The weakness of the U.S. dollar, new phenomena like Under Armour and Lululemon and the fast-paced development of Chinese companies all aided the sporting goods industry to record a 16.9 percent increase in their combined stock market capitalization in 2007. However, in local currencies, European sporting goods firms registered an increase of only 4.2 percent, down sharply from the 37.3 percent increase that they had scored in 2006. They did 12 percent better in U.S. dollars.
The overall gain is remarkable, considering that the Financial Times’ All-World Equities Index rose by only 10.3 percent in 2007, pulled by a 36.7 percent gain for emerging markets such as China, where equities jumped by 61.3 percent. In the developed market, all sorts of listed companies saw their combined share value increase by only 7.6 percent. Stocks went up by 4.1 percent in the USA and by 5.4 percent in the UK. In the rest of Europe, they increased by 15.2 percent, thanks mainly to the recovery of the German economy, where the DAX index rose by 22 percent.
In the sporting goods sector, American and Canadian companies saw their stock market capitalization rise at a weighted average rate of 9.9 percent according to Sporting Goods Intelligence, down from 14.1 percent in 2006. The value of Asian stocks grew by 35.7 percent in local currencies, compared with a 2006 increase of 53.0 percent. One year ago, our annual stock chart had signaled a higher global increase of 23.9 percent in dollars for our sector in 2006.
This exclusive chart compiled by SGI tracks down the market values of the biggest public sporting goods companies – manufacturers, vendors and retailers – all over the world at the end of each year, taking into account both stock prices in local currencies and shares outstanding on both dates uses. We include companies such as Luxottica, which has taken over Oakley, and Fortune Brands, which owns the Titleist, Cobra and FootJoy golf brands.
In order to weigh the stocks according to their relative value, all stocks are converted into U.S. dollars at the year-end exchange rate to rank them and to determine their shares of the total equity market. The corresponding values of the 94 largest industry stocks are listed on pages 2 and 3 of this issue. They continue to show Nike at the top, but the Adidas Group has replaced Fortune Brands as the second-largest factor in terms of stock market capitalization, followed by Luxottica and by Li & Fung, the big Asian sourcing company. In 2006, the former Adidas-Salomon had come in third, followed by VF Corp. which is now in 6th place after Fortune Brands.
With its market value recovering by 28.4 percent to $32 billion, after a 6.6 percent decline in 2006, Nike has come to represent just under 5 percent of the global sporting goods industry’s total market capitalization of $184.6 billion. As with Nike, Adidas’ global presence and its strong growth in emerging markets helped the industry’s #2 to show a gain of 26.1 percent in local currencies to the equivalent of $15.3 billion. Its stock had already gained 49.8 percent in 2006.
Together, Nike and Adidas accounted for just over half of the total value of the sports shoe sector, which rose by 21.8 percent to represent 45 percent of the industry’s total value. Fast-rising stocks like Crocs and Deckers helped out, but 11 of the 22 footwear stocks saw declines during the year. One of the big disappointments was Puma, which lost 9.5 percentage points, taking up 7th place on our chart after VF.
VF, too, lost 17.7 percentage points, contributing to drag down the value of the apparel sector ex Nike, Adidas and Puma. Even Under Armour went down by 12.3 percent, after its previous stellar performance. Columbia Sportswear and the three major surfwear brands – not just Quiksilver – lost points, too. Overall, the sports apparel segment rose by 16 percent for the year and accounted for 22 percent of the total market capitalization. It was aided by the exceptional performance of companies such as Li & Fung, Gildan and Umbro, whose market value appreciated by 41.1 percent because of Nike’s takeover bid.
The equipment sector was the worst performer. Heavily influenced by an awful winter season and by a lack of innovation in big sectors like golf and fitness, this segment suffered a 7.8 percent decline in market value for the year. The 19 equipment companies accounted for 21 percent of the industry’s total market capitalization value in the industry, and 11 of them recorded declines. Shimano, the leading factor in the segment with an 8 percent share in market value, was the bright spot with a 15.1 percent gain. Amer Sports mustered a 7.0 percent increase but this was not sufficient to offset weakness at other big stocks with declines, such as Brunswick, Fortune Brands and Jarden, the new parent company of Coleman and K2.
The retail sector had an overall 4.8 percent increase for the year, in spite of difficulties for U.S. outdoor specialists like Cabela’s and Gander Mountain and mall-based U.S. retailers like The Finish Line, which are covered regularly and extensively in the American edition of SGI. A relatively new entrant on the U.S. retail scene, Lululemon, ended the year as the world’s most valuable sporting goods retailer, coming ahead of Dick’s Sporting Goods and Foot Locker.
Excluding Lululemon and Dick’s, the retail sector would have suffered a 32 percent decline worldwide. This was partly due to the intense competition in the UK, where the four major sporting goods retailers suffered a combined 54 percent drop in their stock market value. The only winner was The John David Group with an 11.0 percent increase. The big loser was Sports Direct International, whose market value fell by 61.2 percent from its initial quotation on the London Stock Exchange last February.
