Fila Korea, which bought back the rights to the Fila brand in Europe, the Middle East and Africa (EMEA) earlier this year, has entirely changed its distribution setup in the region by sealing licensing deals with several leading retailers.
The partners are JD Sports Fashion for the U.K. and Ireland, Sportmaster in Russia and Dosenbach/Ochsner in Switzerland for the rest of Europe. Cravatex, which already had a license for Fila in India, obtained an expanded deal for Northern Africa and the Middle East, other than Israel.
The structure is meant to harmonize Fila's strategy in Europe, where its sales have been suffering from a dispersed and oft-revised approach. The latest strategy is based on direct relationships with retailers, to be complemented with wholesale operations through distributors and sub-licensees. The long-time licenses give the partners the right to make apparel, footwear and accessories under the Fila brand.
The new deals were formally sealed through Fila Luxembourg, a subsidiary of Fila Korea, which acquired global rights to the Fila brand in 2007 from Sports Brand International, a holding company owned by the U.S. hedge fund Cerberus Capital Management. Fila Korea, which was listed on the Seoul stock exchange last September, effectively bought back licensing rights for EMEA earlier this year when it acquired a 75 percent stake in Integrix Sports Group, the former Fila license-holder for the region.
JD Sports, the leading British sports lifestyle retailer, will introduce the Fila products made under its license later this year in the JD stores, its online store and some of its other outlets, focusing on fashion. The company also has the right to sell these products in its retail stores in Europe, which include the Chausport banner in France, Champion Sports in Ireland and, since last month, Sprinter in Spain.
JD, which is owned at 57 percent by the Pentland Group, already owns several brands, such as Kooga and Canterbury, and it holds licenses for others. Furthermore, it has a share of 49 percent in the Focus Group, which until last year held the U.K. license for Converse and still has rights for brands such as Le Coq Sportif and Sergio Tacchini. This has enabled it to build up strong wholesale partnerships in the U.K. sports market.
Fila's partner for the rest of Europe, Dosenbach/Ochsner, is owned by the huge Deichmann footwear group in Germany. It has turned into the largest integrated sporting goods retailer in Switzerland through Ochsner Sport, where the sports know-how of the group is now concentrated. The group will sell Fila through its own stores but it will strive to find wholesale partners and sub-licensees for Fila in other European markets.
No further indications could be obtained so far on the arrangements that will be made in some of the larger markets that will be covered by Deichmann through Dosenbach/Ochsner, like Italy and France. A Deichmann spokesman said the planning for this new business line is now in its initial phase, and the wholesale part of it will likely be implemented in 2013.
As part of the shake-up, most of the Fila operations in the U.K., Germany and Italy will be discontinued. Details of the reorganization could not be obtained, but it will evidently involved major layoffs. A commercial director based in Italy is to supervise Fila's activities in EMEA, with administrative and product functions based in Europe.
As for Cravatex, it has been selling Fila in India since 2002 and it obtained a new license for the brand last year. It then stepped up investments around the Fila brand to launch an apparel range last September and to open 30 to 50 Fila stores in India in the next three to five years.
Based in Mumbai, Cravatex is owned at about 75 percent by the Batra group, which previously owned rights for the Fila brand in EMEA and remains a sourcing partner for the brand in Europe. Cravatex is otherwise involved in the Indian sports business through its Proline Fitness unit, which imports fitness equipment from the Johnson Health Tech group; and with the distribution of Dunlop's golf and racquet sports products in India.
The company said it already had some distributors in the Middle East and some African countries, and it was expanding its sales infrastructure to service these markets. Cravatex will encourage these distributors to open dedicated Fila stores.
The new set-up was partly engineered by George Napier, former president and chief executive of Prince Sports, who made a strategic evaluation of Fila's activities in EMEA and advised the company on a new European structure.
No details could be obtained about Fila's recent performance in Europe. Without providing a regional breakdown, Fila Korea has reported a 42 percent increase in total revenues for the first quarter to 181.4 billion won (€117.4m-$170.1m), probably under the impact of Fila EMEA's acquisition. The gross margin dipped by 4.7 percentage points to 47.8 percent, but operating income rose by 45 percent to KRW 19.2 billion (€12.4m-$18.0m). Net income went up to KRW 13,165 million (€8.5m-$12.3m) from KRW 8,719 million in the year ago period.
