Retail: 55
8.67%
Retail: 181
-0.39%
PRESENTING SPONSORS
Monday, October 22, 2018
Volume 2, Issue No. 41

OUTDOOR Insight
Improved Credit Metrics at Bass Pro-Cabela’s

Some 13 months after outdoor retail behemoths Cabela’s and Bass Pro became one in an acquisition by Bass Pro Shops, Moody’s Investors Service last week issued a 10-page report on the combined entity that paints a favorable picture of the combined operation.

“Since closing of the acquisition,” writes Moody’s, “margin improvement has more than offset a decline in revenues, and faster debt repayment has resulted in improvement in pro-forma credit metrics more quickly than initially projected.”

In declaring a positive outlook on Bass Pro-Cabela’s financial situation, Moody’s said it believed the retailer’s EBITDA “will increase materially in 2019 from continued cost and margin synergy realization, contribution from the combined (Bass Pro-Cabela’s) loyalty credit card program on flat retail sales.”

The combined Bass Pro-Cabela’s, which produced annual revenues of more than $6.31 billion for the 12 months ended June 30 and a 14 percent share of U.S. sporting goods retail (behind DKS’ 19% but ahead of Academy’s 12%), is forecast to use growing free cash flow in the coming months to continue lowering its debt level.

The Moody’s report expresses confidence that Bass Pro-Cabela’s will find long-term synergies in administrative expense, information technology, marketing, supply chain and sourcing as well as category optimization. Additionally, Cabela’s is forecasted to benefit from Bass Pro’s efforts in several areas, including merchandising and sales of higher-margined proprietary products, an improved product assortment and growth in boat revenues.

Elsewhere in sporting goods retail:

Schuylkill Valley Sports has become the first retailer to integrate weekly point-of-sale data compiled by Celerant Technology integration tools to manage its 16 store locations and ecommerce business. The retailer, which implemented the POS solution in 2009, can now access actionable and nearly real-time sales trend reporting across 12 retail distribution channels in the active lifestyle market.

Footwear Insight
Caleres Acquires Vionic Group

The parent of the Famous Footwear retail chain has acquired 11-year-old Vionic Group for $360 million. The acquisition, Caleres’ third in the last 22 months, adds a 14th label to the St. Louis company’s brand portfolio that generated $277.1 million in second quarter revenues. In Dec. 2016, premium men’s brand Allen Edmonds was purchased by Caleres for $255 million. In July it acquired California comfort brand Blowfish Malibu.

In Vionic, a San Rafael, CA company co-founded by its CEO Chris Gallagher in 2007, Caleres gains access to a contemporary, comfort footwear brand that is a favorite of Oprah Winfrey (she’s worn the brand on the cover of her “O” magazine twice this year). Vionic has generated a compounded annual growth rate of more than 20 percent since 2012. Vionic’s trailing 12-month revenues are approximately $180 million with 25 percent produced from ecommerce sites and 8 percent from international, Caleres said in a statement.

Caleres will offer more details about its latest acquisition during its upcoming third quarter earnings call and will host an investor event at Vionic’s New York showroom on Dec. 4.

“This brand has already proven to be a disruptive addition to the industry, as the dynamic Vionic team has blended proprietary technology with comfort and style,” Diane Sullivan, CAL’s CEO, president and chairman said in a statement, adding Caleres will share its extensive infrastructure and expertise in product design, brand development and global sourcing with Vionic.

The industry veteran and global product leader for Gore-Tex footwear talks tech and component branding.

VF Corp. Sizes Up Prospects for The North Face, Timberland

Photo: Timberland.com

Revenues for The North Face are forecast to rise 7-8 percent in H2 after sales gained 5 percent in Q2 ended Sep. 30 (7 percent in constant currency) with Direct-To-Consumer up 13 percent overall from strength in all regions and Digital growth at 35 percent. Impacted by a timing shift for certain shipments, brand revenues increased only 2 percent in the U.S. versus 16 percent growth in the EMEA region.

“Where we’ve [North Face] seen really nice growth, and we’ve talked about this previously, is more of that Mountain Lifestyle component, the more contemporary logo-ed sportswear pieces that are taking their influence from the Mountain Sports category,” VFC President and CEO Steve Rendle told analysts in describing the brand’s increasing European appeal. In the U.S., The North Face experienced strong sell-throughs for daypacks and lifestyle sportswear.

“We’re trending extremely well, strong retail sell-throughs, setting the brand up for a really strong season when you come into the wheelhouse of outerwear,” Rendle added.

As for Timberland in Q2, the brand’s Americas’ wholesale business dipped 5 percent, DTC sales rose 8 percent and overall U.S. revenues were off 5 percent. A major retail bankruptcy, presumably Sears, negatively impacted Timberland PRO sales. Non-Classic footwear sales rose more than 20 percent in the region. VFC is convinced the company’s diversified product and distribution strategy will eventually lead to mid-single digit topline expansion over the long-term.

“We’re seeing momentum in our women’s business, continued success in apparel and most importantly, in our non-Classic footwear, both men’s and women’s,” Rendle said.

The strategy to relocate VFC’s outdoor brands in lower downtown Denver in Fall 2019 is moving ahead. Meanwhile, VFC’s decision to split into two companies, via a spinoff of its Jeans business, is on schedule to occur by April 30, 2019. Also, the company reports the integration processes for Icebreaker, Altra and Williamson-Dickie, which contributed an aggregate $324 million in Q2 revenues, are on track.

Skechers Banking on Domestic Rebound

While Skechers execs continue to see international as the “biggest growth opportunity” for the company, the company anticipates its fortunes in its mature home U.S. market to turn positive in the Q4. Additional momentum is expected in early 2019 when year-over-year comparisons become easier, bolstered by new lifestyle athletic products in the pipeline and an expanded presence online on its own websites and those of third parties. Skechers is forecasting high-single to low-double-digit fourth quarter sales growth in the U.S.

CFO John Vandemore told analysts last week that Skechers’ core business is healthy in the U.S. and continues to grow, but the off-price channel has been a drag for the brand, which generated record overall Q3 revenues of $1.176 billion on 12.5 percent international growth and a 1.8 percent sales improvement in the U.S. The brand’s concept stores felt the impact of lower traffic levels in Q3, he said.

Meanwhile, COO David Weinberg, in elaborating on Skechers’ current plan to break ground on a new distribution center in China before year-end, added the company is looking to expand capacity in the U.S. and add more automation but has no definitive plans in place yet.

Inside Trade
U.S. Seeks Bilateral Trade Deals, Moves Forward with China Tariffs

The Trump Administration is showing no signs of backing down from a trade war with China as it moves ahead with its “America First” trade policy and strategy to establish a “fairer, more balanced’ trade environment with other nations. Trade experts opine one of the most important stipulations of any future deal will be limitations on trading partners striking separate pacts with China.

Last week, the U.S. began the process of negotiating individual trade agreements with the United Kingdom, Japan and the European Union. There are also plans to commence trade talks with the Philippines and Vietnam. A deal with Japan, which agreed to talks at the end of September, would mark the first trade deal between the globe’s first- and third-largest economies.

Meanwhile, the U.S. has moved forward with its intention to slap $200 billion in retaliatory tariffs on certain products from China, reports the Outdoor Industry Association, including backpacks, sport bags, headwear, and some leather gloves and camping gear. An additional 10 percent tariff on these products and others, which went into effect on Sept. 24, rises to 25 percent on Jan. 1, 2019. There will be a process for companies to file a petition with the government to remove products from the list. Jim Weber, CEO of Brooks Running Company, told CNBC this morning that the company is considering shifting some of its sourcing operations to Vietnam from China due to the current U.S.-China trade war, adding any move would likely be permanent.

Separately, new Miscellaneous Tariff Bills (MTBs) took effect on Oct. 13, lowering the cost on certain outdoor footwear products for three years. The MTB petitions, which reduce or suspend duties on certain products, were vetted to ensure that there is no domestic production and that there is cost is $500,000 or less, according to the OIA’s Rich Harper. A new MTB round will commence in 2019 and the trade group is soliciting ideas for new products to be covered.

Quotable

“For context, about 11 percent of VF’s total cost of goods sold come directly to the U.S. from China... And we have the ability to reposition our  global sourcing footprint in the near- to mid-term to mitigate the potential negative impact of additional tariffs should they materialize.”
– Steve Rendle, Chairman, President and CEO of VF Corp.

Execs on the Move
Soles4Souls Adds CMO; Macy’s Taps UPS CEO for Board

Left to right: Ron Arnold, Joe Cavallaro and Robert Galvin.

Ron Arnold, the founder and CEO of agency Leading Good, has joined Soles4Souls as Chief Marketing Officer. The Nashville non-profit, global social enterprise has distributed more than 30 million pairs of shoes in 127 countries since 2006.

Elsewhere,

• Macy’s will welcome United Parcel Service Chairman and CEO David Abney to its board on Oct. 25.

• Under Armour has lost its chief human resources officer, Kerry Chandler, to Endeavor, a Beverly Hills, CA talent agency.

• Iconix Brand Group names industry veteran and current Big 5 Sporting Goods director Robert Galvin as CEO, president and director.

• Nordica hires Joe Cavallaro, ski racer and entrepreneur, as a marketing and sales support specialist.

What’s Hot? What’s New?

The Schwinn 411 Elliptical Built For You from Nautilus is approximately two feet shorter than a standard elliptical. It has an 18-inch stride, offers a high-intensity interval training workout program and workouts may be integrated with the RunSocial app by users. More info available at: https://www.schwinnfitness.com/411/100734.html. MSRP: $499

Years after alligators and penguins debuted on apparel, along came the goat. GOAT USA emerged on the scene in 2016. The Westbury, NY-based brand of sweatshirts, T’s, sweatpants and accessories is the brainchild of a trio of 25-year old founders who insist you don’t have to be considered the “Greatest Of All Time” to wear the athleisure brand that currently has more than 22,000 Instagram followers and is working to expand beyond direct sales at GOATUSA.com nto retail stores.

Bearpaw has more than a dozen booties available for women this fall, including the Gramercy (charcoal here) in a number of colors. MSRP: $80.

The Buzz

Global Product Labeling Database, developed to help sports and fitness companies maintain compliance with national and local laws, is launched by the World Federation of the Sporting Goods Industry (WFSGI) with support from the Sports & Fitness Industry Association (SFIA). The online tool, known officially as the Compliance Labeling Requirements (CLR) database, will assist companies in avoiding potential costly re-work, stop ships and product recalls. A number of companies, including Asics, New Balance, Columbia Sportswear, Pentland Brands and VF Corp., are already benefitting from the platform. Others interested in the database are advised to subscribe through the SFIA.

Huntsman Textile Effects and The Chemours Company FC, LLC expand their long-term alliance, established in the early 1990s, around durable water repellence (DWR) and developing new, sustainable DWR solutions and chemistry.

PGA Merchandise Show, first established in 1954, was named the “Greatest Show of 2017” at the 2018 Trade Show Executive (TSE) Gold 100 Awards Gala last week. The 66th edition of event is scheduled for Jan. 22-25 in Orlando.

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
With the crucial, two-month holiday season fast approaching, the segment losing streak extends to seven. Ten stocks rise and five fall as the Index falls further below ’60.’ The 2.4 percent decline for the period exceeds the Dow, which fell more than 327 points on the final day of period, or 1.27 percent, but was only off 0.2 percent for the week. JD Sports Fashion CFO Brian Small is retiring Oct. 31 and will be replaced by the retailer’s Finance Director Neil Greenhalgh. Sports Direct is cut to “underperform” by the Royal Bank of Canada. UBS analyst Jay Sole writes, “The key to Foot Locker’s long-term success is to make its stores an indispensable part of how brands enhance their images and market goods.” Meanwhile, FL opens a 26,000-sq.-ft. store in Hong Kong with a barber shop and Xbox Gaming Zone. Macy’s sees some analysts predict a double-digit drop in third quarter earnings despite a forecasted single-digit revenue gain. Walmart CEO Doug McMillon asks analysts to re-think their impression of the company due to its investments in technology and changes in culture and mindset. But WMT also lowers its annual profit forecast and warns its ecommerce growth next fiscal year may be slower than this FY ending in January. Hibbett is opening a store in Georgetown, TX in December.  
Brands
Segment rises less than 1 percent for the period as 12 of 15 stocks rise. GoPro, which had the largest percentage gain, sees growing consumer interest in its HERO7 Black with users posting more videos online. Skechers is forecasting double-digit revenue growth for its international joint venture business in the third quarter and high-single digit expansion for its international distributor segment. Nike gets an upgrade to “outperform” by CIBC and another upgrade from Oppenheimer, citing the Swoosh’s investments in technology to enhance its business model. Meanwhile, the Portland Business Journal reports that Nike has donated $637,000 to federal political candidates this year with more 80 percent going to Republicans. Puma’s basketball play extends to a multi-year endorsement deal with Golden State’s DeMarcus Cousins after Nike declines to match The Cat’s offer. Adidas Originals uses its Instagram account to introduce its P.O.D. system sneaker with a disappearing video featuring 19-year-old rapper Curtis Roach. Meanwhile, the college basketball lawsuit involving a former Adi consultant and executive wraps with closing arguments in New York. Also, Adidas signs a 10-year extension of its all-team deal with the University of Massachusetts. Amer Sports, which reports Q3 results on Thursday, may report additional progress on the non-binding, $5.4 billion for Finnish parent of Wilson, Arc’teryx and Precor by a Chinese investment group led by Anta Sports Products.  

RETAIL: 57

43.38%

BRANDS: 174

74.05%

Weekly Review

Retail Name (Ticker Symbol)
Close on 10/11/18
Close on 10/18/18
% change over week
Big 5 Sporting Goods (BGFV)
BGFV
$5.10
$5.39
+5.69%
Sports Direct (LON: SPD)
SPD
$410.30
$412.54
+0.55%
Camping World (CWH)
CWH
$20.94
$20.85
-0.43%
Dick's Sporting Goods (DKS)
DKS
$33.31
$34.48
+3.51%
JD Fashion (JD)
JD
$553.64
$510.72
-7.75%
Foot Locker (FL)
FL
$48.15
$48.80
+1.35%
Genesco (GCO)
GCO
$41.81
$42.53
+1.55%
Hibbett Sports (HIBB)
HIBB
$19.10
$17.77
-6.96%
Kohl’s (KSS)
KSS
$70.82
$71.45
+0.89%
Macy’s (M)
M
$32.14
$32.41
+0.85%
Sportsman’s Warehouse (SPWH)
SPWH
$5.32
$5.17
-2.82%
Shoe Carnival (SCVL)
SCVL
$36.95
$38.43
+4.01%
Tilly’s (TLYS)
TLYS
$16.19
$17.10
+5.62%
Walmart (WMT)
WMT
$93.92
$96.17
+2.40%
Zumiez (ZUMZ)
ZUMZ
$22.31
$22.06
-1.12%
TOTAL
TOTAL
$1,410.07
$1,375.87
-2.43%
Brand Name (Ticker Symbol)
Close on 10/11/18
Close on 10/18/18
% change over week
Acushnet Holdings (GOLF)
GOLF
$24.48
$24.423
-1.02%
adidas (ADDYY)
ADDYY
$111.28
$113.39
+1.90%
Amer Sports (AGPDY)
AGPDY
$38.05
$39.71
+4.36%
Callaway (ELY)
ELY
$22.88
$23.48
+2.62%
Columbia Sportwear (COLM)
COLM
$85.10
$87.89
+3.28%
Deckers Brands (DECK)
DECK
$103.79
$109.86
+5.85%
GoPro (GPRO)
GPRO
$6.19
$6.72
+8.56%
lululemon (LULU)
LULU
$140.51
$142.68
+1.54%
Nautilus (NLS)
NLS
$13.09
$12.93
-1.22%
Nike (NKE)
NKE
$74.51
$75.60
+1.46%
Puma (PUMA)
PUMA
$492.24
$482.15
-2.05%
Skechers (SKX)
SKX
$25.19
$26.12
+3.69%
Under Armour (UA)
UA
$16.82
$17.14
+1.90
VF Corp. (VFC)
VFC
$85.47
$87.09
+1.90
Wolverine Worldwide (WWW)
WWW
$34.23
$35.44
+3.53%
TOTAL
TOTAL
$1,273.83
$1,284.43
+0.83%

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.