Sporting Goods Retail – Sector and M&A Report

Sports retail raises the bar

Sporting goods retail continues to benefit from strong macro tailwinds, as people of all ages across the globe lead healthier and more active lives. The market is posting a CAGR 4Y of 5% – around twice the rate of global GDP. Mature markets remain robust, while emerging markets continue to perform strongly, boosted by rising participation trends (especially in China), as well as growing disposable incomes among the emerging middle-class.

The M&A market is also flying, underpinned by deals that extend geographic footprints, increase market share, enhance product portfolios (especially in dynamic categories such as outdoor), and deliver e-commerce solutions. External growth is the industry’s preferred strategy (barriers to entry remain high), which will continue to boost M&A activity in 2017.

Key insights

  • Sporting goods retail is posting a CAGR 4Y of 5%, and is forecast to remain between 4% and 5% until 2020. Growth is being driven by emerging markets, casual fashion trends, women’s lifestyle sports, and government initiatives for health & wellbeing.
  • There were some headline grabbing deals in 2016, including a mega deal between US outdoor giants Bass Pro Shops (fishing & boating) and Cabela’s (hunting), which makes the new entity the world #3, with combined revenues of almost €8bn. As a general rule, specialists are posting better numbers than generalists, as customers opt for specialist (expert) service and product offerings.
  • Larger players are embracing vertical integration from both ends of the value chain to improve margins: the big brands (Nike, Adidas, Puma) are growing their retail operations downstream, while leading retailers (Decathlon, Go Sport) are increasingly manufacturing their own in-house brands upstream.
  • Valuation multiples for the sector are typically double-digit EBITDA, and higher for category captains and market leaders. Europe is displaying the highest listed valuations, at 13x EBITDA, followed by Asia (11x) and North America (9x).
  • Leading e-commerce players are also receiving high multiples, and being aggressively targeted by Private Equity (PE) – financial investors are present in 43% of all e-commerce deals. These buy & build platforms are designed to build scale, cost and distribution synergies, and to consolidate the fragmented online marketplace.
Alexandre Ebin
Alexandre Ebin
Partner
Frankrijk

“A positive macro environment is helping the M&A market for sporting goods retail. Deals are being used to tap growth in complementary and high growth market segments, such as outdoor. E-commerce continues to be a popular target, as well as specialists. The days of the traditional bricks-and-mortar SME generalist are numbered.”

Bart Jonkman
Bart Jonkman
Managing Partner
Benelux
Jürgen Schwarz
Jürgen Schwarz
Partner
Duitsland