Retail: 55
8.67%
Retail: 181
-0.39%
PRESENTING SPONSORS
Monday, October 1, 2018
Volume 2, Issue No. 38

BREAKING NEWS
New North American Trade Deal Struck

After more than 13 months of negotiations, the U.S. has a replacement trade pact for the North American Free Agreement (NAFTA) in place with Canada and Mexico. Called the United States-Mexico-Canada Agreement (USMCA), Canada signaled its approval for the $1.2 million trade agreement just hours before the midnight deadline. The U.S. had struck a trade pact with Mexico in August.

The USMCA treaty, which includes more market access and a review provision every six years, retains a controversial dispute resolution mechanism known as Chapter 19. It will be signed by President Trump and representatives from Canada and Mexico before Nov. 30, but it won’t be acted on by Congress until 2019.

While portions of USMCA address intellectual property protections and requirements that more car parts be made in North American areas where workers are paid at least $16 hourly, a provision aimed at shifting some jobs away from Mexico, the new deal does not resolve U.S. tariffs on steel and aluminum exports from Canada.

Chief U.S. trade negotiator Robert E. Lighthizer, in a joint statement with his Canadian counterpart late last night, said USMCA “will result in freer markets, fairer trade and robust economic growth in our region.” He added the deal “will strengthen the middle class, create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”

Re-invigorated YETI Files for IPO Again

Yeti Hopper

More than 26 months after filing for an Initial Public Offering, only to withdraw it in March, the Austin, TX-based marketer of premium-priced coolers and drinkware filed for a $100 million IPO on Sept. 28. Market analysts expect the size of offering may eventually approach $300 million.

The 855-page document, besides providing financials on the company founded in 2012 by Roy and Ryan Seiders and majority-owned by Cortec Group, details major changes undertaken by YETI over the last 18 months. Some of that effort, which included major Direct-to-Consumer and international expansions and an 88 percent increase in company staff to more than 500, was a response to challenging market conditions in early 2017. YETI’s 4,800 retail partners were saddled with excess inventory after overbuying in 2016 and overall ordering slowed, in part due to the delayed merger of Bass Pro Shops and Cabela’s.

YETI’s multi-pronged approach to the negative issues focused on aligning with independent retailers and partners committed to the brand’s long-term growth strategy (including Dick’s Sporting Goods); eliminating 1,100 underperforming retailers; rationalizing its supply chain to expand capacity and lower product unit costs; and making technology and infrastructure investments.

Today, the emerging growth company says it operates a more balanced omni-channel distribution model, a more powerful DTC platform, and offers a wider range of products. All of it, the IPO suggests, makes the company “better positioned to achieve sustainable long-term growth.”

Since 2015, YETI says it female customer base has grown to 34 percent from 9 percent prior as its heritage hunting/fishing customer base has moved to 38 percent from 69 percent due to wider general consumer awareness for the brand. The company, which realized a 27 percent decline in FY17 operating income to $63.9 million on a 22 percent drop in total revenues to $639.2 million, spent $50.7 million on marketing for the year. DTC sales jumped to $194.4 million in 2017 from $14.1 million in 2013 as the company opened a flagship store in Austin and planned for additional retail stores in H2/18 or in 2019. Meanwhile, independent retailers accounted for 37 percent of YETI’s FY17 revenues.

For the six months ended June 30, YETI financials fortunes have turned, thanks in part to the rising influence of that DTC business and international development. Operating income was up 137 percent year-over-year to $36.4 million as the topline rose 34 percent to $341.5 million. After entering the Canadian and Australian markets in 2017, YETI expanded to Japan earlier this year. Additional international growth opportunities for YETI exist in Europe and Asia, including China.

Matt Reintjes, who previously led Vista Outdoor’s product division, joined YETI as president and CEO in 2015. In June, the company hired former Dunkin Donuts and Talbots executive Paul Carbone as CFO.

Highly Leveraged Academy Debt Downgraded

Academy Sports + Outdoors, the U.S.’s third-largest sporting goods retailer, faced with the possibility of flat earnings over the next 12-18 months and a 2022 due date on a $1.6 billion term loan, saw Moody’s Investor’s Service downgrade the rating on that term loan early last week. Former Foot Locker senior executive Ken Hicks, who had been on the Academy board, has been Chairman and CEO of Academy since mid-May.

In its seven-page report that discloses its new “Caa1” rating on the KKR-controlled retailer’s term facility, Moody’s wrote, “The term loan has first priority lien on substantially all assets of the company except cash, accounts receivable and inventory…”

The investor service, which is forecasting roughly flat earnings for Academy over the next 12-18 months due in part to “a challenging operating environment,” says the retailer’s credit profile is constrained by its geographic concentration and long-term lease commitments to large-format stores. Nearly all of Academy’s 249 locations are in Texas and the southeastern U.S. More than 100 of its doors are in its home Lone Star State where Dick’s only had half as many at the end of 2017.

But in detailing components of Academy’s business, Moody’s said the retailer is different from its top rivals, including Bass Pro/Cabela’s, due to its value-focus and lagging ecommerce business with less than 5 percent penetration versus approximately 12 percent for DKS.

“Academy’s declines have been more severe than those of Dick’s and only somewhat better than Hibbett’s and Big 5’s,” wrote Moody’s. “In our view, in its rapid store expansion phase, Academy was not highly focused on store operations and category profitability.” The Katy, TX-based retailer, which generates 52 percent of revenues from hard good sales and 21 percent from footwear, was described as having “slightly negative” year-to-date comparable sales as EBITDA dipped in the mid-single digits as gains in private label, firearms and cost savings were unable to offset declines in branded apparel, footwear and sports & recreation products. Lower-margin guns and ammunition are said to account for approximately 10 percent of the topline. For the fiscal year ended Feb. 2018, Academy’s annual revenues were up slightly more than 2 percent to $4.835 billion.

Moody’s does project $25-50 million in free cash flow for Academy in both FY18 and FY19 after $130 million in capital investments and $18 million in mandatory term loan amortization. At Q2 end, the retailer had no revolver borrowing and about $991 million in available credit capacity.

“While we do not view Academy’s current funded leverage as unstainable,” the investor service wrote in one conclusion, “we believe the company needs to demonstrate positive operating performance trends in order to position itself for ultimate successful refinancing of its relatively large $1.6 billion term loan due 2022.”

FootJoy marketing executive dishes on the history of the iconic golf brand and its new luxury 1857 Collection.

Nike Will Go High, Low and Direct

Nike Air Max 720

Despite seeing expansion in average selling prices and units in Q1 ended August 31, Nike does not intend to abandon lower-priced offerings as it continues to invest and develop a long-term North American strategy. The company, forecasting mid-single digit revenue growth in the region over the next five years, is promising more innovation on the digital front and more transformation “in the broader retail landscape.”

Nike’s North American revenues rose 6 percent in Q1 to more than $4.14 billion with apparel sales rising 8 percent to $1.4 billion and footwear increasing 5 percent to more than $2.55 billion. Across all geographies, NIKE Direct sales rose 12 percent and NIKE Digital revenues jumped 34 percent on a currency-neutral basis.

“While NIKE Digital is leading the way, we believe physical retail will also play an important role in doubling our direct connection to consumers,” CFO Andy Campion said. “We see growth in the physical environment being driven by smarter retail experiences that leverage digital technology to better serve customers.”

Citing women, young athletes and Brand Jordan as having significant upside potential for the brand, Nike President and CEO Mark Parker told analysts, “A strong roster of core footwear at entry price points is equally important to Nike’s growth potential. We’re not where we want to be in core footwear, particularly in North America. But two priorities for the business are to develop innovation specifically for the core consumer and to better leverage pinnacle performance platforms like Nike Air…”

On the digital and direct fronts, Nike has inked a distribution deal with Walmart-owned Jet.com in North America for distribution of select Nike and Converse assortments and is preparing to expand the reach of its SNKRS app to Mexico, Brazil and Southeast Asia. Additionally, learnings from the Nike LIVE retail store in Los Angeles, including frequently updated assortments based on local demand and product reservation through an app, will shortly be taken to new flagship stores in New York and Shanghai.

More than anything, Nike is intent on making more investments this fiscal year on the development of new capabilities that will include digital demand sensing, consumer data and analytics, connected inventory, digital product design and creation and a new enterprise resource platform focused on increasing speed and flexibility in its supply chain. Parker says the company has invented a flat assembly process for uppers in its Advanced Product Creation Center in Beaverton that uses 30 percent fewer manufacturing steps and 50 percent labor.

Nike, meanwhile, maintained its FY19 guidance that calls for revenue growth at the lower-end of a high-single digit forecast with drag from currency offsetting operational upside.  

Execs on the Move
Under Armour Adds Marketing Czar, Digital Exec

Left to right: Alessandro de Pestel, Helen Sahi and Brent Moody.

Two new senior executive hires at Under Armour will help navigate a global brand marketing strategy, in the wake of the Baltimore company’s recently announced three percent downsizing, and further develop Under Armour’s digital ecosystem.

Alessandro de Pestel, a 20-year brand marketing executive who most recently served as EVP of marketing, communications and consumer insights for Tommy Hilfiger Global/PVH Europe, steps in as Under Armour’s new chief marketing officer reporting directly to company President and COO Patrik Frisk. Meanwhile, Ann Funai, most recently chief technology officer for PeopleAdmin in the education industry, will be based in Austin, TX as a SVP of engineering, reporting to UAA’s Chief Digital Officer Paul Fipps. Her focus will be the engineering function of Under Armour’s fitness applications and global ecommerce business.

Elsewhere,

Co-operative REI names its first chief customer and first chief digital officers. Ben Steele, REI’s chief creative officer, adds EVP and chief customer officer to his responsibilities. His work as CCO for the last four years has included the company’s brand engagement efforts with #OptOutside and Force of Nature. Meanwhile, Curtis Kopf, who has worked for Alaska Airlines, Microsoft and Amazon, is REI’s first chief digital officer. He will report to Steele.

Camping World promotes COO and legal officer Brent Moody to president of Camping World Holdings. He has worked for the company in a variety of capacities since 2002.

Unifi hires former Bank of America and Avery Dennison executive Helen Sahi as its VP of global corporate sustainability.

What’s Hot? What’s New?

8K is a U.K.-based maker of heated outerwear that is starting its second season with an expanded range of colors, styles and sizes. Currently only sold direct at www.8kflexwarm.com, the company is currently in negotiations with a number of retailers in the U.S. where 70 percent of its web traffic and sales are generated. Heated jackets and vests in the range are equipped with a dual-port powerbank that provides up to six hours of warmth and the ability for a smartphone charge. Retail prices range from $250-300.

Nike’s Air Max 720 is the brand’s first full-length lifestyle Air Max unit and tallest at 38mm. The 720 Air unit, which contains more than 75 percent recycled manufacturing waste, is expected to debut in a number of silhouettes in the coming months. (see photo above.)

Louisville Slugger is introducing its 2019 Meta PRIME BBCOR bat today. Product’s composite barrel gives players a light bat with a large sweet spot, making it ideal for serious contact and power hitters. Retail price is $500.

The Buzz

Coterie, the global women’s fashion event, is partnering with the Australian Fashion Council (AFC) to introduce Australian brands to the U.S. market. The non-profit AFC works to promote the growth of the textile and fashion industry in Australia. PROJECT WOMEN’S in Feb. 2019, which takes place in Las Vegas during MAGIC, will have a focus on Australian brands in the popular OASIS section.

Elevator Group and True North Brand Group, two creative agencies known for launching brand and product lines, have merged as Elevator North in Hingham, MA with principals Mark Tedeschi and Mark Richardson. The company offers a suite of services to outdoor brands—creative, social media strategy and execution, trade show management and public relations among them.

Kathmandu Holdings Ltd., the Australian outdoor retailer that completed its acquisition of Oboz Footwear in April, will launch its wholesale business in North America at Outdoor Retailer Winter Market next month. For the FY ended July 31, Kathmandu sales were up nearly 12 percent in local currency to the equivalent of $330 million as net income improved 33 percent to $33 million.

Association of Outdoor Recreation and Education (AORE) is assuming ownership of the Outdoor Nation Campus Challenge (ONCC) this fall with the assistance of the Outdoor Foundation. AORE will work with OF staff to transition assets, knowledge and resources. In 2017, ONCC was on 93 campuses with nearly 25,000 participants logging more than 120,000 outdoor activities.

Pou Yuen (Cambodia) Enterprise, whose parent company is publicly traded footwear maker Yue Yuen Industrial, is reportedly refusing to compensate, under an arbitration ruling, hundreds of Cambodian factory workers it laid off last December after closing a factory. Instead of compensation as permanent employees, the workers were reportedly paid 5 percent of their salary only, with payouts ranging from $91-$243.

Surf Technicians inks a long-term deal with Jorcani Sports, S.L. to distribute, market and sell Surftech product in Europe, the Canary Island and Scandanavia.

Tubes of the Week

Mon, Aug 28, 2017
Vol 1, Issue No. 33
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
Retail
Losing streak for segment continues for fourth straight week with four stocks up and 11 down. The Dow, meanwhile, dipped 1.07 percent for the period. Some of segment’s decline may be associated with seasonal lag in the immediate period after Back-to-School ends and before holiday shopping kicks in. Kohl’s is launching a women’s private label, plus size brand, EVRI, in Spring 2019 online and in-store. Also, chain will have the Nike Plus brand for the entire family in Spring 2019, a sure sign the Swoosh isn’t abandoning lower retail price points or this channel. Zumiez shares get a $36 price target from Pivotal Research. Foot Locker sees Cannaccord Genuity put a $63 target price on its shares. Walmart, according to Chain Store Age, intends to open a “pick-up” only location in a Chicago neighborhood in Spring 2019.  
Brands
Segment rises 1 percent as 11 stocks rise and four fall during the period. Acushnet and Callaway and others in the golf segment are expected to benefit from rising interest in the game, higher PGA Tour viewership thanks to Tiger Woods’ resurgence and off-course play such as Topgolf, surmises JP Morgan analyst Steven Zaccone. Meanwhile, U.S. golf rounds played fell 2.7 percent in August with the drop at private courses (-3.2%) higher than the decline at public courses (-2.5%). Nike and New Balance lose in their bid to sign Boston Celtic Gordon Hayward to an endorsement deal. The small forward, who suffered a season-ending injury in his first Boston game last year, has inked a sneaker deal with Anta, the publicly traded Chinese company that has made a $5.3 billion bid for Amer Sports. Adidas recently teamed with Kanye West to run front-page ads in nine newspapers to promote the launch of the Yeezy Boost 350 V2 Triple White. Separately, the Three Stripes has unleashed the third version of its James Harden signature basketball shoe for the NBA’s reigning MVP. Nike is preparing to expand its SNKRS app to Brazil, Mexico and Southeast Asia in the fourth quarter of this year.  

RETAIL: 63

37.13%

BRANDS: 185

85.20%

Weekly Review

Retail Name (Ticker Symbol)
Close on 09/20/18
Close on 09/27/18
% change over week
Big 5 Sporting Goods (BGFV)
BGFV
$5.10
$5.15
+0.98%
Sports Direct (LON: SPD)
SPD
$454.26
$449.14
-1.13%
Camping World (CWH)
CWH
$21.57
$21.27
-1.39%
Dick's Sporting Goods (DKS)
DKS
$37.15
$35.73
-3.82%
JD Fashion (JD)
JD
$630.29
$605.92
-3.87%
Foot Locker (FL)
FL
$47.29
$50.63
+7.06%
Genesco (GCO)
GCO
$47.00
$47.55
+1.17%
Hibbett Sports (HIBB)
HIBB
$20.60
$19.35
-6.07%
Kohl’s (KSS)
KSS
$76.89
$74.73
-2.81%
Macy’s (M)
M
$35.18
$34.59
-1.68%
Sportsman’s Warehouse (SPWH)
SPWH
$6.26
$5.89
-5.91%
Shoe Carnival (SCVL)
SCVL
$41.13
$37.83
-8.02%
Tilly’s (TLYS)
TLYS
$18.78
$19.22
+1.91%
Walmart (WMT)
WMT
$95.76
$94.25
-1.58%
Zumiez (ZUMZ)
ZUMZ
$28.60
$26.55
-7.17%
TOTAL
TOTAL
$1,565.94
$1,527.80
-2.44%
Brand Name (Ticker Symbol)
Close on 09/20/18
Close on 09/27/18
% change over week
Acushnet Holdings (GOLF)
GOLF
$26.86
$27.31
+1.68%
adidas (ADDYY)
ADDYY
$123.65
$122.94
-0.57%
Amer Sports (AGPDY)
AGPDY
$41.12
$41.14
+0.05%
Callaway (ELY)
ELY
$22.96
$24.14
+5.14%
Columbia Sportwear (COLM)
COLM
$91.84
$92.72
+0.96%
Deckers Brands (DECK)
DECK
$112.49
$116.37
+3.45%
GoPro (GPRO)
GPRO
$6.51
$7.30
+12.14%
lululemon (LULU)
LULU
$155.97
$161.24
+3.38%
Nautilus (NLS)
NLS
$14.21
$14.25
+0.28%
Nike (NKE)
NKE
$85.37
$84.54
-0.97%
Puma (PUMA)
PUMA
$498.00
$495.51
-0.50%
Skechers (SKX)
SKX
$26.58
$27.74
+4.36%
Under Armour (UA)
UA
$18.16
$19.24
+5.95%
VF Corp. (VFC)
VFC
$91.87
$93.12
+1.36%
Wolverine Worldwide (WWW)
WWW
$38.92
$39.16
+0.62%
TOTAL
TOTAL
$1,3654.51
$1,366.72
+0.90%

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.