Retail: 67
0.31%
Retail: 201
1.78%
Monday, February 4, 2019
Volume 3, Issue No. 5

Footwear Insight
The Adaptive Footwear Race is On

Nike's Adapt BB, Puma's Fit Intelligence, and Biom 3 golf shoe from ECCO with BOA Technology.

Could the athletic footwear business be taking a hard trend turn toward performance with personalized customization via technology? Developments at Nike and Puma certainly suggest as much. Meanwhile, Adidas’ decision to widen distribution on its Yeezy styles from Kanye West led to a six-fold increase in Q4, but some analysts worry that the brand’s stray from a scarcity strategy could negatively impact future growth for the Yeezy style. And UGG parent Deckers is working on extending its successful U.S. allocation and segmentation strategy for the brand to international markets.

The breakdown:

• Two weeks after Nike announced plans to introduce its Adapt Basketball shoe ($350 retail) with an advanced power lacing system controlled by a mobile app this month, Puma rolls out its new Fit Intelligence (Fi) concept in a training shoe for workouts and light running ($330 retail) that will make its consumer debut in 2020 after a Beta testing program this year. The technology, an evolution of The Cat’s Disc (1991) cable closure system and AutoDisc (2016), wirelessly connected adaptive fit shoe, allows wearers to monitor, adjust and fine-tune fit through a smartphone app and make on-the-fly adjustments via their Apple watch. And BOA Techonologies, which sells variations of its unique closure system to footwear and other sporting goods companies, is vowing to accelerate its performance and technology story in the coming seasons. The Denver company intends to build a performance fit lab to study performance benefits and hire an in-house PhD biomechanist. It bears watching to see if other brands move into this direction in coming seasons to set the bar and price tag higher while also bringing new excitement to the performance segment.

• Besides reporting a six-fold increase in Adidas Yeezy sales, NPD reported that there was a high-single digit increase in Q4 U.S. athletic footwear sales with Nike brand sales posting mid-single digit growth. Running sales, bolstered by strength in opening price points, improved low-single digits; sports lifestyle (athletic-inspired and casual) sales were approximately 10 percent higher.

• Deckers is now forecasting FY19 revenues of $1.986-$2 billion with year-over-year UGG sales “roughly flat,” HOKA ONE ONE annual sales up in the mid-40% range; Teva up low-single digits and the Sanuk brand down mid-single digits. The company’s annual operating margin will exceed its target of 13 percent as it also delivers $100 million in operating profit improvement. UGG sales were up 3.6 percent in Q3 to $761 million, fueling DECK’s FY guidance lift.

Outdoor Retailer Snow Show
Cold Weather Warms Outdoor + Snow Sports Industry

It was a good week for insulated outerwear, and not just for Midwesterners in the grip of the polar vortex and its Arctic-like temperatures; Patagonia, Obermeyer, The North Face and Burton all show strong sales growth in parkas this season. Other cold weather apparel categories are also trending up: fleece “sweatshirts” grew almost seven percent to $123 million in the past year, and flannel shirts, a wardrobe staple of today’s active lifestyle crowd, continues to be a top seller in the outdoor specialty channel.  

These and other industry statistics were shared at a morning presentation by NPD research group during the Outdoor Retailer Snow Show held in Denver last week. This was the second go’round of the industry-combined trade show, and while not as high-energy and bustling as it’s 2018 debut, this year’s gathering was generally upbeat. Innovation in the apparel segment centered on softgoods and sustainability. The snowboard section of the Show was also a bright spot with busy booths and lots of youthful attendee enthusiasm.

Major product introductions by The North Face and Smartwool offered advancements in performance apparel. Waterproof/breathable Futurelight jackets and pants by TNF elevate temperature regulation for outdoor sports and Smartwool’s new Intraknit technology for baselayer items features 3D knitting for enhanced fit and function.

Both companies stressed the importance of sustainability in today’s marketplace.  

In textiles, for instance, strides are being made in biodegradable products and creating “circularity” in the supply chain. Eco breakthroughs like PrimaLoft’s Bio insulation and Bio fabric; Polartec’s new Eco-Engineering initiative and Unifi’s continued leveling up of its recycling effort are directional in the sustainability push forward. At the Denver Show Unifi announced its second annual Champions of Sustainability awards; 68 brand, textile, and retail partners have helped the company recycle more than 14 billion bottles that get made into the company’s Repreve performance fiber used in a wide array of consumer goods.  

Women-specific product is another category to watch. Across the board from women’s footwear to apparel to accessories, sales are performing well, and in some instances out-performing men’s. This trend is tied to the resilience of athleisure’s hold in the marketplace — a contemporary style fusing function and fashion that is increasingly encroaching on the active outdoor and snow sports space.

Brands and retailers will return to Denver for Outdoor Retailer Summer Market June 17-20, 2019.

The president and director of the United Inventors Association talks strategies for young creators.

Brunswick Will Spin-Off or Sell Fitness Segment

Intending to move forward as a marine-only company, Brunswick Corp. says it’s proceeding with a strategy to separate its fitness segment—consisting of Life Fitness, Cybex, Hammer Strength, SciFit and Indoor Cycling—either through a spin-off or outright sale by the end of Q1.

BC’s current FY19 outlook for its fitness segment calls for a mid-single digit drop in overall revenues due to lower sales to value-oriented health clubs and flat market demand. A new strategic plan being overseen by a re-organized senior management team will focus on increased investments in new products and IT (including ongoing expansion of digital and online content) and numerous cost reduction initiatives that will likely focus on freight and manufacturing.

“Looking forward, I’d say the (fitness) business has an opportunity through better execution to improve margins I think fairly substantially from where they are going to trough in 2019,” Brunswick CEO Dave Foulkes told analysts last week. “I also think there are opportunities to start to simulate some demand through additional product investments.”

Brunswick Fitness suffered a 65 percent decline in annual operating income to $22.4 million in FY18 on flat annual revenues of $1,038.3 million. Annual operating margin came in at 2.2% versus 6.2% in FY17. The U.S. accounted for more than 51 percent of revenues at $533.9 million. In Q4, commercial strength sales increased 8 percent, but consumer fitness (-5%) and commercial cardio (-13%) revenues were down year-over-year. BC senior executives estimate the fitness business has an estimated $8-10 million in negative impact on FY19 pretax earnings from China tariffs.

Meanwhile, Matrix Fitness, the commercial brand of Johnson Health Tech, last week reported a 21 percent increase in global revenues in 2018 to $528 million. U.S. sales were up 40 percent in Q4 and 26 percent for 2018 with double-digit increases to key accounts, athletics/education, multi-housing and medical, the company said.  

Quotable

“According to the NPD Group’s retail tracking service, UGG was the number one woman’s U.S. fashion footwear brand in the three months ending December 31 up 11% from last year and commanding 8% of the market. Additionally, in the same time period, UGG was the number 6 men’s U.S. fashion footwear brand up 18% from year ago level.”
– Dave Powers, President and CEO of Deckers Outdoor

INSIDE RETAIL
Academy Gets Downgraded; Walmart.com Snares Fanatics’ Shop

Ken Hicks, Academy, CEO. Academy has ample revolver availability, but has credit rating downgraded.

KKR-controlled Academy, Ltd., parent of the 253-door regional sporting goods chain Academy Sports + Outdoors, last week had its credit rating downgraded by Moody’s due to its high leverage, weak operating performance and challenging turnaround prospects. On the upside, the investors service says Academy has ample revolver availability and a solid market share in its core markets driven by a range of value price points and a broad assortment. While the retailer’s primarily lower-income consumer is more vulnerable to economic downturns, reported Moody’s, Academy is poised to gain customers trading down from more expensive products.

Nearly nine months ago, the Katy, TX-based retail chain hired Houston native and former Foot Locker senior executive Ken C. Hicks, 66, as Chairman and CEO. Prior to Hicks’ arrival, Academy under former CEO J.K. Symancyk restructured operations , including the outsourcing of IT and transportation services, as it began an omnichannel pivot that will include the addition of a Buy Online, Pick-Up In-Store (BOPIS) program that will commence this year.

For the trailing 12 months ended Nov. 30, Academy generated nearly $4.9 billion in revenues and had a Debt-to-EBITDA ratio of 6.6x, down from a peak of 7.0x in Jan. 17. Still, according to a Moody’s projection, that ratio will creep up to a 7.2-7.5x range over the next 12- to 18-months. Through Q3/18, the chain’s comparable store sales were negative, and EBITDA was off 7 percent year-to-date due to competitive pressures, ongoing weakness in firearms sales and the loss of replacement demand from Hurricane Harvey.

Hicks has been busy overhauling Academy’s merchandise assortment, including the exit of certain product categories, website and in-store services. Nonetheless, Moody’s predicts the retailer will see ongoing earnings declines over the next 12-18 months, in part due to margin pressure caused by the mix shift to ecommerce and cost of investments targeting improvements to Academy’s store and digital experience. Already, the retailer has pulled back on brick and mortar expansion to eight doors in both 2019 and 2020 and may be considering withdrawals from markets where it has a single store or small presence. Approximately 70 percent of the chain’s doors are in one of six states with the home Texas market accounting for 40 percent.

Elsewhere, in the persistent Walmart-Amazon battle for customers and their wallets, the discount behemoth scored a coup last week by striking an agreement with sport licensing giant Fanatics that put a Fan Shop by Fanatics store within its online marketplace featuring 75 million branded, licensed products from the likes of Nike, New Era and others.

Execs on the Move
Reef Lands New Prez; Puma Hires Sourcing Chief as COO Departs

Mike Jensen and Anne-Laure Descours.

Beachwear brand Reef, acquired by The Rockport Company from VF Corp. in late October, has hired industry veteran Mike Jensen as president. Jensen, who will now report directly to Rockport CEO Gregg Ribatt, was most recently general manager/head of brand for DC Shoes. His prior experience includes stints at Asics, SPY, Inc. and Converse.

In other news, Puma SE has created a board position for sourcing and appointed six-year employee Anne-Laure Descours, as Chief Sourcing Officer, effective Feb. 1. She has been overseeing product development and sourcing activities for all global apparel and accessories at the Puma Group since 2012. In her new position, the French national will continue to be primarily based in Hong Kong. In a separate development, Puma SE COO Lars Radoor Sorensen left the company and its board on Jan. 31.  

At Timberland, industry design veteran Chris McGrath is tapped as the company’s new VP of global footwear design. Most recently, head of design for Pentland Brands in the U.K., he previously has worked for Musto, Clarks, Puma, Nike, Speedo and McLaren Formula 1.

Elsewhere,

The National Ski & Snowboard Retailers Association (NSSRA) elects three officers and four new board members. New board members are: Jon Morrill, Kittery Trading Post; Jenna Pate, Summit Sports/Skis.com; Robb Shepherd, Shepherd & Schaller; and Roger Sobotka, Paoli Pro Shop. Teddy Schiavoni of Summit Ski & Snowboard, Framingham, MA was re-elected Chairman with Lori Underwood of PeterGlenn re-elected Vice Chair and Tracy Gibbons of Sturtevant’s elected Secretary-Treasurer. NSSRA also recognized President Larry Weindruch, who is retiring March 1.

What’s Hot, What’s New?

HydroFlask, Journey Series and Prowler VT Driver Orange from Lynx Golf.

Hydro Flask is introducing its Journey Series of insulated hydration packs on April 1. The collection’s 10 L and 20 L packs are designed to keep water chilled for more than four hours. Available in three colors—Brick, Lagoon and Black—10L has a MSRP of $165; 20L MSRP is $200.

Lynx Golf, whose global trademark portfolio in the U.S. was acquired by U.K.’s Charles Claire LLP from Dick’s Sporting Goods last year, introduces the Prowler VT Driver with switch-face technology. The design concept gives golfers the ability to adjust the true loft of their club. At launch, the driver (MSRP $525) will be sold with a free face of the customer’s choice (lofts of 8,9,10,11 and 12 with varying open and closed settings) with individual faces available separately.

The Buzz

Descente nine-month sales rose 4.3 percent to $909.1 million. Operating profit was down 14 percent to slightly more than $42 million for the period ended Dec. 31. The Japanese brand’s gross profit margin improved 68 basis points to 55.44 percent.

NPD Group is acquiring the SSI Data POS Sports and Outdoor tracking business from SportsOneSource. The transaction is scheduled to close on April 1 with SOS continuing to collect data and service clients through March 31. Current SSI Data clients will be able to subscribe to NPD services for continued and expanded visibility in the marketplace.

PrimaLoft partners with five outdoor brands—Helly Hansen, Houdini, L.L. Bean, Norrona and Vaude—to introduce the first 100% recycled, biodegradable synthetic apparel insulation and performance fabric. Apparel featuring PrimaLoft Bio will debut in some apparel brands in Fall 2020 with some brands debuting styles in following seasons. “PrimaLoft and our brand partners are committed to extending the life of garments through recycling, repurposing, and re-use, “ said Mike Joyce, president and CEO of the Latham, NY company. By 2020, 90 percent of PrimaLoft insulation products will have at least 50 percent post-consumer recycled content, including three 100-percent PCR insulation products introduced over the last year.

Tifosi Optics, the family-owned eyewear company founded in 2003 by Elizabeth and Joe Earley, is teaming up with the nonprofit Moms RUN This Town. The eight-year old, free running club, which currently has more than 700 chapters, shares Tifosi’s dedication to clean running. The eyewear firm is donating a portion of sale proceeds to nonprofit drug education and support programs.  

WFSGI partners with ISPO to expand the reach of its shared global labelling database. Launched last fall, the international trade group’s Compliant Labelling Requirements (CLR) Database is already being utilized by 13 sporting goods companies, including Columbia Sportswear, New Balance and Canyon Bicycles. The system, powered by C2P, gives companies up-to-date information on global labelling requirements in three clicks. For more information on the database, contact either Charlotte Giudicelli (cgiudicelli@wfsgi.org) or Tobias Groeber (Tobias.Groeber@messe-muenchen.de) .

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
Retail
January was good to the segment with four consecutive weeks of gains ahead of the year-end earnings season. Nearly 1.8 percent improvement this period, with 10 stocks up and five down, exceeded the Dow’s 1.27 percent increase. Camping World expands its Gander RV stores to eight states with plans to open additional doors in AL, KS, MN, NY, LA and IL. The company says Gander Outdoors is the most effective way to increase its RV presence. CWH shares have lost 67 percent of their value since Nov. 2017. In a related matter, Motley Fool’s David Gardner, citing both GoPro’s Nick Woodman and Marcus Lemonis of Camping World and TV’s “The Profit,” says television stars don’t make good stock picks. Macy’s may be preparing to monetize its NYC flagship at Herald Square, which reportedly is valued at around $4 billion. Separately, the department store has sold its I. Magnin Building in San Francisco to a Silicon Valley developer for $250 million. Kohl’s is teaming up with WW, the former Weight Watchers, on a pilot program starting in June that includes branded kitchen and cookware in select stores and online and a WW Studio in a KSS Chicago area store. While the retailer says it hopes the partnership assists its customers with their respective health goals, no formal word if KSS expects the endeavor to boost the fortunes of its activewear business. Active and Wellness accounted for more than 15 percent of Kohl’s FY17 revenues. Hibbett Sports will benefit from its recent acquisition of City Gear, writes an investment manager on SeekingAlpha. By providing valuable information on demands and trends, the small-market operator is likely to gain better allocations from key vendors.
Brands
For the second straight week, the segment outperforms Dow and Retail, rising more than 2.6 percent with 10 stocks up and 5 down. Deckers Brands, bolstered by growth in men’s and non-core styles in women, generated 3.6 percent topline growth for the UGG brand in Q3 to $761 million. Meanwhile, DECK’s Hoka One One brand grew nearly 80 percent to $57 million in quarterly sales and should reach $220 million in FY19. Nike creates a limited-edition colorway of its VaporMax 2019 and a special hoodie tied to the Madden NFL video series and Super Bowl LIII. Meanwhile, the Swoosh sees its former marquee endorser for cross-training, Bo Jackson, appear in a Super Bowl ad for Sprint. Nike also gets push back from some Muslims over a design element in its Air Max 270 — a small section of the shoe’s sole is said to look similar to the Arabic word for Allah. Columbia Sportswear files a $20 million lawsuit against two companies and 10 individuals for allegedly fraudently challenging its Omni-Heat patent. Wolverine Worldwide is investing $300,000 in the Outdoor Foundation to support the Thrive Outside Communities program aimed at helping young people’s social, emotional and academic development through outdoor experiences. Skechers ran a Super Bowl spot featuring CBS game analyst and brand endorser Tony Romo.

RETAIL: 58

41.88%

BRANDS: 188

87.89%

Weekly Review

Retail Name
(Ticker Symbol)

% Change over week
Price 1/24/19 • 1/31/19

Big 5 Sporting Goods
(BGFV)

1.43%

$3.49 • $3.44

Sports Direct
LON: SPD

1.92%

$357.89 • $364.75

Camping World
CWH

2.74%

$14.58 • $14.18

Dick's Sporting Goods
DKS

2.88%

$34.32  • $35.31

JD Fashion
jD

3.28%

$587.51 • $606.78

Foot Locker
FL

0.50%

$55.61 • $55.89

Genesco
GCO

5.18%

$47.65 • $45.18

Hibbett Sports
HIBB

2.38%

$15.96 • $16.34

Kohl’s
KSS

0.51%

$68.34 • $68.69

Macy’s
M

7.30%

$24.51 • $26.30

Sportsman’s Warehouse
SPWH

0.96%

$5.19 • $5.14

Shoe Carnival
SCVL

5.44%

$39.00 • $36.88

Tilly’s
TLYS

4.13%

$11.63 • $12.11

Walmart
WMT

2.57%

$98.36  • $95.83

Zumiez
ZUMZ

9.10%

$23.29 • $25.41

TOTAL
WEEK OVER WEEK

1.79%

$1,387.33 - $1,412.23

Brand Name
(Ticker Symbol)

% Change over week
Price 1/24/19 • 1/31/19

Acushnet Holdings
GOLF

1.03%

$23.23 • $22.99

adidas
addyy

4.09%

$114.33 • $119.01

Amer Sports
AGPDY

0.38%

$44.16 • $44.33

Callaway
ELY

1.75%

$16.58 • $16.29

Columbia Sportwear
COLM

3.21%

$6.42 • $89.19

Deckers Brands
DECK

4.49%

$122.93 • $128.45

GoPro
GPRO

0.60%

$4.96 • $4.93

lululemon
LULU

0.42%

$148.43 • $147.81

Nautilus
NLS

0.79%

$7.63 • $7.57

Nike
NKE

1.79%

$80.44 • $81.88

Puma
PUMA

3.61%

$540.00 • $559.50

Skechers
SKX

4.46%

$26.01 • $27.17

Under Armour
UA

0.42%

$18.86 • $18.94

VF Corp.
VFC

1.00%

$83.34 • $84.17

Wolverine Worldwide
WWW

1.48%

$33.41 • $34.31

TOTAL
WEEK OVER WEEK

2.62%

$1,351.13 - $1,386.54

Sports Insight Extra Podcast Series