Their performance was better than that of the equity market in general, with Asian and European stocks outperforming North American companies. The stock market capitalization of American sporting goods firms, which dominate the publicly quoted industry, registered a combined 14.1 percent increase in 2005. However, European stocks grew by a stronger 37.3 percent in local currencies, while the 17 Asian stocks tracked by us soared by 53.0 percent.
Evidently, macroeconomic factors weighted heavily on the fortunes of many sports goods companies. While the DJ Industrial Average dropped by 0.61 percent last year, the European DJ Stoxx 600 index increased by 23.51 percent, with the Frankfurt Stock Exchange up by 27.3 percent. In Tokyo, the Nikkei index ended the year 40.2 percent higher. Thanks in part of higher oil and gas prices, the Russian stock market in Moscow rose by 80 percent.
Our annual study compares the stock prices of nearly 100 publicly held stocks trading on U.S., European, Asian and Canadian stock exchanges. Prices were compared between Dec. 30, 2004 and Dec. 29 or 30, 2005, and multiplied by the number of fully diluted shares outstanding at the end of each year, using the most recently reported figures. Comparisons were made in local currencies to minimize the impact of currency swings, as the U.S. dollar increased by 14.38 percent against the euro and by 13.31 percent against the yen during the year. Five American initial public offerings were also included, using the start-up price and the Dec. 29 price.
Nike continued to lead the list of the world’s biggest sporting goods companies in terms of market capitalization at the end of 2005 (see pages 2-3), although its market value declined by 6.6 percent to $23.05 billion. It was followed by Fortune Brands, parent company of Titleist and other golf brands. Adidas-Salomon came in third with a market capitalization of $9.66 billion, scoring 49.8 percent better than at the end of 2004. Its stock market value continued to increase after the year-end, reaching an all-time high of €168 last week, before settling down at €167.27 this morning.
The European region was strong across the board. Only one stock had a decline while 8 of 12 had double-digit increases and one had a triple-digit increase. Puma’s market capitalization grew by 18.8 percent, propelling the brand into 6th place after VF Corp. & Li & Fung. A year ago it had rushed into 7th place, coming after Brunswick Corp., parent of Life Fitness.
Three Asian companies – ASICS, Descente and Prime Success – had triple-digit gains last year, followed by Mizuno with a gain of 84.1 percent. On the other hand, aside from Prime Success, many Asian contract manufactures trailed far behind because of rising oil costs and pressure on wages, recently compounded by the threat of European anti-dumping duties.
With its 23.9 percent weighted growth in terms of local currencies, the stock market capitalization of the industry nearly matched the 31.2% growth rate achieved in 2004.Thirty of the companies in our index, just under one-third, had an increase above the mean.
By sector, 24 apparel stocks were the top performers with a 39.6 percent increase in value for 2005, closely followed by 22 footwear stocks at 25.4 percent. Gildan was the top performer in the apparel sector and Prime Success in the shoe category. The equipment sector registered a 7.9 percent increase in value, led by Mizuno. Retail companies had a 20.4 percent increase, led by Citi Trends.
Favored by low interest rates, mergers and acquisitions generally boosted the values of several quoted companies, with some exceptions. Nike and K2 did not make any acquisitions last year. Quiksilver bought Rossignol, losing 3.4 percentage points, but Amer Sports, which bought Salomon, gained 22.8 points. VF bought Reef, Stride Rite took over Saucony and Nautilus acquired Pearl Izumi. Adidas’ planned acquisition of Reebok weighed positively in the balance. Another boost came from new IPOs like that of Under Armour, which has rise by 206.6 percent since it went public, ending up in 19th place globally.
Last year’s European stock market rally was driven in part by improving consumer confidence throughout the eurozone. It reached last December its highest level since September 2002, boosting pre-Christmas sales in various countries. MP3 players, flat-screen TV sets and other such items benefited more than sporting goods from the improved climate, however.
Karstadt reports a 1.2 percent sales increase to €1.5 billion for its sports and department stores for the critical 4th quarter – the first increase in 10 years – in spite of little discounting before Christmas. Karstadt Quelle’s mail order business suffered a planned small decline, but the group managed to reach its sales goals for the year.
The World Football Cup in Germany will certainly give a new boost to the sporting goods market in Germany this year, although many consumers will want to spend some of their money on other consumer durables such as TV sets or automobiles ahead of a planned increase of 3 percentage points in the German value-added tax on Jan. 1, 2007.
