As reported in our issue #18-24 of July 6, certain IIC shareholders have proposed to take Intersport International Corp. (IIC) public in order to “monetize” their holdings in the big international retail organization. They have argued that a public offering would help IIC to finance its expansion and create new incentives that would make it more efficient and more profitable. The pressure for such a move is increasing because IIC is doing well and six of IIC’s 13 shareholders are no longer cooperatives of national retailers and are owned by profit-driven interests, including Intersport Denmark which is due to follow the same pattern.
According to IIC executives, the matter was discussed at a special shareholders’ meeting last March as part of a review of organizational structures that is conducted within IIC every 3-4 years, but the overwhelming majority of the shareholders, including even certain stock-listed companies, decided to keep for the time being to the proven status quo. Three of the 13 shareholders of IIC are quoted on the stock exchange.
It was agreed that IIC should continue to operate mainly as a service company, rather than as a profit-priven enterprise. IIC’s main goal and priority thus remains the optimization of the services that it performs for the national Intersport licensees - a system that allows for reasonable fees and low commissions on product sales, enabling the affiliated retail members to offer very competitive products to the consumer. IIC shareholders continue to receive a yearly bonus related to the amount of purchases conducted through IIC, instead of dividends. While this type of organizational structure ensures that profit is made mostly on a national level, the current system has allowed IIC to report a profit in each of the 39 years of its existence. IIC’s revenues increased by a double-digit rate to a record level in the financial year ended last April, although the actual value of the revenues and the profits could not be obtained.
The special shareholders’ meeting of last March also endorsed a group strategic plan for the 2008–12 period, calling for specific action. in the areas of purchasing, retailing, marketing, expansion, information technology, logistics and social responsibility. The group is aiming for total retail sales including VAT of €11.3 billion through its affiliated stores by 2012, compared with €8.3 billion in 2006. Some of the growth should take place in Eastern Europe and through Intersport’s entry into new markets, but additional retail sales are also expected in mature markets such as France, Germany, Italy and the Scandinavian countries.
As previously reported, China is one of the targets for market entry before the Beijing Olympics, but IIC is still looking for a suitable partner to help it to make this momentous step. Other Asian countries and the Baltics are under the radar screen, too, but Intersport’s previously planned introduction into the U.S. market has been postponed until further notice. In general, the aim is to expand Intersport’s global presence to a total of over 40 countries by 2012, up from the present tally of 33. The banner entered 15 new countries in the past eight years.
IIC’s shareholders also confirmed their intention to raise the proportion of exclusive brands sold through affiliated stores to 25 percent of their total turnover, from the present level of 18 percent. However, the strategic plan calls for a continuation of IIC’s long-standing collaboration with some of the world’s leading brands, although the number of these suppliers will decline rather than increase. The ideas is to involve selected brands in certain key product categories more deeply in the product and marketing strategies not only of the Intersport banner, but also of the new low-priced Budget Sport banner being successfully tested in Finland. Many other national Intersport organizations have expressed interest in adopting this new format, but it is most likely to be launched first in such countries as Greece and Switzerland as well as in some Eastern European countries.
Over the last 12 months, IIC has gradually implemented a new SAP platform to help facilitate relations with the brands, with suppliers of private label products and with the national Intersport licensees that belong to the international group. They themselves have been investing in data processing. One of the results is the fact that about 60 percent of all the affiliated Intersport stores are providing their sales data electronically to the national organizations they belong to, allowing them to obtain a better picture of changing demand patterns.
The new strategic plan also calls for further development of a “verticalization” process, which has been gradually and successfully implemented within the Intersport organization over the last 4-5 years, aimed at making it work more like an integrated retail chain at the national and international levels. Specific initiatives and standards have been defined in areas such as purchasing, retailing and marketing, with national or even local adaptations where it is necessary to stay close to the consumer.
For example, more regional ranges of private label apparel and footwear products will be developed at the international level, particularly in the lifestyle non-performance segment of the sporting goods market, to respond to the styling codes of consumers in Southern Europe and other parts of the world. IIC has already boosted its central product development staff in Switzerland over the last five years and it will probably continue to do so.
As reported in the last issue of SGI Europe, IIC moved last month into a modern new head office in Bern, Switzerland to help cope with its strong growth. Its staff has increased from 40 to 104 people in the last five years alone. IIC has bought a piece of land covering 8,000 square meters from the Canton of Bern of which only 2,500 sqm. are developed for the moment, allowing for possible enlargement at a later stage. Additionally the Canton of Bern has granted a lifetime tax agreement to IIC.
This and other investments approved by the shareholders, including SAP and the agreed strategy and business plan for the Chinese market, will cost just over €20 million – an amount that IIC will be able to finance through its own cash flow and its equity reserves, without borrowing any money.
At their regular annual general meeting in June, IIC’s shareholders approved the election of a new supervisory board member to replace Guy Leclerc, former chairman of Intersport France, who has attained the maximum statutory age of 65 years. The new representative is Roland Garrigou. Based in Toulouse, he owns the second largest network of Intersport stores in France. The board confirmed John Forzani and Klaus Jost as chairman and vice chairman of IIC, respectively.