In a preliminary statement, Intersport International Corp. (IIC) announced that its 5,350 affiliated Intersport stores in Europe and the rest of the world managed to raise their retail sales by about 1 percent to €10.3 billion in 2013 including taxes and excluding The Athlete's Foot, which IIC bought at the end of 2012. However, Intersport's growth would have been higher than 4 percent on a comparable basis without the pullout of Sport Eybl & Sports Experts in Austria.
The Austrian chain's sales were included in Intersport's retail turnover in 2012, but they have not been counted as of Jan. 1, 2013 because of its takeover by Sports Direct International last summer, even though IIC and Intersport Austria continued delivering special make-ups and other exclusive products to the chain up to the end of 2013. Sport Eybl was also given a deadline until end of December 2013 to remove all Intersport signs from the Sport Eybl stores.
Franz Julen, chief executive of IIC, is predicting growth of between 2 and 4 percent this year for the international retail network of the group because of the positive impact expected from the Winter Olympic Games in Russia and - even more so - the World Cup of football in Brazil, plus Intersport's expansion in Western and Eastern Europe, in the Middle East and new markets such as China and Australia. With the first stores scheduled to open in Casablanca and Minsk in April 2014, the addition of Morocco and Belarus will lead Intersport to be represented in a total of 44 countries.
Julen announced that the franchise agreement with Fujian New Huadu Supercenter, which originally covered ten provinces in Southern China, has been extended to include online retailing and to cover three additional provinces - Sichuan, Yunnan and Tibet - and the metropolitan areas of Shanghai and Chongqing, which have a population of 23 million and 29 million people, respectively.
The first Intersport store in Shanghai will open by 2015 at the latest, competing with other local and Japanese multi-brand sports stores recently opened in the city (the development of multi-brand retailing in China will be an important topic of our new report on the Chinese sporting goods market, due to come out by June 2014). Meanwhile, the total number of Intersport stores in China is set to increase from three to 14 in the course of 2014, ranging in size from 500 to 1,500 square meters. Julen said that sales at the Chinese stores are improving with every passing week and one of the first three stores has almost reached the breakeven point after five months of operation.
Faster progress is being recorded in China than in South Korea, where the local master franchisee, LG Fashion, still operates four physical Intersport stores and an online shop. IIC and LG Fashion have still not reached an agreement for renewal of their five-year franchising agreement for Korea, which is due to expire in the upcoming months.
As we have already reported, IIC signed a master franchise agreement for Australia last summer with Independent Sports, a local retail cooperative of more than 70 sports stores (SGI Europe no. 24-30+31 of Sept. 5, 2013). As of now, Australian retailers have signed up to place the Intersport banner on 37 stores by next July 1 at the latest to accommodate deliveries of IIC's product ranges for the third and fourth quarters of this year. Two of these new Intersport stores were previously not part of the cooperative, and Julen feels confident that the total number of franchised stores in Australia will go up to 100 within five years' time, exceeding earlier projections.
In Europe, Intersport suffered in 2013 from the absence of big international sports events and from the vagaries of the weather. Contrary to competitors like Sports Direct International, JD Sports Fashion or Foot Locker, Intersport is far more dependent on cold winters since its winter sport business is worth over €1.5 billion a year, or more than 15 percent of the total retail turnover. At the beginning of the past year, the cold weather came relatively late and persisted in the month of March. In the autumn, the month of November was outstanding in Europe, but the month of December was dismal, particularly in Central Europe and the Scandinavian countries.
Moreover, while more Intersport stores operated by year-end in Eastern Europe and in countries such as France, Germany and Austria, the opposite occurred in Italy, Spain, Switzerland, Norway and Sweden.
In terms of product categories, sales of winter sporting goods declined across the Intersport network. Outdoor went up by a low single digit, while running products and fitness clothing experienced high single-digit increases as compared to 2012. Fitness machines and football equipment went down, but football came out higher than in 2011, when no big tournaments took place either.
Retail sales went down last year to the equivalent of €270 million for the international store network of The Athlete's Foot as compared to €280 in the previous year due to a clean-up that reduced the number of affiliated stores from 421 to 392. More TAF stores will be closed this year, especially in the U.S., but the total store count should go up again to at least 400 units.
IIC, which bought TAF at the end of 2012, is applying to the athletic footwear chain the regional master franchising policy that it has successfully applied to the Intersport banner in Europe, allocating responsibilities for several countries to its stronger partners in Germany, Greece, Slovenia and Finland. It has extended TAF's franchise agreement with K-Misetas Deportivas Kadepo CIA for Ecuador and Peru to other parts of Latin America, allowing this partner to set up stores also in Bolivia, Colombia, Chile and Panama. Other similar territorial extensions are under negotiation.
