After ringing up increases of 31.2 percent in 2004 and 23.8 percent in 2005, the stocks of the major publicly listed sporting goods companies around the world clocked a weighted average 25.2 percent increase in their market capitalization in terms of local currencies during 2006. The score came out slightly ahead of the overall equity market worldwide, testifying to the fundamental health of the sporting goods industry. The FTSE All World Index ended the year about 20 percent higher in dollars, boosted by the dollar’s weakness against the euro and the yen, and driven by an increase of 30 percent in emerging markets where sporting goods are not yet a major factor.
On the other hand, the European sporting goods industry stocks underperformed the overall stock market, rising overall by 10 percent in local currencies, against a 16.3 percent gain in the FTSE Eurofirst 300 index. The best performers in Europe were BasicNet, up by 76.7 percent in euros; JJB Sports, up 37.6 percent in pounds sterling; Accell Group, up 30.8 percent in euros; John David Group, up 27.7 percent; and Puma, up 20.0 percent. Puma remained in 6th position on our stock chart, coming after Nike, Fortune Brands, Adidas Group, Li & Fung and VF Corp..
Our annual stock chart, which we are running on pages 2 and 3 of this issue, features the market capitalization of 93 sporting goods companies around the world in local currencies and in U.S. dollars, and compares their performance between the end of 2005 and the end of 2006. Where companies went public during the year, the price of the initial public offering was used instead of the quotation at the end of 2005.
Based in China, where the Shanghai Composite index racked up an overall increase of 130 percent, Li Ning’s stock market valuation rose by 128.5 percent, marking the best performance among the stocks carrying a market cap of more than $1 billion. It was followed in this league by two special footwear companies, Skechers and Crocs, which were up by 121.7 and 108.9 percent. Other strong performers included Hong Kong-based Li & Fung, VF Corp. and Under Armour.
Six more traditional high-capitalization U.S. companies – Foot Locker, Brunswick Corp., Timberland, Pacific Sunwear, Warnaco and K-Swiss – recorded declines, but the biggest drop was suffered by a Japanese company, Goldwin, whose market cap went down by 52.2 percent. Together, the 17 Asian stocks on our chart recorded a 47.2 percent gain for the year, down from a 53.0 percent increase in 2005.
The industry leader, Nike, earned nice multiples from investors with a year-end market cap of $24.95 billion, representing about one-sixth of the industry’s total market capitalization of $152.32 billion. However Nike’s stock rose by only 8.3 percent. Bogged down by the acquisition of Reebok, Adidas managed an increase of only 1.7 percent in euros. It was worth $10.86 billion as compared to $6.29 billion for the much smaller Puma.
Combining their scores with those of other footwear and footwear-oriented companies, the overall sports shoe segment recorded an increase of 20.6 percent, aided by Crocs, Li Ning, Skechers and also Deckers. Apparel-related stocks performed better, with an overall 45.2 percent gain. Equipment was the worst of the class, registering a 9.0 percent increase in spite of good scores by the likes of Accell, Cybex, Oakley and K2.
