Intersport International Corp. (IIC) reports a 2 percent increase in 2007 for the sales of the retailers affiliated with its national licensees around the world, reaching another record of €8.54 billion after VAT. A total of 143 new shops joined the ranks of the world’s largest retail organization in the sporting goods sector, raising the number of doors to 5,049 in 35 countries. The overall sales increase was lower than the growth of 8.6 percent recorded in 2006 because of several factors, but the retailers’ turnover should go up faster again in 2008 due to the upcoming European Football Championship and the Olympic Games in Beijing, in addition to continued growth in key areas such as running, outdoor and fitness.
A rise of 20 percent is expected in football-related sales within the international Intersport retail network, to exceed €850 million, judging from sales and orders so far. Sales of these products through Intersport stores jumped by 30 percent to €710 million in 2006, thanks to the FIFA World Cup. As in 2006, there will be strong synergies this year in the implementation of special product and marketing strategies with brands such as Adidas, Nike and Puma, complementing Intersport’s own exclusive team sports brand, Pro Touch, but there will be other new factors at play as well, thanks to the special status that the Intersport brand will enjoy.
As the only official sports retailer for the licensed products of the UEFA Euro 2008 football championships, which will be played in Austria and Switzerland this summer, Intersport’s organizations in these two countries will have exclusive rights to sell these products in all the eight football stadiums, in all fanzones and in the 129 special public viewing zones set up with the support of Coca-Cola in Austria and UBS in Switzerland. This program alone will involve some 700 salespeople at more than 233 points of sale, including the space in some railway stations, and will contribute to reinforcing Intersport’s image and credibility in the all-important football sector.
In addition to that, the Euro 2008 football program will have a presence in more than 1,200 Intersport stores in 26 countries, with only Italy and the U.K. refusing to play the game and Spain joining in the program only recently. It will also run in three dedicated Intersport superstores in Austria and Switzerland during the tournament and immediately before and after. Intersport Eybl will operate a dedicated Euro 2008 superstore of 1,000 square meters in downtown Vienna, while Intersport Switzerland will do the same in Basel and Zurich with 600-square-meter stores in their cities.
Aside from a tough comparison with a World Cup year, especially in Germany, France and Italy, the relatively slow growth of 2 percent recorded by the international Intersport network in 2007 was partly due also to the fact that no new license agreements were signed last year in any new markets and to the bad winter season at the beginning of the year.
As a group, Intersport suffered disproportionately from the lack of snow in the first quarter of 2007 because some of its most important national licensees are heavily winter-dependent. While those in Canada and Scandinavia performed relatively well because of good snow conditions, those in Germany, Austria, Switzerland and Italy suffered sales decreases of between 10 and 25 percent in winter sports in the first three months of the year. In some cases, affiliated retailers were able to raise their market shares under the tough local market conditions because they chose to concentrate on IIC’s range of ski products, where they could benefit from better margins.
On the other hand, Intersport retailers were able to make up for lost sales of winter sports items through higher sales in other categories where the group is strong, such as its own McKinley line of outdoor products and a host of other products in the running, walking, football, cycling and in-line skating segments. Sales of footballs and replica shirts went down by only between 3 and 7 percent in most countries, in spite of the lack of a major international football event such as the World Cup, and sales of football boots, shinguards and similar products actually went up, indicating a further increase in market share in this important product category. Last year’s early spring led to good sales and, in many countries, helped to compensate for the low winter retail sales by the end of the second quarter. Sales in the third and fourth quarters were up by 2-4 percent, with good results being recorded in most markets.
The strong development of Intersport’s retail network in Eastern Europe and in the Balkan peninsula, where it now has 237 shops with a total sales surface of more than 250,000 square meters, helped to offset difficult market conditions in many mature Western European markets. Sales grew strongly in countries such as Croatia, Greece, Hungary, Poland, Romania, Slovenia and the Czech Republic but Intersport had a harder time in countries such as Serbia and Bulgaria, as shown in our extensive market research on the Balkan peninsula. Also, the Russian market made a pause as Intersport’s local licensee, Delta Sport, closed some stores as part of a consolidation of its operations.
Overall, the revenues of national licensees increased last year by 1 percent to €4.04 billion, including stock sales, commissions on central settlements and other transactions. They were able to cover 95 percent of the product requirements of the affiliated retailers. Retail sales of Intersport’s exclusive brands remained flat, totaling €1.55 billion and representing 18 percent of all retail sales.
According to Intersport, the European sporting goods retail market grew by around 1 percent last year to €37.5 billion in spite of the bad winter weather, indicating no loss in the 19 percent market share that it claims in Europe. We have not yet finished our analysis of the European sports retail market, which we believe to be higher, but the first indications are that it grew very little overall.
