Le Coq Sportif was affected by declining royalties and far-reaching investments to upgrade its apparel business last year, but the efforts are part of a broader strategic plan to reinforce the brand that is starting to pay off in France.
Le Coq Sportif saw its reported sales fall by 11.5 percent to 108.2 million Swiss francs (€98.1m-$111.3m) in 2015, but this was entirely due to exchange rate changes. Without them, the French brand's sales increased by 0.7 percent, with a sharp rise in apparel sales.
Le Coq Sportif has been investing abundantly to support its strategic development, with a specialist apparel unit in Romilly and more branded retail space. These efforts are meant to reaffirm the French brand's identity and the quality of its apparel, which is produced in Europe.
The brand's wholesale equivalent sales reached €175.2 million in 2015, which was a decline of 8.5 percent. While the French brand was under pressure in Italy, which was its largest market ten years ago, it has strongly raised its turnover in France, with a double-digit sales rise in its own stores. Demand in the French market supported a rise of 32 percent in apparel sales, pushed up by an endorsement deal with Saint Etienne football club.
The figures are detailed in the annual report of Airesis, the Swiss holding company that owns 78 percent of Le Coq Sportif. In June 2015 it acquired 92 percent in Movement, a Swiss company specializing in freeride skis.
Separately, Le Coq Sportif's subsidiary in Spain reportedly raised its sales again in 2015. Luis Pruñonosa, country manager for Le Coq Sportif Iberia, told CMD Sport that sales advanced by 14 percent to reach more than €10 million and that they should rise by another 20 percent in 2016 to surpass €12 million. About 70 percent of the Spanish turnover comes from footwear, compared with 25 percent for apparel and 5 percent for accessories. Le Coq Sportif has one outlet near Madrid and one store in Barcelona, and the country manager said that it wanted to add a second store in Madrid in 2017.
The royalties earned by Le Coq Sportif in 2015 were on the slide, which was chiefly attributed to weaker sales in Brazil and in the Benelux countries. The French brand's licensing agreement in Brazil was ended and sales started to decline in the Benelux countries, where Le Coq Sportif has been reaping outstanding sales for many years through a licensing agreement with Unlimited Sports Group (USG), one of the leading sports retailers in the Netherlands. Over the years, the agreement was expanded to cover Germany and Scandinavia.
As things turned out, USG suddenly went bankrupt earlier this year, as previously reported. Airesis is currently evaluating other options for all of the above countries, which appears most likely to involve its own sales force in the Benelux countries and Germany, and distribution partners in Scandinavia.
Le Coq Sportif's gross profit margin declined by 1.0 percentage point to 44 percent in 2015, as it compensated partly for the strong impact of the dollar with more sales in France and in own retail stores, which yield higher margins. But after a rise of 13.9 percent in operating expenses, the brand's operating loss (Ebit) widened to €10.0 million, compared with €3.0 million in 2014. It ended the year with a net loss of €8.2 million, compared with €3.0 million. Airesis attributes the operating loss to the currency situation as well as investments that have yet to fully pay off.
These efforts to enhance the brand are apparently starting to resonate. Le Coq Sportif's turnover was on the rise in the first quarter, with a sales increase of nearly 10 percent for the spring/summer range, driven by a 25 percent sales hike in France. Airesis regards this pick-up in France as an important signal that its strategy is working. It thus predicts that its investments will lead to increased sales and an improved margin in 2016.
Movement brought in sales of CHF 9.3 million (€8.43m-$9.56m) in 2015, with a gross profit margin of 46 percent and operating profit of CHF 1.1 million (€1.00m-$1.13m). Movement's net profit amounted to CHF 421,000 (€382,048.6-$433,671.1) but the company still generated a loss of CHF 958,000 (€869,222.0-$986.745.5) due to required adjustments in the valuation of the acquired stock. This entire stock for 2015 has been sold, meaning that there will be no further impact of this sort in 2016.
Airesis ended the year with a consolidated turnover of CHF 117.6 million (€106.7m-$121.1m), which was a decline of 3.9 percent. This turnover included licensing revenues of nearly CHF 5.6 million (€5.1m-$5.8m), down from more than CHF 7.6 million (€6.9m-$7.8m) in 2014.
The Swiss company's operating loss (Ebit) amounted to CHF 12.6 million (€11.4-$12.9), compared with CHF 3.7 million in 2014. The net loss attributable to Airesis shareholders, excluding the adjustment in stock valuation for Movement, landed at CHF 10.0 million (€9.0m-$10.2m), compared with a loss of CHF 3.7 million (€3.4m-3.8m) in 2014.
