Retail: 57
1.47%
Retail: 183
+3.05%
PRESENTING SPONSORS
The next issue of Sports Insight Extra will be published on January 7, 2019. Our first issue of 2019 will include a look back at some of the most important industry stories from the past year.
Monday, December 17, 2018
Volume 2, Issue No. 48

Acquisition
Lids’ Sell-Off Signals Further Consolidation of Licensed Retail

Nearly 10 months after formally putting its Lids Sports Group business on the block, Genesco has finally shed the largely licensed headwear business to an affiliate of Ames Watson Capital, LLC for $100 million in cash, or approximately 40 percent less than GCO paid for the business in 2004. In February, Ames, founded in 2003 by former Blackstreet Capital chief investment officer Lawrence S. Berger, acquired the 120-store Fanzz retail chain that was founded in 1987 by former Utah Jazz co-owner Larry H. Miller.

Fanatics Inc., at one time considered the frontrunner for the Lids’ business, which consists of more than 1,100 brick-and-mortar locations including 119 Locker Room by Lids locations inside Macy’s stores, will make a minority investment in the acquiring company FanzzLids Holdings.

It bears watching how a new national licensed retailer might emerge under Ames Watson’s financial guidance and Fanatics’ influence. Before the announced Lids’ acquisition, which should close by early February, Fanzz had 89 retail stores primarily located in the Western U.S., Texas and Chicago. But the banner has no presence along the densely populated Eastern Seaboard. One possible scenario has new ownership retaining the best-performing Lids’ stores throughout the U.S., filling in key markets where Fanzz stores are not, and striking some sort of Buy Online, Pick-Up In Store relationship with Fanatics, which has tight relationships with all of the professional sports leagues and the majority of all online sports licensed consumer purchases.

Lids Sports Group has not been a strong contributor to Genesco’s top or bottom lines for some time, a factor that Genesco President and CEO Bob Dennis has blamed on the “lack of a clear trend driver” in the segment and a shift to lifestyle and away from a sports league-driven headwear business.

For the nine months ended Nov. 3, Lids Sports Group reported an operating loss of nearly $4.6 million and a 7.4 percent decline in year-over-year revenues to $498.9 million.

Footwear Insight
Journeys Shifting More E-Fulfillment to DC

Parent Genesco has invested in expanding and upgrading the retailer’s distribution center over the last year, including the addition of a customized module for e-commerce picking, to increase delivery speed to consumer, better efficiency and lower costs. The result: An estimated 65 percent of all web and store orders have been shipped by Journeys’ DC during the first nine months of 2018 versus 55 percent in the same year-ago period.

“Shipping directly from the DC is the most efficient way to process e-commerce orders and it allows us to a keep a stronger inventory position in our small footprint stores…while also freeing up our store people to focus on selling instead of packing up orders to ship,” Genesco President and CEO Bob Dennis told analysts earlier this month.

Additionally, the 1,219-store Journeys chain is nearing the completion of a network upgrade that will enhance speed during the checkout process and web searches for product. With the announced divestiture of the Lids Sports Group, Genesco is focusing solely on its footwear business going forward.

Journeys and Genesco’s Johnston & Murphy business each posted solid gains in Q3. Journeys, which generated a 9 percent comp increase and double-digit improvement from e-commerce orders, benefitted from its diverse assortment of fashion, athletic and casual styles, and got an added boost from boot sales after Back-to-School. After a positive November, Genesco CFO Mimi Vaughn says the company is more optimistic about the banner’s Q4 comps despite a difficult comparison. The company also sees upside for its Journeys Kidz concept, currently at 184 locations.

As for Johnston & Murphy, double-digit growth in its Q3 footwear business was driven by a sport casual assortment. Better in-store conversion and higher average ticket size drove the retailer’s comp improvement as comparable sales rose 10 percent.

RetaiL ROUND-UP
Sporting Goods Sales Don’t Bounce in November

Photo credit: stadiumgoods.com

November retail sales in the U.S. rose 5 percent unadjusted year-over-year, according to monthly sales data released by the U.S. Census Bureau Friday, but sales at sporting goods stores were down 7.8 percent year-over-year for the month. The National Retail Federation said the November sales gains were on track “to easily meet” its holiday sales growth forecast (Nov.-Dec.) of 4.3 to 4.8 percent.

Elsewhere,

• Stadium Goods, the sneaker and streetwear marketplace, is being acquired for an enterprise value of $250 million by U.K.-based global technology platform Farfetch Ltd. that was launched in 2008. Stadium Goods, founded in 2015 by John McPeters and Jed Stiller, has participated in the Farfetch marketplace since April.

• Sports Direct’s Rest of World segment, consisting of 30 Bob’s Stores, 20 Eastern Mtn. Sports locations and 30 Sports Direct doors in Malaysia, posted a 26 percent in H1/19 revenues to the equivalent of $126.36 million.

• Performance Bicycle will shutter all stores in going-out-of-business sales at 102 locations as part of parent Advanced Sports Enterprises’ Chap. 11 bankruptcy. Bids for ASE’s assets are due by Jan. 11 with an auction scheduled for Jan. 15 if there are qualified bids for the company that owns five bicycle brands, Bike Nashbar and a wholesale distributor.

• Decathlon, the global sporting goods retailer, which has had a U.S. flagship presence in San Francisco since April, is utilizing a fully-autonomous inventory robot from Simbe in the store. The robot has integrated RFID technology to capture, report, and analyze the quantity and location of store inventory.

• Vineyard Vines debuts a pop-up store, Unlock Your NFL Style, offering licensed products for all 32 teams at Grand Central Station in New York City that will be open through Feb. 4, 2019.  

Under Armour’s Growth Strategy Doesn’t Rely on North America

In the wake of two senior marketing executives being jettisoned for alleged corporate expense misconduct, Under Armour detailed a five-year growth plan last week during its annual investor meeting. Initial Street response to the corporate strategy, which focuses heavily on the international, Direct-To-Consumer, footwear and women’s segments, was not good as UAA shares dipped more than 10 percent on Dec. 12 and nearly 19 percent for the week ended Dec. 14. Nonetheless, Under Armour presently has six “sell” ratings on its stock, down from 14 six months ago, while “buy” ratings on the shares have remained steady at three.

“Under Armour is designed for resilience and over the past two years, our global team has worked tirelessly to transform our business—operationally, strategically and culturally,” Under Armour Chairman and CEO Kevin Plank said in a statement.

Fueled by international (+17-19 %) and DTC, Under Armour intends to return to a low double-digit growth rate by 2023 with a low double-digit annual operating margin (vs. approximately 3 percent in FY18) and gross margin of at least 48.0 percent. The home North American market is forecast to grow 1-3 percent.

The brand’s largest North American category is training and its biggest market opportunities are said to be in footwear and women’s. Under Amour saw its percentage of retail sales in the athletic specialty/sporting goods channel decline to 32 percent in FY17 from 36 percent FY14, with Dick’s accounting for much of the drop. UA’s ecommerce (8% vs. 6%) and dept. store/family channel (16% vs. 15%) businesses grew over the same period, according to NPD data cited by the company.

The company’s FY18 outlook remains at 3-4 percent topline expansion with 25 percent growth internationally offset by a low single-digit drop in North America, which will account for approximately 73 percent of all revenues in FY18 but decline to approximately 56 percent by FY23. The company’s current FY19 outlook calls for 3-4 percent revenue growth with a double-digit gain internationally offset by “relatively flat” sales in North America. Gross margin is forecast to improve 60-80 basis points on supply chain initiatives, lower off-price channel sales and DTC becoming a larger overall percentage of revenues.

Under Armour, which sources approximately 415,000 SKUs from 151 factories in 26 countries, is improving margins by lowering its SKU base by approximately 40 percent and reducing its number of vendor partners by 30 percent while simultaneously improving lead times by an estimated 20 percent. The brand is in the midst of lowering its reliance on China, to 7 percent of all units in 2023 versus 18 percent in FY18, while increasing its sourcing reliance on Vietnam (25% in 2023), Jordan (18%) and Indonesia (15% vs. 6% in FY18).  

Quotable

“With a leadership change @Interior, I profoundly hope the next chapter brings back respect for dedicated career staff, restoring science, upholding trust & treaty commitments to tribes, and putting the “public” back in public lands. Future generations deserve no less!”
– Tweet from Sally Jewell, former REI CEO and Secretary of the Interior, reacting to Ryan Zinke, current Secretary of the Interior, resigning from his cabinet position.

Trade Shows
Grassroots Connect Shifts Spring Dates

The twice-annual buying show of the Grassroots Outdoor Alliance is moving its Spring 2019 event dates one day earlier to support the outdoor industry calendar. Grassroots Roots Connect at the Knoxville (TN) Convention Center will take place June 9-12, 2019. The event will begin with an education day and the annual Grassroots Awards dinner on June 8 with pre-booked retailer and vendor appointments to follow Sunday through Wednesday. For Fall 2019, Grassroots Connect will return to the Colorado Convention Center from Nov. 1-4, 2019. More information on both events is available at https://connect.grassrootsoutdoors.com

Elsewhere:

The inaugural RVX: The RV Experience trade show is slated to debut at the Salt Palace Convention Center in Salt Lake City, UT in March 2019. The event will mark the official “Kick-off to Camping Season” and focus on new innovations, technologies and products for both dealers and consumers. Go RVing, the vehicle-supported adventure platform, is partnering with Verde Brand Communications to support the event via various public relations efforts and digital marketing programs.

What's Hot, What's New?

Adidas Ultraboost 19.

Adidas partnered with Snapchat for the launch of the Ultraboost 19, allowing users anywhere in the U.S. to “try on” the performance running shoe using AR technology. The Three Stripes shared the Snap lens with consumers via AirDrop in select locations in New York, Los Angeles and Houston last week. The shoe, whose many features include a 3D heel frame and 20 percent more BOOST in the midsole, became available worldwide on Dec. 15.

Telic Intl. intends to launch its style-forward Mallory sandal, part of its recovery footwear line, in Feb. 2019. The style was developed through the brand’s social media channels and is named after the brand’s social media manager, Mallory Leuzinger.

Puma has teamed with Chinatown Market founder Mike Cherman on a “Co.Creative capsule” that represents the West Coast lifestyle in a collection of footwear and apparel that debuted Dec. 12.

Tubes of the Week

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Keeping it warm and cozy all season long. 🍂

A post shared by Cougar Shoes (@cougarshoes) on

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
Retail
With 2019 winding down and Pacific Investment Management Co. predicting a 30 percent probability of a U.S. recession over the next 12 months, ’tis the season for red and green. But there is only red here as the segment declines for the fourth time in five weeks with a more than 7 percent drop that takes the Index score below 50. Sports Direct fell nearly 16 percent for the period and a was a big contributor to the segment’s overall decline. CEO Mike Ashley called November retail results in the U.K. “unbelievably bad” as the company released H1/19 results. His comment sent SPD shares down almost 20 percent. Dick’s, according to Bloomberg but yet to be verified by the retailer, may be eying some of the 500 locations that bankrupt Sears intends to exit. Purchase proposals for the properties are due Dec. 28. Macy’s is buying back some $750 million of its debt, higher than initially planned, to take its total debt level below the $4.8 billion mark and beneath its $7.6 billion peak in early 2016. Genesco has offloaded its Lids Sports Group (see story above) to focus exclusively on its footwear business.
Brands
Segment dips nearly 1.3 percent for the period as only three stocks rise and 12 fall. The decline, following a flat week last week, is higher than the Dow’s 0.89 percent drop, or 212.44-point decline, for the period. Nike is reportedly preparing to open a 12,000-sq.-ft. store about halfway between Baltimore and Washington, D.C. in Columbia, MD. Under Armour is forecasting a low double-digit growth rate by 2023, driven by international (+17-19%) and Direct-To-Consumer with North America forecast to grow 1-3 percent. More immediately, the company is banking on 3-4 percent topline growth in FY19 on low-double digit expansion internationally and flat North American revenues. Columbia Sportswear has hired industry veteran Peter Ruppe, 61, a former Nike, Under Armour and Reebok executive, to grow its $538 million footwear business. VF Corp.-owned Vans taps company veteran Stefano Saccione as VP/GM for the EMEA region, overseeing business in 40 countries and based in Switzerland. Saccione most recently served as a VP/GM for VFC’s Eastpak segment. Puma partners with the Trayvon Martin Foundation, agreeing to donate $5 from every purchase of the new ‘Peace on Earth’ colorway of the Clyde Court Disrupt basketball shoe. Wolverine-owned Merrell was recently named the official footwear sponsor of the Ragnar Trail Series for the 2019 and 2020 seasons.

RETAIL: 48

52.18%

BRANDS: 175

75.40%

Weekly Review

Retail Name (Ticker Symbol)
Close on 12/06/18
Close on 12/13/18
% change over week
Big 5 Sporting Goods (BGFV)
BGFV
$3.39
$2.89
-14.75%
Sports Direct (LON: SPD)
SPD
$354.19
$298.07
-15.84%
Camping World (CWH)
CWH
$16.84
$15.15
-10.04%
Dick's Sporting Goods (DKS)
DKS
$35.71
$34.16
-4.34%
JD Fashion (JD)
JD
$466.88
$453.68
-2.83%
Foot Locker (FL)
FL
$54.47
$49.94
-8.32%
Genesco (GCO)
GCO
$43.84
$42.12
-3.92%
Hibbett Sports (HIBB)
HIBB
$15.72
$14.36
-8.65%
Kohl’s (KSS)
KSS
$65.63
$61.18
-6.78%
Macy’s (M)
M
$32.37
$30.80
-4.85%
Sportsman’s Warehouse (SPWH)
SPWH
$4.54
$4.51
-0.66%
Shoe Carnival (SCVL)
SCVL
$36.27
$33.16
-8.57%
Tilly’s (TLYS)
TLYS
$11.24
$10.60
-5.61%
Walmart (WMT)
WMT
$94.82
$92.96
-1.96%
Zumiez (ZUMZ)
ZUMZ
$19.26
$18.31
-4.93%
TOTAL
TOTAL
$1,255.16
$1,161.89
-7.43%
Brand Name (Ticker Symbol)
Close on 12/06/18
Close on 12/013/18
% change over week
Acushnet Holdings (GOLF)
GOLF
$23.45
$22.00
-6.18%
adidas (ADDYY)
ADDYY
$110.54
$113.50
+2.68%
Amer Sports (AGPDY)
AGPDY
$39.92
$43.63
+9.29%
Callaway (ELY)
ELY
$16.87
$16.48
-2.31%
Columbia Sportwear (COLM)
COLM
$91.98
$84.54
-8.09%
Deckers Brands (DECK)
DECK
$128.07
$122.68
-4.21%
GoPro (GPRO)
GPRO
$5.18
$4.79
-7.53%
lululemon (LULU)
LULU
$131.44
$120.20
-8.53%
Nautilus (NLS)
NLS
$12.01
$11.55
-3.83%
Nike (NKE)
NKE
$75.51
$72.93
-3.42%
Puma (PUMA)
PUMA
$513.25
$532.00
+3.65%
Skechers (SKX)
SKX
$26.19
$23.51
-10.23%
Under Armour (UA)
UA
$22.57
$17.81
-21.09%
VF Corp. (VFC)
VFC
$79.92
$76.22
-4.63%
Wolverine Worldwide (WWW)
WWW
$34.14
$32.57
-4.60%
TOTAL
TOTAL
$1,311.04
$1,294.41
-1.27%

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