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January 17, 2011

NEWS & INFORMATION FOR THE RUNNING & TRIATHLON MARKET

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Group Publisher / Editor–in–Chief James Hartford james@sportsonesource.com January 17, 2011

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

NEWS & INFORMATION FOR THE RUNNING & TRIATHLON MARKET

Associate Editor Kyle J. Conrad (704.987.3450 x111) kconrad@sportsonesource.com Contributing Editors Mackenzie Lobby Kate Siber 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 (720.272.9787) 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 Senior Ad Sales Manager Susan Tauster (630.858.1558) stauster@sportsonesource.com Circulation & Subscriptions subs@sportsonesource.com 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 Busness Weekly Footwear Business Weekly Outdoor Business Weekly

FEATURE page

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Photo courtesy of Brooks

NEWS 4 5 6 7

FLEET FEET SURPASSES $100 MILLION IN 2010... DSW TO MOVE MORE DELIBERATELY INTO TECHNICAL FOOTWEAR MERRELL GETTING RUNNING SPECIALTY LIFT WITH VIBRAM BAREFOOT DEAL - ZAPPOS TOPS NRF CONSUMER SURVEY - BIG 5 SEES CHALLENGING HOLIDAY SALES PERIOD LULULEMON RAISES SALES AND EARNINGS GUIDANCE

FEATURES 8 PEAK PERFORMANCE New Trends And Technologies For Fall/Winter 2011 Running Apparel 14 THE MANY FACES OF VENDOR-OWNED RETAIL Changing The Landscape Of Sporting Goods Retail 18 I AM... PERFORMANCE Matt Lucas, President & CEO Luke’s Locker, Inc., Dallas, TX Cover photography courtesy of Saucony

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NEWS

Jeff Phillips, President, Fleet Feet, Inc.

FLEET FEET SURPASSES $100 MILLION IN 2010...

Wrapping up another stellar year, Fleet Feet Sports, Inc. revenues for the Fleet Feet Sports franchises surpassed $100 million in 2010 for the first time and marked the seventh straight year of double digit comp store gains. Revenues were up approximately 11.5 percent to $107 million from $96 million in 2009. Comps rose 10 percent for the year. Company President Jeff Phillips said the driver for Fleet Feet’s success is the local owner/operator and their unique ability to connect with local communities. “This is our competitive advantage over all of the chain type operations that sell many of the same products carried by our stores,” said Phillips. “Our ongoing success is a direct result of the ability of our franchisees to acquire customers and change their lives through a culture of inclusiveness and belonging where they can not only become runners but more importantly, live a more fit life.” Among footwear brands, Brooks had the best year of any vendor, took the lead footwear share position at Fleet Feet more than a year ago. “Asics remains a strong footwear vendor, but they have slipped to a distant number two in overall market share,” Phillips added. “Saucony has seen solid growth for the second straight year as their product line continues to improve. We are seeing our Nike business grow due to product improvements as well as a shift in their internal focus to strengthening their business with our brand. We have not seen the growth in New Balance that we feel is possible, but with improved product and a willingness to partner with our franchisees, we see growth for them over the next few years.” He said the minimalist footwear conversation bolstered the performance of a few smaller brands, but collectively they have not had a dramatic impact on sales. On the apparel side, Nike, Brooks, Moving Comfort and Saucony have become Fleet Feet’s primary apparel suppliers with some smaller niche brands rounding out the business. The niche apparel brands are working mainly with non-traditional running products, Phillips noted. Phillips called accessories a “huge bright spot” and a promising growth driver going forward. “We saw growth in the electronics category in 2010 as well as in nutrition, hydration, and related products,” said Phillips. “The growth is being driven by improved focus and training as well as elevated consumer awareness through our growing training programs.” Looking ahead, Phillips said the “clutter in running retail” continues to increase as retailers from all channels chase growth in the running category.

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SGB PERFORMANCE l JAN 17, 2011

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(Fleet Feet story continued from page 4)

“Connecting with the running consumer is so much more complex than any other athletic category,” said Phillips. “Our ability to connect with the consumer on a personal level and provide premium services beyond a transactional relationship is a competitive advantage for us. We have a much more personal relationship with our customers than our vendors or larger competitors. This is a not something that you can simply duplicate overnight by throwing a lot of money at it.” Fleet Feet added four locations this year and closed one. Currently there are 90 Fleet Feet Sports stores located nationwide. Phillips expects additional stores in 2011 although it’s not a primary focus. “We don’t spend any time stressing over store count,” said Phillips. “We’re more concerned with our overall growth plans and how we are going to achieve them. Our growth is driven in a number of ways: same-store growth and space expansion, new store openings and certainly the acquisition and conversion of independents.” He also said Specialty Retail Development Company (SRDC), Inc., a multi-store Fleet Feet Sports franchise affiliated with Fleet Feet Sports Inc., continues to have “aggressive” growth plans. In October, SRDC purchased Phidippides Encino, the Los Angeles running institution, giving it 17 stores. SRDC was formed in 2007 by Fleet Feet’s Chairman and CEO Tom Raynor and a group of investors to

purchase existing specialty stores and provide a path to ownership for employees. Meanwhile, Fleet Feet held its annual Winter Franchise Conference in New Orleans during the week ended January 14. At the event, Fleet Feet partnered with sock manufacturer Balega International to sponsor a night of baseball with the children of the Greater New Orleans Miracle League. The Miracle League provides opportunities for children with disabilities who are unable to be mainstreamed into regular baseball leagues. Balega also presented its sixth InDuna Award to Natalie and Tony Vice, owners of Fleet Feet Sports in Stockton, CA. The InDuna Award is presented annually by Balega in recognition of a Fleet Feet store that has made substantial contributions to its local community. “The impact that Fleet Feet Sports stores truly have in their communities often goes unmentioned or at the very least is understated,” said Balega General Manager Chris Bevin. “We created this award to recognize stores that have made significant impacts on the social fabrics of their communities and Fleet Feet Sports Stockton has done that in just a few years. Their influence is felt throughout Stockton and the greater San Joaquin area.”

DSW TO MOVE MORE DELIBERATELY INTO TECHNICAL FOOTWEAR DSW Inc. is indicating that they plan to focus more on technical athletics, believing the category is going to offset some of the expected decline in toning footwear.   The discount family retailer is already selling $125 product from some key brands and sees expanding that selection as the trend to running continues.  “Customers know DSW for fashion athletic, for street wear,” said Mike MacDonald, DSW’s president and CEO during comments at the annual ICR XChange investor conference in Dana Point, CA last week. “They don’t know us so well for technical athletic. And we are changing that, we think, pretty rapidly. We put in Nike technical product for men’s for the first time in July of last year and that jump started us in terms of giving us credibility in technical athletic.”

 Accessories, such as handbags, scarves, casual hosiery, wraps and umbrellas, are expected to grow from 6.5 percent of the mix to upwards of 10 percent. Private brands are seen growing from 7.5 percent now to 13 percent to 15 percent going forward.   DSW is also testing three stores in small markets [under 400,000 trade area] this year that will be expanded to 50 new markets if successful. Kids’ footwear will be sold on its website this fall for the first time.  MacDonald also noted that for the first time since opening its first store in 1991 DSW is “beginning to look at acquisitions that make sense for us.” It expects to end the current year with between $350 million and $400 million in cash and no debt.

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

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NEWS

MERRELL GETTING RUNNING SPECIALTY LIFT WITH VIBRAM BAREFOOT DEAL Wolverine World Wide has received orders for 400,000 pairs of its Merrell Barefoot line of minimalist footwear, which were launched at the Outdoor Retailer Summer Market last August. Company Chairman and CEO Blake Krueger said that likely exceeds the initial sell-in for the Merrell Jungle Moc, one of Merrell’s all-time best-sellers.  “We had approaches by a lot of the higher-end, better grade running shops around the country to carry this particular offering and this is going to give Merrell real penetration into a new channel,” Krueger said during a presentation at the annual ICR XChange in Dana Point, CA last week.  Merrell sales likely reached $450 million in 2010. Several of the company’s brands are benefiting from what Krueger described as strong consumer demand for authentic heritage brands “that stand for something.”  WWW expects cost inflation coming out of Asia to increase costs in the mid-single-digits in the first half of 2011 and in the mid- to high-single-digits in the back half of the year, said CFO Donald T. Grimes. He added that the company remains confident it can continue to grow profits, cash flow and shareholder returns in the “tumultuous cost environment.”

ZAPPOS TOPS NRF CONSUMER SURVEY In a survey of 9,200 shoppers, Zappos.com took top honors in the sixth annual NRF Foundation/ American Express Customers’ Choice survey, conducted by BIGresearch.   While many of these companies are not new to the list, newcomer for 2010, Newegg (#10) jumped five spots to make the top 10 this year. Continuing to impress shoppers with their stellar service, Amazon. com (#2), LL Bean (#3), Overstock. com (#4), Lands’ End (#5), JC Penney (#6), Kohl’s (#7), QVC (#8) and Nordstrom (#9) round out the remainder of the list.   In order the companies were Zappos (1), Amazon.com (2), LL Bean (3), Overstock.com (4), Lands’ End (5), JC Penney (6), Kohl’s (7), QVC (8), Nordstrom (9) and Newegg (10).  

BIG 5 SEES CHALLENGING HOLIDAY SALES PERIOD Big 5 Sporting Goods Corp. reported that same-store sales decreased 0.7 percent in its fourth quarter ended Jan. 2. Comps grew in the low- to mid-single-digit range through the first two months of the quarter, which included the “Black Friday” weekend, but turned negative during the shopping period before Christmas.   By category, apparel comps increased in the low-single-digit range, footwear was relatively flat and hardgoods decreased in the low-single-digit range. Total sales in the quarter slid 4.6 percent to $226.7 million from $237.6 million a year ago.  Merchandise margins decreased 20 basis points year-over–year. Big 5 noted that its merchandise margins improved 88 basis points during Q4 2009.  As a result, Big 5 now expects earnings of 23 cents to 25 cents a share in the fourth quarter compared to its previous guidance range of 25 to 33 cents. Big 5’s estimate excludes a net charge of 7 cents a share related to legal matters. EPS in Q4 2009 was 32 cents a share, excluding a net charge of 3 cents per diluted share related to legal matters.  “We were disappointed with this result, particularly given that we comped positively in October, and we were up mid-single-digits in November, which included a very strong Black Friday weekend,” said Steven Miller, Big 5 chairman, president and CEO, at ICR XChange. “Unfortunately our business trends -- turned negative for the three-week period preceding Christmas, he continued. “The gift giving buying just was not there for that three-week period. Once we got past Christmas, positive trends returned. We were very solid the last week of the year, and we have continued quite positively into the beginning of 2011.”  Miller also noted that the retailer reduced borrowings under its credit facility by 12 percent to $48.3 million at year-end compared to the end of fiscal 2009.  Looking ahead, Miller said he expects Big 5’s “2011 growth rate to be consistent with or slightly higher than 2010.” Net sales last year inched up 0.1 percent to $896.8 million with comps ahead 0.8 percent. BGFV opened 15 stores in 2010 versus three in 2009.   The pre-tax charge of $2.3 million, or 7 cents a share, taken in the fourth quarter covered lawsuits previously disclosed in company filings with the SEC. One lawsuit dealt with wage violations while another concerned deceptive pricing and marketing of certain tennis products.   For Breaking Trade News Every Business Day Go To SGBUPDATE.com


LULULEMON RAISES SALES AND EARNINGS GUIDANCE Lululemon Athletica, Inc. now expects fourth quarter earnings between 55 cents and 57 cents a share for the period ended Jan. 30, well above the yoga-inspired retailer’s own projection for earnings of  46 cents to 48 cents. The company said its improved guidance reflects stronger than anticipated net revenues for the quarter, which are now expected to be in the range of $237 million to $239 million for the period. This compares to the company’s previous guidance of net revenue in the range of $210 million to $215 million for the quarter, and compares to net revenue of $161 million for the fourth quarter of fiscal 2009.  Comparable-store sales for the fourth quarter of fiscal 2010 are expected to reflect a mid- to upper-20s percentage increase on a constant-dollar basis. This compares to the company’s previous guidance of high-teens comparablestore sales for the fourth quarter of fiscal 2010.  CEO Christine Day said the company expects to open 40 new stores this year and that she is closely monitoring progress at Iviwa, a concept store launched in late 2009. The store sells dance and gymnastics apparel to 6- to 12-year-old girls. That and the company’s new men’s line is meant to expand LULU’s reach beyond its core demographic of successful, athletic woman.

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Photo courtesy of Saucony

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SGB PERFORMANCE l JAN 17, 2011


PEAK PERFORMANCE NEW TRENDS AND TECHNOLOGIES FOR FALL/WINTER 2011 RUNNING APPAREL By Mackenzie Lobby

At the dawn of a new decade, running apparel companies brought their A-games, demonstrating they are ready to change with the times. Comfort, safety, and fashion underscore the 2011 collections of fall and winter running garments, illustrating the importance of new technologies and attention to detail. Not only are the freshest offerings allowing runners to look good doing what they love to do, but performance and comfort are also enhanced through the features of the 2011 lines. Like a sci-fi movie, this year’s running apparel claims to control moisture, reduce odor, speed recovery, and ensure a runner’s safety on the road. What’s more, the designs are more comfortable and better looking than ever. All the stops have been pulled out and the bells and whistles added. The year 2011 looks to good for runners and the companies who outfit them.

TEMPERATURE AND MOISTURE MANAGEMENT While our running forefathers prided themselves in sporting cotton sweat suits, technology has come a long way. Gone are the days of sweat-soaked t-shirts and heavy outer layers. A new era of moisture-management and temperature-controlling fabrics set to debut in 2011 are a sign of the steep competition between brands and the push to provide runners with the best science has to offer. Along with performance fabric mainstays, like Asics Thermocool, Nike’s Dri-FIT and Mizuno’s Breath Thermo, Puma is also set to release its Moisture Management system in Fall’s Complete Running line. Regardless of the patented technology, these special fibers work to keep a runner warm and dry no matter the weather. Companies such as Moving Comfort are kicking off Fall 2011 with an innovative twist on moisture and temperature management. The focus is now on providing runners with the same warmth and wicking qualities, without adding garment volume. Blending fashion and function, their new NoChill collection features mid-layer warmth and moisture control, but avoids bulkiness. Like much of the latest apparel hitting the market, NoChill’s tighter knit contributes to the wearability of these pieces. Brooks has approached the issue of warmth and dryness by implementing a high-tech aluminum membrane in a number of their products. This collection protects a runner from the worst Ole’ Man Winter has to offer, while remaining lightweight. The warm, windproof and water-resistant aluminum technology is one of the more exciting advances of the season.

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ODOR CONTROL Although fabrics have become more technical with each passing year, there is one problem runners are still faced with -- performance fibers can really stink. While these tech fabrics are successful in wicking moisture away from the skin, they often hold onto odors. Enter the latest line of performance running apparel that presents the best of both worlds -- moisture and odor control. At the head of the class is New Balance, which has begun promoting their new odor-fighting silver technology, called Polgygiene. This antimicrobial treatment employs ionic silver, inhibiting the growth of harmful bacteria and fungi, thus keeping the garment fresh. New Balance guarantees the Silver Lining will last the lifetime of the product, which means its odor-fighting capabilities will not wane with use. Smartwool is set to launch its own odor resistant Thermal Midlayers Line this fall. An ideal option for those in-between-layers, the Thermal Midlayer vests, half-zips, and full-zip tops manage the elements but skirt both bulk and stink. Their all-natural Merino performance fibers continue to be popular among both competitive and recreational runners training in colder climates. Making use of a similar technology, New Zealand-based Icebreaker employs merino wool from the Southern Alps to do the same job. By adding Lycra to the mix, they have created a different type of high tech gear that manages odor, moisture, and temperature all at once. Whether it is an all-natural or synthetic fiber, runners will be happy to find their gear stench-free.

SEAMLESS PERFORMANCE While technical fabrics made running a more comfortable experience, companies continue to tweak overall design. For a better fit and a reduction in chafing, the designers of the latest and greatest running apparel paid special attention to the seams that hold the gear together. From Puma’s flat-locked seams to New Balance’s seam seals, chafing is a problem and seam construction is the solution. Smartwool emphasizes the importance of placing zippers in places that won’t rub and ensuring that seams don’t stack up on one another causing hot spots. The company’s Fall 2011 Microweight Collection utilizes Coats Seamsoft thread on already flatlocked internal seams to provide the utmost in comfort. Asics similarly addressed this issue by utilizing overlock seam detailing, especially in the most chafe-prone areas. Highlighting the importance of design, flatlock stitching has become the standard in the industry, both decreasing chafing and improving the strength of the garment.

OFF THE CUFF What was once a design novelty has become the norm in much of 2011’s Fall/Winter running tops. Mitts, cuffs, and thumb loops are trendy, functional and now, ever-present. Contoured to fit over the hands, thereby keeping the sleeves in place and the hands 10

SGB PERFORMANCE l JAN 17, 2011

Moving Comfort NoChill Half Zip with 11" front zipper and large invisible back zip storage pocket. Suitable as a mid or outer layer. Signature Moving Comfort thumb loops included. MSRP $80

warm, these sewn-in mittens give runners an easy option to go with or without, bypassing the need to carry along extra gear. Skirt Sports is going beyond their namesake to take advantage of this burgeoning style. To be released in 2011, its Toasty Mitts Sweater, which includes mitts sewn into the sleeve cuffs, can be pulled over the hands for cold weather running. Both adidas and Sporthill have also introduced comparable features in their running lines, providing great seasonal pieces that are highly useful for anyone running through the winter months. The more modest cousin of the mitted cuffs are the thumb loops, giving runners the option to cover part of their hands while leaving their digits free. This design is especially popular for runners who want easy access to a GPS watch or MP3 player. Riffing off of the success of thumb loops in non-running apparel, this trend is now a customary feature, especially in the women’s category.

REFLECTIVE RUNNING As the days get shorter in the fall and winter months, reflectivity becomes increasingly vital. Although reflective vests are still an option, companies are learning that less is more and the fewer components needed to complete a running outfit, the better. Following Asics’ Retro-Reflectivity lead, a number of companies found a way to combine fashion and safety with reflective designs. Puma’s silver reflective cat logo, featured on nearly every piece


Photo courtesy of Saucony


Puma’s Complete Windblock Hooded Half-Zip top features stay-down puller, sports cuffs with thumb loops and an MP3 player pocket. Stretch mesh and wicking finish make it a great outside layer. MSRP $120

from its most recent line, signals a shift in understanding of what runners need. In addition to making logos more than just a brand advertisement, reflectivity is to appear on the zippers and enclosures of much of the 2011 apparel. Some companies, like New Balance, even figured out a way to work it into a perforated reflective mesh, thereby leaving the original garment design intact. Brooks has upped the ante in this category introducing 360 degree 3M Scotchlite retroreflectivity in a number of their 2011 products. Guaranteeing runners will be seen from every direction, it’s not only a great safety feature, but it also provides yet another selling point.

COMPRESSION OBSESSION

Puma’s Complete Warmup Top with signature reflective PUMA Cat logo, this wind resistant and water repellent top has an MP3 pocket and an inside pocket for portability. MSRP $65

Skirt Sports’ Toasty Mitts Sweater is comprised of performance-based fleece and features contoured mitts hidden in the cuffs. Built-in fleece panel for quick wipes of the brow and nose. MSRP $90

Saucony’s AMP PRO2 Reco After-Sport Moccasins are the newest addition to Saucony’s compression garment line. Promoting blood flow and healing after training and racing, these are perfect to sport with a pair of AMP PRO2 tights. MSRP $65

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Photo courtesy of Spyder SGB PERFORMANCE l JAN 17, 2011

Compression technology is nothing new, it appears to have entered the mainstream in 2011. Thanks to a boost from exercise science researchers and retailers, compression has become a popular topic of conversation. Academicians devoted attention to compression garments in an effort to find out if they really do what companies say they can do. In the meantime, retailers found that regardless of its effectiveness, runners like compression gear. No longer are there just a few obscure brands that tout this gear, now virtually every company markets their own compression line. With everything from full compression suits to calf sleeves, runners have a lot to choose from. Leading the charge in the compression garment industry is Saucony’s expanded AMP PRO2 collection. Woven with a special technical fiber called Celiant, the company claims this line of apparel will aid recovery and improve blood circulation up to 32 percent more than regular compression gear. It is said that the AMP PRO2 material has the ability to essentially absorb energy that would otherwise be wasted. Comprised of a polyester and mineral-infused blend, the 2011 collection includes tops, bottoms, suits, and even moccasins. As Saucony has gone all in, smaller companies like Oiselle also began testing the waters in the compression market. To debut for Fall 2011, they are talking up a new line of compression shorts with a “bum wrap,” which makes it similar to traditional running skirts, but with added recovery benefits. These compression pieces follow the success of Asics Inner Muscle and Sugoi’s Race + Recovery collections, showing this technology is here to stay. Whether it’s better blood flow, visibility, odor control or warmth that a runner seeks, there is much to be considered in the 2011 lines of fall and winter running apparel. Runners have long asked for both comfort and functionality and the industry has answered that call by improving safety, style, and overall fit. While nothing replaces miles in the bank and time on your feet, a better running experience is what the 2011 Fall and Winter running apparel will provide. Road and race ready, this gear is as good as it gets. The industry has certainly come a long way since sweat suits and wind pants. ■


N O M I N ATI O N S A R E N O W O P E N! Do you know someone under 40 ready to become – or already is – a leader in the industry? Please nominate individual(s) you think deserve to be singled out for their achievements. Nominees must be a sporting goods industry professional born on or after January 1, 1971 who are actively working in the industry including footwear, apparel, outdoor, snow sports, hunting and fishing, action sports, tennis, golf and all retailers. Candidates can also hold positions as executives, buyers, store managers, sales reps, agency heads or work for vendors, distributors, wholesalers and trade associations.

NOMINATIONS CLOSE FEBRUARY 11, 2011 THREE WAYS TO NOMINATE! FAX - 704.987.3455 / EMAIL - UNDER40@SPORTSONESOURCE.COM / ONLINE - WWW.SGB40UNDER40.COM For more information please email under40@SportsOneSource.com or contact Katie O’Donohue 704.987.3450 (x110)


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THE MANY FACES OF VENDOR-OWNED RETAIL CHANGING THE LANDSCAPE OF SPORTING GOODS RETAIL By Kate Siber

There’s a new breed of retail store increasingly populating the streets, malls, and strip malls of America, and they’re owned and run by the manufacturers themselves. Though vendors have long opened their own shops—and now online retail operations are virtually expected—they’ve never done so in such numbers. For the first time, vendor-owned retail stores such as The North Face, Under Armour and Puma made SGB’s annual list of top 100 sporting goods merchants. This past year, brands like New Balance and Nike expanded their brick-and-mortar retail operations while others like Ibex opened the doors of their first stores. The proliferation of vendor-owned retail stores and online sales is not only changing the landscape of sporting goods retail, but the way manufacturers and traditional specialty and independent retailers are marketing, selling, and serving customers.

COMMUNICATING A BRAND For manufacturers, there are many reasons to set up a retail store. First, outlets can serve as a channel through which companies liquidate excess inventory, closeouts, and factory seconds. Second, brick-and-mortar stores—as well as online e-commerce sites— drum up direct-to-consumer sales for a company and some, such as Nike, have adopted aggressive direct-to-consumer growth strategies. Third and most commonly, a retail store in a strategic location can act as a unique marketing tool. “In our branded stores, we wanted to enhance our brand to the consumer and show them the depth and breadth of our brand,” said Kerry Barnes, vice president of retail for Columbia Sportswear Company. “We couldn’t think of a better way to do that than through our own stores.” Though Columbia has run a flagship store in Portland, OR since 1996, the company has expanded its outlet stores from ten in 1997

to about 50 with nine branded retail stores currently. Last year, they opened one new store in Minneapolis and another on the Miracle Mile downtown shopping district of Chicago. The shops offer the opportunity to showcase marketing tools that communicate their brand and that traditional retailers may not have the space for, such as “totems,” interactive kiosks, and videos projected onto walls that describe the new reflective electric jacket technology, Omni-Heat. “We really are a wholesale business first and we’re dedicated to serving our wholesale customers,” says Barnes. “When opening stores, we have that in mind. We look at our brand retail initiative as a way to extend our brand awareness to build an emotional connection with our customers. We believe that will help our wholesale business and increase our sales.” Other manufacturers have similar approaches when it comes to their retail operations: the stores are not at all designed to steal business from traditional retailers, but rather to augment those retailers’ businesses by building brand awareness and a community of like-minded customers through a unique store experience. “For us, we can tell our story in the store better than anywhere else,” says John Fernsell, CEO of Ibex, which recently opened its WEEK 1103 | SGBweekly.com

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first retail store in Tk Month in Boston, MA. When it comes to the retail space, “people are bombarded with a lot of noise and if we can create a little oasis and interact with our brand, we feel that we’ve got them as a customer whether they go into [small independent retailers] or REI,” he adds. Ibex’s Boston store is located on Newbury Street and, unlike its retailers who pick and choose items to carry, it gives consumers a look at the full spectrum of Ibex apparel and accessories, from lifestyle to active gear. For the brand, the location made sense. Ibex has a strong New England following but no retailers in that area of Boston. Newbury Street is a destination less about utilitarian purchasing and more about shopping as a leisure experience. Nearby, The North Face and Patagonia also established stores and the three now work symbiotically. The store itself is an embodiment of the Vermont-based brand’s practical but laid-back ethos, with fun perks like an official store dog and friendly staff. It’s also a representation of Ibex’s core principles: the store blends the old and new—18th century round-cut boards combined with a clean, white, modern aesthetic—just as the company’s products blend the tried-and-true practicality of merino wool with a clean, modern style. Ibex plans to open another store in 2011. New Balance has been in the retail business since its inception but has steadily expanded. Now, they have 19 factory stores and one specialty outlet. Last year, they opened two more factory stores and two branded stores, one in the Pentagon—since the company has a strong military business—and a concept store in Dedham, MA not far from their headquarters. “Our owned retail is not on an aggressive growth path and we continue to grow with our independent retail partners as well as sporting goods retailers,” says Stephanie Smith, vice president of retail at New Balance. “Our hope is that wherever we show up at retail we have a solid product line—footwear or apparel—that offers a good return on the inventory investment for that retailer. If we open up stores or forge new partnerships, the goal is to have a positive halo effect for all channels.” This summer, New Balance plans to open a flagship store in New York City, which is designed to give customers a sense of their history and legacy as an international athletic brand.

COMMUNICATING WITH CUSTOMERS

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16 SGB PERFORMANCE l JAN 17, 2011 ICEBREAKER -WOOSTER STREET STORE, NYC

While stores offer an unparalleled way for companies to communicate their brands to customers, they also offer an unparalleled way for customers to offer feedback to the companies. “Owning retail allows you to test, test, test, and in most cases capture consumer and product data to bring back to your marketing and R&D teams,” says Smith. “This research and data helps pinpoint local-flavor trends, which helps every retailer you vend with.” For New Zealand merino-wool manufacturer Icebreaker, its newest store in Soho was designed expressly as a site for testing new designs and graphics and a vehicle for customer communication. “It’s a marketing vehicle, but most importantly, it’s a way of getting direct consumer feedback,” says Jeremy Moon, CEO and founder of


Icebreaker. “We test new objects in the retail store. They can be graphics, point-of-sale material, or fixtures, and we get direct customer feedback. Sometimes we even test new products that we have committed to producing. It brings us closer to our customer and this informs our wholesale business as well as raising visibility.” The brand has six stores in New Zealand, one in Montreal, and two in Portland, one of which is an outlet, but this is the first in New York—a strategic move to be close to the fashion world and the media. Since the Icebreaker store opened in Soho, more than 30 stores have appeared in the press, a key part of Icebreaker’s strategy to increase their visibility as a brand. The store, called TouchLab, is designed to encourage customers to interact and learn more about the fabric itself. It features a signature 100% merino shag carpet as well as a “Tactile Gallery,” offering customers the opportunity to touch different types of garments and learn more about the wicking, non-stinky benefits of merino. Icebreaker’s next branded shop will open in Vancouver, BC in March, 2011.

NEW BALANCE

NURTURING RETAILER RELATIONSHIPS Traditional retailers carrying a multitude of brands have mixed

reviews on manufacturers they carry opening up nearby retail stores, but some have seen it as a positive. “I’m one of those people who applauds brands that can stand up tall and showcase their brand,” says Will Manzer, CEO of Eastern Mountain Sports. “It breeds better competition and forces us to get better at what we do. It helps validate their brand and the importance of their brand. I actually would encourage it more.” Manzer feels that online sales have had more of an effect on his brick-and-mortar business than new manufacturer-owned retail stores. The heat from e-commerce, however, also makes them better at what they do. The most successful sporting goods retailers compete with very good customer service and an exceptional shopping experience, something customers can’t get while sitting in front of their computers. For other specialty retailers, the relationship with manufacturers that have opened stores nearby has been less than positive. Aspen, for example, has seen outdoor brands like Marmot, The North Face, and Helly Hansen open stores to the chagrin of local specialty retailers. “I don’t think it helps brand awareness that much,” says Paul Perley, general manager of Ute Mountaineer, an outdoor specialty store in Aspen. “In the case of Marmot, they went out of their way to ensure that we were able to maintain our margin for a few seasons, so that was a positive. They have been a good partner. The North Face opened years ago and we had to find out by seeing a construction permit in the window. That was pretty poor communication on their part.” The North Face declined to comment for this story.

Manufacturers can certainly turn their own retail operations into positive aspects for their traditional retailers; however, Columbia, for example, makes a point of bringing wholesale buyers into their retail stores. “I’m encouraged when our sales reps actually bring our wholesale reps into the stores and they have a wow moment and realize ‘hey this is what Columbia should look like at retail,’” says Kerry Barnes. “The feedback we’re getting has been positive.” New Balance reports that results have also been positive for retailers near their own branded stores. “When we open up one of our independently operated stores or concept stores, we see our SKU counts go up in the market with other channels of trade,” says Stephanie Smith of New Balance. “The independents sell the best of our line with a higher average selling price and offer sit-and-fit service. This has pushed some of our accounts to not only offer better service but also take a second look at expanding into our head-to-toe offerings.”

A WORLD OF OPTIONS It’s clear that consumers are increasingly aware of multiple channels of communication—and multiple ways of purchasing the items they need or want. Savvy manufacturers realize that in order to be competitive, they must offer multiple ways for the consumer to reach them. “I honestly think the customer today is multi-channeled,” says John Fernsell of Ibex. In other words, they’ll buy a product online, from a specialty retailer, a vendor-owned retailer, or a department store. “People want convenience. Once they like a brand and want to own that brand, they will buy it any number of ways. You want to make it so it’s easy for them.” ■


I AM... PERFORMANCE MATT LUCAS President and CEO, Luke’s Locker, Inc., Dallas, TX Matt Lucas became president and CEO of Luke's Locker in 2000. His father, Don and mother, Sharon, founded the business in the mid-seventies in the family living room. WERE YOU INTO RUNNING GROWING UP? I’ve been running since I was five or six years old. My father would make me and my two older brothers run around a one or two mile course. A lot of times I didn’t like it but my dad pushed us and its second nature now. WHAT DID YOU WANT TO BE WHEN YOU GREW UP? I considered becoming a lawyer. That was the primary career for my dad for most of his life. My mother taught school. I also dreamed of being in a rock band. I always loved music and still do. We were your typical heavy-sports family so I always dreamed of becoming a basketball star or famous in sports. I went to high schools when SMU had their storied football program with Eric Dickerson and Craig James. We also saw the best track athletes race at the Dallas Times Herald Track Invitational. It was a really good time to be into sports. WHEN DID YOU START GETTING INTO RETAIL? Our stores are 35 years old and we started retailing in our house. There were no running shoes in the area at the time. My dad initially sold running shoes out of the trunk of his car and soon started stocking those shoes in our garage. People would sit in our living room to get fitted. Then we opened our own stores. Mom ran our first store from day one. We grew up in the retail business. My dad was one the pioneers of the first running boom. He ran when running wasn’t cool. He wound up finding Blue Ribbon Sports (BRS) and brought distribution of Nike and Onitsuka Tiger (Asics) and other running brands to the Dallas community.

WHAT DO YOU LIKE ABOUT YOUR JOB? What I’ve grown to love about the business is the relationships you cultivate. These are relationships with our customers, with the brands we sell, events and community projects, and probably most satisfying, our fellow staff members. Retail can be a grind. You have to have something there to sustain you and for me it’s the relationships with people. We are lucky to be in a retail business where Luke’s job is really to improve people’s lives. Most people come into our stores looking to buy something they believe will help improve their lifestyles. NAME ONE THING THE INDUSTRY MAY BE SURPRISED TO KNOW ABOUT YOU? I play the drums. A group of friends get together once or twice a month. I’ve always had that passion. FAVORITE DRUMMERS: Neal Pert, Steve Jordan, Vinnie Colaiuta, John Bonham.

BIGGEST LESSON FROM DAD? Do it right the first time. FAVORITE BOOK: Pillars of the Earth, Ken Follett. WHEN DID YOU DECIDE YOU WANTED TO JOIN THE FAMILY BUSINESS? I went through a period when I did all kinds of different jobs with the business. I was warehouse manager at one time and then CFO when I attended law school at SMU. Then I actually went to practice law for a couple of years. But my dad eventually gave me the opportunity to run the day-to-day operations of the company. I thought it was a good opportunity for me and I took it. 18

SGB PERFORMANCE l JAN 17, 2011

FAVORITE MOVIE: Big Lebowski. WHAT HISTORICAL PERSON YOU MOST ADMIRE AND WHY? Winston Churchill and Abraham Lincoln. They dealt with some of the biggest challenges historically and stood up for what they knew in their heart was right.


Conference Sponsored By

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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 conference@nsga.org, or call 800-815-5422 x127.

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