Retail: 55
8.67%
Retail: 181
-0.39%
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Monday, June 25, 2018
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Mon, Aug 28, 2017
Vol 1, Issue No. 33

The Key to Puma’s Success in Basketball

Clyde Frazier. (Photo: Getty Images for PUMA/Jamie McCarthy, courtesy of PUMA.)

Two decades after Vince Carter signed on with the brand and nearly 39 years since Hall of Famer Walt “Clyde” Frazier ended his NBA career; The Cat is back in roundball and ready to roar with the current market trend of heritage and authenticity certainly favoring the brand’s chances.

But can it do so in an athletic footwear segment that has been dominated for years by brands Nike and Jordan? Market observers say it really depends on how Puma executes its entry in the coming months and builds connections with young male consumers in the U.S. and worldwide. They also point out that it’s “newness” and “fresh looks” that are more important to today’s young, kicks-buying consumers, not a specific silhouette or what category a sneaker belongs in.

NPD sports industry analyst Matt Powell, noting that every performance athletic footwear category “is underwater right now,” is blunt with his assessment. “If Puma comes in with a fresh approach, maybe by being disruptive, there’s a way to turn this business around,” contends Powell. Dollar sales of basketball shoes were down 4 percent for the 12 months ended April 30, according to NPD. Over the last five years, casual basketball participation has risen 3.2 percent while the number of “core” players has dipped 1.8 percent, according to the 2018 SFIA Topline Participation Report.

“I don’t know what that (disruption) is, but (basketball) is due for some fresh thinking. So, it could make a difference,” Powell continued. “But if Puma comes in playing the same sort of (business) model we’ve been seeing, I don’t expect it (the entry into basketball) to be anything meaningful.”

Puma is banking on the old, the new and the hip to navigate its course in basketball. The brand’s marquee basketball endorser Frazier was signed to a lifetime Puma contract last week and the brand’s first performance basketball shoe in decades, the Clyde Court ($120 retail), will make its debut on Oct. 1. The new element of Puma’s strategy is NBA Draftees Deandre Ayton (drafted first overall by Phoenix) and Marvin Bagley III (selected second by Sacramento). Observers suggest it bears watching how Puma utilizes the young guns and expands their appeal given they will each be playing in smaller NBA markets. Ayton’s decision to sign with Puma, according to Bleacher Report, was due to wanting to stand out on his own with a brand and not play in the shadows behind Lebron James at Nike or Steph Curry at Under Armour. 

Meanwhile, the modish component of Puma’s strategy for the category is the company’s decision to sign hip-hop mogul and sports agency owner Jay-Z as creative director, similar personnel move Puma made with Rihanna and the women’s category a few years back, where the company says he will oversee creative strategy/marketing and product design. 

Jay-Z’s Puma signing instantly elicited comparisons to Adidas’s relationship with Kanye West (Could the older Jay-Z have the same impact on younger consumers?) and contentions that Jay-Z may face conflicts with his Roc Nation Sports business that represents athletes.

“If more people move to basketball, it’s probably good for everybody,” admits Susquehanna analyst Sam Poser, adding, “Nike is charge of its own destiny (within the category)” and “(Market) share is not the issue here, revenue growth is.”

“It’s about product, who blesses it and how it’s brought to market,” conveys Poser. “…If they (Puma) do it the way Adidas did with Ultraboost or Nike does with Virgil Abloh with something really compelling and ‘tear dropping’ it in (distribution) before bringing in other products around it, then maybe it can work. So much of this is a combination of product and how you go to market.”

Ecommerce’s Tax Advantage Waning


The U.S. Supreme Court’s 5-4 ruling last week, upholding a 2016 South Dakota law that requires online merchants with more than $100,000 in annual sales or 200 transactions within a state to collect sales taxes, may only be the first step in creating a “fair and balanced” sales tax playing field for online and local retailers. The ruling clears the way for states to collect an estimated $13 billion or more annually in extra taxes.  

But the National Retail Federation continues to believe federal legislation is still necessary to spell out details on how sales tax collection will take place rather than leaving this taxing issue for each state to interpret. But at this juncture, it’s highly unlikely the matter will be addressed by Congress before the upcoming holiday season, casting concern that confusion will continue to reign over the matter for months.  

Nonetheless, industry trade groups, including the Outdoor Industry Association and National Sporting Goods Association were quick to praise the highest court ruling on the matter.  

“This decision benefits brick-and-mortar retailers who have been collecting sales taxes,” said Matthew Carlson, the NSGA’s president and CEO. “It removes the unfair price advantage that many remote Internet sellers have by not collecting sales taxes that are due.”  

In a friend-of-the-court brief filed last year, the NRF argued that the Supreme Court’s 1992 decision in Quill Corp. v. North Dakota was outdate and that sales tax collection is no longer the burden it once might have been due to improvements in technology. In a brief filed this year, various trade organizations maintained the lack of uniform tax collection is “inflicting extreme harm and unfairness” on local retailers by “distorting the retail market in favor of absentee ecommerce.”

Bain Capital Acquiring Varsity Brands for Reported $2.5 Billion

Photo credit: varsitybrands.com/spirit

The purchase price for the parent of BSN Sports, the team sports equipment and apparel distributor; cheerleading uniform, camp and competition brand Varsity Spirit; and Herff Jones, a marketer of graduation and education products and services represents a 47 percent premium over the Memphis company’s 12-month revenues of $1.7 billion for the 12 months ended Sep. 30, 2017.  

Bain, which is acquiring Varsity Brands from Charlesbank Capital Partners and an affiliate of Partners Group, will reportedly further accelerate the company’s growth via complementary acquisitions and organic acquisitions and work with management to expand VB’s digital reach and ecommerce operations. Varsity Brands CEO Adam Blumenfeld will continue the business under Bain, whose investment portfolio has included stakes in Canada Goose, TOMS Shoes and Burlington Stores. The transaction is forecast to close in Q3.  

In 2015, a federal court granted Varsity Brands copyright protection on its cheerleader uniform patterns and color designs. The company, acquired by current ownership in 2014, has been the Heisman Trophy maker since 2002. Herff Jones, which purchased Varsity Brands in 2011, bought BSN Sports for $460 million two years later.

Auerbach Center Basketballs.

New Balance Teams with NBA’s Celtics

New Balance didn’t chase any prospective NBA players ahead of last week’s annual draft, but the company did something that will forever align it with the league’s most storied, 17-time champion franchise, its hometown Boston Celtics. 

The 70,000-square-foot Auerbach Center, named after the late legendary president, general manager and coach of the Celtics and mentor to New Balance Chairman Jim Davis, was opened at New Balance world headquarters as the team’s official practice facility. 

EXECS ON THE MOVE
New Leadership at Eddie Bauer, Pacific Sunwear

Arc’teryx’s Megan Cheesbrough and George Weetman. Nautilus’ Jay McGregor and Fjällräven’s Matthew Hershey.

Retailers Eddie Bauer and Pacific Sunwear, controlled by Golden Gate Capital entity PSEB, each have new senior leadership. At EB, Damien Huang has been promoted from SVP of merchandising & design to president. He joined the Seattle company in March 2010 as SVP of outerwear, accessories and gear where transitioned the brand’s product assortment to activity-specific and outdoor lifestyle product. Over at PacSun, Alfred Change is promoted to president from EVP of men’s merchandising & design. Other executive changes at the 422-door specialty retailer include the naming of Brie Olson as EVP/Chief Merchandising Officer for men’s and women’s and Joel Quill to VP of stores.

Elsewhere,
Arc’teryx promotes Megan Cheesbrough to VP of retail and George Weetman to VP of brand and digital commerce as Adam Ketcheson, VP of global marketing and B2C, exits the Amer Sports-owned brand.

• Fitness company Nautilus hires Jay McGregor, whose industry experiences spans Adidas, Birkenstock, Coleman Co., Gerber and Teva, as VP/GM of North American retail.

Fjällräven hires Matthew Hershey as VP of sales and promotes Lara Silven to key accounts manager and adds Christian Brown as sales manager for Canada as the Louisville, CO company restructures its sales team. In July, the company is opening a Canadian office and establishing a third-party logistics warehouse in Montreal.

Nike’s longtime advertising agency Weiden + Kennedy names Andre Gustavo, the managing director in its Brazilian unit as group brand director overseeing the Nike account globally.

Nite Ize names a trio of executives—Brenda Issac as VP of marketing; Jen Bryan as VP of customer experience; and Dale Karacostas as VP of innovation. The Boulder, CO company, set to celebrate its 30th anniversary in 2019, markets more than 500 products and accessories across seven categories, including fitness.

The Buzz

CrossFit sued Reebok last week in California, alleging the Adidas-owned company and its former exclusive licensing partner altered the way it calculated royalty payments made to the company starting in 2013 and paying CrossFit less than it was due over the period. The two companies signed a 10-year deal in 2010 giving Reebok exclusive rights to sell fitness apparel and footwear bearing the CrossFit trademark. In the lawsuit, the plaintiff also contends Reebok has failed to produce documents showing it spent a required $51.75 million on marketing the products over a period between 2011 and 2017.

Update: The qualified bid deadline for bankrupt The Rockport Co. was reinstated to June 29 at 5 p.m. late last week after earlier being pushed back to July 6 at the same time. If there is more than one bidder for the West Newton, MA company, an auction for company assets will take place July 10 in New York. Meanwhile, sourcing factory Don Guan Stella Footwear Co. is objecting to the “cure amount” proposed in filings, suggesting the $5.7+ million listed is less than the $10.57 million owed to it under existing company contracts.

World Cup Fever: Fox Sports reported nearly 5.4 million U.S. viewers for Saturday’s dramatic 2-1 match win for Germany over Sweden, the most-watched, non-U.S. men’s World Cup group stage game since 1990. This reporter saw multiple kits out in full force walking through Manhattan and Williamsburg, Brooklyn, including those of Mexico, Germany and Colombia. 

Tubes of the Week

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Numbers In Play
The Sports Insight Index is our opinion of what we think are the 30 most important public companies in the industry, 15 vendors and 15 retailers. Space considerations prevent us from tracking more, but we will make changes over time.
Index base of 100 is key to the closing prices of 12/31/14

Note: Coinciding with the arrival of the summer solstice and the end of Q2, the Index has been changed—JD Fashion, which completed its acquisition of the Finish Line June 18, is added to Retail and Puma has replaced Fitbit in the Brands segment. The initial INDEX total, an aggregate of stock prices on Dec. 31, 2014 (in two instances, the end of day trading price for listed companies that went public after that date) has also been adjusted. The two entrants, JD and Sports Direct, based in the United Kingdom, have had their stock prices converted to U.S. dollars from British pounds at the average conversion rate for the particular date.

Retail
Segment loses less than 1 percent for the period with nine stocks down, five up and Foot Locker staying the same. The Dow fell nearly 34 points over the period. Macy’s acquires a minority stake in gadget store retailer b8ta and intends to utilize its software to help expand its Market@Macys shop-in-shop concept. According to a release from The National Center for Public Policy Research, the conservative think-tank’s Free Enterprise Project recently tangled with Dick’s Sporting Goods CEO Ed Stack and the retailer’s decisions to stop selling AR-15 rifles and certain accessories and raise the age limit for gun purchases to 21. “The management of Dick’s Sporting Goods shot itself in the foot by catering to fanaticism of gun-grabbers,” the organization wrote, calling the retailer’s policy change both “irrational and irresponsible” and not a “sustainable strategy.” Meanwhile, strong Q1 improvement at Genesco-owned Journeys was helped by an extended boot season and continued strength from retro and lifestyle athletic footwear trends that helped the period’s comp sales come in above expectations. 
Brands
Segment holds steady for period with nine stocks up and six down. Nike terminates distribution of its Nike x Undefeated line ahead of its June 17 release date after the U.S. Naval Academy objects to the use of a logo on the collaborated line that resembles the Naval Academy’s crest that was adopted in 1899. Adidas, just in time for the World Cup, is preparing to introduce a soccer-inspired lifestyle shoe with a knitted upper and gum sole called the Sobakov, according to highsnobiety.com. Also, Three Stripes honors Lionel Messi during Argentina’s first tournament match against Iceland with an animated GOAT (Greatest OF ALL TIME) on the pitch’s sideboards. Fitbit launches its tracker for kids, the Ace, globally. The $100 retail device tracks a child’s steps, sleep and active minutes. Nautilus sees its Bowflex HVT machine, which offers hybrid velocity training, earn a silver IDA award in the outdoor/exercise equipment category. VF Corp.’s The North Face has introduced a refurbished gear line called North Face Renewed via a collaboration with The Renewal Workshop, which has already worked with Toad & Co., Icebreaker, Prana and Mountain Khakis. Skechers, involved in legal tangles with Adidas recently, is sued for patent infringement by ECCO for a golf shoe outsole.  

RETAIL: 65

35.45%

BRANDS: 185

85.23%

Retail Name (Ticker Symbol)
Close on 06/14/18
Close on 06/21/18
% change over week
Big 5 Sporting Goods (BGFV)
BGFV
$9.05
$8.45
-6.63%
Sports Direct (LON: SPD)
SPD
$570.81
$528.47
-7.42%
Camping World (CWH)
CWH
$23.56
$26.66
+13.16%
Dick's Sporting Goods (DKS)
DKS
$37.40
$36.73
-1.79%
JD Fashion (JD)
JD
$553.02
$562.59
+1.73%
Foot Locker (FL)
FL
$57.65
$56.81
-1.46%
Genesco (GCO)
GCO
$39.90
$42.70
+7.02%
Hibbett Sports (HIBB)
HIBB
$22.70
$23.60
+3.96%
Kohl’s (KSS)
KSS
$73.28
$77.33
+5.53%
Macy’s (M)
M
$37.56
$39.32
+4.69%
Sportsman’s Warehouse (SPWH)
SPWH
$5.41
$5.70
+5.36%
Shoe Carnival (SCVL)
SCVL
$32.24
$33.88
+5.09%
Tilly’s (TLYS)
TLYS
$14.72
$14.94
+1.48%
Walmart (WMT)
WMT
$83.79
$84.21
+0.50%
Zumiez (ZUMZ)
ZUMZ
$25.75
$27.10
+5.24%
TOTAL
TOTAL
$1,568.49
$1,568.49
-1.16%
Brand Name (Ticker Symbol)
Close on 06/14/18
Close on 06/21/18
% change over week
Acushnet Holdings (GOLF)
GOLF
$24.84
$25.27
+1.73%
adidas (ADDYY)
ADDYY
$115.97
$110.11
-5.05%
Amer Sports (AGPDY)
AGPDY
$32.36
$32.04
-0.99%
Callaway (ELY)
ELY
$20.22
$20.34
+0.10%
Columbia Sportwear (COLM)
COLM
$91.04
$92.60
+1.71%
Deckers Brands (DECK)
DECK
$119.10
$121.94
+2.38%
GoPro (GPRO)
GPRO
$6.22
$6.71
+7.88%
lululemon (LULU)
LULU
$125.88
$127.71
+1.45%
Nautilus (NLS)
NLS
$16.25
$16.20
-0.31%
Nike (NKE)
NKE
$74.70
$73.94
-1.02%
Puma (PUMA)
PUMA
$580.00
$569.43
-1.82%
Skechers (SKX)
SKX
$28.98
$30.37
+4.80%
Under Armour (UA)
UA
$21.73
$21.08
-2.99%
VF Corp. (VFC)
VFC
$84.03
$82.94
-1.30%
Wolverine Worldwide (WWW)
WWW
$36.25
$36.27
+0.06%
TOTAL
TOTAL
$1366.95
$1377.67
-0.78%

Sports Insight Extra Podcast Series

Nikki Barua

The old way of retail is dead, and there is a massive opportunity to re-invent, proclaims the CEO of Beyond Curious in Los Angeles.

Matt O’Toole

President of Reebok dishes on the brand’s mission and objectives from its headquarters in Boston.

Gabriella Santaniello

Retail expert dishes on what’s going right and wrong in industry today and weighs in on the Walmart vs. Amazon tussle.

Guy Yehiav

The CEO of Profitect addresses the right medicine for changing the paradigm of accountability—prescriptive analytics.

Pat Ryan

Batter Up! The global product director for baseball/softball at Wilson Sports details the new USA Baseball standard that took effect January 1 and what it means when you hit the store this spring looking for a new stick for junior.

Patrick Clark

President of Nextwave, a Buford, GA system integrator, discusses benefits of an on-demand apparel microfactory, a bridge to Just In Time manufacturing, from Sourcing at MAGIC in Las Vegas.

Shawn McBride

Ketchum Sports & Entertainment EVP talks Olympics—impact of three consecutive Games in Asia, social media, corporate guerilla marketing and drawing in younger consumers.

Tyson McGuffin

Tennis pro Tyson McGuffin, 28, talks about the rising popularity of pickleball and how he became a champion in the sport.

Bob Mullaney

The 20-year shoe and retail industry veteran, recently named president and CEO of RG Brands, dishes on the comfort footwear business and Barry’s iconic Dearfoams brand.