Kesko Oy disclosed in its annual report that it plans to withdraw from the difficult Russian market in the course of this year, due to low volumes and unprofitable performance. The big Finnish retail group, which took on the Intersport license for Russia in 2011, has booked €17.2 million in non-recurring impairment charges and provisions for the restructuring of Intersport Russia's operations in the fourth quarter of 2015.
Top executives of Kesko and Intersport International Corp. told us that they have hired a specialized consultant to help find a new licensee for Intersport and The Athlete's Foot in the country, indicating that the operation has improved lately to a level at which it should start making a profit in two years' time.
Like with the previous Russian licensee, Intersport has had continued problems in the country, partly because of the strong competition from Sportmaster and other local players. After conversion from the weaker ruble, Intersport Russia's sales fell last year by 17 percent to €12 million. In terms of rubles, its revenues actually grew by 12 percent at its own stores and by 36 percent in terms of sales to a growing number of franchisees. In the first two months of this year, sales at the company's own Russian stores were up by nearly 50 percent in rubles.
Intersport Russia had 18 stores at year-end, one fewer than at the end of 2014, That includes five multi-sport stores in Moscow, eight in St. Petersburg, four in Novosibirsk and one in Nijni Novgorod. In addition to them, the company now has a factory outlet, two Intersport Run & Fit stores in the two main cities and one TAF store. It also has 11 franchisees, mostly in the regions.
Meanwhile, Intersport's net sales in Finland increased by 1.5 percent to €174 million last year, and they reached €194 million after including online sales. Those of Kesko's low-cost sporting goods retail format, Budget Sport, jumped to €46 million from €41 million. The number of stores declined from 62 to 60 at Intersport Finland and from 12 to 11 at Budget Sport. Intersport
Kesko confirms that it is about to introduce The Athlete's Foot in Finland. The group estimates that it has a share of 31 percent in the Finnish sporting goods market. It operates more than 1,500 stores in the grocery, home improvement, specialty products and car trade sectors in eight countries, but Russia represented only 4 pecent of its turnover last year. At year-end, it operated a total of 40 stores under different formats in Russia that generated a turnover of €311 million in 2015.
The group's consolidated revenues declined last year to €8,679 million from €9,071 million in 2014, but operating earnings before non-recurring items improved. Pre-tax income rose to €188 million from €145 million.
