an operating margin of 10.4 percent before amortization and depreciation (EBITDA) in 2005.
On the other hand, Décathlon continued to expand abroad, contributing to a 7.4 percent increase in total sales before VAT to €4,005 million. The press release said that the group’s domestic sales declined to 42 percent of the total turnover in 2006, indicating relatively stable sales of around €2.3 billion in France and growth of more than 18 percent abroad to €1.68 billion, largely due to new store openings. Décathlon says it recorded an overall increase of 1 percent in same-store sales globally, but it would not comment on an earlier report that its sales in France went down by 3 percent on a comparable basis.
Décathlon closed 4 stores in France last year, but opened 7 others and enlarged or moved 9 other stores, ending up with a network of 225 stores in its home country. Observers believe that, with a market share estimated at around 31 percent, France’s largest sporting goods retailer has reached a level of saturation in its home market and that it is beginning to suffer from the competition of Go Sport, Intersport and Sport 2000, which reported major sales increases last year, thanks in part to an easier expansion of their store network.
Décathlon cited different reasons for its new weakness, notably its policy of everyday low prices and the unusual weather conditions, which affected sales during the summer months at the beginning of the winter period. The first few months of 2007 have been encouraging, and the company is launching now a new e-commerce operation and a major campaign centered on the innovative features of its extensive private label program, rather than on its attractive pricing.
The group opened a total of 31 new stores last year, including 8 in China, 4 in Italy, the same in Spain, 2 in Portugal and in Hungary, and one each in Belgium, Poland and Brazil. It shut down its 4 remaining stores in the USA but opened its first store in Russia. Two Italian stores and a Belgian one were enlarged.
As of last Dec. 31, Décathlon counted 52 doors in Spain, 39 in Italy, 13 in China, 8 in Belgium and in Portugal, 7 in Germany, 6 in the UK, 5 in Hungary and in Poland, 3 in Brazil, 2 in the Netherlands and one in Russia. Including the 225 French stores, the total network comprised 374 stores.
Décathlon plans to open a total of about 35 new stores this year, for the most part outside France. The group is considering an entry into Romania, a fast-growing market that we have started to study as part of our ongoing market research throughout Europe, but it will probably not happen until 2008.
Almost 10 new store openings in France have already taken place or are in the pipeline for completion this year, but many of the new stores will be small. Three of them will carry a new banner, Fonisto, and will be selling only fishing and hunting products except for firearms, which the company dropped from its ranges four years ago. They will all concentrate on Geologic, Décathlon’s private label for this product segment. They will be around 1,200 square meters in size. The first one of the three is set to open tomorrow at Englos, near Lille, where Décathlon opened its first multi-sport store 30 years ago.
