MARCH 7, 2011
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MARCH 7, 2011
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SportsOneSource Publications SGB TEAM Business Sportsman’s Business The B.O.S.S. Report Sports Executive Weekly SGB Update
6 FEBRUARY RETAIL OUTPERFORMS FORECASTS
7 GENESCO, INC. Fourth Quarter Sales and Earnings Post High-Teens Growth
FOOT LOCKER, INC. Doubles Q4 Earnings On Strong Margin Gains, Solid Comp Growth
8 ADIDAS GROUP Sees Fourth Quarter Net Income Sink Despite Strong Revenue Gains
BROWN SHOE Acquires American Sporting Goods
Footwear Business Update PSR Update Sportsman’s Business Update Team Business Update SGB Weekly Team Business Weekly Sportsman’s Busness Weekly
10 BACKCOUNTRY HARDGOODS MARKET Perfect Storm Creates Big Opportunities 14 NEW ERA Plots Aggressive Five-Year Growth Plan 18 NSGA STUDY Multi-Door SG Stores Outperformed In 2009/2010
Footwear Business Weekly
Outdoor Business Weekly
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WEEK 1110 | SGBweekly.com
FEBRUARY RETAIL OUTPERFORMS FORECASTS
Retailers enjoyed a better-than-expected February selling period as consumers braved more wet, cold weather to cash in on tax returns and stimulus checks to make discretionary purchases. The International Council of Shopping Centers, which tracks 28 major retail chains excluding Wal-Mart, said the industry was “firing on all cylinders” during February, as particular strength from the high-end and low-end outlets bourgeoned consolidated same-store sales to year-over-year growth of 4.2% - better than the 3.8% growth originally forecasted by the ICSC. Economists attributed the stronger-than-expected market growth to improving customer sentiment that was spurred by the aforementioned assorted “stimulus funds” as well as pent-up discretionary demand generated from a blustery January that kept many shoppers at home. Bargain hunters and luxury shoppers provided the boost during February while many “mid-level” retailers - Dillard’s, Stage Stores, Gap - reported disappointing sales as shoppers clearly adhered to one of two extremes in the month. For the Luxury Chains, strong sales continued from January due to the return of a full-priced customer that is more resistant to volatile fuel prices. Saks (+15.3%), Nordstrom’s (+7.3%) and Neiman-Marcus (+12.7%) all turned in strong to very-strong results as luxury shoppers hit the aisles in search of new spring merchandise, apparel, shoes, jewelry and designer handbags. Among other Department Stores, reports weren’t as positive, as mid-tier retailers clearly suffered in the wake of a solid month for the high-and low-end sectors. At Stage Stores (-7.2%) winter storms in Oklahoma, Arkansas, Missouri and Texas kept customers away, causing the chain to miss analysts’ projections badly. Despite the retailer’s misfortune, company President and CEO Andy Hall said management was “pleased with the way business performed in the second half of the month,” when comps were up approximately 10%. At Dillard’s (-1.0%), same-store sales were weaker-than-expected on slight sales weakness from the company’s Eastern region and soft sales of the home & furniture category and men’s category. Macy’s (+5.8%), on the other hand, outpaced estimates on solid returns from spring merchandise at Macy’s and Bloomingdales. For the Discounters, comps were generally very solid, with the ever-reliable Stein-Mart (+8.2%) leading the way on strength from robust sales in the Southeast and Northeast along with strong showings from ladies’ career sportswear, men’s sportswear and the home category. At high-end, discounter Target (+1.8%), the retailer missed forecasts but saw strength from fresh food and shoppers using Target’s branded cards, which offer a 5% discount. Weakness in the Midwest, the Carolinas and the Northeast along with disappointing sales of home products and electronics tempered results. 6
SGB WEEKLY l MARCH 7, 2011
At the mall, The Buckle (+2.1%) and Zumiez (+12.8%) maintained strength while Hot Topic (-1.4%) continued to flounder and Gap (-3.0%) missed forecasts badly. Management at Gap, Inc. said sales at the usually-stellar Banana Republic chain dipped 4% during the month while sales at Gap North America slipped 1% and sales at Old Navy NA dropped 4%. In related news, retail sales improved across all districts of the Federal Reserve Board, according to the latest Beige Book. The report also said retailers and manufacturers were encountering less resistance to passing along rising costs and there appeared to be little wage pressure due to the high unemployment rate. The report confirmed that retails sales improved everywhere except the Richmond and Atlanta districts “although Boston, New York, Philadelphia, Atlanta and Kansas City noted that severe snowstorms had a negative impact on merchant activity.” Looking ahead, the ICSC forecasts March comps to be flat-to-up-2% with the Easter holiday shift being a “big drag” on year-over-year sales growth. Early expectations for April indicate a sales gain of about 5%.
GENESCO, INC. FOURTH QUARTER SALES AND EARNINGS POST HIGH-TEENS GROWTH Genesco, Inc.'s fourth quarter earnings climbed 19.3% to $30.9 million, or $1.31 a share. Excluding write-downs, tax rate changes and other items, earnings from continuing operations increased 13.0% to $31.3 million, or $1.33 per share, topping updated guidance provided in January calling for EPS ranging from $1.25 to $1.30 a share. Sales for the quarter increased 17.0% to $560.5 million. Organic growth, excluding sales from last year's acquisitions, was up 11% for Q4, driven by an overall 6% comp increase, a 29% increase at Lids.com and sales from 18 new stores. In February, comps were ahead 10% across all its businesses and direct-to-consumer was up 34% for the month. For the full year, Genesco's revenues grew 13.7% to $1.79 billion while adjusted earnings climbed 36.9% to $59.0 million, or $2.48 a share. For the current 2011 fiscal year, Genesco expects EPS to be in the range of $2.78 to $2.85, which represents a 12% to 15% increase over last year's earnings. The guidance assumes comp growth of 3%, overall sales growth of 8% to 9%, a gross margin decrease of about 20 basis points, and expense leverage of about 70 basis points.
FOOT LOCKER, INC. DOUBLES Q4 EARNINGS ON STRONG MARGIN GAINS, SOLID COMP GROWTH Foot Locker, Inc. reported last week that, excluding net charges in both years, fourth quarter net income surged 56.4% to $61 million. Total sales increased 5.1% to $1.39 billion. Excluding the impact of currency fluctuations, sales advanced 6.5%. Comps increased 7.3%. Reported GAAP net income, which includes certain one-time charges in both years, reached $57 million, or 36 cents a share, in the fourth quarter, compared to net earnings of $23 million, or 14 cents, in the prior-year period. By month, comps increased high-single-digits in November and December and increased midsingle-digits in January. By region, Foot Locker's combined U.S. store business generated a high-mid-single-digit comp store sales increase, which included a high-single-digit increase in apparel and accessories. Average footwear selling prices in the U.S. increased high-mid-single digits for the quarter while unit sales were relatively flat. The increase in average selling prices reflects a continuing mix shift toward higher priced footwear and a lower markdown rate. In Europe, comps increased in mid-single-digits and the division profit rate was up in the lowteens. Solid sales increases were generated in both men's and kids' footwear as well as a "very strong" increase in apparel, said Hicks. Canada recorded a mid-single-digit revenue comp gain along with a "solid" profit increase with a double-digit division margin rate. Asia-Pacific generated a low-single-digit comp increase in the quarter and a relatively flat profit comparison to last year. The DotCom business delivered "an outstanding fourth-quarter result from both a sales and profit standpoint," according to Hicks. Comps for the division increased double-digits and division profit margin reached the low-teens. Gross margin rate on a GAAP basis increased 320 basis points. On a non-GAAP basis, excluding a $14 million inventory write-down recorded last year, gross margins increased 210 basis points. That reflects a 120 basis point improvement in the merchandise margin rate, including increases in both footwear and apparel; and a 90 basis point improvement in its buying and occupancy rate. The Foot Locker, Inc. SG&A expense rate improved by 50 basis points to 21.8% of sales in Q4 despite increased incentive compensation accruals and planned additional marketing expenses. Looking to 2011, Foot Locker expects to generate a double-digit EPS increase versus last year's adjusted results based comps increasing low- to mid-single digits, its gross margin rate improving 30 to 50 basis points, its SG&A expenses growing 1% to 2% reflecting increased marketing costs, offset in part by lower incentive compensation accruals. â–˛
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ADIDAS GROUP SEES FOURTH QUARTER NET INCOME SINK DESPITE STRONG REVENUE GAINS Powered by a strong performance by both its Reebok and Adidas brands, Adidas Group's currency-neutral revenues in the fourth quarter grew 9% on a currencyneutral basis. Driving the gains was another healthy performance in North America, where currency-neutral Group sales grew 11.5% for the quarter. In reporting euro terms, Adidas Group sales in the North America region sales jumped 22.4% in the quarter to €665 million ($904 mm), driven by a 13% increase for the Adidas brand and a 24% increase for Reebok. Overall, Group revenues increased 19.2% in the fourth quarter to €2.93 billion ($3.87 bn), reflecting year-over-year appreciation of various currencies. Net earnings sunk 65.4% to €720 million ($980 mm) in the seasonally-smaller quarter due to increased marketing expenses. Fourth quarter gross margin improved 30 basis points to 46.5% of sales, mainly due to a larger share of higher-margin owned-retail sales and less clearance sales. Other operating expenses as a percentage of sales increased 0.5 percentage points to 47.1%, mainly due to higher sales and marketing working budget expenses. As a result, the Group's operating margin decreased 0.8 percentage points to 1.0% and operating profit declined 33.3% to €28 million ($38 mm). Combining Wholesale and Retail, brand Adidas sales jumped 20.0% to €2.09 billion ($2.8 bn) while growing 10% on a currencyneutral basis. Reebok advanced 25.6% to €517 million ($703 mm) and 15.3% currency-neutral. For the full year, total Adidas Group sales in the North America region grew 18.8% to €2.81 billion ($3.7 bn) and was up 11.7% currencyneutral. North America sales grew 14% at brand Adidas in 2010, led by double-digit sell-through in five key lines representing its lightweight push. Reebok's sales in the region grew 22% for the year, led by toning and ZigTech.
BROWN SHOE ACQUIRES AMERICAN SPORTING GOODS Brown Shoe Company,Inc. last week announced that it acquired privately-held athletic shoe-maker American Sporting Goods Corp. The purchase price was $145 million in cash plus the assumption of approximately $6 million in debt. Brown Shoe expects the acquisition, which had been rumored for months, to be accretive to 2011 net income by 10 cents to 12 cents per share, excluding the impact of purchase accounting adjustments and transaction and integration costs. BWS anticipates approximately 2 cents per share in duediligence costs to impact fourth quarter 2010 results, which will be released March 15. The cash transaction will be funded by Brown Shoe's revolving credit agreement, which has been increased by $150 million to $530 million. Brown noted that the valuation was approximately 0.6 times 2010 preliminary net sales and five times 2010 preliminary EBITDA. For Brown Shoe, the acquisition brings a significantly stronger athletic focus to its wholesale segment while also building on the success it's already having in comfort and fitness, particularly with its Dr. Scholl's and Naturalizer brands. The BWS wholesale segment also includes LifeStride, Etienne Aigner, Franco Sarto, Sam Edelman, Carlos Santana, Fergi, Via Spiga, Vera Wang Lavender Label and Buster Brown. Brown Shoe also operates the Famous Footwear and Naturalizer retail chains as well as shoes.com. The acquisition will lead wholesale segment sales to top $1 billion in 2011. Brown Shoe Co. CFO Mark Hood added that ASG has traditionally operated with doubledigit operating margins but he expects that operating under Brown Shoe's larger structure will add about 200 basis points to ASG's operating margin over the next several years. Said Hood, "The ASG brands have been consistently profitable, and looking forward we believe we can further elevate that profitability through the creation of sourcing, distribution and other infrastructure synergies." Diane Sullivan, Brown Shoe's president and COO, added that ASG has a "solid presence" with many of the top athletic chains in the U.S., providing an opportunity to further diversify Brown Shoe's wholesale segment. About 25% to 30% of ASG's sales are sold in athletic specialty or sporting goods stores with national chains and family footwear stores being its largest channels. Asked to elaborate on growth potential for each brand in a Q&A session, Sullivan said she sees Avia as the "cornerstone" of the company. She added, "We think there is a significant opportunity to build on that brand with additional innovative product, more speed and more strength in their go to market strategies than they've had up to this point in time." Sullivan views Ryka as an "underdeveloped opportunity" and noted that it's lately been regaining traction at retail. She said, "When we think about the first athletic brand for women, and you think about our position with Naturalizer in the marketplace as the first comfort footwear brand for women, we think there's some interesting opportunities in terms of the way that we take our knowledge of women and women's fashion, and to bring that into their company." She also said that although both Avia and Ryka benefited last year from the toning craze, Brown Shoe doesn’t expect to see any kind of inventory issue to impact ASG's margins. While expecting toning "to represent a much smaller portion of the marketplace in 2011," she expects to see growth at Avia, Ryka as well as And1. Good demand in the lightweight running category is expected to make up for any declines in toning for Avia. At the same time, she stressed that ASG's team will also help grow Brown Shoe's existing wholesale brands. The acquisition includes three factories that ASG owns in China.
“You can’t manage what you don’t measure” Peter Drucker
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BACKCOUNTRY HARDGOODS MARKET Perfect Storm Creates Big Opportunities By Charlie Lunan
Abundant snow, brisk sell through, tight inventories and lots of innovation made for a buoyant mood in the backcountry section of the Outdoor Retailer Winter Market 2011 in Salt Lake City this January. Data released by Snowsports Industries America a week after the show showed U.S. snow sports sales broke $1 billion for the first time in December, with equipment sales leading the market with 22 percent increase in dollars sold and 11 percent in unit growth. While alpine ski equipment sales were up 27 percent for the August through December period, dollars sales were up more than 90 percent for AT/ Randonee equipment, 165 percent for reverse/mixed camber skis and 58 percent for reverse camber snowboards. “We’ve had snow all over the place so that makes us all look like we are a lot smarter,” said Mike Harttrup, Director of Telemark and Alpine Touring at K2 Sports. Several exhibitors remarked how impressed they were with the All Mountain Demo, which was moved from Snowbasin to the Solitude Mountain Resort within a half hour of the Salt Palace that hosts the show. “Moving to Solitude made a big difference,” said Scott Deur, North American Sales Manager for Genuine Gear Guide (G3), which was completely sold out of skis and probes by the time of the show and is now building skis to order after exhausting its inventory. The Vancouver, BC-based company returned to the show after a one-year hiatus, during which it tried to service its dealers individually. “We were slammed,” Deur said of the demo, noting he had booked appointments with more than 100 dealers. 10
SGB WEEKLY l MARCH 7, 2011
Many executives who spoke with SGB Weekly indicated that skis, boots and bindings were selling through at good prices and margins because dealers cleared out carry-over inventory last winter and manufacturers were offering little to no close-outs this year. That may point to strong preseason orders for the 2011/2012 Fall/Winter season. It looks like there was little left on the floor leading into President’s Day weekend, historically the key weekend for seasonal inventory. “I think the industry will exit the 2010/2011 season cleaner than it has been in my lifetime,” Black Diamond, Inc. President and CEO Peter Metcalf told analysts in an earnings call last week. “And, I don't think that's an exaggeration. People have been more cautious because of the 2008/2009 economic implosion, a couple of bad winters and this year has been good. It's been good globally. And, the supply chains are very clean.” In recent years, ski makers have become much more disciplined and rational about ordering and managing inventory under a new set of “more rational” owners, Metcalf said. That has created a healthier dynamic for vendors and dealers alike. “Yes, we wish we had, had more product in key categories and key models,” Metcalf said. “But, at the same time, it sure feels good to have people wishing they had gotten more product from us and it helps with the pre-season ordering cycle that we're in now. I think it actually helps train the consumer, which is very healthy, to buy before New Year's if they want to get their coveted ski or boot.” Several factors are driving growth. First and foremost has been the weather. Second has been the improving economy, which has
prompted the affluent-skewing ski crowd to resume spending on gear and travel after a two-year hiatus. Hard core enthusiasts and younger skiers, meanwhile, are responding to rising prices for lift tickets by heading for the sidecountry and backcountry in growing numbers. This continues to fuel sales of not only freeride gear, but has also led to a resurgence in cross-country skiing and stoked interest in Randonee racing and uphill skinning for calisthenics in the United States, said G3’s Deur. Another factor driving sales has been technology and innovation, which accelerated with the introduction five years ago of the Marker Duke binding that allowed North America’s alpine skiers to access the side country and backcountry powder with an unparalleled feeling of confidence, comfort and safety. "In the past two years the technology has changed so much," said Chico Bukavansky, National Sales Manager for park and accessories maker Dakine. "There are a lot or reasons to upgrade." Blurring of the lines between resort and backcountry skiing remained a strong theme at the show with the most striking example being Black Diamond’s announcement just weeks before the show that it would become the lone hardgoods sponsor of the Subaru Freeskiing World Tour in 2011. Several industry sources said they were surprised by the announcement and one alpine retailer even called it “bizarre.” Another example was Marker-Volkl’s decision to exhibit at the show for the first time. Up until the introduction of the Marker Duke binding five years ago, North America’s backcountry skiers relied predominantly on European style bindings like the Fritschi, which were designed to be light and fast for alpine touring (AT) and Randonee racing. To cater to American backcountry skiers, European companies began beefing up their AT/Randonee bindings to handle aggressive downhill runs. Marker, by contrast, started with an alpine binding and strived to make it lighter for touring; i.e., skinning up hills to reach the “virgin pow-pow.” This gave American freeride skiers the “torsional rigidity” they needed to handle jumps and extreme descents in the backcountry of places like Jackson Hole, Snowbird and WhistlerBlackcomb. Beefier backcountry boots soon followed with the result being that it is now common to see fat skis not only in the backcountry of the Rockies but on the showrooms of outdoor retailers. “If you were an alpine skier, you had to drastically lower your expectations because the bindings and boots were inferior,” said Mike Hattrup, K2’s Director of Telemark/Alpine Touring. “The Fritschi binding was the first one you could put an alpine boot in, but with the Marker Duke there is zero sacrifice in performance.” Many of the new products at the 2011 Outdoor Retailer Winter Market were again aimed at the sidecountry market, which is drawing resort skiers. These skiers rely on lifts to get up the mountain, do minimal skinning and therefore require different gear. While they still need to carry a safety kit – shovel, probe and beacon - they don’t need to carry as many extra layers, food or water. Vendors are responding by trimming down packs that minimize discomfort on the lift and using more carbon, new resins and designs to shave grams off their skis, boots, bindings, probes and shovels.
Also driving the inevitable move toward smaller, lighter, faster is growing competition for space inside the pack, which is getting more fierce with the emergence of float bags. These safety devices could be heard hissing across the floor in product demos throughout the show and seem well on their way to becoming standard equipment. While U.S. companies introduced bags well below the $1,000 price point charged by many European brands, look for float bags to take more of wallet and pack share going forward. The trend is causing vendors to include more features and functions, like inclinometer, rulers and emergency litters into ski poles and other gear. While AT/Randonee gear skewed toward getting skiers between huts as quickly as possible, North American-style freeriding gear skewed toward enabling skiers to bomb downhill. This is causing iconic backcountry brands like Black Diamond Equipment, G3, Garmont, SCARPA and Dynafit to move toward the alpine world with fatter, twin tip skis, beefier boots and stouter bindings, while the alpine brands focus on shaving grams off their gear. Some say U.S. designs are driving Europe’s freeride market. It will be interesting next season to see how outdoor specialty and alpine shops carve up the booming sidecountry business going forward. Many resort alpine shops now carry backcountry safety gear and brands. And, many outdoor shops are increasingly carrying fatter, early rise, reverse cambered skis. “We’re entering that market more because that's what the manufacturers are offering,” said Scott Cahoon, Operations Manager for Cole Sport, which operates four alpine shops in Park City, Utah. “All the traditional alpine boot companies now have backcountry/sidecountry boots.” This winter, Cole Sport began carrying Black Diamond skis and committed to safety gear in a much bigger way. The retailer sold through most of that gear by Christmas and has been chasing it ever since. “My kids ski Snowbird, but they may go out of bounds once in a while,” noted Cahoon. “That's who we are going after. We are not going after the guy who is parking on the side of the road and skinning up.” WEEK 1110 | SGBweekly.com
SKIS This category is filled with alpine companies making lighter, narrower skis and backcountry companies making fatter, heavier skis. Rockered skis, originally developed to keep tips up for skinning and skimming powder, were represented in most lines because they make it much easier to turn and the rocker can be adjusted to help even the fattest skis negotiate all snow conditions. Black Diamond introduced its new Power Series which it says reflects its “mission to unite freeride power with backcountry-inspired agility.” The eight-ski collection is aimed at lift-assisted runs on powder, piste or hard snow, making it clear Black Diamond expects to meet its goal of quadrupling annual sales to $500 million in the next five years in part by pushing further into the resort alpine market. The Zealot (MSRP $850) and Verdict (MSRP $820) add a layer of Titanal metal sheeting for “terrain absorbing dampness through any snow conditions.” The 110mm-waisted Zealot is optimal for 50 percent soft snow and 50 percent hard snow, while the 102mm-waisted Verdict is good for 30/70 mix. G3’s 2011/2012 version of its top-selling Highball (MSRP $770) is the fattest ski ever offered by the backcountry brand. It features G3’s progressive Sweet Rise Camber, which combines rocker for soft snow conditions with a camber for edge pressure on firmer snow and is aimed at the freeride market. It also uses a Titanal deck sandwich construction and weighs in at 4.5 pounds per ski. “We have been a guide-oriented company so we are catching up with the market,” said Scott Deur, North American Sales Manager for G3. “The guides like a more cambered, traditionally European touring ski, but the sidecountry wants more rocker.
Backcountry Access Float 18 MSRP $685
Air bags were the big development in this category and now seem destined to become standard issue for serious backcountry skiers. “These have been around 25 years but there has been a big push recently because there has been more testing and real world data proving they work,” noted David Furman, Hardgoods Category Manager for Mammut, which launched its own line of air bag systems at the show. “If you are caught in an avalanche slide, you have a 50 percent chance of being buried without a bag. With a bag, that goes down to approximately 5 percent. I think this is a really important topic in avalanche safety and will really grow.”
Mammut enters next season with a 22- and 30-liter pack (MSRP $680-$700) that uses a modular air bag and venturi (inflation) system that can be moved between packs. Refillable cartridges are available for $175. "In the future you will be able to move our air bag between a 15- and 40-liter backpack as you move between yo-yo skiing and backcountry," Furman said of the system, which is being licensed from fellow Swiss company Snowpulse.
Black Diamond Verdict MSRP $820
SGB WEEKLY l MARCH 7, 2011
Backcountry Access introduced the Float 18 (MSRP $685) and Float 36 (MSRP $785) on either side of its existing Float 30 (MSRP $750), which has been a big hit with backcountry skiers and snowmobilers alike. The Float 18 is aimed at “slackcountry” skiers who yo-yo up and down the mountain using lifts and snowmobilers looking for a lower profile pack. These enthusiasts still need to carry shovels and probes, but don’t need as much room in their pack for extra layers and food. BCA has had a lot of success with the Float 30 because it’s priced well below European competitors, in large part because of the company’s recently patented venture system, which allows it to use much smaller 2700-psi compressed air cylinders that can be refilled cheaply at scuba, paintball and select outdoor retail shops.
BEACONS Here manufacturers are still searching for the right balance of features, easeof-use and price. Mammut introduced the Pulse Element Barryvox (MSRP $350), a slimmed down version of the Pulse (MSRP $490) introduced in 2006 for Mammut Pulse Element Barryvox the professional market. The Pulse uses MSRP $600 signal separation allowing rescuers to distinguish between separate signals in a mass burial situation. Some have rejected the feature as too complicated and time consuming given the rarity of multiple burials, so Mammut introduced basic and advanced user profiles in their beacons in 2009. For 2011-12, they have taken it one step further by stripping out the motion detector, the analog mode and the user profile settings to create a less expensive and easier to use pulse element. “You can add all the features in the world,” Furman noted, “but if people don't want it, you can't sell it.”
Dynafit’s Radical FT12 is an example of how the European backcountry brands are catering to the more aggressive North American freeride skier. The 599gm binding with DIN 12 setting features toeside “power towers" allowing for quick binding entry, increased power transfer, and greater side impact resistance. It comes with an antitorsion plate for big jumps and lateral rigidity, a speed step climbing bar, and 75mm width and 130m brake for fatter skis. MSRP $600
BOOTS Dynafit weighed in with the 1,750 gm Titan Ultralight, a super-stiff freeride touring boot suitable for long tours. Ultra-stiff Pebax mix and a carbon fiber heel booster increased support and performance in the most challenging terrain. The alpine overlap construction combined with micro adjustable magnesium buckles allows for a wide range of motion for walking, climbing and skinning. MSRP $870 Garmont's four new freeride tour boots feature a rear plate that can be adjusted with a hex nut to give three forward lean positions and a new water seal gasket to join the shell over the foot. The line includes Delirium for men and Asylum for women. The Delirium weighs 2400 gms and features a wide forefoot. The Asylum features Garmont’s new EZFIT liner that can be skied without thermoforming. Both skis use a snug heel and a stiffened lower shell for enhanced leverage. MSRP n/a
Dynafit Radical FT12 MSRP $600
Backcountry Access B-1
K2 introduced its first complete line of backcountry tools at the show, including shovels, probes, climbing skins, poles and packs. The company has emphasized versatility. It’s shovels for instance have slots that allow them not only to be used as a dead man anchor but be combined with its skis and poles to construct an emergency litter. The shovel’s handle can be configured for hoeing rather than shoveling. The company improved the stiffness of its probes by 30 percent and integrated inclinometers into its poles so users can quickly gauge the angle of a slope without removing gear from their pack.
Backcountry Access redesigned its avalanche shovels with a more contoured, industrial look that makes them more compact, stronger and and have more shelf appeal. The Arsenal line features an integrated 240cm probe and 35cm saw, while the Bomber series (B-1, B-2 and B-3) features a contoured design and more shallow neck that sheds weight and makes them more packable.
Garmont Delirium MSRP n/a
Dynafit Titan Ultralight MSRP $870
G3 cuts its probe SKUs in half and their individual weights by 15 percent with the introduction of their new line of aluminum and carbon speed tech probes which come in 198, 328, 248, 3080cm versions (MSRP $55-$85). All of G3 probe MSRP $55-$85 the probes are etched their entire length with 5mm lines and feature a single-pull, quick deployment handle to shave seconds off rescue times and add stiffness. ■ WEEK 1110 | SGBweekly.com
P L O T S AGGRESSIVE FIVE-YEAR GROWTH PLAN By Thomas J. Ryan
ith pitchers and catchers for MLB teams reporting for spring training last week, New Era Cap Co., long the official headwear sponsor of Major League Baseball, is well into its busy season. But lately, the brand has been toying with other fields of play. While Nike grabbed much of the attention last year in securing onfield uniform rights for the NFL after the league reworked its licensing agreements, New Era feels it scored a coup in becoming the NFL's on-field headwear licensee. Both the uniform and cap rights have been held by Reebok. As a result, New Era will join Nike, Gatorade, Cannon and Motorola as the only five brands with exclusive sideline rights starting in 2012. "It's big exposure for us," says Chris Koch, CEO of New Era. "Any player or coach that's wearing headwear on an NFL sideline will be wearing New Era headwear. There are some apparel rights but they're not sideline rights. They're more fashion; some women's apparel rights and men's apparel rights. But in both cases, it's going to be a huge upside for our revenue stream starting in 2012." The apparel rights are expected to benefit 5th & Ocean, the Miami-based women's fan apparel specialist acquired by New Era in August 2009. That NFL deal was followed by the signing of a three-year licensing deal for headwear with the Canadian Football League. A separate CFL deal secured T-shirts and outerwear rights for 5th & Ocean. Perhaps most surprisingly was New Era's title sponsorship of the Pinstripe Bowl, the first college football bowl played in Yankee Stadium in nearly a half-century. The football push, as well as two acquisitions completed in the last two years, is part of an ambitious five-year plan by New Era Cap to reach $1 billion in annual sales by 2015. Sales are about half a million currently. But Koch is used to outsized growth as he works on transforming New Era into a global lifestyle brand. Since becoming CEO in 2002, New Era's sales have doubled from 2002 to 2005 and then doubled again by 2010.
"We had a couple years with the recession where we like everyone else took a hard look at things and cleaned some stuff up," says Koch, whose family has owned the privately-held company for four generations. "But we had a very strong year last year and our futures were very strong going into 2011 so we know we're looking at a very strong, five-year cycle of growth." He admits that New Era is benefiting from overall strength in the headwear market from not only the team fan base across sports but also the fashion crowd. "Our fashion business continues to be very strong," said Koch. "It's not an urban play anymore. The fashion side would be what I would call streetwear because it crosses over into the whole action sports markets – whether it's the skater kids and the surfers – or the college kids. And there's lot of different things that are working. If you look at what kids are wearing now, it's what we used to make when we started in the 1920s – fedoras, Gatsby's and paper boys. So that part of our business continues to grow. If it's soft and you can put it on your head, we're going to do it." But he believes New Era, which celebrated its 90th anniversary in 2010, is particularly benefiting from its commitment to innovation both from a design and performance fabric standpoint. "We're always trying to keep it fresh and keep it new and we're always reinventing things," says Koch. "We never rest on our laurels." Still, he says New Era brand's success is grounded in the authenticity it has gained as the official MLB on-field cap sponsor since 1994. "It's the real deal," says Koch. "It's worn by players who actually play the sport of baseball. It's the standard on which all headwear is judged." To fuel growth, New Era launched a "Fly Your Own Flag" campaign that celebrates individuality. The company found that a core reason why customers turn to New Era is to express themselves. "People wear caps for a lot of different reasons," says Koch. "You might be wear a Yankee cap because you're a Yankee fan or you like NY. If you're someone from Japan, it's a piece of Americana. We're playing off the fact that when people buy a cap, it’s an individual decision made for a very specific reason. That's the whole 'Fly Your Own Flag' theme."
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The campaign including print and social media features New Era brand ambassadors like Curtis Granderson, the Yankees outfielder, whose ad says “Raise your own game”; Sam Adams, a rapper, whose ad says “Write your own history”; and Mason Granger, a spokenword poet, whose ad says “Start your own movement.” Skateboard pros, musicians and chefs are also part of the effort. "It's still going along the lines that we're not paying people but we're going out and finding people who are true brand ambassadors," says Koch. The company will also be rapidly expanding New Era branded stores. It currently has stores in New York City, Atlanta, as well as its hometown in Buffalo. Outside the U.S., it has stores in Toronto, London and Birmingham in the U.K., Berlin as well as one that just opened in Hong Kong. For 2011, it's planning stores in Tokyo, Miami, Chicago and Los Angeles. "We want to be in all the big cities," says Koch. "It's really the only place you can go and see the whole breadth and depth of what New Era is all about - all the different leagues, all the different products, all the different designs, etc. It helps ultimately in building the brand but our stores also make money." New Era is also finding newfound success growing through acquisitions. 5th & Ocean more than doubled sales in the last year on "very profitable" growth," says Koch. "We were able to put the capital into the company and put some expertise on the operational side and it's paying good dividends for us," says Koch. "We're excited. They're on a very big growth path and it's proving to be an exceptional acquisition." The acquisition also gave New Era expertise in women's apparel as well as a better foothold to guide New Era toward becoming a full apparel brand. "The women's apparel business is very strong and growing but it's also given us a home for our New Era branded apparel," says Koch. "We had the most successful year yet on the New Era apparel side." 16
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In December, New Era acquired a majority stake in MARC4, a privately-held fashion brand management company in Brazil. MARC4 makes apparel, shoes, headwear and other accessories under licensed brands throughout the country, and has been New Era's official distributor in Brazil since 2006. A particularly advantageous asset is its licensed relationships with 20 of the Brazilian's top soccer teams. "MARC4 has been our distributor in Brazil for three years and they've done an outstanding job of placing our product on the right people in Brazil," says Koch. "We like them because they are also a family business. And it's similar to 5th & Ocean where we feel if we can add capital and operational expertise, we can help their business grow. Plus, it's no secret that Brazil is a huge emerging country. It just seems that the timing was perfect with the World Cup and the Olympics coming up. We're very excited about that." Koch says New Era will continue to explore other acquisitions. "It's definitely part of our growth strategy," says Koch. "We are looking at companies not only domestically but around the world. It's got to be a good strategic fit for us. We are not looking to do it to buy market share. We're looking at companies that have huge potential for growth that would benefit from the capital and right operational expertise we can put behind it." Koch has no plans to sell the company itself or go public. The company has in the past "thought about an IPO," but has found it can finance the growth internally or through bank financing. Koch is also looking forward to driving that growth. "It's an extremely exciting time for New Era," says Koch. "Right now we have a very specific growth plan for the next five years and we think by 2015 we can break the billion dollar revenue mark so there's no reason for an IPO or to sell any part of the company. I feel like we're just starting to hit stride." ■
Chris Koch, CEO New Era
ULTI-DOOR M SG STORES OUTPERFORMED IN 2009/2010 By Thomas J. Ryan
Sporting goods retailers with four or more stores saw net profit before taxes to total revenue in the 2009/2010 period improve to 7.6% from 5.1% two years ago, according to data in the recently-released NSGA Cost Of Doing Business Survey, published by the National Sporting Goods Association. Retailers with one store, however, saw a decrease to 3.2% versus 5.1% over that time frame. In another key measure of profitability - net profit before taxes to total assets retailers with four or more shops also showed an improvement to 8.0% from 4.0% two years ago, according to the survey. Those with one store went from 8.8% two years ago to 6.4% in the current study. Single stores, however, did improve return on net profit before tax to net worth, which rose from 17.2% two years ago to 21.3% in the 2009/2010 period. Retailers with four our more stores saw a decrease from 26.1% to 18.3% in the same time period. Most encouragingly, both single-unit and multi-store units improved in sales per square foot. For stores with four or more locations, sales per square foot increased to $368 in 2009/2010 period versus $273 in 2007/2008. Retailers with one store showed a slight improvement with sales of $294 versus $286 two years ago. A total of 169 firms participated in the survey. Of the companies, 97 were bicycle shops, 36 were ski shops, 19 were institutional/team dealers, and 16 were full-line sporting goods stores. Overall, revenues per selling square foot averaged $259 in the 2009/2010 period, ranging as low as $188 to a high of $428. Exploring profitability by store type, the highest gross margin on average was netted by ski shops, averaging 39.0%, although both bike shops (38.8%) and institutional/team dealers (38.2%) were close behind. Full-line stores were at 36.2%. Bike shops led in selling per square foot, averaging $320. Selling per square foot at the represented bike shops ranged as low as $190 to as high as $505.
Ski shops selling per square foot was $261, ranging from $191 to $387. At institutional/team dealers, selling per square foot averaged $267, ranging between $200 to $681. At full-line stores, revenue per selling square foot averaged $225, ranging from $194 to $287. One bright spot for full-line stores, however, was inventory turnover of 3.6 times. Institutional/team dealers also achieved an inventory turnover of 3.6 times. Ski shops were at 2.1 and bike shops at 2.0. Shrinkage was also much higher at ski shops (1.4%) and bike shops (1.5%) than full-line stores (0.6%) and institutional/team dealers (0.5%). Overall, the median ROA (before tax return on assets), which measures overall financial performance from a managerial standpoint, for the group held at 6.6% in the 2009/2010 period, the same ratio as 2007/2008. Both periods marked dramatic improvement over the 4.0% achieved in 2005/2006 and 3.9% notched in 2003/2004. Over the past 15 years, the ROA ratio peaked for the group at 9.9% in 1995/1996. The group's RONW (before tax return on net worth), which measures overall financial performance from the owner's standpoint, improved to 21.1% in the 2009/2010 period, up from 16.7% in 2007/2008, 12.1% in 2005/2006 and 9.2% in 2003/2004. That ratio had averaged between 17.3% to 20.4% from 1995 to 2002.
OTHER KEY FINANCIAL RATIOS FOR THE OVERALL GROUP ◆ Net profit before tax to total revenues decreased from 4.5% in 2007/2008 to 3.2% in the 2009/2010 period. But it still marked improvement over the 2.8% achieved in 2005/2006 and 1.8% in 2003/2004. Overall, net profit before tax to total revenues in 2009/2010 period ranged from negative 0.5% to as high as 6.9%.
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Gross margins on merchandise sales improved to 39.0% in ◆ 2009/2010, up from 36.3% in 2007/2008. In 2005/2006, that ratio was 39.9%. Overall, gross margins for the group in the 2009/2010 period ranged as low as 32.1% to as high as 45.5%. ◆ Inventory turnover averaged 2.2 times on average in 2009/2010 – matching the ratio achieved in the 2007/2008 period and the 2005/2006 period. Overall, however, that's down from the 2.7x averaged in 2003/2004. In 2009/2010, inventory turns ranged as low as 1.6 and as high as 3.1. Gross margin return on inventory improved to $1.53 in ◆ 2009/2010, marking an improvement over the $1.43 in 2007/2008. Over the past 15 years, that ratio peaked at $1.71 in the 2003/2004 period. In the 2009/2010 period, the return ranged between $1.05 and $2.05. ◆ Shrinkage averaged 1.6 times in the 2009/2010 period. Total asset turnover was 2.5 on average. Current asset turnover ◆ was 2.9. Total debt to total assets on average was 64.2%. Accounts payable ◆ to inventory was 45.0%. ◆ Current ratio on average was 1.8; quick ratio was 0.4. 20
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Total revenue per total equivalent employee was $129,252 in 2009/2010; ranging from $102,144 to $173,879. Operating margin per total equivalent employee was $58,953. Exploring some key expenses, payroll averaged 21.6% of total revenues with payroll costs for owners and officers making up 5.2% of sales while all other employee costs averaged 14.0%. Rent on average accounted for 6.2% of sales, and advertising and promotion, 2.5%. Looking at the profitability of core categories (footwear, apparel and equipment/hardgoods), apparel ranked as the highest margin at 42% for 2009/2010 period. Apparel's average initial markup was 50.0%. Footwear's gross margin was 35.0% with an initial markup at retail of 40%. Equipment/hardgoods' gross margin was 35% with an initial markup of 44%. Footwear, however, achieved the highest inventory turnover at 3.0 over the 2009/2010 period compared to 2.2 for apparel and 2.1 for equipment/hardgoods. Gross margin return on inventory was $1.59 for footwear, $1.53 for apparel and $1.27 for equipment/hardgoods. Comparison categories in the report also include sporting goods stores and specialty sport shops by sales volume, size of store, and marketing mix. Beside balance sheet and income data, the NSGA Cost Of Doing Business Survey includes five measures of profitability, three measures of financial management and 14 measures of productivity. The study is provided at no cost to NSGA retailer members. ■
Conference Sponsored By
The National Sporting Goods Association presents:
47th Annual Management Conference & 13th Annual Team Dealer Summit
May 1-4, 2011
at Loews Ventana Canyon - Tucson, Arizona
Featuring: • A robust educational track with presentations by industry leaders and other experts • Networking opportunities with top sporting goods executives • The Annual NSGA Golf Tournament and other outstanding entertainment For more information please visit nsgaconferenceandsummit.org, e-mail us at email@example.com, or call 800-815-5422 x127.
Team Dealer Summit Sponsored By
For full year calendar go to sportsonesource.com/events
Sea Otter Classic Monterey, CA
FIBO 2011 Essen, Germany
NSGA Management Conference and Team Dealer Summit Tucson, AZ
Licensing International Expo Las Vegas, NV
SGB 40 Under 40 Awards Chicago, IL
EORA Southeast Summer Early Bird Show Greenville, SC
EORA Northeast Summer Early Bird Show Manchester, NH
TAG Spring / Summer Show St. Louis, MO
EORA Mid-Atlantic Summer Show Parsippany, NJ
NBS Summer Market Grapevine, TX
EORA Mid-Atlantic Summer Show Parsippany, NJ
ADA Spring Buying Show Atlanta, GA
ASA-ICAST International Sport Fishing Expo Las Vegas, NV
BCA International Billiard & Home Recreation Expo Las Vegas, NV
ASI Chicago Chicago, IL
European Outdoor Trade Fair Friedrichshafen, Germany
Bike Expo 2011 Munich, Germany
AUGUST 3 4-7 22
Outdoor Retailer Open Air Demo Outdoor Retailer Summer Market Salt Lake City, UT
SGB WEEKLY l MARCH 7, 2011
TRADE ASSOCIATIONS | BUYING GROUPS
Athletic Dealers of America 1395 Highland Ave. Melbourne, FL 32935 t 321.254.0091 f 321.242.7419 athleticdealersofamerica.com National Sporting Goods Association 1601 Feehanville Dr., Suite 300 Mount Prospect, IL 60056 t 847.296.6742 f 847.391.9827 firstname.lastname@example.org www.nsga.org Nationâ€™s Best Sports 4216 Hahn Blvd. Ft. Worth, TX 76117 t 817.788.0034 f 817.788.8542 nationsbestsports.com Outdoor Industry Association 4909 Pearl East Circle, Suite 200 Boulder, CO 80301 t 303.444.3353 f 303.444.3284 email@example.com outdoorindustry.org SGMA 8505 Fenton Street Silver Spring, MD 20910 t 301.495.6321 f 301.495.6322 firstname.lastname@example.org sgma.com SnowSports Industries America 8377-B Greensboro Dr. McLean, VA 22102 t 703.556.9020 f 703.821.8276 email@example.com snowsports.org Sports, Inc. 333 2nd Avenue North Lewistown, MT 59457 t 406.538.3496 f 406.538.2801 firstname.lastname@example.org sportsinc.com Sports Specialists Limited 590 Fishers Station Dr., Suite 110 Victor, NY 14564 t 585.742.1010 f 585.742.2645 sportsspecialistsltd.com Team Athletic Goods 629 Cepi Dr. Chesterfi eld, MO 63005 t 636.530.3710 f 636.530.3711 tag1.com
"I can't imagine having achieved the expanded retail space & growth of our business without regularly attending OR." â€“ Marc Sherman, Outdoor Gear Exchange and GearX.com
AUGUST 4-7, 2011 Salt Palace Convention Center Salt Lake City, UT
JANUARY 19-22, 2012 Salt Palace Convention Center Salt Lake City, UT
Open Air Demo AUGUST 3, 2011 Jordanelle State Park, UT
All Mountain Demo JANUARY 18, 2012 Wasatch Range, UT
VISIT OUTDOORRETAILER.COM OR CALL 949/226-5722 FOR MORE INFORMATION.