For the sports retail sector the year now coming to a close has been one of economic turbulence and major international events. Customers’ current reluctance to spend in many markets is causing sales to shrink, although they had been growing consistently until recently. This is not a universal phenomenon, however. A few categories and brands have escaped. Furthermore, Sport 2000 (Zentrasport) in Austria has seen organizational changes since its acquisition, on Oct. 1, by the ANWR Group. This has transformed the five-country network, comprising Germany, Switzerland, Belgium, the Netherlands and Luxembourg, into a seven-country network, with the addition of Austria and the Czech Republic. Get to know more about the current situation at Sport 2000.
Margit Gosau, CEO of Sport 2000 International and Managing Director of the seven-country alliance Sport 2000 GmbH, provides insights into the current situation in sports retail and offers her expectations for the coming year.
The year is coming to an end. What is the situation for your retailers in your national markets?
In Germany, we are seeing very stable development among our retailers. It’s about the same as last year. If you look at the sell-through, we had a bit of a slow start to the year, but towards the end, in September and the beginning of October, the situation improved, and at the moment it looks quite good. On an international level, it’s also about the same as last year.
In Switzerland, the situation is a bit different, because sales have dropped significantly because of the developments at our Sport 2000 partner Sport X. Sport X decided to downsize its sports business and sell parts of it. Part of it was taken over by Ochsner Sport, for example, and this sales volume is no longer included in Sport 2000’s sales. Then Manor left the network, and of course those sales are missing as well. If you look at the existing retailers that were there before and are still there now, you can say that they’re also developing consistently at the previous year’s level. This is very similar to the situation in Germany.
In Benelux, on the other hand, we’ve seen a very positive development with an increase in sales. This is certainly also because we generally have a lot of team sports and sportstyle sales in Benelux. Our retailers there are generally doing very well, also because our international strategy is working well in terms of format and concept development, renovations, elevation programs and the roll-out of our Absolute formats and sneaker concept in Benelux. In general, the markets are slightly in line with last year.
Sport 2000 CEO Margit Gosau: Modernization has a clear sales impact on retailers
Since October of this year, you’ve been a seven-country association. What’s the current situation in the new markets?
On Oct. 1 of this year, the ANWR Group took over the operational business of Sport 2000 (Zentrasport) in Austria. Since then, we’ve been a seven-country association, because Sport 2000 Austria brought the Austrian and Czech markets on board. Of course, the situation in Austria is a bit special. Last August, Zentrasport, our license partner for Sport 2000 and an independent cooperative at the time, had to file for Chapter 11. This was triggered by the insolvency of a very large retail partner. As a result, we had to start from scratch in Austria. The Austrian retailers had to be completely brought back into the new network, with new partner contracts, new brand contracts and so on. This process is still ongoing and is not 100 percent complete. That’s why it doesn’t make sense at the moment to compare current sales with last year’s figures.
In addition, we have a strong winter-sports and bicycle business in Austria. Both businesses have been under a lot of pressure over the last year and a half.
You’ve said that in Benelux you can see positive sales effects to the new formats and concepts. Why can’t we see this in other countries?
In Germany, this strategy is also working, especially for Absolute Run, Absolute Teamsport and in the sneaker business. In general, however, we still have some catching up to do when it comes to encouraging multicategory retailers to modernize.
Here in Germany, for example, we are seeing a generational change among retailers. As a result, some retailers have not invested as much in recent years, which has led to an investment backlog in the average multicategory retailer. That’s why we’re now going to these retailers and supporting them in transformation processes.
We have not yet made as much progress in Germany as we have in Benelux. In Benelux, you can see the results, even at the store level. When a retailer modernizes and attracts new target groups, it has a clear positive impact on sales.
How did the major sporting events, the Olympic Games and the European Football Championship, affect sales? Would you have expected sales to be higher?
No, I haven’t. The Olympics generally don’t cause a lot of volatility in the sporting goods industry. That’s never been the case. There’s only a slight positive trend, because interest in sports is much higher during these periods and some consumers are inspired to start exercising again and buy new equipment. But these are small effects. The effect of the European Football Championship or World Cup is usually much bigger, and at Adidas it has had a very strong effect. The German team’s pink Adidas jersey was the best-selling jersey of all time. The white national team kit was also very well received. This gave a real boost to sales and also generated a lot of interest in the Adidas football brand in general. At the same time, the brand was also revitalized in the lifestyle sector, so we achieved significant effects at Adidas.
“Adidas-effect can be observed at Sport 2000 retailers”
For a long time, Nike was ahead of Adidas in the lifestyle sector. Has that changed?
Adidas and Nike are both very strong in this area. Adidas recently recorded a significant increase and performed better than expected. This effect can also be observed at our retailers. Even retailers who haven’t been buying so much Adidas recently are now seeing a significant increase in sales. The revival of the classic Samba, Spezial, etc., in particular has provided strong impetus here. Looking at the two brands, this has also shifted the distribution of sales in this product category slightly in favor of Adidas.
Has there been a noticeable change in the number of retailers? In Germany, for example, we’ve seen some major insolvencies in the retail sector.
No. Those who are pronounced dead tend to live longer. It’s always been said that small sports retailers are not that relevant. But the big brands have been very much mistaken about that. There’s a small renaissance of classic sports retail. The small retailers in particular have proven to be very resilient. They often own the real estate, they can scale their costs better than the big flagship stores, and that’s why they’re often a little bit more flexible. Large retailers can’t suddenly scale back their business if consumers buy less. When warehouses and stores are full, they tie up a lot of capital. That’s why we see the impact on larger retailers such as SportX, Sportscheck and Galeria Kaufhof much more than on smaller retailers, who can control this better.
And there’s another problem: If they’re not specialized, the big ones often have the problem that they have large generalist areas that need to be well curated and advised. But we all know that it’s not easy to find good staff these days. There’s a generational change, and young people have different expectations. But if I can’t provide advice, because I don’t have the staff, then large spaces are not a help but a hindrance.
Also, medium-sized retailers tend to be more resilient, because they often have a top-dog function and a loyal customer base. That’s often not necessarily the case with the really big ones.
Gosau: Consumers are adapting spendings
With the current consumer crisis in mind: What areas are still doing well? During the Coronavirus crisis, running and outdoor were the strongest. Is there a shift now?
No, you can’t say that. These segments are now returning to normal. Sport is still important, and lifestyle fashion is also important. People are still spending money on these things. But not so recklessly anymore. They think twice about whether they need to replace their running shoes again or whether they should wait a few more months. In general, retail traffic has decreased after Corona. There aren’t as many people in the shops or online. People are cutting back on their consumption because they don’t know what’s going to happen. Inflation, rising energy costs – we have a very volatile market out there. Consumers are adapting to this by holding back on spending.
Generally speaking, however, we have not seen a lot of change in the different categories. Running and walking remain strong. Outdoor sports are still an important and strong revenue driver, although they’ve declined slightly. Team sports are strong, as are leisure and fashion. The bicycle segment has declined significantly, but this is also due to the fact that the boom of previous years is slowly leveling off at a normal level.
“Winter sports sales have started very well” for retailers
What about winter sports? How are they doing?
Winter sports have of course picked up, because of the season, and you can see that it’s back to what it used to be. So far winter sports have started very, very well, and now we have to see if the winter will develop as we all hope.
What are your best margin categories?
Many running products in the specialist area are sold at MSRP. This is our category with the lowest price erosion. It’s closely followed by swim and beach, which is also consistently strong in terms of margins. This is remarkable, because this is an area that is often overlooked. But it consistently delivers good margins. Outdoor is also relatively strong in terms of margins, especially in the specialist area. So we advise our retailers to order well in high-margin categories, to keep good stock levels there and to be very careful with volatile areas.
Can you give us a brief outlook on what you expect next year? How will retailers order for winter 2025?
If I could say that, I would be a sought-after person! I can try to speculate: I think retailers will continue to order well in the successful categories of running and walking. Team sports will remain at the current level.
Outdoor has significantly reduced orders at retailers. Retailers also had high inventories, particularly in the outdoor footwear segment. We also had a bit too much merchandise on the market in the textile sector. I think this will level out again. In other words, this category will definitely pick up again and orders will remain stable.
Lifestyle fashion and casualwear also play an important role and are in high demand. But there’s always the question of availability. Which retailer can get what? Not every Adidas, Nike or Puma product is available to every retailer. With our concepts and formats, we provide the best possible support to ensure good availability for our partners.
In the winter-sports segment, it will of course depend on how the winter develops after this good start. If the warehouses are empty at the start of the order phase in mid- to late February, orders will be good. This business is very weather-dependent.
