ECONOMY

Elmec loses Nike and a quarter of its value

Sports apparel wholesaler Elmec Sport shares yesterday continued to sustain heavy losses in trading on the Athens Stock Exchange, totaling more than a quarter of its value (25.3 percent) in just two sessions, following news that its exclusive distribution of Nike products will end in June 2006. Elmec’s share price fell from 2.53 euros on Monday to 1.89 euros yesterday, when it shed a further 9.13 percent. According to a statement on Monday, negotiations with Nike European Operations Netherlands (NEON) failed to result in a renewal of the contract for wholesale distribution of Nike products in Greece and Cyprus which expires on May 31, 2006. The new contract specifies that NEON will undertake the wholesale distribution itself after that date, while Elmec will maintain the development of the chain of stores with Nike products, Exclusive Sports. This transforms Elmec’s main activity from wholesale to retail, a particularly negative development for the group as it implies an approximate 40 percent loss in turnover in 2004 figures – estimated at about 60 million euros in sales and 10 million euros in earnings. Management believes the projected loss can be recovered by a series of business initiatives, such as expanding the Exclusive Sports chain from 36 to 45 stores in Greece and abroad in the next three years. The same contract, however, allows Elmec to continue the exclusive distribution of Nike products in Bulgaria and Romania for another year, until May 31, 2007, when negotiations will resume. To balance the negative effect, the company aims to make the most of growth potential in Bulgaria and Romania, and of the department store now under development at the old Army Providence Fund building in Athens. Management also plans to restructure Elmec’s operational expenses to minimize the impact on its earnings for 2006 and 2007, counting further on the second Factory Outlet at Athens airport and on exclusive deals for clothing and shoe distribution. Meanwhile, the Capital Market Commission (CMC) said it will investigate all trading of Elmec Sport’s shares on the day before the announcement of its split with Nike. CMC President Alexis Pilavios stressed that every suspicious occurrence on the market will be thoroughly scrutinized, as the new bill on market abuse will bring an end to all «gray zones» and loopholes in the law.