Elmec Sport, a leading Greek sports retailer and wholesaler that is responsible for the distribution of Nike in Romania and Bulgaria, confirms that it has been in advanced talks with Laskaridis, a Greek shipping company, to sell part of its shares. While Elmec is listed on the Athens stock exchange, about 51.8 percent of its shares belong to Lucy and Sam Fais, the chairwoman and general manager of the company.
The Fais siblings, who founded the company in 1981 with their father, Ino Fais, indicated that the talks should come to an end “within a reasonable short period.” In a recent statement, Elmec confirmed that Sam owned 27.51 percent of the company, against 24.32 percent for Lucy. A recent increase in the price of Elmec’s shares places the company’s worth at about €194 million. It remains unclear what is motivating the Fais siblings to talk about a sale, and how Elmec could benefit from its acquisition by a shipping magnate.
Meanwhile, Elmec stated that its sales had crept up by 0.4 percent to €181.3 million for 2006. The fast expansion of Elmec’s retail business just about made up for the loss of its distribution agreement with Nike for Greece and Cyprus, which ended on May 1, 2006.
Nike, which has set up its own Greek subsidiary, has partly compensated for this termination by attributing to Elmec another distribution agreement to sell Converse in Greece and Cyprus, for 6 years from the beginning of 2007. The brand was previously in the hands of a company specializing in electronics. Elmec has already been selling Converse in Greece and Cyprus from 1988 until 2006 by Athanasopoulos, a strongly established distributor of sporting goods in Greece. Athanasopoulos has a long track record in the business since it started as the distributor for Adidas in Greece from 1975 to 1988. From the beginning of this year it has been the exclusive distributor of K-Swiss in Greece and Cyprus.
For the full year 2006, the end of the Nike deal knocked about 37 percent off Elmec’s wholesale turnover from apparel and footwear. Sales for the division, which otherwise includes the distribution of such brands as Harley Davidson, Gas Jeans, Dockers and Helly Hansen, among others, dropped to €49.3 million for the year.
On the other hand, the company’s department stores saw their sales increase by 56 percent to €83.6 million, which appears to validate Elmec’s gutsy diversification drive. The Attica department store, a high-end complex that is described as the largest in Athens, lifted its sales from about €43 million in its first year, where it operated for only nine months, to €71 million in 2006. Last December Elmec opened a discount department store at Athens’ international airport and it will take part in several other large-scale retail developments in Greece and Romania over the next years.
Sales at Elmec’s 130 single-brand and multi-brand stores in Greece, Romania and Bulgaria were up by more than 16 percent to €56.2 million. Elmec opened 34 stores during the period, 20 of them in Greece, 10 in Romania and 4 in Bulgaria. It intends to further expand its network of Nike stores from 58 to 70 stores in Greece, Romania and Bulgaria.
Sales of gym equipment remained much smaller at €4.2 million, up from €3.8 million in 2005. Elmec sells Technogym equipment to Greek and Romanian gyms, as well as Icon machines on the Greek home fitness market.
Greece still makes up the largest part of Elmec’s sales, but chiefly due to the loss of the Nike contract domestic revenues increased by less than 1 percent to €155.1 million in 2006. Sales in Romania more than doubled to nearly €40 million, and excluding new store openings they rose by about 20 percent. Elmec is most bullish about the prospects for this country, which is now a member of the European Union. It has just opened a large multi-brand store in Bucharest, called the Famous Brands Gallery, featuring Nike and all the other sportswear brands that it represents in the country. It is participating in the development of a 122,000-square-meter shopping center and other projects in Romania.
Elmec’s revenues in other countries were nearly halved to €9.5 million, owing to the end of the Nike contract in Cyprus. Included in this tally, Elmec’s Bulgarian sales remained stable as the company refrained from investing in the country on the same scale as in Romania. Company officials point to very disturbing problems with the Bulgarian authorities, with sales of counterfeit Nike products in the country estimated at about the same volume as genuine Nike items.
Elmec’s gross margin declined from 45 percent to 42.7 percent due to the larger share taken up by Attica, which generated a relatively low margin of 32 percent. Net earnings declined sharply to €5.9 million, down from €10.1 million in 2005, due to the lower margins as well as lower revenues from secondary operations.
For the present year, Elmec sees continuing growth for its department stores and its sports retail outlets. It targets sales of €80 million for Attica and further growth from store openings. Elmec’s sale of Converse products in Greece and Cyprus will begin to add to revenues from September 2007 and Elmec expects this new business to start generating profits in 2008.