Retail: 57
Retail: 183
Monday, November 26, 2018
Volume 2, Issue No. 45

Crucial Week Ahead for U.S. - China Trade

All eyes will be on Buenos Aires later this week as President Trump is scheduled to meet China President Xi Jinping face-to-face at the G20 Summit on Dec. 1. The trade war between the two countries, already becoming acrimonious, is slated to escalate Jan. 1 as 10 percent tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent in 2019.

With market observers suggesting both sides are showing signs of digging in their heels on nearly all trade issues and showing no signs of major concessions, the best-case scenario at the G20 might be a “temporary ceasefire” on the higher duties.

White House advisor Larry Kudlow is one who thinks there will be a direct confrontation between U.S. and Chinese officials at the G2. Any positive developments, including agreements to continue negotiating, would calm global markets that have not responded well to the ongoing trade tensions. The Trump Administration has already rejected 142 concessions offered by China, although the President has suggested that a new trade deal could be struck before Jan. 1.

Last week, U.S. Trade representative Robert Lighthizer said, “China has not fundamentally altered its unfair, unreasonable and market-distorting practices.”

Both sides have maneuvered behind the scenes ahead of the G20, according to analysts. China is said to be campaigning U.S. allies on its declining trade surplus. The U.S., meanwhile, has lessened trade conflicts with Canada, Mexico and the European Union in attempt to dissuade them from forging new trade agreements with China.

Meanwhile, a key benefactor of the current trade dilemma may well be other markets in Southeast Asia, including Vietnam, Singapore and Thailand, as more companies look to diversify and redirect more of their supply chain away from China.

Foot Locker Works to Keep Improving Game

The retail behemoth’s go-forward strategy, tied to more creative projects with key partners and smaller, secondary players (Vans, K-Swiss, Fila, Puma and Reebok), less promotional selling and a beefed-up digital presence, is about “further strengthening (Foot Locker’s) emotional connection with consumers.” That is particularly important given the myriad of options available for kicks and apparel purchases and the number of social distractions today. The current Q4 comp sales forecast calls for growth in the low- to mid-single digit range.

Foot Locker realized a 0.5 percent year-over-year drop in Q3 revenues to $1,860 million, but the comparison was impacted by an extra week in 2017. A comp sales increase of 2.9 percent and period net income of $130 million each topped the Street consensus. In North America, Foot Locker U.S., Champs and Eastbay were each up mid-single digits. SIX:02 experienced a low-single digit sales gain; Kids Foot Locker was down slightly, and Footaction sales were off mid-single digits, largely due to a Brand Jordan reset by Nike. In footwear, women’s was the strongest with comps up double-digits. Men’s rose low single-digits as kids increased slightly. Men’s running comped up double-digits. Basketball, while down mid-single digits, improved from Q2.  

New partnership endeavors by Foot Locker include “House of Hoops Courtside,” a mobile pop-up shop that will be utilized around the U.S. “during key basketball moments” to sell exclusive footwear launches from Nike, Brand Jordan and Converse; an augmented reality initiative called The Hunt within the Foot Locker app to help unlock a purchase opportunity for limited-edition sneakers; the Adidas Never Made collection that continues with launches in Q4; and ASICS’ East Meets West exclusive concept. Additionally, Foot Locker has teamed with Brand Jordan to open a new Jumpman store in a 25,000-sq. ft. former 1920s theater in Los Angeles. The space includes a footwear and apparel customization bar, a rooftop basketball court with fan seating and a training lab for personal training sessions.

Following up on the opening of a Power Store in Hong Kong that includes Xbox gaming stations and a barbershop, Foot Locker will debut its first U.S. Power Store on Detroit’s historic 8-Mile Road in Q4 with many of the same concepts found in Hong Kong, London and Liverpool Power locations.

Nautilus executives talk about physical fitness today and the brand’s new AI-driven Max Intelligence platform.

Caleres Sees Vionic’s Potential

Vionic brand is headed to Nordstrom.

The Famous Footwear parent, which acquired Vionic for $360 million in mid-October, thinks the 11-year old northern California company possesses significant growth potential in the premium comfort segment for men and women.  

“So, it really is everything from category growth, to gender growth, to channels of distribution,” Caleres CEO and President Diane Sullivan told analysts last week about Vionic’s opportunities. “…They (Vionic) have built a really profitable and sizeable business with sellers and with QVC. Now they are moving into Nordstrom.”

Caleres’ existing infrastructure should benefit Vionic as it continues expanding its business, including into international channels. The profitable business currently has a seasonal product ratio of 55-45 spring to fall, said Caleres CFO Ken Hannah, who added that Vionic has already expanded beyond its initial women’s sandals business into men’s and boots.

As for Famous Footwear in Q3, the retailer generated a 2.8 percent comparable store sales increase as total period revenues hit $448.8 million, and ecommerce sales grew 25 percent to represent 13 percent of all revenues. Women’s comps rose mid-single digits; sandals/boots were up low-double digits; lifestyle athletic sales increased high-single digits and kids and adult performance athletic comps jumped low-single digits.

“The overall environment continues to be more promotional and we responded as appropriate to drive business and attract more consumers,” said Sullivan. “Our actions included some aggressive testing of new promotions…”

The 1,007-door banner, which generated a 4.5 comparable store sales increase in October, conducted both in-store and online promotions in Q3 as well as promotions on certain brands and categories to gauge customer reaction.

Kohl’s Will Reveal ‘Active’ Expansion Strategy in Early 2019

CEO Michelle Gass says the retailer remains “very committed” to its active business and future opportunities within the segment. Kohl’s, which described its men’s active business as “very strong” in Q3 when the retailer generated a 2.5-percent comp store increase, counts Nike, Adidas and Under Armour as key branded active partners that complement its private brands. It is currently studying customer response at 30 pilot doors where it has expanded space for active by close to 25 percent and the total active assortment by 40 percent before making a decision on active for other store locations.

“Customer research we’ve done continues to see us more and more as an active destination…People are wearing actives to work out, they are also wearing it to run to the supermarket or the coffee shop.,” said Gass. “So, I think given Kohl’s is so known for being a casual apparel destination, we’ve been able to extend that into being a destination for active.”

Elsewhere, the 1,159-door retailer experienced a mid-teen increase in digital sales in Q3 and realized its positive regional comp sales improvement in the Mid-Atlantic, Midwest and Northeast. More than 25 million consumers have downloaded the Kohl’s app to-date with approximately five million actively engaging with it on a monthly basis. During Q3, the retailer opened two pilot stores to test a new customer service center concept with a centralized checkout, self-service kiosks and Buy Online, Pick-Up In-Store lockers and store associates utilizing IPads to assist customers with the banner’s mobile endless aisle.


• Target said comparable sales in its digital channels grew 49 percent in Q3 as overall comp sales increased 5.1 percent and traffic rose 5.3 percent. In-store pick-up, meanwhile, currently accounts for approximately 15 percent of digital volume. Shipt shoppers are now fulfilling guests’ orders for more than 1,400 Target stores. This is the first holiday season that the banner has featured the Umbro and Universal Thread brands among others in its apparel assortment.

• Athleta N.A., a Gap-owned format with 157 locations, had a strong Q3 as the Hill City brand, a performance lifestyle label conceptualized a year ago by a team of less than 20, launched in the banner. Year-over-year sales for Athleta/Intermix N.A. (36 locations) rose nearly 29 percent to $257 million. Considered a growth engine in Gap’s portfolio, Athleta currently represents 1.9 percent of the company’s 36.9 million retail square feet.

New Era Cap, Woolrich Exiting U.S. Manufacturing

The ‘Made in the USA’ movement took a hit earlier this month as baseball cap brand New Era and longtime fabric maker Woolrich Inc. each revealed respective plans to exit manufacturing operations in the northeast U.S. In a related recent development, The Alliance for American Manufacturing is asking the Federal Trade Commission to get tougher on companies that falsely claim and label their products as American-made. Since 2010, the FTC has issued 135 warning letters and filed 10 lawsuits against firms for false ‘Made in the USA’ labeling, but only one company has been fined.

Privately held New Era, which has diversified its contracted supply chain in recent years to include factories in Haiti, China, Bangladesh and Vietnam, is shutting down its own 57-year old manufacturing plant in Derby, NY and laying off 219 staffers. But the Koch Family-controlled company is retaining its 330-person staffed corporate headquarters in downtown Buffalo and naming rights on the NFL’s Bills’ stadium through 2023. The official supplier of caps to Major League Baseball will continue to honor a ‘Made in the USA’ clause in its league contract by shifting that cap sourcing to its Miami screen-printing factory.

As for 189-year old Woolrich, recently acquired by a Luxembourg private equity firm, L-GAM Advisers, it intends to end its fabric manufacturing operation in Woolrich, PA on Dec. 31 and layoff 40 staffers there. Company president Nick Brayton cited economic constraints, including a need for considerable capital improvements to modernize the plant, as the primary reason behind the closure. The closure of the Woolrich mill, opened in 1845 and the oldest, continuously operated one in the U.S., leaves two remaining—Pendelton Woolen Mill in Portland, OR and Faribault Woolen Mill in Minnesota.

In September, the FTC reached consent agreements with two sporting goods companies with each agreeing to stop making false ‘Made in the USA’ claims—a Farmingdale, NY firm selling a product called the ‘Patriot Puck’ and Sandpiper of California/PiperGear USA of California that produces backpacks, travel bags and wallets.

Execs on the Move
VF Taps New Altra President; Sustainability Leader

VF Corp. has hired Saucony’s former SVP of sales Todd Dalhausser as brand president of its Altra brand. With the move, Brian Beckstead, co-founder of Altra, moves into a new role as founder and chief marketing officer with responsibility for all product and marketing for the brand. Beckstead will report to Dalhusser.

Separately, as she announced on Twitter, Beth Jensen, senior director of sustainable business innovation for the Outdoor Industry Association, is moving into a similar role at VFC. The company is in the process of relocating its corporate headquarters to the Denver market.

Elsewhere, John W. Rogers, 69, Chairman and CEO of Ariel Investments, has been appointed to the Nike board.  

The Buzz

Agenda Winter, scheduled for Jan. 3-4, 2019 in Long Beach, CA has been postponed by organizer Reed Exhibitions. After 15 years, the event will now be evolved into a B2C platform in June that focuses on lifestyle and fashion around action sports and streetwear with a consumer component. The Las Vegas edition of Agenda, scheduled for Feb. 5-7, 2019, will take place as scheduled in a new downtown venue, World Market Center.

Fanatics strikes a long-term partnership with Ticketmaster that will integrate verified tickets and official licensed merchandise in the fan shopping experiences of both websites. Leagues, teams and universities will receive an integrated ecommerce solution as the customer databases of each partner help create a fan rewards program. Ticketmaster and Fanatics will also partner on marketing and brand activations at key sporting events and at New York-based retail stores.

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
Segment declines for second consecutive week as five stocks rise and 10 decline. The nearly 3.6 percent aggregate drop for the period slightly exceeds the Dow’s 3.08 percent drop for the period ended Nov. 21, Thanksgiving Eve, or 777.66-point decline for the four days. Sports Direct CEO Mike Ashley is slated to speak before a committee of the U.K.’s parliament on Dec. 3. He will reportedly address the need for the government and landlords to take action and help the market’s struggling retail sector. Foot Locker shares soared nearly 16 percent after it reported results despite a mixed reaction from Wall Street. Three investment houses, including Wells Fargo and Canaccord Genuity put a “buy” on the stock; two analysts issued “hold” or “neutral” ratings and Morgan Stanley had a “sell” on the stock. Dick’s, meanwhile, slated to report Q3 results this week, is expected to exceed its earnings estimates for the period. Gap (not on the INDEX) reported a 7 percent drop in Q3 sales and is looking to close hundreds of stores “quickly and aggressively,” including some of its “amazing flagships,” senior management told analysts. Tilly’s reports Q2 results on Nov. 28.  
Segment declines more than 4.2 percent with 13 stocks down, two up for the period. Acushnet Holdings, Callaway and others in the golf game are hoping to see a lift in consumer interest in the game following the Black Friday, $20 pay-per-view match between Tiger Woods and Phil Mickelson — the matchup and telecast got plenty of attention, but did not get rave reviews. Lululemon’s site began crashing on Thanksgiving morning, according to Business Insider, preventing shoppers from completing their purchases of Black Friday deals from the brand. Adidas’s original Ultraboost hits retail again on Dec. 1. Meanwhile, the Three Stripes and Kanye West donate $500,000 to California wildfire relief. VF Corp. hires Todd Dalhausser, former SVP of sales for Wolverine’s Saucony North America business as brand president of Altra, a business it acquired in June. Rapper Meek Mill, who will appear on The Tonight Show with Jimmy Fallon and The Ellen DeGeneres Show this week, will give instant download access to his latest studio album, “Championships,” on Nov. 30 to all who purchase a Puma shoe at Foot Locker online or in-store. Nike offered U.S. customers 20 percent discounts on approximately 3,500 clearance SKUs ahead of Thanksgiving with a special “Thanks’ checkout code.  





Weekly Review

Retail Name (Ticker Symbol)
Close on 11/15/18
Close on 11/21/18
% change over week
Big 5 Sporting Goods (BGFV)
Sports Direct (LON: SPD)
Camping World (CWH)
Dick's Sporting Goods (DKS)
JD Fashion (JD)
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 11/15/18
Close on 11/21/18
% change over week
Acushnet Holdings (GOLF)
adidas (ADDYY)
Amer Sports (AGPDY)
Callaway (ELY)
Columbia Sportwear (COLM)
Deckers Brands (DECK)
GoPro (GPRO)
lululemon (LULU)
Nautilus (NLS)
Nike (NKE)
Puma (PUMA)
Skechers (SKX)
Under Armour (UA)
VF Corp. (VFC)
Wolverine Worldwide (WWW)

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