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APRIL 11, 2011

A Weekly Web Magazine for the Sporting Goods Industry

THE BRAND STRENGTH REPORT 2011


Group Publisher / Editor–in–Chief James Hartford james@sportsonesource.com

APRIL 11, 2011

Senior Business Editor Thomas J. Ryan (917.375.4699) tryan@sportsonesource.com

A Weekly Web Magazine for the Sporting Goods Industry

Associate Editor Kyle J. Conrad (704.987.3450 x111) kconrad@sportsonesource.com Contributing Editor Eugene Buchanan Creative Director Teresa Hartford Graphic Designer Camila Amortegui VP Business Development Bill Bratton (409.392.5029) bill@sportsonesource.com VP/GM Specialty Businesses Paul Gagner (303.997.7302) pgagner@sportsonesource.com VP Business Development Barry Gauthier (774.553.5312) barry@sportsonesource.com Business Development Manager Katie O’Donohue (704.987.3450 x110) katieo@sportsonesource.com Circulation & Subscriptions subs@sportsonesource.com

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Technology Chief Information Officer, Mark Fine VP Research & Development, Gerry Axelrod Manager Database Operations, Cathy Badalamenti

SportsOneSource Publications SGB TEAM Business Sportsman’s Business The B.O.S.S. Report Sports Executive Weekly SGB Update Footwear Business Update PSR Update Sportsman’s Business Update Team Business Update SGB Weekly Team Business Weekly Sportsman’s Business Weekly Footwear Business Weekly Outdoor Business Weekly

NEWS

6 7

FEATURES

10 2011 BRAND STRENGTH REPORT 8 SGB QUESTION? The Coming Inflationary Cycle - How The Overall Inflationary Movement Might Impact The Industry

DEPARTMENTS

SportsOneSource, LLC 2151 Hawkins Street • Suite 200 • Charlotte • NC • 28203 t. 704-987-3450 • f. 704-987-3455 www.SportsOneSource.com

NEW BALANCE Posts 2010 Revenue Gains; Named Top Value Brand In Survey MOVERS & SHAKERS FORZANI GROUP Fiscal Fourth Quarter Profits Rise; First Quarter Comps Weaken SPORTS AUTHORITY To Sponsor Rock 'N' Roll Denver Marathon IN BRIEF

18 CALENDAR

Copyright 2011 SportsOneSource, LLC. All rights reserved. The opinions expressed by writers & contributors to SGB WEEKLY are not necessarily those of the editors or publishers. SGB WEEKLY is not responsible for unsolicited manuscripts, photographs or artwork. Articles appearing in SGB WEEKLY may not be reproduced in whole or in part without the express permission of the publisher. SGB WEEKLY is published weekly by SportsOneSource, LLC, 2151 Hawkins Street, Suite 200, Charlotte, NC 28203; 704.987.3450. Send address changes to SGB WEEKLY, 2151 HAWKINS STREET, SUITE 200, CHARLOTTE, NC 28203; 704.987.3450.

WEEK 1115 | SGBweekly.com

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MOVERS AND SHAKERS Jim Hoff has resigned as VP of sales at Asics America. Under Armour, Inc. announced that Mark Dowley is transitioning from his role as EVP, Global Brand and President of International to an advisory role. Outdoor Industry Association (OIA) presented its inaugural OIA Advocacy Leadership Awards to Sally Jewell, CEO of REI, and Will Manzer, CEO of Eastern Mountain Sports, during this week’s Capitol Summit in Washington, DC. Both were founding supporters of the OIA political action committee, OIAPAC, and worked closely with the Obama Administration to launch America’s Great Outdoors Initiative (AGOI) in 2010. Cramer Products has hired Tim Maloney Sales, Inc. of Lake Forest, CA, to handle its west coast sales activity O'Neill Clothing announced Sasha Hartloff as the new girls sales manager for the swim and activewear categories. Reporting to O'Neill's SVP of sales and marketing, Steve Ward. Joshua Tree Skin Care has named Bryan Pappas as its national sales manager. Gregory Mountain Products, part of Black Diamond, Inc., has hired Bill Kulczycki as general manager and vice president. DSW, Inc. appointed Roger Rawlins to SVP/GM of DSW.com, and Jennie Wilson as Controller & SVP of finance. The Board Retailers Association has named Vicki Vasil communications and events manager.

NEW BALANCE'S ILLUMINATED SIGN AT FENWAY PARK

NEW BALANCE POSTS 2010 REVENUE GAINS; NAMED TOP VALUE BRAND IN SURVEY New Balance Athletic Shoe Co. regained momentum in 2010 with worldwide revenues climbing 7.9 percent to $1.78 billion from $1.65 billion in 2009. Figures include estimated sales by joint ventures and distributors, and cover its wide range of brands that include New Balance, Dunham, PF Flyers, Aravon, Warrior Lacrosse and Brine. The 2010 revenue increase follows flat to meager gains over the last few years. Revenues of $1.65 billion in 2009 compared to $1.64 billion in 2008, $1.63 billion in 2007, and $1.55 billion in 2006, with some of those gains coming from acquisitions. In a busy media week for the athletic footwear company, New Balance signed on to become the official footwear and apparel sponsor of the Boston Red Sox. An illuminated sign featuring its logo on an HD videoboard was unveiled in Fenway Park's right field at the Red Sox opening-day. In other New Balance news, company President and CEO Rob DeMartini was recognized as the country's Most Playful CEO by Playworks, a nonprofit that supports learning through play and physical activity. Playworks said in a statement, "DeMartini is personally involved in the company's commitment to get people moving, and a clear supporter of New Balance's community service initiatives." DeMartini also serves as vice chair on the board of directors for KaBOOM!, a national nonprofit organization that empowers communities to build playgrounds. Finally, New Balance ranked first in the athletic footwear category in the 2011 Harris Poll EquiTrend Value Retail Brand of the Year study. Based on a survey of 25,099 U.S. consumers in January, New Balance earned a score of 67.7; followed by Sperry TopSider, 66.2; Nike, 65.5; Asics, 65.0; Dexter Shoes, 64.6; Adidas, 63.1; and Reebok, 60.9. The industry average was 60.2. Other brands scored were Airwalk, Converse, K-Swiss, Keds, Puma, Saucony, Skechers and Stride Rite. ▲

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SGB WEEKLY l APRIL 11, 2011

For Breaking Trade News Every Business Day Go To SGBUPDATE.com


FORZANI GROUP FISCAL FOURTH QUARTER PROFITS RISE; FIRST QUARTER COMPS WEAKEN The Forzani Group Ltd. reported net earnings grew 4.4 percent in the fiscal fourth quarter on a 7.3 percent comp gain for the period. But results fell short of analysts’ estimates as markdowns accelerated in January to clear merchandise. Comps for the Canadian-based retailer were also running down so far in Q1 due to tough comparisons against last year's Vancouver Olympics as well as lingering winter weather. Earnings reached CN$24.2 million, or CN84 cents a share, in the fiscal fourth quarter, below the CN89 cents per share analysts polled by Thomson Reuters had, on average, been expecting. A charge related to the taxation of stock-based compensation costs reduced net Bob Sartor, CEO earnings by CN$1.5 million, or CN5 cents per share, in the quarter. On a conference call with analysts, CEO Bob Sartor said cold, wet seasonable weather in November drove its pre-Christmas winter business, Christmas and Boxing Week results were "solid," and sales continued to grow in January with the aid of more aggressive marketing tactics. "These tactics reduced [the] year-over-year margin rate for the quarter, but the plus side is it generated significant incremental margin

dollars and maintained our very clean inventory position," said Sartor. "This contributed to our fourth consecutive quarterly improvement in both EBITA and EPS." Fiscal Q4 revenue grew 10.2 percent to CN$410.9 million. The quarter's comp gain was helped by planned initiatives to expand key hardgoods categories, the impact that seasonably cold weather had on winter categories early in the quarter and improved consumer confidence throughout the Christmas and Boxing Day period. Corporate same-store sales grew 9.5 percent while franchise comps advanced 3.7 percent. Gross margins fell 120 basis points to 39.7 percent of sales in the quarter, with improved margins for wholesale offset by a planned reduction in margins in corporate retail due to promotional strategies that drove volume. Store operating expenses were flat in absolute dollar terms and down 180 basis points to 22.3 percent as a percentage of revenue. For the first eight weeks of the current year, comps, as expected, were down slightly versus the prior year's first quarter results. The first four weeks of sales were up against sales of Vancouver 2010 Winter Olympic licensed products, which offset positive comps in all other categories to post a decline of 3.3 percent. Excluding licensed product sales, comps advanced 5.1 percent across all categories. In the subsequent four weeks, continuing winter weather hampered sales of spring hardgoods categories to post an overall 2.8 percent comparative store decline.

IN BRIEFS Nike, Inc. confirmed that it will be closing Niketown at the Denver Pavilions shopping center in mid-May 2011.

SPORTS AUTHORITY TO SPONSOR ROCK 'N' ROLL DENVER MARATHON Sports Authority partnered with Competitor Group to become a title sponsor of October's Rock 'n' Roll Denver Marathon. The multiyear partnership involves naming rights as well as a variety of marketing, promotional, hospitality and retail components. Said David Campisi, President and CEO of Sports Authority, "With our corporate headquarters located in Colorado, we're looking forward to a terrific event that annually brings runners, spectators, employees and the community together in a positive and memorable way."

Nestor's Sporting Goods in Whitehall Township, PA, is closing after 65 years in business. The store will close in June to make way for a Buckman's Ski and Snowboard Shop. Saucony, Inc. announced its long-term exclusive footwear and apparel sponsorship of the BolderBOULDER. New Balance has signed a three-year licensing agreement with Denver-based Mountain Shades, Inc. for sunglasses. K2 Sports has partnered with Jones Soda Co. to create Jones Soda skis and snowboards. WEEK 1115 | SGBweekly.com

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NEWS

PAC STUDY CONFIRMS COACH POTATO NATION By Thomas J. Ryan

A study by the Physical Activity Council (PAC), a partnership between the major sports trade associations, confirmed the assessment of many anti-obesity advocates that we are a nation of coach potatoes. The PAC survey, examining participation numbers and frequency across 119 different sports, fitness and recreational activities, found that 76 percent of Americans, ages 6 and older, took part in at least one activity (216.6 million people) in 2010 leaving 67.1 million people, or 23.6 percent inactive. Inactivity rates have increased over the last three years. "What's most alarming is that 34 percent of the inactive people are between 6 and 34 years of age," said Tom Cove, president/CEO of the Sporting Goods Manufacturers Association (SGMA), which is the managing partner of the Physical Activity Council. "The study also shows that the number of inactive 6 to 12 year olds has more than doubled since 2008." The findings come from an online survey of 38,742 people over the age of 6 took that took place in January and early February 2011 with the questions probing 2010 sports and fitness activity participation. On the positive side, the overall participation trends for sports, fitness and related activity shows a slowing of the downward trend that was reported in the reports from the previous two years. While not back to the participation levels from 2008, the data shows that a vast majority of Americans are getting off the sidelines and back out on the court, gym and fields of play. The study also found that while the weak economy continued to have a major impact in spending on sports, fitness and recreational activities, spending picked up slightly over the data reported in 2009. Fewer active participants said they had spent considerably less and fewer had put off some purchases. Of those who participated in one of the 119 activities, only 6 percent said they had spent more in 2010 than in 2009 but that's still up from the 5 percent found from the same question asked in early 2010. Fifty-nine percent said they "spent about the same" versus 54 percent in the prior-year's survey. Looking forward, there were positive signs for 2011 with significant numbers of active participants set to increase spending. Of those surveyed, about 35 percent said they planned to join or rejoin a health club, about 28 percent planned to increase spending on travel to take part in sports and recreation, and 22 percent expected to increase their 8

SGB WEEKLY l APRIL 11, 2011

spending on equipment purchases in 2011. As it has for the last two years, the survey results continued to show that physical education (P.E.) is the pathway to all sports and fitnessrelated activities. For example, participants in the survey were 3.2 times more likely to take part in team sports if they had P.E. than if you they didn't have P.E. Outdoor activities, cycling, running/jogging and all the activities listed show similar increases in activity among those who have P.E. in school. This year’s study also asked respondents to provide insight into those activities that they would like to play in the future, but just don’t right now for one reason or another. Among those between the ages of 13 to 17, working out with weights was the top activity they were interested participating in that they didn't currently, followed by swimming, working out using machines, running/jogging, and camping. For people between the ages of 25 to 34 the top aspirational sport or activity that they didn't currently participate in was working out with machines, followed by working out withweights, swimming, fitness classes and running/jogging. The 35 to 44 year-old group listed working out with weights as their highest aspirational sport/activity, followed by swimming, cycling, working out using machines and hiking. For the 55-to-64 year-old group, the activity they most yearned to participate in was cycling, followed by working out using machines, swimming, hiking and fitness classes. “The whole concept of measuring people’s aspirations when it comes to sports participation has previously not been done in this sort of research environment,” said Keith Storey, vice president of Sports Marketing Surveys USA, which coordinated the overall study. “The answers to these questions show there is a clear desire by Americans to participate in a number of fitness, sports and outdoor activities, but they just don’t know where to start. It is this pent‐up demand that presents both an opportunity and a challenge to our seven organizations. The survey results prove that people want to ‘get off the sidelines’ and participate, but might need a bit of a push to get going.” The member organizations of PAC are the National Golf Foundation (NGF), Snowsports Industries America (SIA), The Outdoor Foundation (OF), Tennis Industry Association (TIA), United States Tennis Association (USTA), International Health, Racquet and Sportsclub Association (IHRSA), and the Sporting Goods Manufacturers Association (SGMA).


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THE

BRAND STRENGTH REPORT 2011 COMPILED BY

A SERVICE OF THE SPORTSONESOURCE GROUP

While the U.S. consumer appears to have finally been awakened from a deep slumber induced by the economic woes and market crash in late 2008, they have apparently also done so with a new attitude about where to shop and what to buy. The 2010 holiday season — and the 2011 fiscal first quarter that followed — was also a reflection of the uneven nature of the fragile economic recovery in the U.S. Wealthier consumers have gotten back to the business of shopping like it was 1999 while lower- to middle-income consumers are finding it hard to get back to the care-free spending habits of the pre-recessionary period. Yes, the stock market is up as this report goes to print, providing working Americans with a better feeling about their “wealth effect,” but stagnant-to-falling housing prices have eaten into the positive attitude that comes with rising 401(k) portfolio positions (that still fall short of pre-crash levels). The effect on the retail landscape has been profound, with the luxury and specialty segments posting very solid gains in the market in 2010 while the discount/mass sector was challenged by continued high unemployment, inflationary pressure on staples, high gas prices and the stagnant economy’s impact on the consumer’s ability to spend. One clear outcome of the recession is the consumer’s move to quality and product purchases as an investment. The brand has to be trusted. The product needs to last. And the brands that build trust through innovation, quality and value established stronger bonds with the consumer over the last two years. The consumer is also embracing some newer brands (and some old stand-bys) as new or re-invented categories and the related marketing programs build brand awareness and first-time customers. How the consumer feels about those brands will determine if they stay committed to a particular brand. Those observations and many more are but a few of the highlights contained in the 2011 edition of the Brand Strength Report, the annual output of a consumer survey conducted by The SportsOneSource Group to measure the consumer’s awareness, attitude and intent to purchase active lifestyle brands. The following pages contain top-line excerpts from the report. For more information on the Brand Strength Report, contact The SportsOneSource Group at 704.987.3450.

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SGB WEEKLY l APRIL 11, 2011


BRAND STRENGTH INDEX

BRAND STRENGTH INDEX - OVERALL TOP 50 BRANDS* Brand

The centerpiece of the Brand Strength Report, or BSR, is the Brand Strength Index, a rating system developed in early 2009 by The SportsOneSource Group in an effort to more effectively measure the overall consumer perception of a specific brand. Each brand measured was tested across four main criteria, with those criteria each individually weighted to reflect their importance in the overall indexing formula. Two key factors influencing the Brand Strength Index focused on awareness: unaided awareness and aided awareness. In an effort to measure a brand’s mindshare, the survey respondents were first asked to name five footwear, apparel, or equipment brands in the sports or outdoor sector. Respondents were then provided a list of 72 brands and asked about awareness levels for each. The next factor measured in the study and used to formulate the Brand Strength Index (BSI) was a respondent’s likelihood to purchase a specific brand again in the future. For each brand that a respondent mentioned having purchased in the last year, the respondent was asked on a scale of 1 to 5 -- with 1 representing “Definitely Would Not” and 5 representing “Definitely Would” -- how likely he or she would be to purchase that specific brand again in the future. Brands earned points for positive responses while points were subtracted for negative responses. The attribute with the highest importance in the BSI formula was based on researchers’ attempt to measure a consumer’s uncompromising commitment to a brand. Respondents were first asked if they would leave a specific retailer if a particular brand was not offered. The respondents answering “yes” were then asked (unaided) which brands were so important to them that they would leave a retail location if that brand were not available. All four criteria were then combined using a proprietary formula to generate a single Brand Strength Index for each qualifying brand. The Nike brand was at the top of the BSI ratings by a wide margin again this year, but separated itself a bit from the #2 brand, Adidas, in the latest report. Nike’s dominant position reflects overwhelming consumer brand awareness, both aided and unaided, due in large part to the massive spending on marketing, or what Nike, Inc. refers to as “demand creation.” Nike’s BSI score remained consistent with the results of the 2010 Brand Strength Index, improving 7.0 BSI points in 2011 versus the 2010 BSI score for the brand. This is an indication that even in the tough economy -- or perhaps because of it -- Nike has been able to maintain its dominance in the consumer’s mindshare. Adidas followed Nike with a BSI score of 620.6, almost 120 points lower than Nike, a widening gap versus scores published in the 2010 Brand Strength Report. Last year’s point differential between Nike and Adidas was 100 BSI points.

Index

Brand

Index

Nike

742.0

DC Shoes

359.5

Adidas

620.6

Keen

353.5

Reebok/RBK

573.6

Keds

352.6

New Balance

555.1

Fila

352.1

Under Armour

518.3

Saucony

347.0

Puma

490.5

Billabong

343.5

Jordan

474.4

Speedo

342.6

Converse

471.5

Tapout

342.5

The North Face

470.9

Hurley

337.2

Skechers

460.3

Burton

333.7

Timberland

459.6

Teva

331.2

Columbia

445.5

New Era

328.0

Asics

437.8

Quiksilver

326.3

Champion

432.7

Starter

325.4

Ugg

416.2

Roxy

320.3

Vans

403.6

Ocean Pacific

314.0

Patagonia

382.0

Volcom

311.3

Russell Athletic

379.0

Everlast

310.8

K-Swiss

376.3

Body Glove

309.0

Merrell

372.5

Reef

306.4

Oakley

372.2

O’Neill

302.5

Avia

369.7

Life is Good

302.5

Danskin

367.7

Mizuno

302.3

Crocs

364.9

Brooks

300.5

Sperry Top-Sider

362.5

Airwalk

300.4 * Index out of 1,000

Reebok made another big move in the latest report on top of a fair move up in the 2010 report. The brand, also referred to as “RBK” in some product lines, leap-frogged New Balance into the #3 spot in the 2011 Brand Strength Index, an increase of nearly ten points versus the 2010 report, thanks to its strong showing in the toning category and its push into running and other technical categories with the ZigTech product. Perhaps the most interesting data points for the Reebok brand is its gains on the male side of the business, which exceeded the score gains on the female side. Puma was the other big mover in the 2011 report, jumping four spots in the index rankings thanks to a 25 BSI point jump versus the 2010 report. The Jordan brand moved into the Top 10 on the Brand Strength Index for 2011, gaining over 16 BSI points to capture the #7 spot just ahead of the Converse brand, another Nike, Inc. property. Skechers also moved into the Top 10 on the BSI, capturing the #10 position.

WEEK 1115 | SGBweekly.com

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BRAND AWARENESS In the Brand Awareness section of the survey, respondents were asked about their recognition of brand names on two levels -- unaided and aided. First, respondents were asked an open-ended question to identify brands of sporting goods, including footwear and apparel that come to mind to determine the unaided level of awareness. The respondents were later asked to select from a randomized list of 64 brands to determine their recognition of each brand. The charts below show total awareness which combines both lines of questioning. Respondents that mentioned a specific brand in the unaided awareness portion of the survey automatically selected those certain brands during the aided portion of the survey. Predictably, Nike led the Brand Awareness charts, followed closely by Adidas and Reebok. New Balance and Puma round out the top five brands in total awareness.

Note: The Full Report, Core Report and Young Consumer Report (all of versions of the Brand Strength Report) provide Brand Awareness levels by specific demographic segments. For more informationm, please call 704.987.3450.

BRAND AWARENESS - BY GENDER

BRAND AWARENESS - OVERALL TOP 50 BRANDS Brand

12

MOST RECOGNIZED BRAND NAMES Percentage Brand Percentage

Brand

MALES Percentage

Brand

FEMALES Percentage

Nike

98.3%

Russell Athletic

50.9%

Nike

98.3%

Nike

98.3%

Adidas

93.5%

Everlast

50.7%

Adidas

92.8%

Adidas

94.2%

Reebok/RBK

90.7%

Ocean Pacific

47.7%

Reebok/RBK

88.6%

Reebok/RBK

92.7%

New Balance

85.2%

Billabong

46.2%

Puma

82.8%

New Balance

88.7%

Puma

84.2%

Quiksilver

45.3%

New Balance

81.7%

Skechers

88.6%

Converse

83.4%

Starter

45.1%

Converse

81.5%

Puma

85.5%

Skechers

83.2%

Saucony

42.4%

Skechers

77.6%

Converse

85.3%

Timberland

74.3%

Body Glove

41.7%

Timberland

73.3%

Keds

80.1%

Keds

71.4%

Heelys

38.8%

Champion

66.2%

Crocs

75.3%

Crocs

69.7%

DC Shoes

37.5%

Speedo

65.1%

Timberland

75.3%

Champion

69.4%

Hurley

37.1%

K-Swiss

64.9%

Champion

72.5%

K-Swiss

67.3%

Brooks

34.1%

Crocs

64.0%

K-Swiss

69.7%

Speedo

67.0%

Roxy

33.7%

Jordan

63.1%

Ugg

69.3%

Fila

63.4%

New Era

33.7%

Keds

62.5%

Speedo

68.9%

Jordan

62.0%

And1

33.0%

Under Armour

62.2%

Fila

65.8%

Vans

59.7%

Teva

32.6%

Fila

60.9%

Danskin

65.0%

Under Armour

58.7%

Patagonia

32.0%

Vans

56.8%

Vans

62.6%

Ugg

57.6%

Mizuno

30.5%

Russell Athletic

55.9%

Jordan

61.0%

Asics

56.6%

Sperry Top-Sider

30.1%

The North Face

55.3%

Asics

59.0%

The North Face

56.4%

O'Neill

29.6%

Everlast

54.7%

Airwalk

58.1%

Columbia

54.6%

Tapout

29.6%

Asics

54.2%

The North Face

57.5%

Avia

52.8%

Etnies

28.8%

Columbia

53.0%

Avia

56.6%

Danskin

52.4%

Hi-Tec

28.2%

Oakley

53.0%

Columbia

56.2%

Oakley

51.7%

Merrell

28.0%

Starter

49.5%

Under Armour

55.3%

Airwalk

51.5%

Volcom

27.8%

Avia

48.9%

Oakley

50.4%

SGB WEEKLY l APRIL 11, 2011


BRAND PURCHASING - OVERALL TOP 50 BRANDS Brand

Percentage

Brand

Nike

66.4%

Ocean Pacific

Adidas

45.8%

Ugg

Reebok/RBK

44.3%

Quiksilver

Percentage

BRAND PURCHASING - BY GENDER Brand

MALES Percentage

Brand

FEMALES Percentage

Nike

69.9%

Nike

63.0%

9.7%

Adidas

47.6%

Reebok/RBK

45.1%

9.4%

Reebok/RBK

43.6%

Adidas

44.1%

38.0%

New Balance

42.5%

10.2%

New Balance

40.3%

Oakley

9.3%

New Balance

Skechers

33.2%

DC Shoes

8.5%

Converse

29.5%

Skechers

41.6%

Converse

29.7%

Billabong

8.3%

Timberland

26.5%

Converse

30.0%

Champion

25.9%

Saucony

8.0%

Champion

25.2%

Champion

26.6%

25.0%

Puma

25.5%

Puma

25.3%

Everlast

7.7%

Puma

Timberland

23.4%

Hurley

7.3%

Under Armour

24.7%

Keds

25.1%

Under Armour

21.4%

Body Glove

6.5%

Skechers

24.7%

Danskin

23.4%

Columbia

19.1%

Roxy

6.2%

Columbia

18.9%

Timberland

20.4%

Vans

18.1%

Columbia

19.3%

Jordan

18.0%

Under Armour

18.1%

Russell Athletic

17.8%

K-Swiss

18.1%

The North Face

16.0%

Crocs

17.3%

K-Swiss

15.7%

Vans

17.2%

Asics

15.4%

Asics

16.6%

Starter

15.1%

The North Face

14.2%

Fila

13.9%

Fila

14.0%

Crocs

12.1%

Avia

13.7%

Oakley

11.7%

Ugg

13.7%

Speedo

11.6%

Jordan

13.4%

Quiksilver

11.5%

Airwalk

12.2%

Airwalk

10.1%

Speedo

11.5%

Ocean Pacific

9.9%

Ocean Pacific

10.6%

Vans

17.6%

Teva

6.1%

Keds

17.5%

Merrell

5.9%

K-Swiss

16.9%

Heelys

5.7%

Asics

16.0%

Sperry Top-Sider

5.7%

Jordan

15.6%

And1

5.7%

The North Face

15.1%

Etnies

5.3%

Crocs

14.7%

Mizuno

5.0%

Russell Athletic

14.1%

Volcom

5.0%

Fila

14.0%

New Era

4.7%

Danskin

13.9%

O'Neill

4.6%

Starter

12.6%

Brooks

4.5%

Avia

11.6%

Tapout

4.4%

Speedo

11.6%

Reef

4.3%

Airwalk

11.2%

Patagonia

4.3%

BRAND PURCHASING Much like awareness, Nike was the top purchased brand of all surveyed brands. More than 66% of respondents indicated purchasing the Nike brand in the past year, a 20 point differential between Nike and Adidas, which was the second most purchased brand at nearly 46% of respondents indicating they made a purchase in the last year. As in the awareness responses, Reebok moved into third place on the purchasing side as well this year, with more than 44% of respondents indicating they had purchased the brand in the last year. New Balance ranked fourth in both awareness and purchasing of the brand. Skechers moved into the top 5 spots in purchases by the respondents in the 2011 survey, with nearly a third of all respondents indicating a purchase of the Skechers brand versus with 28.1% of purchasing the brand in the prior year. As in the 2010 report, the brand’s purchasing rate driven up by a significantly higher percentage of female respondents purchasing the brand than male respondents.

Another key metric observed in the 2011 Brand Strength Report is conversion rate, or the percentage of respondents that said they were aware of the brand and also purchased the brand. It’s not enough to just be recognized; the real strength comes from turning that brand awareness into sales. While not at the top of the conversion rate chart, Under Amour stand out because of the strength of their conversion rate versus their overall purchase rate. While just over 21% of respondents said they had purchased the Under Armour brand in the last year, 36.5% of those that recognized the brand had done so. This bodes well for the brand if the company can continue to build awareness levels in the coming years. The top 5 brands identified in the purchase chart were also the top 5 in conversion rates.


INFLUENCES ON FOOTWEAR PURCHASES Brand Strength Report survey respondents were asked to rate a list of factors with a 1 to 10 scale on the influence each factor has on their own footwear purchases. “Product Quality” was rated as the most influential factor, with an average rating of 8.93, driven by 93 percent of respondents rating “Product Quality” as at least ‘Somewhat Important’ in the survey -- even in a struggling economy. Consumers are apparently still more willing to pay the price for higher quality footwear product if they feel they can get a few more miles or a few more months -- or years -- with the brand. Supporting this observation is the fact that “Value for the Price” was rated as the second most influential factor when purchasing footwear, with an average rating of 8.62, significantly higher than “Low Price”, which ranked fifth with an average rating of 7.4 in the report. Only 68 percent of survey respondents cited “Low Price” as at least ‘Somewhat Important’ compared to 71 percent that indicated the same in the 2010 report. The brands topping the list for “Value for the Price” was also important with the top positions held by premium brands. Note: The Full Report, Core Report and Young Consumer Report (all of versions of the Brand Strength Report) provide Brand Awareness levels by specific demographic segments. For more informationm, please call 704.987.3450.

INFLUENCES ON FOOTWEAR PURCHASES - OVERALL

14

SGB WEEKLY l APRIL 11, 2011


INFLUENCES ON APPAREL PURCHASES - OVERALL

INFLUENCES ON APPAREL PURCHASES Because the purchasing decision varies when deciding on footwear or apparel, the questions about purchasing were asked separately. For the 2011 report, respondents were asked to rate a list of factors using a 1 to 10 scale on the influence of each factor when purchasing apparel. The responses for footwear and apparel were fairly similar, with Product Quality ranking as the most influential factor in both decision making processes. Only the Style/Fashion/Fit and Low Price attributes had a higher mean score for apparel purchase influences than they did for footwear. It is noteworthy that Athlete/Celebrity Sponsorship ranks as the least important factor both when purchasing apparel and footwear. Despite the large amount of money spent by brands each year on endorsement contracts, only 18% of respondents said Athlete/Celebrity Sponsorship was at least ‘Somewhat Important’ when making an apparel purchase.

Note: The Full Report, Core Report and Young Consumer Report (all of versions of the Brand Strength Report) provide Brand Awareness levels by specific demographic segments. For more informationm, please call 704.987.3450.

WEEK 1115 | SGBweekly.com

15


METHODOLOGY The Brand Strength Report, compiled and presented by The SportsOneSource Group research team, was designed to gauge the strength of sporting goods brands in the overall U.S. market. Respondents were asked a variety of questions relating to brand perception and individual products as pertains to his or her sporting goods purchases in the twelve months prior to the study, which took place in late November and early December 2010. As with last year’s BSR, the 2011 Brand Strength Report is focused primarily on footwear and apparel brands across various segments of the sporting goods market, including team sports, outdoor sports, action sports and others categories. To qualify for this study, each respondent must have purchased athletic footwear or apparel in the past year. A total of 4,020 responses were received, providing detailed information on awareness levels, purchasing trends and brand allegiance for more than 60 athletic and outdoor brands. This study contains responses from consumers ages 13 and older, all of whom were surveyed through a third party Web-based panel provider. The SportsOneSource Group made every effort to control the demographics to best represent the U.S. population. However, as is the case with all Web-based surveys, the demographics and psychographics tend to skew towards older, more affluent households. The results of this survey can be projected to the U.S. population with a margin of error of +/- 1.55 percentage points.

KEY DEMOGRAPHICS Gender

Employment Status

Male

49.6%

Full-Time

43.7%

Female

50.4%

Part-Time

10.7%

Mean Age 39.0

Age

Self-Employed

6.8%

Unemployed

8.0%

Retired

13.9%

Student

6.9%

13 to 17

15.0%

Homemaker

8.9%

18 to 34

30.0%

Prefer Not to Answer

1.2%

35 to 54

30.0%

55 or Older

25.0%

Race Non-Hispanic White

65.4%

African-American

12.7%

Hispanic

15.0%

Asian

4.4%

American Indian

0.4%

Other

2.1%

Marital Status

Household Income Less than $40K

31.9%

$40 - $60K

21.4%

$60 - $80K

15.3%

$80 - $100K

10.7%

$100 - $150K

11.1%

$150K+

3.7%

Prefer Not to Answer

5.9%

U.S. Region Northeast

22.2%

Southeast

23.2%

Married

55.0%

Midwest

23.8%

Single

28.6%

Southwest

12.0%

Separated/Divorced

12.0%

Rocky Mountain

3.1%

Widowed / Widower

2.9%

Northwest

3.9%

Prefer Not to Answer

1.6%

California

11.9%

FORMULATING THE BRAND STRENGTH INDEX Survey respondents were asked a series of questions that helped to determine the strength of each brand. The factors that were used to build the index are listed in order of importance

1. Non-negotiable brands 2. Likelihood to Repurchase (on a scale of 1-5 with 1 meaning would not and 5 meaning definitely would) 3. Unaided Awareness 4. Aided Awareness For this edition of the Brand Strength Report, SportsOneSource surveyed respondents on over 70 brands. To qualify for the BSI, a brand had to be purchased by a minimum number of respondents so that each answer did not over-represent the perceptions of the total population.

Note: The Full Report, Core Report and Young Consumer Report (all of versions of the Brand Strength Report) provide Brand Awareness levels by specific demographic segments. For more informationm, please call 704.987.3450. 16

SGB WEEKLY l APRIL 11, 2011


“You can’t manage what you don’t measure” Peter Drucker

BRAND STRENGTH REPORT Pre-Order Your Copy Today! Ask For Special Early Bird Pricing Comprehensive Nationwide Survey • Brand Strength Index Listing In-Depth Consumer Behavior Analysis • Detailed Individual Brand Analysis Customizable Format For more information or to customize your personal copy, please call 704.987.3450 or email research@SportsOneSource.com

www.SOSresearch.com


THE COMING INFLATIONARY CYCLE HOW WILL IT IMPACT THE INDUSTRY? Inflation is coming. No one seems to be sure to what extent but it's coming in a big way for the first time perhaps since the 70s or early 80s. With both costs of labor and raw materials (cotton, polyester, etc.) heading north, many manufacturers have already been gently raising prices to protect margins but are also looking for ways to soften likely much larger price hikes in 2012. At the same time, they're wondering how the consumer – already seeing prices on lessdisposable items such as food, gas and other staples noticeably rise - will react to any higher prices. SportsOneSource e-mailed a query out to subscribers of Sports Executive Weekly and The B.O.S.S. Report to explore how these overall inflationary movements will impact the industry. The following are a few of the responses.

With the price of raw goods increasing, price increases should be evident across all product categories. Retail spending will change depending on the individual needs of the consumer. In our institutional business we are aware that schools have set budgets to spend and yet still expect the same product quality. They will search for service providers to meet those needs or additional funding to assist in making the up the difference. GARY BARFIELD, EVP, Russell Athletic

At Oboz we're doing our best to mitigate the substantial inflationary trends in Asian manufacturing. We've seen two nearly 20% minimum wage increases in the Guangdong region of China just in the last year. Additionally, monthly and sometimes weekly increases on raw goods and ongoing fuel surcharges from shipping companies have all had an impact on our internal margins. So far, we've been able to absorb or push out the timeline on small increases without impacting pricing. But we know that retail prices are going to have to increase in the next six months. When this happens, we will still aim to provide the most quality and value in footwear, mindful that the U.S. consumer is struggling. To do this, we'll keep our operations lean in order to bring the best product to market for the best price. JOSH FAIRCHILDS, VP of Product and Marketing, Oboz Footwear

Sporting goods numbers should stay on track. With the increase in numbers in the longboard market, I feel it should still maintain growth. With gas prices rising, people will be more apt to spend money on bikes, skates, and skateboards that do not require trips to the pump. Once you relate to the customer that a skateboard can be purchased for the same amount as a tank of gas, they are more likely to make that purchase, knowing that it will last longer than two weeks, and will not require driving around. It's how we relate to everything now. CHRIS BUNCH, Owner, Alpine Ski Shop, Sterling, VA

Overall, as we said on our recent conference call for investors, we believe that consumers remain cautious with unemployment, gasoline prices, food prices, etc. on the rise. That said, we have been able to remain more than competitive in this environment because while consumers are cautious, they are spending on the products that truly inspire them. In our case, that is the newest technology and hottest styles in footwear. We trade at the premium end of the market - the best brands - and our customers are still buying when the product is compelling and the product lately has been very compelling. As far as specific increases anticipated, we have essentially made our buys through holiday and the vendor price increases we have seen through that period have been primarily in apparel, which is a small part of our business and not significant enough to make a meaningful impact. We'll see what happens with prices after that and will continue to monitor what our vendor partners do and we'll react accordingly. Again, as long as the product is compelling, we believe our customers will buy it despite price increases. So, the situation could potentially benefit Finish Line if the customer perceives the value to be commensurate with the price. SAM SATO, Chief Merchandising Officer, Finish Line Inc.

18

SGB WEEKLY l APRIL 11, 2011


There are two types of inflation. One is caused by demand pushing prices higher. The other is manufactured by the financial system. We are in a perfect storm. The fed is printing money like a drunk and there is tremendous pressure on all raw commodities. The great leveler in this situation is the consumer is broke. Some of the brightest minds believe that what happened in the fall of 2008 was caused by the consumer’s inability to pay for the rapid increase in consumer prices and make payments on home loans that were exploding as interest rates climbed. The best advice is to stay away from the bank and stay liquid. MARK MERTENS President, A4

I'm no economist, but I did stumble my way through four years of Econ classes 35 years ago. The sad fact is that I'm as confused about the super dynamic subject as I was then, but have the following basic thoughts on how it will affect the outdoor retailer. The rising cost of offshore labor combined with increasing fuel costs, which impacts production costs as well as transporting the goods around the globe and to our doors, is something we're all already experiencing. But I fear 'We ain't seen nothin yet.' The good news is that there also appears to be a lagging but forward moving trend in Americans heading for the hills for more affordable recreation and a dose of much needed solitude. The question is, which factor will outweigh the other and how will it affect sales and our bottom lines. My hunch is that it's 'even Steven.' In other words, the positive and negative factors will mostly cancel each other out. At A16 we're projecting a 5% increase in same store sales over 2010, but in terms of units I think we'll be lucky if it's half of that. JOHN MEAD, President, Adventure 16

Value will be key for consumers this year in purchase preferences. While inflationary pressures, especially from Chinese sourcing, add a level of uncertainty to the sporting goods market, we look at it as an opportunity to continue to reinforce what we do best, build high quality/long lasting, innovative, and performance oriented products for the serious athlete. The brands that are recognized for doing this will thrive in this type of environment. We've seen this already with hugely successful launch of our XR Crossmax (Runner’s World Best Debut). JEFF LARSEN, VP of Softgoods, Salomon

I think we are going to see us get hit with a new wave with gas prices going up and up. It was starting to loosen up a little, but I am cautious right now. Everyone is up on all the increases, but in the school business, budgets are getting tighter, so this is not helping. It is affecting everyone. We are all looking for new ways to get new sales. It will be another challenging year. We just have to be lean and aggressive. GEORGE KLINE, President,

Bethlehem Sporting Goods

Impulse purchasing is a thing of the past and the consumer has become very picky and cost conscience. BRIAN DANI, Owner, CBS Boardshop, Lake Forest, CA

Footwear prices from our top vendors have remained fairly static over the past three years, so I don't think loyal customers will be shocked to see our $100 "sweet spot" shift to $110. Also, we're a specialty retailer that dedicates a significant amount of resources for training staff, so making a little more money on each sale is a good thing. Where we'll need to be careful is managing our inventory to allow it to turn faster so we're not too heavily leveraged as a result of cost increases. I thing the running industry will be fine though. Running is addictive, and there are more people choosing to participate day that need our help. TED KUSHION, Merchandise Manager - Footwear, Gazelle Sports

What happens if consumers can’t afford inevitable price increases? U.S. consumers, who are just catching their breath after the “Great Recession,” who are still grappling with unemployment over 9%, and with higher prices for food, gas, and apparel may not be able to absorb significant price increases and will need to limit discretionary spending. The good news is, the typical snow sports participant lives in a household with income levels far higher than average, very high education levels, less unemployment, and more discretionary income. They are less likely to be strapped for cash when prices go up. So, the good news is, snow sports suppliers and retailers most likely can preserve their margins next season. The bad news is, if the average U.S. consumer stops spending we could see the economy dip back into recession. KELLYANN DAVIS, Director of Research, SIA

As long as the inflation is kept in check (and that's a big "if"), we're expecting to absorb any rising product input costs and avoid passing them on to the retailer. Obviously, our margins will be compressed a bit, but if consumers have more dollars (albeit they're worth less) and prices remain the same, I think we'll be able to make up any margin loss with increased volume. TYSON ANDRUS, Sr. Marketing Machine, Skullcandy

Our political 'experts' are reactive rather than proactive and we are at the mercy of the oil cartels. I believe that for every additional dollar the consumer spends at the pump or heating their homes will be one less dollar to spend on consumables, be it hard or soft goods. MICHAEL MCGINLEY, President, Rivers West Apparel

WEEK 1115 | SGBweekly.com

19


I don't think it's going to impact us much at all in 2011. There are some price increases in footwear already that are noticeable but you're not going to see a massive amount of inflation in 2011. Fuel prices will have an impact but often that benefits the outdoor recreation business. If they're making alternatives to the family vacation because of higher gas prices and even due to recessionary pressures, we seem to benefit. 2012 is another story and I think there's going to be consumer resistance to price changes. I don't know how significant the increases are going to be but I don't see raw material prices going down. Much of the incremental costs will ultimately stem from higher worldwide demand for petrol. 2012 is the one to worry about. WILL MANZER, CEO, Eastern Mountain Sports

As consumers have learned to tighten their belts already due to 20082010 economic downturn/recession, the initial hit to sales will be a bit delayed or may be minimal. It will come with an extended duration of inflationary price increases, but many of our vendors have already made or announced price changes which we are dealing with now. KEVIN SMITH, Owner, Elite Runners, McKees Rocks, PA

With the turmoil in the Middle East, upheaval in Japan and the rapid increase in gasoline and raw material prices, the consumer is all but expecting some inflationary pressures to be passed onto them. I think just as impactful to the consumer however, will be the coming and expected cuts in social services, education, etc. as federal and state governments grapple with huge budget deficits and are forced to undertake drastic measures to live within their means. And while I in no way mean to diminish or trivialize the devastation and suffering in Japan, I believe that an economic tsunami is forthcoming, the recent stock market gains notwithstanding. Director of Recruiting, Athletic and Team Sports, Nation's Best Sports STUART SNOW,

The consumer is going to have to pay more of the true value of what goes in to these products we consume. How will these issues affecting our business? Patagonia is a brand that stands for trust, quality, durability, and products that truly function for the intended use. Our consumers trust us and know, they get what they pay for. We expect our business to continue to prosper. JAMIE BARBOR,

Director, Patagonia Footwear

With the way oil prices are moving, price increases are going to be a way of life for the near future. Service, ease of product search, and value will be the sales drivers in this climate. Our business thrives on the three fore-mentioned elements. I think people are ready to inject some dollars into the economy especially where their interests lie in the sports and recreation categories. RICK BARRIONUEVO, President, Knives America

It's difficult to speculate how consumers will react. There are many variables to consider, including the disposable income bracket to which a brand appeals and how consumers within each of those brackets behave when it comes to absorbing price increases, trading down in order to maintain price, postponing purchases, omitting purchases or, in some cases, even accelerating purchases, across the spectrum of discretionary items they buy. That being said, in an environment of inflationary pressure we think that brands that innovate and create highly desirable products, such as Columbia’s Omni-Heat Electric line and Sorel footwear, will succeed in driving a higher price/value proposition. It will likely be more difficult for companies that rely on commoditized, same-as-last-year styles and decades old technologies to pass on higher prices, especially to consumers in lower discretionary income brackets. Sr., Director IR & Corporate Communications, Columbia Sportswear RON PARHAM,

As prices (such as cotton) rise, and people's incomes are not going up accordingly it does not bode well for consumer spending. Consumer reception to price increases? The consumer has still not completely recovered from the recession mentally and they are very cautious and always looking for the best price. With commodities like food and gas they have no choice but to spend, with sporting goods they can always cut back. How will this affect our business? We are still very cautious and as prices rise on oil and cotton related products, we believe the consumer is going to have less discretionary income. JERRY WILLIAMS, President, Schuylkill Valley Sports

There is no doubt that inflationary pressures and continued insecurity in the employment market will affect consumer purchasing behavior in 2011. Consumers will begin to see price increases across many categories, including outdoor footwear and apparel. At a minimum, I would expect consumers to consider their purchases more carefully and to focus on buying quality and value. This all works in favor of the Chaco brand, as our products are well-known for their quality and durability. CHIP COE, General Manager, Chaco

I'm not sure if retailers, and certainly consumers, are aware of the severe inflationary and upward pricing pressures on the sourcing end. I'm also worried about increasing commodity prices worldwide food and energy and the daily essentials. If people are paying $2 or $3 more for milk, as well as more for fuel and all the basics, that is going to have an impact on everyone from Ketchikan to Kathmandu. It's the spiraling basic costs that will affect discretionary spending and our industry is based on discretionary spending. People will either be able to afford a jacket that costs more or they simply cannot buy it at all. TASHI SHERPA, 20

Founder and President, Sherpa Adventure Gear

SGB WEEKLY l APRIL 11, 2011


"I can't imagine having achieved the expanded retail space & growth of our business without regularly attending OR." – Marc Sherman, Outdoor Gear Exchange and GearX.com

201 1

2012

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.


CALENDAR

For full year calendar go to sportsonesource.com/events

Athletic Dealers of America 1395 Highland Avenue Melbourne, FL 32935 t 321.254.0091 f 321.242.7419 athleticdealersofamerica.com

MAY

NSGA Management Conference and Team Dealer Summit Tucson, AZ

JUNE 14-16

Licensing International Expo Las Vegas, NV

24-26

SGB 40 Under 40 Awards Chicago, IL

27-29

EORA Southeast Summer Early Bird Show Greenville, SC

27-29

EORA Northeast Summer Early Bird Show Manchester, NH

29-30

TAG Spring / Summer Show St. Louis, MO

JULY 6-8

EORA Mid-Atlantic Summer Show Parsippany, NJ

6-8

NBS Summer Market Grapevine, TX

6-9

EORA Mid-Atlantic Summer Show Parsippany, NJ

8-10

ADA Spring Buying Show Atlanta, GA

13-15

ASA-ICAST International Sport Fishing Expo Las Vegas, NV

13-15

BCA International Billiard and Home Recreation Expo Las Vegas, NV

14-17 19-21 21-24

European Outdoor Trade Fair Friedrichshafen, Germany ASI Chicago Chicago, IL Bike Expo 2011 Munich, Germany

AUGUST 3 4-7

Outdoor Retailer Open Air Demo Outdoor Retailer Summer Market Salt Lake City, UT

TRADE ASSOCIATIONS | BUYING GROUPS

1-4

National Sporting Goods Association 1601 Feehanville Dr. / Suite 300 Mount Prospect, IL 60056 t 847.296.6742 f 847.391.9827 nsga.org Nation’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 outdoorindustry.org SGMA 8505 Fenton Street Silver Spring, MD 20910 t 301.495.6321 f 301.495.6322 sgma.com SnowSports Industries America 8377-B Greensboro Drive McLean, VA 22102 t 703.556.9020 f 703.821.8276 snowsports.org Sports, Inc. 333 2nd Avenue North Lewistown, MT 59457 t 406.538.3496 f 406.538.2801 sportsinc.com Sports Specialists Ltd. 590 Fishers Station Dr. / Suite 110 Victor, NY 14564 t 585.742.1010 f 585.742.2645 sportsspecialistsltd.com Team Athletic Goods 629 Cepi Drive Chesterfield, MO 63005 t 636.530.3710 f 636.530.3711 tag1.com World Wide Distributors 8211 South 194th Kent, WA 98032 t 253.872.8746 f 253.872.7603 wdi-wdi.com


Where Strategic Decisions Begin SportScanInfo.com A Service of The SportsOneSource Group


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SGB WEEKLY 1115