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Mon, Aug 28, 2017
Vol 1, Issue No. 33
Monday, November 13, 2017
Volume 1, Issue No. 44

Adidas Promises Growing Pains Won’t Impact U.S. Mission

adidas Group CEO Kasper Rorsted

After logging yet another period of double-digit growth in the U.S. on seemingly unstoppable momentum, Adidas senior executives admitted there remains much work to do in the region for the company that still trails Nike by about $9 billion in annual sales and has yet to achieve its large-market target of a 15-percent share in North America.

“We still think we have a long way to go in the U.S., despite the fact that we’ve had three to three-and-half good years,” adidas Group CEO Kasper Rorsted told analysts last week after the company generated 26 percent currency-neutral revenue growth to $3.6 billion in North America for the third quarter. That increase was paced by 31 percent sales expansion for the Adidas brand to $3.24 billion on double-digit sales growth in running, training and outdoors. The regional results also included a 240-basis- point jump in gross margin on more favorable pricing and product mix and a 350-basis-point hike in operating margin.

Overall, Adidas generated global, currency-neutral revenue growth of 12 percent to approximately $6.6 million in the third quarter, falling 3 percent shy of Street estimates, but 35 percent profit growth, ahead of expectations, to about $637.8 million. The company confirmed its FY17 outlook, saying revenue growth will come in at the lower-end of a 17-19 percent range as annual profitability rises between 26-28 percent.

Adidas could have produced upwards of 34 percent revenue growth in North America in the period if it were not for a warehouse capacity issue that “significantly impacted” ecommerce deliveries and hindered on-time deliveries to some key wholesale accounts. In the short-term, Adidas is addressing the dilemma for the holiday period, promising to commence an infrastructure strategy in FY18 that will provide a long-term solution in FY19 and beyond.

Meanwhile, Adidas declined to detail its segmentation strategy for Direct-To-Consumer and wholesale brick-and-mortar other than confirming that Originals will stay distributed in Foot Locker and other premium accounts with lower-priced NEO products reserved for the family footwear channel. Also, senior executives expressed confidence that Reebok will return to growth in FY18 and eventually be a contributor to its parent’s bottom line.

“We need Reebok to contribute to the value creation of our company,” proclaimed Rorsted. “And that means a meaningful bottom line contribution. We’re not going to chase revenue for the sake of chasing revenue,” he added, contending Reebok will generate single-digit growth next year. In the third quarter, Reebok currency-neutral revenues dipped 14 percent to the equivalent of $362.5 million as the company continued the process of closing U.S. outlet stores. Last week, Reebok announced a partnership with Victoria Beckham that will be highlighted by the introduction of a new Reebok X Victoria Beckham Collection in late 2018.

Trans-Pacific Trade Deal Being Resurrected Without U.S.

The much-heralded, multinational trade agreement, in negotiations around the globe for years during the Obama Administration, may come to fruition after all. Eleven nations, including Japan, Canada and Mexico and representing a sixth of all global trade, are reportedly close on the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This new trade pact may include Vietnam, but not the U.S. after President Trump had the U.S. withdraw from talks earlier this year.

Under the new TPP pact, members will obtain tariff-free trade with one another, allowing companies in participating nations to have faster and better access to other markets than their U.S. rivals. The potential members—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam—would see better intellectual property protections in certain markets and expansion of digital services.

Japan, for one, is hopeful the U.S. may eventually return to TPP, although that is an unlikely scenario under the current administration.

Retail Round-Up
Finish Line Downgraded; Camping World Readies Gander Outdoors

Finish Line's new design concept at the Del Amo Fashion Center in Los Angeles.

Mall athletic specialty retailer The Finish Line is upping its game with a design concept offering special merchandise displays from key vendors and digital display integrations. But is the effort too little, too late?

As FINL unveiled its new design concept at the Del Amo Fashion Center in Los Angeles over the weekend, it was already facing a stock price downgrade and meltdown. Cowen & Company became the second investment house to downgrade FINL shares over the last month, cutting the retailer’s target share price to $7 and citing the impact the chain’s “skyrocketing” promotions are having on its margins and relationship with key vendors.

Del Amo is the third new store design store for FINL, following Woodfield Mall in Chicago and Roosevelt Field on Long Island, but Cowen wrote the retailer continues to highly promote products from Nike, Adidas and Under Armour, which could jeopardize key product allocations going forward. Finish Line, which has been rumored as a possible acquisition target of both Sports Direct and rival Foot Locker this year, has seen its share price fall 43 percent over the last six months from $15.93 on May 10 to close at $9.11 on November 10. Meanwhile, in his downgrade on the stock, Cowen analyst John Kernan wrote, “The cash burn will begin soon.”

Camping World CEO Marcus Lemonis is defending the target 8 percent EBITDA margin projected for the new Gander Outdoors chain. Initially 15-20 Gander stores will open in the first quarter followed by another 40 over the second and third quarters of 2018 with an average lease rate forecast at $285,000-$295,000 per location.

“When we talk about 8 percent, we’re talking about just what’s happening in those four walls,” Lemonis told analysts last week. “Not the ancillary products and services and the profitability associated with them.”

None of the initial Gander locations will have RV centers adjacent to them due to timing, but it’s expected that co-dealerships will be co-located on 15 of the first 60 Gander stores.

“Our primary business is our dealership business,” Lemonis said. “And we don’t want anybody thinking that anything we’re doing with Overton’s or The House or Gander is even moderately distracting us from our core business.”

Zappos has launched a Classic sneakers business called The_ONES with a new online hub, shoppable Instagram account @The_ONES and temporary pop-up, premium boutiques, starting with BEYOND from Tarek Hassan, in New York’s Arlo Hotel, and the Brooklyn boutique Bird.

Leaner, More Focused Wolverine Taking Shape

Two years in the making, with an eye on a 12 percent operating margin, Wolverine Worldwide has emerged steps closer to its goal by slashing its SKU base across all brands by 30 percent, closing its own unprofitable doors to settle at 80 go-forward locations, and proactively reducing exposure to certain U.S. retailers and distribution channels.

At the same time, the Merrell, Saucony and Sperry parent has accelerated category and geographic expansion, expanded its speed initiatives to reduce concept-to-market lead times for new and existing products and initiated the company’s first unified consumer database to better understand and engage with its consumers across all brands.

As a result of all the actions, Wolverine is vowing to incrementally invest over $20 million in FY18 on core infrastructure, digital capabilities and key brand initiatives—particularly in the areas of ecommerce and international.

This FY, WWW is forecasting approximately 1.5 percent revenue growth to a range of $2.34-$2.37 billion. Due to divestitures, store closures and the impact of currency changes, the top line will be impacted by approximately $160 million.

In the third quarter, Merrell posted mid-single digit growth with gains in all global regions and a 30+ percent increase in business at Core performance outdoor product sales increased mid-single digits while men’s active lifestyle sales gained double-digits. At Saucony, the business experienced mid-single digit sales growth, driven by double-digit expansion in North American wholesale and ecommerce. Total company sales were $581.3 million in the period.

Vista Outdoor Divesting Eyewear Brands

The Farmington, Utah company, which is being headed by new CEO Chris Metz and last week formally announced Michael Callahan as Chairman, is selling its Bollé, Serengeti and Cébé brands within its Sports Protection unit. The businesses, acquired during Vista’s 2013 acquisition of Bushnell and focused on fashion, prescription and safety eyewear, will be divested sometime over the next six months. Bob Keller, president of Vista Outdoor’s Shooting Sports division, is leaving the company at week’s end as part of the restructuring.

Meanwhile, Vista Outdoor reported a 14 percent drop in second quarter revenues to $587.3 million for the period ended October 1. The company recorded a $152 million impairment charge in the third quarter due to downward pressure on sales and margins within its Sports Protection and Hunting/Shooting Accessories business units caused by challenging market conditions. High channel inventory levels within the Hunting/Shooting segment are forecast to persist for the remainder of the fiscal year.

The Buzz

Fanatics was busy last week, first signing a long-term global agreement with Major League Soccer that commences in 2019 that includes worldwide rights to exclusively produce and market MLS fan gear, headwear and hard goods across all retail and wholesale channels. The deal includes launching a Canadian ecommerce platform in 2018 and on-site retail rights to key league events, including the MLS All-Star Game. Separately, Fanatics unveiled a Canadian-based ecommerce platform for the NHL at NHLShop.CA that is available in both English and French with various Canadian payment options.

GK Elite Sportswear has introduced a new limited-edition collection of gymnastic apparel that features unique prints and fabrics featuring Marvel characters such as Spider-Man and the Avengers.

Ibex Outdoor Clothing, the premium Merino wool company, laid off a dozen staffers last week and reports suggest more significant changes to its business structure are coming. The White River Junction, Vermont company continues to operate retail stores in Boston, Denver and Seattle. Earlier this year, the company notified retailers that it would commence selling its products exclusively in its own stores and through its website starting in Spring 2018.

Repreve and New Era Cap have launched the first NFL cap made with plastic bottles using Repreve fiber. The eco-friendly cap, available in multiple styles and made from four plastic bottles, was slated to debut at the Denver Broncos Team Store at Sports Authority Field last night.

Tubes of the Week


Numbers In Play
Week of 11/02-11/09
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
Despite having eight stocks up to seven down, Index fell more than 2 percent for week. Segment hurt by declines by Big 5, Sports Direct and Sportsman’s Warehouse. Dick’s Sporting Goods unveiled a holiday strategy that includes free shipping on all online orders with no minimum purchase; a ‘Best Price’ match guarantee and Thanksgiving Night hours (6pm-2am) before Black Friday. Also, fitness guru, author and former reality TV star Christmas Abbott, 35, will endorse Dick’s own Second Skin apparel brand. Finish Line, meanwhile, unveiled its third “elevated” store design location Friday at its Los Angeles flagship with digital display integrations following similar openings in Chicago and on Long Island at Roosevelt Field Mall. Walmart has begun testing new in-store tech features at certain locations ahead of the holiday rush. Macy’s, which intends to offer tech deals from Amazon and Apple on Black Friday, suffered a 3.6 percent comparable store sales decline in third quarter against expectations of a 2.6 percent drop. Still, shares rose 11 percent November 9 despite the lackluster results. Senior management says the department store still expects to head into 2018 with momentum. Kohl’s generated strong apparel and footwear sales in third quarter, driven by Nike and Adidas. Chain says it continues to gain share in activewear. Realized its first comparable store sales gain (+0.1%) in seven quarters.
Segment Index fell more than 1 percent with only four of 15 shares up, but remained at the ‘100’ mark. Adidas brand sales rose 31 percent in North America in third quarter despite overall period revenues falling 3 percent shy of the Street’s forecast. Annual growth rate will be 17-19 percent higher as forecast annual profit jumps 26-28 percent. Acushnet, parent of Titleist and FootJoy, says the club and ball business is becoming a “whole lot more predictable” since it is no longer comping against closed retail doors. Testing new AVX golf ball in Florida, California and Texas. Ball, built on ProV1 chassis, could launch in Q2/18 if test goes well and production ramps up smoothly. Skechers bid adieu to the competitive career of its six-year brand endorser Meb Keflezighi at the New York City Marathon. Deckers’ activist investor Marcato, which owns an 8.4-percent stake, has nominated nine directors to the company’s board. One is Steve Fuller, the former chief marketing officer for L.L. Bean.





Retail Name (Ticker Symbol)
Close on 11/02/17
Close on 11/09/17
% change over time
Big 5 Sporting Goods (BGFV)
Sports Direct (LON: SPD)
Camping World (CWH)
Dick's Sporting Goods (DKS)
Finish Line (FINL)
Foot Locker (FL)
Genesco (GCO)
Hibbett Sports (HIBB)
Kohl’s (KSS)
Macy’s (M)
Sportsman’s Warehouse (SPWH)
Shoe Carnival (SCVL)
Tilly’s (TLYS)
Walmart (WMT)
Zumiez (ZUMZ)
Brand Name (Ticker Symbol)
Close on 11/02/17
Close on 11/09/17
% change over time
Acushnet Holdings (GOLF)
adidas (ADDYY)
Amer Sports (AGPDY)
Callaway (ELY)
Columbia Sportwear (COLM)
Deckers Brands (DECK)
Fitbit (FIT)
GoPro (GPRO)
lululemon (LULU)
Nautilus (NLS)
Nike (NKE)
Skechers (SKX)
Under Armour (UA)
VF Corp. (VFC)
Wolverine Worldwide (WWW)

Sports Insight Extra Podcast Series

Bob Smith

The design consultant who began his 20-year career as a graphic artist for Nike dishes on the blur between lifestyle and performance and the importance of Struktur, the creative conference for active, outdoor and urban design.

Rob & Mike Barnes

The co-founders of Selkirk Sports, a Hayden, ID maker of Pickleball paddles and accessories, dish on the rise of the sport that counted 2.5 million participants in 2015.

Brendan Candon

CEO of SidelineSwap, an online marketplace for used sports gear and equipment, dishes on the market and whether it steps on the toes of traditional, full-line retailers.

Dave McGillivray

The long-time race director and long-distance runner weighs in on marathon participation, the future of event marketing and his latest venture that may bring a marathon to a MLB ballpark near you.

Paul Froio

Reebok’s VP of U.S. Retail and Direct-to-Consumer channels talks about the company’s new South Boston headquarters and adjacent global flagship store.

Aquiles M. Bermùdez P.

The former president of the Dominican Association of Free Zone Companies and current member of the National Commission of Footwear addresses the industry, Dominican Republic’s infrastructure and Footwear Technology Institute.

W. Andrew Martin

The managing director for Baird in Charlotte, NC discusses the M&A climate, consumer loyalty to brands today and the impact of private label.

Mark Sullivan

The president of Formula4Media, LLC previews The Running Event conference and trade show set for November 28-December 1 in Austin, Texas.

Bryan Smeltzer

The general manager of Zamst Americas talks sports protectives, dispelling some of the consumer and athlete misconceptions about the category.

Emily Walzer

Formula4Media colleagues Emily Walzer, Textile Insight editor, Jennifer Beaudry-Ernst, footwear specialist, and contributor Kurt Gray, owner of SimplyGrayDesign, dish on key trends from the final Outdoor Retailer trade show in Salt Lake City.

Judith A. Russell

Shifting consumer purchasing patterns are vital to understanding today’s marketplace. Russell, a marketing and strategic planning professional, offered up her thoughts at TexWorld in New York on a panel with Sports Insight Extra’s Bob McGee.

Will Decker

Family-owned Silicon Valley firm Plug and Play, which dubs itself the “Ultimate Startup Ecosystem,” has raised over $6 billion in venture funding during its 11 years while bringing corporations, venture capitalists and start-ups together.

Matthew Lyon

In the fragmented hydration market, where price points for performance products are on the rise, HydraPak is an OE supplier to numerous brands and has its own lightweight, flexible products.

Eric Hayes

Superfeet Celebrates 40th Anniversary. The employee-owned company introduces footwear and rolls out a 3D printed insole program.

Shawn Neville

BOA introduces New Tech and Names New CEO. Nothing will constrict Boa Technology CEO Shawn Neville from helping the Denver company improve its customized fit solution.

Waingarten and Frydlewski

No strings attached. The married Argentinean couple has raised nearly $20 million for Hickies, a Brooklyn company addressing how athletic shoes are closed around the foot two eyelets at a time.

Michelle Carmichael

The Co-founder and Managing Partner of Partners Growth, which brings premium brands into the U.S. market, talks Finnish children’s wear brand Reima. 

Brian Beckstead

Six-year old Altra is teaming with Utah State University to develop outdoor design talent.

Declan Condron

Let's Go Hyperwear: Former Equinox personal trainer merges the innovative, functional fitness gear from Austin, TX company with programming for schools, camps and institutions.

Hugues Gontier

Sly and Simple. and its technology enable a retailer to interact with customers in store and track traffic. No beacon required. The CMO explains the benefits of the platform.

Reza Raji

The CEO of Xenio Systems talks about the company’s new platform that tracks where shoppers spend time in physical stores and its patented hyper-positioning technology.

Jacob Torres Espino

The director of export promotion for Mexico’s Guanajuato State government agency addresses the proposed impact of the Border Adjustment Tax by the U.S. and the possibility of a renegotiated NAFTA free trade agreement.

Isabelle Ohnemus

The founder and CEO of EyeFitU, a former investment banker, talks ‘glocal’ assortments, shoppers’ personal sizing and global web payment options.

Tom Cove #2

The president and CEO of the SFIA addresses the most serious threat the industry has faced in the past half-century and the expected re-introduction of the PHIT Act by Congress.

Matteo Scarparo

The Italian global trade expert in footwear talks about the present and future of TheMicam trade show and the potential impact of a Border Adjustment Tax in the U.S. on imported shoes.

Dr. James Eakin

Dr. James Eakin, chief marketing officer and director of U.S. operations for Xenoma, discusses the Japan company’s e-skin shirt and entire wearable category.

Rusty Saunders

Industry senior statesman Rusty Saunders dishes on industry leadership, pressing issues and the inactivity pandemic.

Barbara Barclay

Expert Barbara Barclay, president of RightEye, talks eye-tracking technology and her company’s recent alliance with Major League Baseball and USA Baseball.

Julie Sylvester

Julie Sylvester, Executive Producer at Living in Digital Times, talks trends likely to emerge at Sports and FitnessTech Summit at CES in Las Vegas.

Chris Palmer

Chris Palmer, Founder and CEO of BoxFox, talks excess inventory and solutions for vendors, retailers and distributors.

Susie McCabe

Susie McCabe, SVP of global retail for Under Armour who previously spent 16 years at The Ralph Lauren Corp., dishes on UA’s retail strategy and new Brand House in Boston.

Tom Cove

On the eve of Election Day, we talk to three leading industry lobbyists on how the results may impact trade in the sporting goods, outdoor and apparel and footwear industries.

Rich Harper

On the eve of Election Day, we talk to three leading industry lobbyists on how the results may impact trade in the sporting goods, outdoor and apparel and footwear industries.

Stephen Lamar

On the eve of Election Day, we talk to three leading industry lobbyists on how the results may impact trade in the sporting goods, outdoor and apparel and footwear industries.

Bill McInnis

The president of Reebok Future discusses the intent of the unit and the brand’s plans to develop footwear in a new way.

Tom Fowler

Polar USA CEO Tom Fowler talks technology and the future of smart wearables.

Paul Schille

TREW CEO Paul Schille dishes on the eight-year old company in the process of completing its Series A round of funding and his dual career.

Jason Kaplan

Milestone Sports CEO Jason Kaplan dishes on the company’s low-cost, wearable pod and how it will help specialty retailers connect.

Duncan Finigan

OOFOS marketing executive talks about the recovery footwear brand and candidly about her courageous personal health journey.

Matt Priest

Footwear Distributors and Retailers of America President Matt Priest the likelihood of the Trans-Pacific Partnership being passed soon.

David and Josh Higgins

ING Source executives dish about compression technology and the Hickory, NC company’s breakthrough OS1st Brace Layer System.

Charles Liberge

Jones & Vining’s Charles Liberge addresses strategies and directions for the iconic brand.

Jim Baugh

PHIT America’s Jim Baugh dishes on the inactivity pandemic.

Sue Dooley and John Daher

Rockport Group senior executives talk about the brand’s fresh start under new ownership that has a major emphasis on versatility.

Josh Shaw

Mission Athletecare CEO Josh Shaw says thermoregulation is the New York company’s singular focus.

Tim Porth

Tim Porth of Octane Fitness talks trends, Zero Runner and the company’s January acquisition by Nautilus Inc.

David Costello

The principal and founder of Rising Tide Associates talks about industry advocate lobbying for the domestic textile and footwear industries.

Steven D’Angelo

The ‘47 brand executive dishes on the Boston company and long-time MLB licensee founded by his father Arthur and his late Uncle Henry.

Pam Gelsomini and CB Tuite

Pam Gelsomini, president, and CB Tuite, VP–sales, discuss the company’s products, partnerships and what’s new for the season ahead.

Kenneth G. Andres

The tradeshowdirector for the American Sportfishing Association casts comments on the activity’s popularity, and trends in fishing.

Dick Sullivan

The principal and founder of Rising Tide Associates talks about industry advocate lobbying for the domestic textile.

Dave Coradini

The VP of sales and sponsorships for Spalding, Dave Coradini talks Shot Tracker and basketball.

Scott McGuire

The executive brand and product innovation leader dishes to F4M’s Emily Walzer on an array of topics.

Kelly Davis

Snow Sports Industries of America’s Kelly Davis talks weather, participation trends and how to handle the psyche.

Kevin Davis

The CEO of Performance Sports Group dishes on new bat standards and Own the Moment.

Gene McCarthy, Pt 2

Gene McCarthy, president of Asics America, speaks to Jen Ernst Beaudry on specialty run and more in the second part of the podcast.

Gene McCarthy, Pt 1

Gene McCarthy, new president of Asics Americas, dishes to F4M’s Jen Ernst Beaudry in the first of a two-part podcast.

Richie Woodworth

Saucony’s Richie Woodworth offers his views on brand’s running business and what it takes to manage through change.

Bruce Cazenave

Bruce Cazenave, CEO of Nautilus Inc., recently ranked 23rd on Fortune’s “Fastest Growing Companies” list.

Tony Armand

Armand is leading USB, created after the April merger of Shock Doctor and McDavid.

Gary Smith

Gary Smith has been at the helm of the Lawrence, MA firm for three years, and his 2016 strategies will broaden Polartec’s scope.

Marty Hanaka

City Sports CEO Marty Hanaka has 42 years in retail, starting at Sears in 1973.

Mike Dowse

Wilson Sporting Goods, one year removed from its 100th anniversary and a major restructuring, has a renewed focus and strategy.