Intersport Finland held up last year in spite of calamitous weather conditions, which have negatively affected the country's cross-country skiing market and are apparently starting to impact the cycling market as well.
Kesko Oy, Intersport's licensee for Finland, reported flat sales of about €316 million in 2016 for all of its sports stores, but managed to slightly raise them on a comparable basis. The business comprised 59 Intersport stores at the end of the year, after three closures. The group runs another 11 Budget Sport stores, although one of them in Espoo was temporarily closed. It was shuttered due to the end of a rental agreement and has since re-opened in another location. Kesko also started operating The Athlete's Foot (TAF) with four store openings and the launch of an online store last year, but this had little impact on sales for the period.
The Intersport stores alone reported sales of €238 million including VAT for 2016, with an improved performance in the second half of the year due to the early start of the winter. The turnover of Budget Sport moved up by 3.1 percent to €59 million, while the remainder came from Kesport and TAF.
The group has managed to stabilize its sales in spite of unfavorable weather conditions for the last four winter seasons. This issue has been compounded by the lackluster economic situation in Finland, which has favored more price-driven retail concepts. The unease in Finland's retail market led to the demise of Anttila, a famous Finnish department store chain that filed for bankruptcy last July. Previously owned by Kesko, it had been sold to a German-based investment firm in 2015.
Yet another negative factor has been the economic tension in Russia, combined with the weakness of the ruble, which has been making it less interesting for Russian consumers to hop over to Finland for a shopping spree. Russian tourists previously made up about 5 percent of sales in some Intersport stores.
The weather has had the strongest impact on the Finnish market for sports equipment and winter apparel. Jussi Mikkola, president of Intersport Finland, estimates that the market for cross-country skis has roughly halved in the last few years, from previous annual levels of 220,000 pairs down to about 120,000 pairs.
Many Finnish consumers no longer buy equipment in advance, waiting instead for the snow to accumulate before they update their gear. Although the start of the last winter season appeared fairly promising in November, the conditions quickly deteriorated. Durably, the snow did not cover the south of Finland, where most consumers reside.
Mikkola says that the unseasonal weather has continued this year. Intersport Finland's sales slipped by 12 percent in January, which is often the most important month of the year for Finnish sports retailers, and the drop followed declining sales in January 2016. April was another weak month, as the spring failed to materialize. The weather remains somewhat dysfunctional, with reports of snow in some parts of Finland in May, and relatively cold temperatures in other parts of the country.
Sporttimyyjä, the Finnish trade publication, relayed an estimate from the country's statistics office that the size of the Finnish sporting goods market increased by 4.2 percent to €1,190 million last year. Kesko remained easily the largest player but XXL Sport & Outdoor, the Norwegian sports retailer, has been expanding much more rapidly. Starting in Finland from scratch in 2014, it reached eleven stores and sales equivalent to 1,161 million Norwegian kroner (€122.5m-$136.5m) last year, which was an increase of 35.5 percent in constant currencies. The next two largest players were Prisma and the S-Group with flat sales of €153 million, and Stadium from Sweden with a turnover of €124 million, up by 6 percent, according to Sporttimyyjä. XXL's strong progress may have more strongly affected sales of sporting goods in hypermarkets and among independent stores.
Intersport Finland is retaliating with a continued focus on performance sports products, while targeting younger consumers of athleisure products via TAF. The group intends to open two more TAF stores this year, moving toward an estimated potential of 15 to 20 stores around the country.
Separately, as previously reported, Kesko has given up the license it acquired in 2011 to operate Intersport stores and later TAF in Russia. The decision was publicized in March last year, after the Finnish group reported €17.2 million in impairment charges and restructuring costs for the Russian business in the last quarter of 2015. It had 18 stores in Russia at the end of that year, which saw their sales shrink by 17 percent to just €12 million – even though they improved in rubles.
It turns out that Kesko sold its shares of the relevant Russian company in July last year to Vladimir Terziev, a Russian businessman. Intersport International Corporation is holding talks with Terziev to work out ways to profitably expand the Russian business again with Intersport and TAF.
