Lotto Sport Italia made a small recovery last year, as its wholesale-equivalent revenues grew by €1 million to €294 million in 2010, driven by its licensees in Asia and Latin America, after a decline to €293 million in 2009 that was clearly induced by the economic recession.
The momentum continued into the 2011 spring/summer season, with increases in deliveries for both footwear and apparel, but the company's super-active chief exe cutive, Andrea Tomat, is somewhat less optimistic about the second half of this year and the first half of 2012.
One of the reasons for his uncertainty has been a somewhat negative reaction by retailers, especially in Italy and some other European countries, to Lotto's latest price increases. The company decided to raise its prices by 10 percent or more on certain products for the fall/winter 2011-12 season, in reaction to strong cost increases and some supply chain problems, and in an effort to improve its overall profitability.
Booking net break-even results, Lotto managed to raise its operating margins in 2010, and the process should continue. While cutting down personnel charges and other costs, Lotto's management has been conducting a major overhaul of the product range, reducing the number of SKUs and focusing more clearly on specific segments such as lifestyle, football, running and tennis. These four segments represented 46 percent, 31 percent, 12 percent and 10 percent of the group's total sales last year, respectively.
The introduction of a new ReactiveArch technology into Lotto's tennis and running shoes for the past spring/summer season fueled some of the brand's recent growth and improved its image in these two product categories, reinforced by several positive product tests.
Likewise, Lotto's higher-end Etonic brand in the U.S. has been delivering a completely new collection of running shoes recently, after taking some time to develop the range. Etonic has also launched a rather revolutionary customization system for bowling shoes. In 2010, the brand's total sales increased by 15 percent in spite of persistent difficulties in the weak U.S. golf market.
Lotto was under pressure in football last year in the competition with the major brands due to their intense marketing activities around the World Cup. On the other hand, it has been experiencing a rebound in the futsal segment thanks to new designs, especially in the junior styles.
For Lotto, the competition was stronger last year in clothing, whose sales went down generally, especially to the retail chains. Its apparel sales held up well in the more technical and lifestyle segments, though. Lotto's sales of footwear increased overall, but its lifestyle shoes performed better than its more technical models before the introduction of the latest innovations.
Lotto's sales declined last year by around 4 percent in Italy and a few points more in the rest of Europe. The trend tremains negative. The most critical area for the company is Eastern Europe, where sales have been falling by double digits in some countries such as Romania and Hungary. Sales were flat in France, Germany and Spain.
The Americas represented 15 percent of Lotto's global sales last year. The company's performance improved in North America, whereas South America remained unchanged. In Central America, Lotto recorded a decline as it switched to a new licensee for Mexico, Iridium Sports.
A much better performance occurred in Asia, where sales of Lotto products jumped by 25 percent and came to represent 23 percent of the company's global sales. The drivers were Li Ning in China and other licensees in India, Indonesia and Korea.
