Retail: 57
Retail: 183
Monday, October 15, 2018
Volume 2, Issue No. 40

Footwear Insight
DSW Wants Larger Role in Footwear Universe

DSW’s decision last week to team with Authentic Brands Group (ABG), on the acquisition of the operations and intellectual property rights of the 17-year-old Camuto Group in a $375 million deal slated to close in Q4, is part of a broader strategy to expand its reach in footwear with both consumers and other retailers.

“Following the acquisition, our business model evolves from one that is 100 percent focused on North American retail to a model with new revenues from wholesale, licensing royalties and investment income,” DSW CEO Roger Rawlins told analysts last week. “Furthermore, it diversifies our business by increasing our exposure outside the moderate channel to improve department stores, regional chains, independent boutiques, pure play online and digital marketplaces.”

Following the acquisition, our business model evolves from one that is 100 percent focused on North American retail to a model with new revenues from wholesale, licensing royalties and investment income.

The complex transaction will bring DSW’s annual topline close to $3.5 billion after it pays $200 million for Camuto’s operations and $56 million for a 40-percent ownership in an IP joint venture with ABG. The deal also gives DSW the resources to manufacture high-quality men’s and women’s shoes in Asia. DSW will also acquire the licensing rights for Jessica Simpson footwear, the Lucky Brand and Max Studio footwear and handbags and joint venture (JV) participation in the Ellen DeGeneres and Mercedes Castillo brands.

From the transaction, DSW sees its four largest “buckets of growth” coming from other shoe retailers—Dillard’s, Nordstrom and Macy’s among them—in growing their respective footwear businesses; more private label product for DSW which currently generates only about 10 percent of revenues; licensing royalties through its relationship with ABG; and Direct-To-Consumer expansion.

Once the transaction closes, DSW is vowing to “go slow” out of the gate as its team learns the Camuto business, makes sure the Connecticut company’s wholesale partners are serviced properly and plots its longer-term strategy for the business. Camuto Group has been profitable over the last year, Rawlins said, but the footwear business has more recently been challenged by supply-chain constraints. DSW’s ownership will help Camuto return to “more normalized” operations over the next 12- to 18-months.

As for ABG, the global brand management company backed by investor Leonard Green, General Electric, David Simon and Chairman and CEO Jamie Salter, the New York company currently oversees 33 brands in the celebrity, lifestyle and sports categories. Among them: Nautica, Tapout, Spyder, Juicy Couture, Marilyn Monroe, Tretorn, Greg Norman and Elvis Presley. ABG brands generate 40 percent of revenues in international markets and over $8 billion in worldwide retail sales from approximately 50,000 points of distribution. The DSW-ABG JV includes the Vince Camuto, Luise et Cie, Sole Society and Enzo Angiolini brands among others and will focus on licensing the brands across existing lines in footwear, handbags and jewelry and new category development.

Bankruptcy Means Fewer Sears Stores

The 132-year old retailer Sears, which has struggled under mounting debt and slowing sales for years, filed for Chap. 11 bankruptcy protection late Sunday, hours before a deadline to pay $134 million in loans. Ahead of the filing, the Wall Street Journal reported late Friday that the retailer, which hasn’t reported a profit in seven years, would obtain a lifeline of $500 million in emergency financing enabling it to keep open approximately 300 locations through the upcoming holiday season. Under bankruptcy protection, Sears intends to close 142 stores by Dec. 31 on top of 46 set to close by Oct. 31. The fate of another 250 stores would be determined after evaluations. Hedge fund ESL Investments, owned by Sears’ Chairman Edward Lampert, is the “stalking horse” bidder to purchase an unspecified portion of the retailer’s real estate.

Sears hired M-III Partners LLC, a boutique advisory firm, on Oct. 9 as it prepared a reorganization plan. Last week, some investment houses predicted retailers Kohls and Macy’s would be beneficiaries of Sears’ bankruptcy filing.

“It is sad to lose such a historic and household brand such as Sears,” remarked Gavin Bisdee, VP of global marketing for Zynstra, “but they are not the first retailer to fall by the wayside, and they certainly won’t be the last, either. It is important, however, to remember that it is not a barometer of the overall trends in U.S. retail, despite claims of a ‘retail apocalypse’ over the past year. Recent reports clearly show there have been more store openings than closures in the U.S., and sales in physical stores will still account for 80 percent of retail sales by 2021. That said, change must continue to happen in retail. The bankruptcy of Sears only reinforces the importance of adapting fast to the change in consumer buying habits. Those (retailers) that are adapting fast to omnichannel integration, including the use of stores as distribution and fulfillment centers as well as sales outlets, will be the clear winners. In fact, don’t be surprised to see other retailers looking at Sears’ real estate inventory for their own sales and distribution needs.”

Higher Postal Shipping Rates on Horizon

Amazon will have to pay more to the U.S. Postal Service for delivery of its packages after the holidays under a proposal submitted late last week. Starting Jan. 27, 2019, costs for traditional parcel delivery, the type most used for Amazon orders and other retailers for fulfillment, will rise 9.3 percent. Meanwhile, the cost of lightweight (under a pound) packages would be hiked 12.3 percent and the cost of a first-class stamp would rise to 55 cents.

U.S. retail sales rose a meager 0.1 percent in September from August, below Street expectations of 0.6 percent gain. Year-over-year sales were up 4.7 percent, according to monthly data from the U.S. Census Bureau. Sales in the sporting goods/hobby/musical instrument/book store channel fell 3.8 percent on an adjusted basis in September and were down 2.7 percent for the first nine months.

Scheels has announced plans to open its second Colorado store, in Colorado Springs, in April 2021. The proposed 220,000-sq. ft. location by the employee-owned is planned for the Interquest Marketplace near the Great Wolf Lodge and will be the chain’s 29th door after two stores are opened in 2020 in Eden Prairie, MN and The Colony, TX.

Dick’s Sporting Goods is opening stores this month in Spokane, WA and Greendale, WI and two Golf Galaxy doors in Dublin, CA and Greendale, WI. The four openings will bring Dick’s store count to 733 across 47 states and Golf Galaxy to 96 locations. Also, last week, DKS inked a multi-year extension to its partnership with Pittsburgh-based First Insight, which has assisted the retailer for the last three years with predictive analytics for its design, buying and pricing decisions.

Customers at L.L. Bean’s store in Mansfield, MA over the weekend, drawn to the store by its 20-percent off sale on all Bean footwear and apparel through Oct. 15, were lining up to use “Albert,” a retail footwear scanning system introduced last year by Aetrex Worldwide. The round device measures pressure and sizing, conducts 3-D imaging and has the ability to track gait. Built and developed in Israel, the system is equipped with more than 5,000 sensors, 1,000 infrared LED lights and receptors and 18 digital cameras.

Execs on the Move
New Prez at Vibram U.S.; Fanatics Expands International Team

Left to right: Fabrizio Gamberini, Michael Gionfriddo, Ignacio Beristain Borra

Fabrizio Gamberini, previously CEO for Geox USA and a Nike GM, is the new president and CEO of Vibram USA. He is replacing 20-year company veteran Michael Gionfriddo, who is retiring on Dec. 31. Until then, he and Gamberini will work together to ensure a smooth transition at the North Brookfield, MA company. Gionfriddo has been president of Vibram USA since 2011. Separately, Vibram Corp. has appointed Richard Riegel, a company director since 2015 and the founder and CEO of privately-held Airstream 2 Go, LLC, as Chairman.

At Fanatics, former 18-year adidas executive Ignacio Beristain Borra has joined the company to lead retail, buying and merchandising across Southern Europe. Additionally, Bill Tung, with international experience at both Columbia Sportswear and New Balance, joins as Managing Director for Fanatics Branded International, and Ian Nelson, from Pentland Brands, as product marketing director. Meanwhile, Zohar Ravid joins as director of strategy and M&A.


• Duluth Trading Company promotes SVP Allen L. Dittrich to Chief Operating Officer, a new position at the Belleville, WI-based retailer. A retail industry veteran, Dittrich was previously SVP of retail for Allen Edmonds Shoe and a COO and CMO at the former Gander Mountain.

• Outdoor Industry Association (OIA) hires Patricia Rojas-Unger, VP of public affairs for the U.S. Travel Association, as VP of government affairs. She will lead the trade group’s Washington, D.C. office.

• Dynamic Brands, the Richmond, VA parent of seven sporting goods brands, adds customer service, operations and production staff. The company is relocating its production and warehouse operations to Pageland, SC from Monroe, NC in Q1/19.

The CEO and president of PHIT America discusses actions taken by the non-profit to the stem the U.S. inactivity pandemic, including GO! Grants toU.S. Schools and the PHIT Act bill before Congress.

The Buzz

Allbirds Inc. now has valuation of $1.4 billion after selling new, unspecified equity to investors last week. The San Francisco-based footwear company, which operates stores in its home city and New York, was valued at $370 million when Tiger Global Management invested more than $50 million last year. Co-founder Joey Zwilliinger told the Wall Street Journal that Allbirds, profitable since its first day, is exploring an IPO “for a variety of reasons.”

American Golf, a specialty golf retailer in the U.K. with 132 locations and an estimated $183 million in annual revenues has been acquired by Endless. The British-based, mid-market private equity firm will acquire 112 of the retailer’s 132 doors and its two ecommerce websites, beating out Sports Direct and JD Sports Fashion with its unspecified bid. American Golf was founded in 1970.

Asics Tiger is reportedly adding robots to a Japanese factory that produces Onitsuka Tiger shoes in early 2019. The robotics, according to the Nikkei Asian Review, will stitch uppers and assume one-third of production at the plant in Tottori Prefecture, eliminating about half of the current factory staff. After perfecting automation in its home market, Asics hopes to introduce robot-driven production in both the U.S. and Europe.

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 losing streak hits six weeks and Index dips below 60. Eight stocks fall, six rise and Sportsman’s Warehouse is flat for the period. The aggregate 4 percent decline for the period is a better performance than the Dow, which dips more than 5.2 percent or more than 1,353 points between Oct. 10-11 and has prognosticators suggesting the market is “entering correction territory.” With Sears’ Chap. 11 bankruptcy appearing imminent, both Kohl’s and JC Penney (not listed) saw their shares get lifts as investors bet both chains will net a sales lift from any Sears’ demise. Dick’s, which saw Morgan Stanley raise its share target price to $36, is expanding its partnership with Pittsburgh-based First Insight, which uses consumer-driven predictive analytics to help the retailer make design, buying and pricing decisions for its branded and private label assortments. Zumiez, which saw Baird lower its rating to “neutral” and target price to $25, reported footwear as its largest comp gainer for the five weeks ended Oct. 6 when overall same store sales were 1.2 percent higher. Transactions were flat, and units were down, but Average Unit Retails (AURs) were higher, the 703-door retailer said.  
With the exception of Puma, which remains locked in a federal patent infringement lawsuit with Nike over the Swoosh’s Flyknit woven-shoe technology, all stocks are red for a second consecutive week. Lululemon’s Chip Wilson has a new tell-all book coming out tomorrow where he rips Under Armour founder and CEO Kevin Plank, insults Diet Coke-drinking women and appears to support children working on some level. In “Little Black Stretchy Pants,” as reported by Business Insider, Wilson writes that he decided against acquiring Under Armour in 2008 after meeting Plank. “I couldn’t see Kevin’s macho philosophy working with that of the Super Girls (a term for lululemon’s target customer)…Under Armour, I thought, had an in-your-face image of winning at all costs, male chauvinism and leaving everybody else in the dust.” Fast forward. Under Armour last week signed NBA star Joel Embiid, a former Adidas endorser, to a multi-year endorsement deal. He, like Steph Curry, will have a signature basketball shoe from the brand. Adidas, which saw its pitchman Kanye West front and center again, this time in an Oval Office visit with Pres. Trump, has snatched the Arsenal soccer club away from Puma starting in July 2019 via a five-year deal worth a reported $391 million. Meanwhile, adidas AG CEO told CNBC that the brand continues to gain share in North America while also acknowledging rival Nike’s market comeback. Reebok president Matt O’Toole ran in the newly named Reebok Boston 10K for Women on Columbus Day in a pair of the brand’s Floatride Runs. The race had been sponsored by Tufts Health Plan for more than 30 years. Nike sees endorser Colin Kaepernick file for a U.S. trademark for a black and white image of his face and hair. Nautilus-owned Octane Fitness introduces an updated version of its workout app designed to work with five of its home equipment models.  





Weekly Review

Retail Name (Ticker Symbol)
Close on 10/04/18
Close on 10/11/18
% 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 10/04/18
Close on 10/11/18
% 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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