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Mon, Aug 28, 2017
Vol 1, Issue No. 33
Monday, April 9, 2018
Volume 2, Issue No. 14

Higher Input Costs, More M&A’s on Horizon

The footwear and apparel industry has a “stable” outlook for the next 12 to 18 months with accelerating profitability fueled by cost-saving measures, improving U.S. retail conditions and less need for inventory markdowns, according to a recent Moody’s report. The investors service is predicting a 3 to 5 percent segment operating profit increase in 2018 on 3 to 5 percent overall sales growth. Operating profit for the next 12-18 months is forecast to grow 4 to 6 percent. These profitability outlooks, while scaled back from earlier estimates, represent “significant improvement” from 2016 and 2017 levels when industry operating profits decreased 3.2 percent and 2.4 percent, respectively. Moody’s lowered its earlier 2018 growth outlook that called for 4 to 6 percent operating profit expansion on the grounds that more companies are directing additional resources into Direct-to-Consumer (DTC) with websites and mobile applications and a persistent, although lessened, promotional environment caused by competition for market share.

Moody’s cites a number of positive and negative factors in its March 29 report. For example, it’s expected that apparel firms will continue to face input cost inflation, particularly with labor costs and cotton prices, in addition to their higher investments that will temper profitability growth through mid-2019.   “While many companies have the ability to increase prices to offset rising costs, it may be challenging to fully recoup costs increase in the challenged U.S. market where many consumers may not be able to, or willing to, pay higher prices for goods,” states the report.

Cotton prices are currently up more than 27 percent from their July 2017 level but more than 60 percent below a $2.15 a pound peak that occurred in 2011.

Increased M&A activity will be fueled by a need to bolster profitability through product extensions or new categories, extended geographic reach or access to new technologies. Moody’s also predicts more apparel companies will move to eliminate non-core businesses from their respective portfolios. One potential downside risk that the service doesn’t delve into deeply is the possibility of higher tariffs on China imports into the U.S. Moody’s does suggest that such a scenario would be a “significant risk” to profitability considering the higher costs “might not be easily passed on to consumers.”

Meanwhile, NPD is predicting a “challenged” year for the U.S. sports equipment segment in 2018 due to lower participation levels in a number of activities. In 2017, U.S. team sports sales fell in the single digits, but some segments showed improvement. Baseball swung down low single digits despite a fourth quarter boost from the changeover in compliant bats. Basketball was up low single digits in 2017 on higher participation. Ditto racquet sports. Protective gear sales grew mid-teens last year and should be a continued growth opportunity for the equipment market, the research firm said. On the downside, soccer, bolstered by the June World Cup, will look for a bounce-back year in 2018 after sales dipped in the low teens in 2017.

China is Boon for Sneaker Biz, Trade War or Not

As the rhetoric and posturing rages on in what could emerge as a full-fledged trade war between the U.S. and China, the athletic footwear industry sits an interesting, budding position. For years, major players Nike and Adidas have steadily been reducing their reliance on China as a footwear sourcing hub while strategically plotting for major sales growth in the Asian nation of 1.32 billion.

As cited by Nike senior management during the company’s most recent earnings conference call, China has accelerating “positive macro trends” ranging from consumer spending to sports participation that are likely to lead to more purchases of athletic shoes and apparel in the months and years ahead.

The Swoosh, which slashed its footwear manufacturing in China to 27 percent of all pairs in FY17 from 32 percent in FY15, is preparing to roll out its NikePlus membership program to Chinese consumers this summer after launching its SNKRS app in the country in December 2017 and forging a partnership with Tmall. Nike brand sales grew 24 percent in China during the period ended February 28 with quarterly EBIT up 30 percent in the market.  Euromonitor, as cited by Investors’ Business Daily last week, says Nike currently has an 8.1 percent share of China’s current $56.6 billion athletic shoe market.

Adidas, meanwhile, enjoyed double-digit growth in running, training, basketball, Originals and neo shoe sales in China in 2017 as currency-neutral sales in the market rose 29 percent and gross margin came in at 57.1 percent. Adidas brand sales were up 30 percent in China last year. The Three Stripes, which sourced 19 percent of its footwear in China in FY17 versus 22 percent in FY16, currently has a 4.7 percent market share in the Asian country. Also, Adidas made 23 percent of 404 million apparel units in China in FY17 against 27 percent of 382 million pieces in FY16.

Under Armour, which has seen its marquee endorser Steph Curry enjoy tremendous popularity in China where the sport of basketball is growing steadily in popularity and participation, has brand penetration in 60 Chinese Tier 1 and Tier 2 cities currently and recently opened a 20,000-sq. ft. store in Beijing. CEO Kevin Plank recently told analysts the company “is very bullish on China” (and South Korea) with its premium positioning, despite its current “relatively small” position in the market. The company says it sees “enormous opportunity” to grow its brick-and-mortar presence in China.

Sport Lifestyle Buoys Athletic; Imports Up for Now

The largest segment of athletic footwear, sport lifestyle, grew 16 percent year-over-year in February as running shoe sales inched up 1 percent during the short month, according to NPD data. Overall, the athletic footwear category, facing an easy year-over-year comparison, grew low-single digits. The dress and non-athletic casual footwear categories improved in February but were well below 2016 levels. Seasonless fashion slides, clogs/mules, loafers and comfort brands continued to perform well, the research house said. But there was “minimal success” in men’s dress and casual footwear since athletic continues to drive sales in both segments.

Meanwhile, with all the global talk of a looming trade war between the U.S. and China, U.S. imports are forecast to grow a healthy 5.8 percent in April after rising 15.8 percent year-over-year in February in a figure that was skewed higher due to Lunar New Year factory shutdowns. March imports are expected to be down 1.2 percent, according to the monthly Global Port Tracker by the National Retail Federation and Hackett Associates.

“If (new) tariffs ultimately lead to a reduction in imports and exports, that will put dockworkers and countless others in the supply chain out of work,” warned Jonathan Gold, NRF’s VP for supply chain and customs policy.

“There is nothing good about a trade war,” added Hackett Associates Founder Ben Hackett. “It is a vicious circle of retaliation where there are no winners, only losers.”

REI Sets Product Sustainability Standards

Photo Credit: Coolcaesar at Wikipedia [GFDL or CC-BY-SA-3.0], via Wikimedia Commons

The 80-year old co-operative, which generated a 2.55 percent increase in FY17 revenues to $2.62 billon, has initiated product sustainability standards for each of the more than 1,000 brands it sells in its stores and online. The measure, REI opines, will make it easier for customers to choose more sustainable products.

The REI Product Sustainability Standards outlines the co-op’s expectations for how brands manage key environmental, social and animal impacts, which REI believes builds on the sustainability work it has done with its own brands. The standards, shaped by input from dozens of various size brands and product categories and REI’s years of participation in the Outdoor Industry Association Sustainability Working Group, will be made available to any retailer that wishes to use them. Additionally, REI is launching a list of preferred sustainability attributes, highlighting brands and products that are manufactured with social and sustainability best practices.

Elsewhere, the co-operative over the last year continued to expand its #OptOutside national movement with the development of an experiential digital search engines that encouraged more than 8 million moments of celebration outdoors; built a nonpartisan coalition of more than 500 companies that mobilized millions to help protect U.S. public lands; piloted Used Gear Beta as a means to keep returned goods and apparel out landfills; and sourced 100-percent green energy to operate its stores, distribution centers and Seattle headquarters.

TaiSPO 2018

Fitness and golf equipment and outdoor sports are the three major exports of the $1.36 billion Taiwanese sporting goods industry. The 45th Taipei International Sporting Goods Show (TaiSPO) took place last month with more than 22,000 attendees, including 1,742 buyers from outside the Asian country. Two new exhibit areas at the event were: Smart Sports and Fitness programs and Services. TaiSPO’s 46th show is scheduled for March 28-30, 2019.

The Buzz

Adidas strikes a multi-year partnership with BIG3 to become the official outfitter of the 3-on-3 basketball league and to support the organization’s efforts in grassroots and community endeavors in local markets. The Adidas-BIG3 relationship commences at the BIG3 Combine in Los Angeles on April 11.

Endeavor Athletic, the fitness apparel company founded by former NHL player turned broadcaster Colby Cohen, opens a pop-up store in Philadelphia.

Champion Athleticwear, owned by Hanesbrands, opens its first U.S. flagship store in Los Angeles. Situated on South La Brea Avenue, the door will feature on-site customization, specialized products only available in the So. California market and frequent product drops from Champion’s global lines.

GrassRoots Connect has added Cotopaxi, Helinox, Meridian Line, Simms Fishing and tasc Performance, to its exhibitors for its national buying show in Knoxville, TN from June 14-17.

OrderMyGear, the Dallas-based provider of ecommerce, order management, payment and supply chain software to the team sporting good and group apparel apparel segments, raises $35 million from Susquehanna. Last year, the company oversaw almost $200 million worth of commerce from 100,000+ individual group stores and 2,000 team dealers and athletic organizations.

Puma introduces new performance soccer boots, The Frenzy Pack, with the FUTURE 18.1 and PUMA ONE 18.1. The Future 18.1, said to be the first football boot offering a customizable fit, will be worn and endorsed by soccer players Antoine Griezmann, Adam Lallana and Nacho Monreal among others.

Urban Outfitters announces the departure of David McCreight, CEO Anthropologie Group president, on April 27. Hillary Super, Anthropologie Group President, Apparel and Accessories, will lead the brand going forward.

Vineyard Vines strikes a partnership with MLB’s Boston Red Sox and Fenway Park. An exclusive style collection for men, women and children will be available at the brand’s website and select stores, including in a renovated store at Boston’s Prudential Center that opens April 27.

Zilingo, a three-year old fashion ecommerce platform started in Singapore, is expanding into the U.S. with a B2B platform, Zilingo Asia Mall. Company recently closed $54 million in Series C funding led y Sofiam Burda Capital Investments, Sequoia Capital India and Amadeus Capital.

Tubes of the Week


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
Segment enjoys second consecutive week of more than 1 percent gain despite the topsy-turvy period for the Dow. Despite the persistent talk of trade wars and tariffs emanating out of Washington, the Dow did post a 1.6 percent increase for the period before tumbling more than 274 points early April 6 on an another possible $100 million in tariffs on China-sourced goods being initiated by the Trump Administration. Dick’s and its Team Sports HQ is named the Official Ball Supplier of the Little League World Series this season with the retailer’s A.D. STARR brand. Big 5 Sporting Goods, which experienced a 16.8 percent increase in its stock price after reporting year-end results, will open five net new doors this fiscal year. Hibbett Sports is sponsoring its hometown Birmingham Barons, the minor league baseball franchise, for a fourth consecutive season. Blackrock creates two exchange-traded funds and a series of new index tracking products for pension funds and employee retirement funds that want stocks of gun makers or any large gun retailers excluded from their investment portfolios. Sportsman’s Warehouse has no intentions of restricting gun sales. The chain is forecasting growth in firearms and 2-3 percent higher ammunition prices this year.
Segment outperforms Dow for the period, rising more than 3.6 percent to push its INDEX to a new record high. Adidas is reportedly in the running to snatch an all-school outfitting deal at the University of Washington. The Huskies have been affiliated with Nike since 1997. Entrants with a stake in golf—Under Armour, Nike, Acushnet (Titleist), Callaway, Adidas and Puma (although not listed in group)—likely got a boost from annual Masters in Augusta. Columbia Sportswear shares hit an all-time high, perhaps benefitting from the extended wintry weather over much of the northern tier of the U.S. Snow on April 6! Fitbit, despite being down for the week, sees Time magazine give a positive review to the brand’s new Versa smartwatch as a viable threat to the Apple Watch. The product was lauded as fashionable and less expensive with 550 apps and watch faces with particular strength in its fitness features and battery life. Under Armour sees Susquehanna go negative on the stock by citing “precarious” situations for the brand and its inventory positions, including fewer sales to both Dick’s and Hibbett Sports last year. VF Corp. completes acquisition of Icebreaker. The deal is forecast to accelerate the company’s market share in the natural fiber apparel segment.





Retail Name (Ticker Symbol)
Close on 03/29/18
Close on 04/05/18
% change over week
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 03/29/18
Close on 04/05/18
% change over week
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

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.

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.