The investors service Moody’s has changed its outlook on the U.S. footwear and apparel industry to “positive” from “stable,” citing revenues and profits that have begun to accelerate at a faster rate than it had estimated. Moody’s is now forecasting 8-9 percent operating profit for the segment in FY18 versus prior guidance of 3-5 percent as industry sales increase 6-7 percent. There will be some moderation in the sales growth rate in FY19, according to Moody’s, with an increase of 4-5 percent. The apparel outlook includes international sales, which have been growing well in Asia for many brands. Expected operating profit expansion is being fueled by a number of factors, including cost savings initiatives, acquisition synergies, lower inventory clearance activity and better U.S. apparel retail conditions overall.
Moody’s cites several industry players in its upgrade report. Nike should benefit further from a new product pipeline and DTC growth; VF Corp. is expected to generate continued growth at Vans, The North Face and its Work segment; Under Armour is starting to emerge from recent challenges and reap benefits from its restructuring and PVH Corp. should continue its strong results due to solid product offerings and marketing.
Under Armour, whose Q3 revenues beat the Street forecast by $20 million and reported EPS was nearly double the consensus, is confident that its North American business has stabilized despite a 2 percent revenue drop in the period. Key initiatives already undertaken include shortened lead times, substantially lowered inventory levels and improved distribution efficiencies. The company’s planned North American promotional days are projected to decline 33 percent year-over-year in 2018. For the FY, Under Armour is predicting a low-single-digit revenue in North America contrasted by 25 percent growth internationally.
Asics, whose four-pronged 2020 growth plan includes more focus on the U.S. performance running market, lost the equivalent of $8.5 million in the American region for the nine months ended Sept. 30. Regional revenues, hurt by weak sales in the U.S., were down 17.8 percent to $599.2 million. Parent ASICS Corp. is projecting a 3.8 percent drop in FY18 worldwide revenues to the equivalent of $3.41 billion.
Mizuno has a new brand positioning, Reach Beyond, that will set the tone for the brand’s marketing and communications globally. (See video below, in Tubes of the Week).
Days ahead of the New York City Marathon and its second year as the official footwear and apparel of the race, New Balance revealed a transition in its senior executive suite and acknowledged its first 6,000 pair shipment of U.S.-made running shoes (950v2) to the U.S. Defense Logistics Agency. The shipment, after more than seven years of lobbying, are part of a $17 million, 92,000-pair contract that was awarded in March and will be completely delivered by the end of 2019.
New Balance veteran Joe Preston, currently chief commercial officer in his 23rd year with the company, will become president and CEO of the privately held firm on Jan. 1, 2019. He will replace Rob DeMartini, the former P&G senior executive, who is leaving the Boston company after a dozen years. During his tenure, DeMartini helped New Balance regain leadership in the specialty running category, expand international sales to 65 percent of revenues, and grow its topline to $4.2 billion from $1.5 million in 2017. Additionally, DeMartini worked with U.S. government and industry officials to secure implementation of Berry Amendment legislation for athletic footwear.
The 950v2’s for U.S. military basic training recruits, consisting of midsoles made in NB’s Boston facility and materials from more than 15 U.S. suppliers, are being constructed by workers at New Balance’s Norridgewock, Maine factory.
Hibbett Sports wants to get closer to urban customers and the trends that drive them to buy premium athletic footwear, apparel and accessories. The publicly-traded retailer, which operates over 1,000 doors mostly located in small and mid-markets, last week agreed to acquire privately held retailer City Gear for $88 million cash and a possible two-year earnout of an additional $25 million. The transaction is slated to close in early December.
With its 135 doors across 15 states with major store presence in Atlanta (19), New Orleans (12), Memphis (19) and Houston (12), City Gear generated $190 million in revenues for the FY ended Feb. 4, 2018. The privately-held Memphis retailer, which will operate as a Hibbett subsidiary under existing senior management led by CEO Mike Longo, is said to have a substantial Nike/Jordan business, generate 70 percent of its topline from footwear, and has produced mid-single digit comp growth over the last years while selling apparel labels such as AKU, Grindhouse and Billionaire Boys’ Club.
HIBB senior management, in talking to analysts about the pending deal, seems most attracted to the banner’s higher-margin sales and ability to connect with its “neighborhoods” through localized assortments and events, social media and in-store special features like a barber at Back-To-School. City Gear ASPs average $90 versus low $60s at Hibbett. The acquirer hopes to leverage its learnings from City Gear’s operation into its 350 existing “fashion” doors and could also eventually convert some of those banners to CG. The deal is expected to deliver unspecified synergies and buying leverage for Hibbett Sports going forward. For its part, City Gear may need Hibbett’s assistance to increase ecommerce penetration that is currently pegged at about 2 percent, but that objective may prove difficult given the chain’s largely lower-income, cash-based customer demographic.
L.L. Bean is going north of the border through a new deal with Jaytex Corp. The Toronto company will distribute Bean products to Canadian retailers such as Mountain Equipment Co-op and Sporting Life, and open 20 L.L. Bean stores across the country over the next decade starting in Toronto in 2019. Bean wants to double its Canadian sales, currently about 2 percent of its topline, over the next 3-4 years.
Big 5 Sporting Goods, which missed Q3 revenues and EPS targets on a 2 percent drop in comparable store sales, says its actively testing pricing strategies “to be more responsive to an increasingly competitive retail environment” and is considering downsizing certain categories that are performing softly, including firearms. In footwear, the 436-door chain wants to “take advantage” of strength in the casual and lifestyle segments.
Brunswick is moving forward with plans to spin-off its fitness segment, which includes Life Fitness and Cybex, by the end Q1/19. BC has tapped two of its outside directors to directly oversee the fitness management team and complete the separation in a timely manner. Through nine months, the division generated a 3 percent revenue increase to $750.6 million with operating income down 55 percent to $25.1 million for the period ended Sep. 29. U.S. fitness sales were off 1 percent for the nine months on lower Cybex sales and softness in several vertical channels, offsetting sales gains by strength products and new Life Fitness cardio products. The U.S. market is trending flat to slightly up for FY18 due to continued Cybex weakness and projected declines in Q4 sales to international markets, and certain value-oriented health clubs after a strong nine months for the segments. BC senior management confirmed its fitness segment has been affected by higher domestic steel costs due to tariffs on foreign-produced steel and is facing a slight headwind related to retaliatory tariffs on fitness equipment sold into China.
At Nautilus, the company missed its Q3 revenue target as it pulled back on spending around the Max Trainer ahead of a November launch of an upgraded, refreshed product. Total Q3 revenues were 3.3 percent higher at $91.1 million with the retail segment up 14.9% but Direct revenues off 14.8 percent. The retail improvement was driven by the mass retail and specialty commercial channels.
Later this month, NLS will roll out its new Max Intelligence Platform, a cloud-based adaptive coaching technology designed to help consumers reach their fitness goals, on the new Bowflex Max Trainer M6 and M8 cardio machines, Subscriptions to the service will be available at $149 annually or $14.95 monthly.
The parent of gun maker Savage Arms, hydration brand CamelBak and Giro bicycle helmets is continuing to downsize, tighten its segment focus and trim debt. Revenues dipped 7 percent to $547 million in Q2 ended Sept. 30 as Vista completed the sale of its Bollé, Cébé and Serengeti eyewear brands. Proceeds were used to pay down debt. Senior management says demand for its golf and outdoor cooking products continue to grow; the hunting/shooting accessories is largely flat; and the competitive hydration market is largely flat despite some growth in packs.
Presently, VSTO is pursuing strategic options for its Jimmy Styks stand-up paddleboard brand; soliciting buyers for Savage, which generated nearly 19 percent growth in the period; and working on a deal to sublease its Farmington, UT headquarters and shift personnel to other facilities in Anoka, MN and Arlington, VA.
Earlier this year, under CEO Christopher Metz, Vista established a strategic plan to focus on four core categories—ammunition, hunting/shooting accessories, hydration bottles/packs and outdoor cooking products (Camp Chef)—and to focus on reducing costs through improved sourcing and production efficiency at its owned factories. The company has installed Vishak Sankaran as president of its Bushnell unit and Greg Williamson as president of CamelBak.
The publicly traded, premium outerwear company Canada Goose took another step forward in extending its brand reach last week by acquiring Canadian boot company Baffin for C$32.5 million ($24.8 million). GOOS will keep Ontario-based Baffin operating independently but will lean on its expertise in design and developing performance boots to eventually enter the footwear segment with its own Canada Goose branded products but a timetable hasn’t yet been established.
In the meantime, Canada Goose is proceeding with its expansion strategy to become a three-season lifestyle brand with new lighter weight knitwear and rain gear products with an established global network of 20 owned brand stores. This holiday season new Canada Goose retail stores will open in Montreal, Vancouver and Beijing, joining established doors in Boston, Calgary, Chicago, Hong Kong, London, New York, New Jersey and Tokyo. The company has also established an ecommerce sales partnership with China’s Alibaba Group as it aims to greatly expand its brand presence in that market.
Eagle Creek redesigns its Cargo Haulers Duffel series for both functionality and sustainability with new PVC-Free TPU fabrics. Backpack straps are now zip-away for storage during bag check-in and a new U-shaped lid provides easy access to the main compartment with a new removable mesh divider inside to separate contents. Available July 1, 2019 in three primary and two seasonal colors. MSRP: Ranges from $99-189
’47 and Carhartt have teamed with Mossy Oak on a limited-edition NFL collection of caps featuring Carhartt’s duck fabric and Mossy Oak’s Bottomland print. Available for 13 NFL teams, including Philadelphia, Seattle, Chicago and Denver. MSRP: $30-35.
Cleveland Golf is launching its new Beach SOFT putters, featuring the brand’s proprietary Speed Optimized Face Technology (SOFT), on Nov. 16. The putter is crafted from soft 304 Stainless Steel and available in 16 color selections with four color fill areas. MSRP: $130 plus $10 for color personalization.
Escalade generated a 32 percent increase in ecommerce sales during Q3 ended Oct. 6. Sporting goods sales into the mass and specialty channels were down 9.8 percent and 3.7 percent, respectively. Total Q3 revenues fell 2.6 percent to $43.96 million but operating income was 9 percent higher at $5.48 million. Quarterly net income rose 40 percent to $3.96 million.
IQ Brands, the Advance, NC socks and accessories company controlled by Huron Capital, recently acquired novelty sock maker Wheel House Designs based in Morrisville, VT. Gail Bourne, who founded Wheel House in 1989, will work with the company’s new parent. The deal marks the fourth add-on acquisition for IQ, formerly known as Socks and Accessory Brands Global. Prior acquisitions included: Top Sox, Twin City Knitting and IQ Brands.
Sports, Inc., which began launching fundraisers for their team dealer customers in October, is partnering with TeamWorks, Inc., an easy-to-use team fundraising application, to help schools and leagues raise money. In 15 minutes, a TeamWorks or Sports, Inc. rep can guide a team through the set-up process using pre-built fundraising templates. This month, TeamWorks will be a key exhibitor at Sports, Inc.’s team dealer show in Las Vegas.