The sporting goods market situation continues to be pretty bad in Portugal. Sport Zone, the country’s biggest sporting goods retail chain, is trying to fight back. It is also going ahead with the opening of new stores at home and abroad, but this program is being hampered by another serious problem: the international real estate crisis.
Sport Zone belongs to the huge Sonae Group, which operates other types of stores and several shopping centers around Europe. Paulo Azevedo, Sonae’s chief executive, has defined internationalization as a priority for the group, aiming for operations abroad to represent 25 percent of the group’s total specialty retail sales and 35 percent of the total assets by 2012.
Sport Zone, which has already reached a dominant position on the Portuguese market, is one of the main banners designed for this strategy. Sport Zone was considering entering the Turkish market, opening its first store in Istanbul last May in a new mega mall, but the financial crisis has placed that real estate project on hold.
While the development of new shopping centers is getting the brake more in emerging markets, where the financial situation is more serious, several new projects have also been delayed or canceled in Iberia. Thus, officials of Sport Zone are no longer certain whether it will be able to open six more stores in Portugal and six more in Spain as previously planned. For the balance of the year, most of its investments will go into the remodeling of existing units.
For the moment, Sport Zone operates 70 stores in Portugal, four more than at the end of 2008, and 10 in Spain. All the Spanish stores have been opened in the last months and their performance so far has not been the same in every region. For instance in Corunna, where the client is similar to the Portuguese, the business is doing well, while in Madrid the consumer is very different from what Sport Zone is used to and it was necessary to make some adjustments.
Other than that, company officials say they have been suffering from an ongoing recession in the Portuguese sporting goods market, with some important brands recording sales declines of up to 40 percent in their own stores, especially in the medium price range. Many other retailers have closed their shops.
Sport Zone has continued to grow, but not at a double-digit rate as before, and the margins are lower. The chain has been reacting to the consumer recession by giving a further boost to its own private-label programs in terms of product ranges and marketing. This strategy has been applied to some of the other banners operated by Sonae in other sectors, and it seems to be working.
Sonae’s results for the first half of this year show a 7 percent increase in the group’s total turnover. Operating income before amortization and depreciation (Ebitda) rose by 16 percent to €272 million for the group, with 12 percent growth for continuing operations. Net profit went up to €29 million.
While its revenues from shopping centers declined by 4.2 percent to €79 million, or by 1 percent on a comparable basis, the group’s food retail stores saw their sales rise by 7.0 percent. The specialty retail segment, to which Sport Zone belongs, had the best performance, recording growth of 24.7 percent to €473 million, but its Ebitda fell by 83.4 percent to €2 million. On a comparable store basis its sales were down by 3 percent for the six-month period, however, but up by 2 percent in the second quarter.
Besides Sport Zone, Sonae’s specialty retail business includes banners such as Worten (electronics and household appliances), Loop (shoes), Modalfa and Zippy (apparel). Together, these operations had a total turnover of €316 million in 2008, and Sport Zone was the biggest contributor with a turnover of €204 million, or 64.5 percent of the total specialty retail segment. Sport Zone, Worten and Zippy all have some stores abroad, and they represented more than 10 percent of the segment’s turnover in the first half of 2009.
The Portuguese island of Tavira will be the venue next Sept. 24-27 for a new event, the Sport Zone Experience, where consumers will be able to participate in 40 different sports over a surface of 100,000 square meters.
