European sports equipment retail giant Intersport considers increasing production in China

One of the world's largest sports equipment retailers is considering shifting production to China, at the same time as brands including Nike and Adidas are moving production out of China in response to U.S. tariffs. Intersport International's new CEO, Foli, told the UK Financial Times that the group is considering sourcing a larger proportion of its own-brand products from China, which generated revenue of about 1.4 billion euros last year.

The move by Intersport International comes as American sport brands shift production to other Asian countries with lower tariff rates. In July, Chinese manufacturing activity continued to shrink for the fourth consecutive month. Foli said that shifting production from China to other countries "could put pressure on the capacity of markets that would not usually experience such situations."

Foli, who took over as CEO of Intersport International in July this year, said: "The current situation is not that we have to (move production) from Bangladesh to China, but we can do so." Intersport's main purchasing markets include China, Bangladesh, Vietnam, and Cambodia.

Intersport is a cooperative based in Switzerland, operating 5,500 stores in 42 countries and regions, owned and managed by national organizations. The company is particularly prevalent in Europe, being the largest sports equipment retailer in Germany.

Intersport International achieved global sales of 14 billion euros (tax included) last year, with France remaining one of the main driving markets, selling both its own brand products and products of brands such as Nike and Adidas. The company does not disclose its profits. Currently, although there is still residual capacity in China, the factory space competition for Intersport in countries such as Vietnam and Bangladesh is becoming increasingly intense.

In recent years, prolonged U.S.-China trade tensions have prompted sports equipment brands to move production out of China. Adidas had 27% of its products made in Vietnam, 19% in Indonesia, and only 16% in China last year – mainly for sales of the brand in China. At the same time, 16% of Nike's footwear is currently produced in China, and it told analysts in June that it hopes to reduce this proportion to a higher single digit within the next 12 months.

Foli said that the balance of power in the industry is shifting from giants like Nike and Adidas to retailers like Intersport. Foli stated, "Their (these brands') dependence on us... has undoubtedly increased," and pointed out that many large brands have failed to scale their direct-to-consumer businesses to the expected level.

Foli added that the balance of power "has returned to the level of eight or nine years ago." He hopes that the sales of Intersport's own-brand products will increase from the current 10% of the group's annual revenue to 20% within five years, with the ultimate goal of improving profitability. Foli emphasized, "To achieve a strong and sustainable business, we need higher profit margins."

Original: https://www.toutiao.com/article/1839526355554315/

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