The loss of Nike’s business in Greece and Cyprus shaved about €20 million off the revenues of Elmec, the Greek retail and wholesale company, in the first half of this year. However, this was partly compensated by the growth of its department stores and its business in the Balkans, so that the group’s consolidated sales declined by just 1.6 percent to €89.9 million for the period.
The deal with Nike ended in June 2006, as the American company set up its own subsidiary in Greece. Elmec continues to distribute Nike in Romania and Bulgaria, where its sales grew by 63 percent to €20.4 million. Elmec distributes many other casual footwear brands and owns a growing number of stores in these countries.
Furthermore, Elmec last year obtained a licensing and distribution agreement for Converse in Greece and Cyprus, which effectively began in the second half of this year. Elmec estimates that Converse’s sales could reach about €14 million this year and more than €30 million on an annual basis in Greece and Cyprus from next year. This would go a long way to compensate for the lost Nike business, which amounted to wholesale sales of €45 million in Greece and Cyprus for its last full year with Elmec in 2005. The Converse business generates a higher gross margin than its former distribution of Nike, due to the fact that Elmec has a license to produce its own Converse shoes, so it could even make up for all of the gross profits formerly delivered by its contract with Nike.
On the retail side, the Attica department store in Athens and Elmec’s two factory outlets saw their sales rise by 40 percent to €46.3 million for the period, while their operating profits doubled. The company is now accelerating its investments in retailing through the buy-out of minority interests in its factory outlets and in Ipirotiki, owner of the Minion department store, which is due to reopen next year. It also plans to invest in a new department store in a mall due to open close to Athens’ Olympic stadium in 2009, and to develop two real estate properties in Romania.
Due to higher operating expenses, Elmec’s earnings before interest and tax ended nearly 30 percent lower at €5.5 million. This decline was partly offset by lower taxes, leading to a smaller decrease in Elmec’s net earnings, down by 9.2 percent to €2.5 million.
The half-year report marks the end of a transition period that followed the termination of the Nike contract in Greece and Cyprus. As a further depressing factor, changes in accounting rules reduced reported consolidated sales by about €1.7 million, although the comparisons reported in this article are based on adjusted figures for the first half of 2006.
As reported, Sam and Lucy Fais have rounded off the sale of their majority stake in Elmec to Homeric Holdings, a company set up for this purpose by the Laskarides shipping group. Homeric Holdings now controls 51.83 percent of Elmec’s shares, while the rest is listed on the Athens stock exchange. Sam and Lucy Fais have reinvested in the company by swapping some of their Elmec shares for a 24 percent stake in Homeric Holdings.
A new board was elected at the end of June for six years, headed by Georgios Galanakis, a representative of the Laskarides group. Sam and Lucy Fais remain on the board as vice-chairman and executive director. Pavlos Kalamarides is no longer chairman, but he remains a leading member of Elmec’s executive board.