Dubai: Sales of sporting goods in the UAE is expected to grow modestly or be flat over the next 12 months, a sign that economic growth is slowing down, according to a retail analyst.
Consultancy Euromonitor International expects the country’s sports retail market, valued at Dh3.9 billion in 2014, to grow by 6 per cent this year. But between 2015 and 2019 the market is forecast to expand by 4 per cent annually.
“Given that sporting goods is largely discretional spending, sales are generally tied to the overall health of the economy and consumer confidence. Our view is that the economy will perform reasonably well over the next year but certainly growth will slow. As a result, we see sporting sales to experience modest gains, possibly remain flat,” said Colin Beaton, managing director of retail consultancy Limelight Creative Services.
To boost sales, retailers are expected to offer more discounts in the coming months. But this means that they will likely be less profitable, he said.
“The issue for retailers will be profit margins. We expect retailers to provide deeper discounts more often on more products,” he said.
According to a report by market research firm Nielsen, the UAE’s consumer confidence index dropped in the second quarter as a result of lower sentiment over job prospects and personal finances. It reached 108, falling by seven index points from the first quarter. This is the biggest decline in six years.
The report suggests consumers are more careful not to overspend on clothes and are looking for ways to cut household spending.
The UAE economy is expected to grow at a rate of 3.8 per cent in the current year, lower than 2014’s growth rate of 4.5 per cent, according to Standard Chartered’s Global Focus report.
While the growth rate of the sports retail market is slowing down, it is outperforming the growth of the entire apparel and footwear industry, according to Diana Jarmalaite, research analyst at Euromonitor International.
Positive effects
Factors like consumers’ increasing health awareness and the launch of sporting events are helping the sports retail market to grow, she said.
“The sportswear retailing has positive effects from global and local sport events, such as FIFA World Cup. Additionally, an increase in health-conscious lifestyles is another booster, as consumers increasingly adopt a cosmopolitan lifestyle by visiting the gym or jogging before work or in their lunch breaks, particularly in Dubai and Abu Dhabi,” she said.
A number of new sporting goods companies are entering the market, while existing players are expanding their presence, she said.
For instance, French chain Go Sport expects to open its largest outlet in the world in Dubai’s Mall of the Emirates in September. It also plans to open an outlet in Dammam, Saudi Arabia in late August, according to Andrew Fairall, general manager at Qatar-based Al Mana Sports Division, which operates Go Sport in the Gulf.
Also, earlier this year, the Dubai-listed retailer Marka said that it plans to open six more Modell’s Sporting Goods stores in the UAE and the region in the next two years.
A drop in the number of tourists from Europe and Russia to the UAE over the last year due to currency fluctuations have not affected the sports retail market since “it was never dependent on tourists”, Jarmalaite said.
