A French private equity fund, Activa Capital, has agreed to acquire a stake of 37.4 percent in the French buying cooperative of Sport 2000 International for about €40 million. Combined with bank loans of about €60 million, the total investment of €100 million is designed to finance the development of a network of company-owned stores to be established in high-potential areas where the retail members of the cooperative don’t have yet a presence, particularly urban and suburban centers with more than 200,000 inhabitants.
The business plan is based on an interesting study by Asterop, a market research company specializing in retailing that works for Intersport France, Galeries Lafayette, IKEA and other major clients. It shows that the French people would probably spend about €2.7 billion more a year on sporting goods if specialty retailers would cover the country on a homogenous basis, creating 1.2 million square meters of retail space where their market penetration is relatively low.
The French market was worth €9,145 million in 2007, according to Asterop, which includes bicycles, camping, hunting, fishing and other segments in the total count, resulting in per capita spending of €350 a year. Spending levels vary, reaching for example €854 in Paris' suburban area and €436 inside the capital. Sport 2000 has no presence in either of these territories, which will probably be attacked only in a second stage.
As Asterop’s study points out, opportunities exist for example in areas where Décathlon doesn’t have a presence because its store format is too big to justify the investment or where it has a dominant position, creating the demand for an alternative. Décathlon has a market share of 30.4 percent according to Asterop, followed by Intersport with 11.7 percent, by Go Sport with 9.5 percent, and by Sport 2000 France with 6.2 percent. According to Sport 2000, the market shares are 42 percent for Décathlon, 15.9 percent for Intersport, 12.1 percent for the Go Sport group and 8.4 percent for Sport 2000.
The new business plan of Sport 2000 calls for a market share of 9.5 percent by 2012 with retail sales of €350 million after VAT through company-owned stores and €890 million through the affiliated members’ stores. The notoriety of the Sport 2000 brand is set to grow from 39 to 59 percent across the country. The ratio of private label items should increase from 5 to 10 percent of sales.
In 2007, the members of Sport 2000 in France reached sales of €580 million, 5.5 percent more than in the previous year and about 50 percent more than in 2003. The 194 Sport 2000 stores located in mountain areas saw their sales grow by 7 percent on a comparable basis. The 289 others grew by 2.2 percent on a same-store basis. They had average sales of €3,000 per square meter and an average net profit margin of between 2 and 3 percent.
The 398 retail members of Sport 2000 in France, which have 530 stores, overwhelmingly approved the new project, which doesn’t involve any changes in their fees, partly because it will augment the buying power and the visibility of the cooperative. Marketing expenses were recently raised to 1.5 percent of revenues and will remain at that level, but they will be leveraged with a high turnover.
The existing retail members will continue to control Sport 2000 France with a joint 58.4 percent stake. The balance of 4.2 percent will be owned by William Monti, chairman and chief executive of the group, and other members of its management. To make the transaction possible, Sport 2000 Deutschland recently gave up a 33.3 percent stake it had acquired in the French cooperative in 2000 to prevent it from falling into other hands at a difficult time.
Under Monti, who has his own stores, Sport 2000 has managed to carve out an interesting position in the market by adding more fashion than its bigger competitors and by starting up new store formats specializing in footwear (S2), bicycles (Modovélo), ski products (Skiway) and outdoor (Espace Montagne).
The number of S2 shops is expected to grow this year from 31 to 50 units thanks to the recent affiliation of about 20 stores operated by former disgruntled franchisees of The Athlete’s Foot. The 18-month-old Mondovélo chain is doing well with 12 stores and five corners in Sport 2000 stores, and 10 others should be added before the end of this year. An additional 25 full-line Sport 2000 stores are also planned for this year. A total of 25 company-owned stores are due to be established in the next 12 months – 15 for the Mondovélo banner and 10 for Sport 2000.
Sport 2000 France badly needed achieve more critical mass after the termination of a former joint purchasing agreement with an even smaller French buying group, Twinner, which is now working together with Intersport France. On the other hand, the management came to the conclusion that Sport 2000 could expand in a significant way in France only as an integrated sporting goods retailer like Décathlon or Go Sport.
There have been numerous other recent examples in other parts of Europe of sporting goods retail cooperatives bringing in outside investors or opening their own stores or acquiring other chains. Even in France, Intersport owned some stores for a while, but then resold them to some of its retail members. Intersport has bought chains in Germany or Sweden. It has set up its own stores in Spain and then resold them to one of its members.
