05 Mar Russian crisis in Ukraine affects Nike, Adidas, Columbia Sportswear, other sports apparel brands
The unfolding crisis in Ukraine is a big deal politically and militarily, and has financial markets nervous the world over. Closer to home, it could have a significant impact on Nike, Adidas, Columbia Sportswear and other footwear and apparel brands that have big footprints in Oregon.
Economic sanctions from the West are a very real potential response to Russia’s military move into the Crimean peninsula. The U.S. said late Monday it will suspend talks with Russia that had been aimed at boosting trade and investment.
In the affected areas, “consumers are probably inclined to save and less inclined to invest in new athletic apparel,” said Lauren Beitelspacher, director of Portland State University’s athletic and outdoor program.
Nike and Adidas have a significant presence in Russia and the companies have made statements in the past year signaling their intentions to grow bigger there and in Central and Eastern Europe.
Nike regards Russia as one of its fastest-growing countries and has said it expects to soon increase sales there to more than $1 billion a year.
While Nike’s annual report does not state revenue figures for specific countries, the narrative says fiscal year 2013 sales in Russia were 28 percent higher than the previous year.
Russia is lumped into the Central and Eastern Europe geography in Nike’s annual report. The region accounted for nearly $1.3 billion in sales in the most recent fiscal year, 7 percent higher than the year before. Given Nike’s stated desire to grow in Russia, then, the country accounts for the vast majority of the regional revenue.
“Revenue growth in Central Eastern Europe was driven by growth in all key categories, most notably Running, Football (Soccer), and Sportswear,” Nike’s 2013 annual report says.
In Oregon and globally, Nike is the biggest sports footwear and apparel brand. In Russia, though, it is chasing Adidas.
Adidas, which has its North American headquarters in Portland, is regarded as Russia’s leading sports brand. The Adidas brand accounted for 17 percent of 2012 sportswear sales in Russia with 5 percent for Adidas-owned Reebok, according to the consumer strategy research company Euromonitor International. Nike accounted for an 11 percent share.
Adidas plans to invest in Russia to make it the third most important market for the company after the U.S. and China. Most of Adidas’ sales are in their own shops “with only a small share of products being sold in other retailers’ shops… Adidas would like to widen both sports-inspired and performance clothing in its … outlets.”
Nike, in 2012, signed a contract with major local retailing company re:Store Retailer Group, which runs Apple, Nokia, Sony, Samsung and Lego shops in Russia, the Eurobrand report says. “The company plans to open three to four new Nike shops of re:Store Retail in 2012 and increase this number to 15 by 2015.”
Nearly 60 percent of Columbia Sportswear’s sales are in the United States. But the region that includes Russia accounts for about 14 percent, which is still significant. Russia was one the three freestyle ski teams that Columbia outfitted for the 2014 Winter Olympics, which concluded in Sochi, Russia, a little more than a week ago. The U.S. and Canada were the other two.
But the situation in Russia also will undoubtedly affect the area’s smaller brands which have had ambitions of establishing a foothold Russia.
Korker’s, the outdoor footwear brand, established a distributor relationship in Russia last year. Sean Beers, Korker’s president, hadn’t given much thought Monday to how the situation will affect that relationship or future sales other than, “this isn’t good.”
— Allan Brettman