February 21, 2011
NEWS & INFORMATION FOR THE RUNNING & TRIATHLON MARKET
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February 21, 2011
NEWS & INFORMATION FOR THE RUNNING & TRIATHLON MARKET
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NEWS 4 5 6 7 8
DSW To Merge With Retail Ventures ADIDAS Eyes 15% To 20% Annual Growth In China SPENDING PULSE January Sees Strong Growth For Most Categories GSI COMMERCE Expands Sports Licensing Business With Fanatics Acquisition BLACK DIAMOND Outlines 5-Year Growth Plans ASICS AMERICA Fiscal Q3 Revenus Up By Nearly A Third MIZUNO Boasts 30% Footwear Sales Growth In Americas Region In 2010 Nine-Month Report E-COMMERCE Sales Up Double-Digits In 2010 RUNNING FOOTWEAR Paces Strong Sport Footwear Growth In 2010 OUTDOOR PRODUCTS SALES Reach $10.85 Billion In Fiscal 2010
FEATURES 9 OUTDOOR RETAILER 2011 WINTER MARKET RUNNING APPAREL 14 NOTHING MINIMALIST ABOUT MERRELL’S GROWTH GOALS 18 I AM... PERFORMANCE John Rogers, Owner, Maine Running Company, Portland, Maine
Cover photo courtesy New Balance
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WEEK 1108 | SGBweekly.com
ADIDAS EYES 15% TO 20% ANNUAL GROWTH IN CHINA
DSW TO MERGE WITH RETAIL VENTURES DSW, Inc. and its largest shareholder, Retail Ventures, Inc. announced that the two companies have signed a definitive merger agreement providing for RVI to become a wholly-owned subsidiary of DSW. The transaction will be done in a tax-free exchange of shares at an exchange ratio of 0.435 DSW shares per each RVI share. In other DSW news, the off-price shoe chain also expects between $2.38 to $2.42 a share for fiscal 2010, up from previous guidance of $2.30 to $2.40. In the prior year, it earned $2.30 a share. The company incurred charges associated with the merger transaction with RVI that impacted 2010 diluted earnings per share by approximately 5 cents a share. DSW said 2010 revenues grew 16.4% to $468.5 million. Comps were ahead 14.9% versus an increase of 12.9% in the prior year.
“Adidas expects to grow 15% to 20% annually in China over the next five years and exceed €1 billion, or $1.36 billion at today’s exchange rate in revenue this year,” said Adidas Chief Executive Officer Herbert Hainer in an interview on German television. He expects the company overall to see significant growth this year following a strong 2010. “We have a very good 2010 behind us -- we have developed enormously well,” Hainer told Deutsches Anleger Fernsehen, according to Reuters. “And we will continue to grow in 2011”. Adidas’ full-year 2010 results are due on March 2, 2011. “We are lucky, that we have the women’s soccer world cup and many other sport events on top of that (in 2011),” he added. Late last year, Hainer had said that he expected Adidas to grow faster worldwide than its rival Nike. He did express concerns about rising input costs. “No matter if you take cotton, polyester or rubber -- we have to fight (with rising prices),” Hainer says. Adidas plans to continue to operate in Egypt although some of its stores have been plundered due to the ongoing unrest. A subsidiary was created there three years ago.
JANUARY SEES STRONG GROWTH FOR MOST CATEGORIES
According to MasterCard Advisors SpendingPulse, January saw strong growth across most categories, continuing the positive performance from Q4 2010, albeit at a slightly slower pace. With the January close of the retail year, sectors that were up for the year outnumbered those that were down by a three to one ratio; however, even among those wthat were up for the year, approximately half have yet to reach their prerecession peak levels of 2006 and 2007. Among categories, the Electronics and Appliances sectors posted a year-over-year decline of 3.8% in January following a modest year-over-year increase recorded in December. Posting their sixth consecutive month of positive year-over-year growth, Total Apparel sales continued to perform well in January albeit at a slightly lower growth rate than the very robust Q4 2010 rate. All sub-sectors of 4
SGB PERFORMANCE l FEB 21, 2011
Apparel posted solid year-over-year increases, the most notable came from the Family (Teen) and Men’s categories respectively increasing 12.8% and 8.1% year-over-year. E-Commerce continued to gain share at a very steady rate, posting double-digit year-over-year increases for the third consecutive month, growing 12%. “A combination of rising consumer demand and strong pricing continued to drive retail sales in January,” says Michael McNamara, vice president, research and analysis for MasterCard Advisors SpendingPulse. “Although less robust, the trends we observed were similar to those recorded in the fourth quarter of 2010. Most sectors continued to post positive year-over-year results during the month despite consumers taking a pause in spending and repeated snow storms affecting the East Coast.” McNamara also notes that there were various factors influencing January sales, including continued high unemployment, rising fuel costs, increased consumer confidence and continued improvement in the financial markets.
GSI COMMERCE — EXPANDS SPORTS LICENSING BUSINESS WITH FANATICS ACQUISITION Already the operator of the official e-commerce websites for NFL, NBA, NHL, MLB, NASCAR, and ESPN, GSI Commerce, Inc. is extending its reach into the sports licensing business with a deal announced last week to acquire Fanatics, Inc., which sells licensed sports merchandise online. The deal, which is expected to be completed in the second quarter this year, was valued at roughly $277 million in cash and stock. Jacksonville, FL -based Fanatics, with about 400 employees, operates over 250 e-commerce websites, including footballfanatics.com and over 60 e-commerce stores for collegiate and professional sports partners and media organizations. The company will combine Fanatics with GSI’s online licensed sports merchandise business, which operates the league and ESPN sites. Fanatics was founded in 1995 by Mitchell Trager and Alan Trager, who is the CEO and will join GSI. The Trager family owns about 63 percent of Fanatics. Insight Venture Partners owns around 30 percent of the company. The Trager family has agreed to a four-year transfer restriction period with 25 percent becoming unrestricted each year on the shares it is receiving under the agreement.
As of Dec. 31, Fanatics had $41.8 million in cash and no debt. Revenue for 2010 was pegged at $186.3 million with operating income at $23.8 million. “The combination of Fanatics and its 400 employees with our licensed sports merchandise business, which had net revenues of approximately $300 million in 2010, will enable us to better serve our partners and fans, and together the combined company will be a leader in the estimated $15 billion licensed sports merchandise market,” says Michael Conn, GSI’S EVP of Finance and CFO. “With more than 50 percent of its revenues coming from college merchandise, Fanatics is a perfect complement to GSI’s focus on licensed sports merchandise for the professional sports leagues. In Fanatics, we have found a company and management team that shares our passion for the licensed sports merchandise industry and our vision for the growth opportunities that lie ahead.”
BLACK DIAMOND OUTLINES 5-YEAR GROWTH PLANS Black Diamond, Inc. President and CEO Peter Metcalf last week outlined targets in the company’s newly minted strategic plan for fiscal 2011 to 2015. Chief among those was the disclosure that the Salt Lake City-based outdoor company is targeting Fall 2013 as a possible launch window for an outdoor technical apparel brand to be distributed exclusively in the specialty channel. Black Diamond has concluded that apparel and footwear represent the only two categories big enough to materially impact growth over the next decade and beyond. “The opportunity is very large and we believe that if we execute it well, we can achieve annual sales of apparel and footwear equal to or larger than our annual hard good sales and at higher margins within five years of our initial launch,” says Metcalf. Black Diamond expects fourth quarter consolidated sales and fullyear pro forma sales for the year ended Dec. 31 to come in at $34 million and $125 million, respectively. That’s up 10 percent from 2009 and near the top end of its previous guidance. Metcalf attributes sales growth to favorable winter weather across the globe and accelerating economy. Sales of a new line of lightweight AT ski boots performed particularly well in Europe, and helped boost sales of Black Diamondbranded skis and accessories during the fourth quarter.
After acquiring Gregory Mountain Products last year in the roll-up that created the newest public company in the outdoor industry, the company is actively pursuing other companies with sales ranging in the $10 million to $50 million range, mostly with CEO founder/ owners, Metcalf says. “For the most part, these companies are capital constrained but growing rapidly in the domestic market and stand to benefit from coming onto our platform,” he added. Metcalf is peaking with both owner CEOs who are looking to cash out and those who would continue running their business as a Black Diamond employee. Black Diamond’s five-year plan envisions 12.5 percent compounded annual sales growth solely from existing categories, and calls for $13 million in incremental operating expense investments annually in areas such as a new and larger distribution facility in Salt Lake City, visual merchandising, direct-to-consumer sales and marketing, product development and infrastructure. In the current fiscal year, Black Diamond expects sales to range between $135 million and $140 million, excluding the impact of new category launches or possible strategic acquisitions.
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ASICS AMERICA FISCAL Q3 REVENUES UP BY NEARLY A THIRD Asics Corporation reported that revenues for the fiscal third quarter ended Dec. 31 grew 11.2% to ¥59.5 billion ($721 mm). Domestic Japanese net sales declined 12.9% (versus a 9-month YTD decline of 6.0%) to ¥13.8 billion, mainly due to the weak sales of sportstyle shoes and athletic wear. The company reported that Europe, the Americas and Australia posted strong sales of running shoes. Mainly due to the higher sales and improvements of the cost of sales ratio overseas, operating income jumped 61.8% year-on-year to ¥6.6 billion ($80 mm). Net income for the fiscal third quarter rose 14.9% to ¥3.5 billion ($42 mm) due to the accrual of the prior-year income taxes in the third quarter of the preceding fiscal year. In the Americas, fiscal third quarter revenues increased 31.3% in U.S. dollar terms to $176 million (¥14.5 bn) from $134 million (¥12.0 bn) in the prior-year period.
Operating income in the Americas region jumped 175% in U.S. dollar terms to $18 million (¥1.5 bn). In home country Japanese yen currency terms, Americas revenue grew 20.7% and operating income increased 153%. In currency-neutral terms, nine-month year-to-date revenues were up 23.0% and operating income increased 96.3% for the YTD period. In Europe, fiscal third quarter revenues increased 4.7% in yen terms to ¥17.1 billion ($207 mm) and operating income improved 34.5% to ¥4.1 billion ($50 mm) for the period. Asia Pacific revenues increased 16.9% to ¥4.9 billion ($60 mm) for the quarter, while operating income for the region jumped 247% to ¥660 million ($8 mm) for the period. Looking ahead, Asics Corp. expects full year revenues to come in at ¥237 billion, flat to previous forecasts, while net income was revised downward to ¥10.0 billion from the previous forecast of ¥10.5 billion for the year.
MIZUNO BOASTS 30% FOOTWEAR SALES GROWTH IN THE AMERICAS IN 2010 NINE-MONTH REPORT Mizuno Corp. reported fairly flat sales for the nine-month year-todate fiscal period through Dec. 31 and swung to a net loss for the fiscal third quarter period. Sales for the Japanese sports footwear, apparel and equipment maker inched up 1.0% to ¥35.0 billion ($424 mm) from ¥34.6 billion ($385 mm) for the prior-year period. The company swung to a net loss of ¥214 million ($2.6 mm) after a prior-year fiscal Q3 net profit of ¥159 million ($1.8 mm). Asia revenues increased 14.4% to ¥2.36 billion ($29 million). The domestic Japanese market eked out a 0.1% gain for the fiscal third quarter to ¥26.2 billion ($318 million) and Europe posted a 2.9% increase in sales to ¥1.77 billion ($21 mm). The Americas business was off 0.6% to ¥4.65 billion ($56 mm) when measured in Japanese Yen terms, but increased 8.1% when measured in U.S. dollar terms. On the product side, the hardgoods categories appear to be the drag on the overall business. The golf business was the biggest decliner for the quarter, with sales falling 14.0% to ¥5.62 billion when measured in Yen terms. The baseball business was down 8.4% to ¥6.52 billion. However, Mizuno’s footwear business was instrumental in offsetting those declines, growing 15.6% in the fiscal third quarter to just shy of ¥7.0 billion ($85 mm), while apparel
increased 2.3% to ¥6.85 billion ($83 mm). Footwear was 20% of overall Mizuno revenues for fiscal Q3, compared to 17.5% in the prior-year period. For the fiscal nine-month year-to-date period, Mizuno saw growth in the golf business in Europe and the Americas and in the overall business across all geographies. Sales growth reportedly came primarily from the non-Japan regions, where currencyneutral sales rose 19.5% in Europe and 15.5% in the Americas and 1.3% in Asia. In Europe, double-digit growth was achieved in all categories, including 14% growth in the footwear category. In the Americas, while golf sales remained mostly unchanged, there were double-digit increases in other categories. Footwear, in particular, boasted 30% currency-neutral growth for the nine-month year-todate period. In Asia, business growth in Taiwan was said to be “remarkable,” with footwear sales increasing 25% for the fiscal year-to-date period. The company updated its forecast of consolidated results for the fiscal year ending March 31, 2011, with the sales forecast holding steady at ¥150 billion, operating income at ¥4.5 billion and net income at ¥2 billion.
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E-COMMERCE SALES UP DOUBLE-DIGITS IN 2010 Total U.S. e-commerce spending reached $227.6 billion in 2010, up 9% versus the previous year, according to the comScore’s 2010 U.S. Digital Year in Review report. Retail (non-travel) e-commerce spending jumped 10% to $142.5 billion while travel e-commerce spending grew 6% to $85.2 billion. “2010 was a very positive year for the digital media industry, highlighted by a strong rebound in e-commerce spending, significant innovation and increased demand for online advertising, and an explosion in digital content consumption across multiple platforms,” says comScore Chairman Gian Fulgoni. “As we embark on a promising 2011, marketers must have a sound understanding of the digital media landscape and how it is changing if they hope to capitalize on key trends that can drive their business into the future.” The report also found that social networking continued to gain momentum throughout 2010, with 9 out of every 10 U.S. Internet users now visiting a social networking site in a month, and the average Internet user spending more than 4 hours on these sites each month. Nearly 1 out of every 8 minutes online is spent on Facebook. The U.S. core search market grew 12% overall in 2010, driven by a 4% increase in unique searchers and an 8% increase in the number of search queries per searcher. U.S. Internet users received a total of 4.9 trillion display ads in 2010 with display ad impressions growing 23% in December 2010 versus December 2009. Social networking sites, which now account for more than one-third of all display ad impressions, were a significant driver of growth in the display ad market in 2010. Photo courtesy of Spyder
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RUNNING FOOTWEAR PACES STRONG SPORT FOOTWEAR GROWTH IN 2010 LIGHTWEIGHT AGAIN SEEN AS EARLY DRIVER IN 2011 The sport footwear business started the 2010 fiscal year with a bang, led by meteoric growth in the nascent toning category, a new trend in barefoot and minamalist footwear and a significant fashion trend to lightweight running that fueled estimates that will net growth opportunities for retailers and vendors alike for a couple of years. Based on retail point-of-sale data compiled by SportScanInfo, sales for the 2010 retail fiscal year ended January 29, 2011 improved in the high-single-digits in dollars and mid-single-digits in units, yielding a mid-single-digit increase in average selling prices for the year. Sales of sport footwear surpassed the $20 billion mark for the first time in fiscal 2010. The category growth for the year came from toning, running (primarily liightweight running) basketball and sandals. Running sales were up in the high-teens for the year, again on the strength of the lightweight category. Total running sales approached $6 billion in 2010. Lightweight running grew about seven-fold and was about 11% of total running sales -- a share percentage that is expected to rise in fiscal 2011 after hitting 20% in the month of January. Lightweight running was about $650 million in 2010 and accounted for roughly 60% of the increase in the overall running category for the year. The core running brands all had double-digit growth, with Brooks taking the top share spot at running specialty for the first time in 2010 and Asics broadened its distribution to expand the business. Reebok running (3% share) grew nearly 5x for the year on the strength of the Zigtech product (3.4% share), and New Balance (8.2% share) both had solid increases while Adidas running (3.8% share) declined, although the Adidas trend improved late in the year. K-Swiss running grew more than four-fold in the non-specialty business off of a small base. For more details on the fiscal fourth quarter and full year trends, or for more information on the SportScanInfo system, contact The SportsOneSource Group at 704.987.3450 or e-mail to SportScan@ SportsOneSource.com.
OUTDOOR PRODUCT SALES REACH $10.85 BILLION IN FISCAL 2010 Based on retail point-of-sale data compiled by SportScanInfo for OIA VantagePoint, total outdoor product sales at retail reached $715.5 million for the retail fiscal month of January, a 2.3% increase versus the prior-year period. Growth in the outdoor specialty channels, represented by the combination of the independent outdoor specialty retailers and outdoor chain specialty retailers, outpaced the broader market growth rate, increasing 5.2% to $195.3 million for the month. Total fiscal 2010 sales of outdoor products in the channels tracked by SportScanInfo for OIA VantagePoint increased 4.0% to $10.85 billion for the year and outdoor specialty channels grew 7.3% to $2.95 billion for the twelve-month period ending January 29, 2011. Overall Outdoor Footwear sales grew just 1.9% to $2.12 billion for the total 2010 retail fiscal year, but sales jumped 15.2% to $564.1 million in the outdoor specialty channels for the year. Outdoor Apparel sales were up 3.8% to $3.72 billion for the twelve-month fiscal year. Outdoor Apparel sales in the outdoor specialty channels increased 4.5% for the year, generating retail sales of approximately $1.24 billion. Full fiscal year sales of outdoor hardgoods in the channels tracked by SportScanInfo for OIA VantagePoint were up 5.0% to just over $5.0 billion for the twelve-month period through January 29, 2011. Sales in the consolidated outdoor specialty channels were up 6.8% to $1.15 billion for the full fiscal year. For more details on the fiscal fourth quarter and full year trends in the outdoor market, or for more information on the OIA VantagePoint system, contact The SportsOneSource Group at 704.987.3450 or e-mail to OIAVantagePoint@SportsOneSource.com.
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SGB PERFORMANCE l FEB 21, 2011
OUTDOOR RETAILER 2011 WINTER MARKET RUNNING APPAREL By Mackenzie Lobby
Photo courtesy of Saucony
WEEK 1108 | SGBweekly.com Photo courtesy of New Balance
unning apparel has officially made its mark as a mainstay at Outdoor Retailer’s Winter Market in 2011. With a jump in the popularity of trail running, outdoor brands have thrown their hats in the ring with traditional running companies to vie for consumers. Attracting performance and recreation-minded runners, this show revealed a new level of understanding for the needs of runners in terms of fit and function. A patchwork of panels make up much of the 2011 collections, offering wind resistance and breathability in the most optimal places as well as gender-specific comfort. Asymmetrical zippers, flip-mitt cuffs, and bold earthy tones are commonalities in design among this year’s apparel. For treadmill-phobic, outdoorsy running enthusiasts, there is much to look forward to in the coming year. Saucony has proven its ability to adapt as it competes with some of the biggest outdoor footwear and apparel companies in the world. Keeping with the times, the company is releasing its Mad-On Jacket and Pants, which are comprised of a Viper Light panel in the front and a DryLete mesh back. “It’s like an exhaust system on a car; the body heat goes right out the back of the jacket,” says Sharon Barbano of Saucony. The company also worked to update their ViZi-PRO line of reflectivity wear by adding pink to the line. Barbano explains, saying, “men have accepted orange better, so Saucony came up with ViZi-pink for women in everything from vests to half-zips to hats and gloves.” This line also includes a blinking light, which insures nighttime running safety. Another running industry behemoth, Brooks, has a similar visibility line, the NightLife Collection. Already available in bright yellow, a bright green option will be available for men and women in 2011. Perhaps most talked-about, however, is the Silver Bullet Jacket. Aptly named, this jacket features a 360-degree aluminum membrane and 3M Scotchlite Retroreflectivity. “The inside layer pulls moisture away from skin, the middle layer warms and breathes, and the outer poly is rain resistant,” says Kurt Heimback, Director of Apparel. This is significant because it reduces the need for an extra layer, which means warmth and wicking without the bulk. Utilizing silver fabric technologies, including X-Static, Polygiene and Silver Lining, New Balance has its own mineral-inspired running line coming out in 2011, dubbed the NBx collection. The thermodynamic properties of the pieces in this line, such as the NBx Adapter Short Sleeve, make the series wearable in the summer and winter. In addition, antimicrobial properties work to eliminate odor and keep the garments fresh. Moving Comfort returns to the scene with its usual line of performance women’s running apparel, while offering several new pieces. The latest addition, the Daphne Bra, uses airflow technology and bonded seams to fit runners of all shapes and sizes. In addition, the company is offering its popular Alexis Bra in a full tank in 2011, as well as a whole new scheme of bright and colorful designs. Icebreaker’s latest Icebreaker GT line offered in Ultralite, Lightweight, Midweight and Outerwear, gives runners a wide variety of options for layering. Technical baselayers made with 97 percent merino wool and 3 percent Lycra make for a form-fit under a shell. This layering system finds its way from the outdoor apparel category to endurance sports, giving runners an option for every temperature. Accounting for about 7 percent of parent company Timberland’s annual revenue, SmartWool means more than just socks these days. The company has expanded to running as it competes with other merino-inspired favorites, such as Icebreaker and Ibex. This year they have completely revamped their running apparel to provide a “body mapping” fit. Following a two-year study, testing clothes on thirty different body types, Smartwool has a new awareness for what fits and what doesn’t, overhauling its silhouettes in order to make them more flattering. “Everything is designed to be layered together,” 10
SGB PERFORMANCE l FEB 21, 2011
Patagonia Ultralight Shirt MSRP $250
Brooks LSD Lite Jacket II, Womens MSRP $75
Ibex Echo Sports Tee MSRP $69
Photo courtesy Outdoor Retailer 2011 Winter Market
Photo courtesy of Saucony
says Mavis Fitzgerald of Backbone Media, explaining SmartWool’s Layer Up System. “One layer will have thumbholes and another will have an asymmetrical zipper so it doesn’t all overlap.” Unique necklines, like the one featured on the new Funnel Neck Zip Top, and outerlayers, such as the TML Light Full Zip Jacket, were showcased at this year’s conference. Ibex emerges as another leader in the field of wool technology. In their new aerobic line comes the Breakaway series, which includes a jacket, vest, and pants. Appropriate for a wide variety of temperatures, the jacket utilizes a 4-way stretch woven Schoeller Climawool front and Ibex’s Shak Lite Ponte Knit on the back. This special fabric is made from 100 percent Zque New Zealand Merino Wool for warmth and breathability. The pants use a similar paneling scheme to insure comfort and protection from the elements. In the baselayer department, Ibex unveiled its Echo Sport T, which is made with a super lightweight 100 percent Merino Wool Echo jersey fabric. Not only is it one of the softer options in running wear - it also regulates temperature and resists odors. Entering into the running market in 2011, Mountain Hardwear is debuting its Dry.Q Active Endurance line. “In addition to customers from our sister company, Montrail, our endurance category has been growing because trail running is becoming more popular,” explains Erin Brosterhous of Mountain Hardwear. “The running apparel is 100 percent waterproof and super breathable with the use of the Dry.Q technology.” The company uses “biomapping” in its line of Dry.Q Active jackets and tights, providing wind panels on the front and breathable fabric on the back for superior ventilation. The North Face also finds itself in the performance running category with its new Better Than Naked collection. Trail-worthy half
SmartWool TML Mid Half Zip MSRP n/a
Brooks LSD Lite Jacket II, Mens MSRP $75
zips, jackets, shorts and tights comprise this line that is custommade for a runner. “You want zero distractions while running, so we use feather weight fabrics, bodymapping, and gender-specific venting,” explains Ruder Finn Senior Account Executive Kristen Ingraham. The North Face’s Stormy Trail Jacket demonstrates the company’s know-how in creating the best performance gear. With claims of 25 percent more breathability than any other running jackets on the market, this piece goes to the front of the class. Not to be forgotten is the unique Ultra Onesie. To be worn like a speed suit, this one-piece, hooded baselayer provides 360-degrees of bodymapping with cooling zones and stretch for comfort. Ingraham explains, saying, “it can be used as a baselayer for winter running or even for alpine. It’s definitely multi-functional.” Not to be forgotten is Patagonia’s new running collection. With a big emphasis on the sport for Spring 2011 and Fall 2011, the company has put a major stake in the running market. The Speedwork Tights offer a different approach to traditional running tights by using a special paneling system. “These tights have breathable panels behind the knee so you don’t get sweaty, as well as a great comfort waistband,” explains Patagonia’s Jess Clayton. A wind-resistant outer layer and a soft polyester interior wicks moisture and promotes comfort. The Speedwork line also includes pants and capris, in addition to new baselayers and cold-weather running jackets. ■ WEEK 1108 | SGBweekly.com
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NOTHING MINIMALIST ABOUT MERRELL’S GROWTH GOALS By Thomas J. Ryan
With the startling early response of its barefoot launch among its many recent successes, Merrell last week took another step to speed up its goal of becoming Wolverine World Wide’s first billion dollar brand. Seth Cobb, a 15-year Merrell veteran and most recently general manager of the Merrell U.S. business, was named VP and general manager for Merrell. At the same time, Chip Coe, who formerly ran SmartWool, was appointed VP and general manager of Chaco, best known for its adventure sandals. But Cobb’s appointment comes as Merrell saw sales climb 20 percent in the fourth quarter with increased market penetration in every geography, category and channel. “We have excellent momentum with Merrell right now,” says Jim Zwiers, president of the Wolverine World Wide Outdoor Group, in an interview with SGB Weekly. “We’ve got very strong backlogs. We have the barefoot initiative, which just hit retail and we have apparel growing at 40-plus percent as well as some key retail initiatives. We continue to target our goal of a billion dollars. We are well over halfway at this point and the opportunity is very strong for Seth.” Cobb will be charged with driving aggressive growth for the Merrell brand across regions and across categories. “Seth is just an excellent people developer,” said Zwiers. “He has a strong sense and passion for the Merrell brand and a great vision for the future.” 14
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In particular, the move establishes a more unified approach to pursuing global opportunities for the brand. “We’re going to have Seth more focused from a brand specific basis and so the marketing area will report to Seth on a global basis and he will continue to retain control of the U.S. business, which is our largest and most profitable business,” says Zwiers. “But from a responsibility standpoint it’s tough to be looking across the whole globe and at all categories. We are making sure that our strategies for apparel, for footwear and for retail mesh into this significant global opportunity.” Overall, he says the potential for Merrell continues to lie with simply raising brand awareness, particularly given the brand’s intent to repurchase rate. “If you ask a consumer who owns a pair of Merrells if they intend to buy another pair, usually our rankings are at the very top of the chart in that metric, which demonstrates the huge opportunity,” said Zwiers. “At the same time, the actual number of consumers who are aware of the Merrell brand, even in our key markets, is still not at the level of where we need it to be.” Zwiers sees ample growth opportunities in both wellpenetrated areas such as North America and the U.K. and developing regions. China and India were particularly cited as highly-underpenetrated but the brand is also finding recent success in Central and South America.
“There’s not a region where the brand doesn’t have a foothold,” says Zwiers. “We’re in over 150 countries right now and whether it is Asia Pacific, Central or South America or one of the emerging BRIC markets, there are a lot of opportunities for the Merrell brand. And it’s not just the outdoor lifestyle message; the ‘performance with style’ message of Merrell continues to resonate with the consumer.” In an interview with SGB Weekly, Cobb said he will be working more closely with the Merrell global marketing teams, the international sales teams, the footwear and apparel product teams, and with the Merrell retail team to refine the global brand strategies. “The new structure will help us align the brand’s product, sales and marketing activities and to do so on a global basis,” says Cobb. “We think Merrell will benefit as we get even better at telling our big product stories, improve our consumer focus, and ultimately drive stronger growth in all markets.” The new structure will also help the brand fully capitalize on the significant commitments it is now making to consumer marketing. The brand’s market spending was ramped up 20 percent in the fourth quarter with the program featuring a mix of traditional media, digital media and consumer events to enhance Merrell’s awareness in all its major markets. “Craig Throne, Merrell’s marketing czar, and his team have done a phenomenal job creating the “Add Your Own Scenery” campaign that’s being launched as we speak,” says Cobb. “The team also generated super strong consumer demand leading up to the recent launch of our Merrell Barefoot collection with an amazing microsite and a very cool IPhone app with a focus on education and “how to barefoot”. We also just installed about a million dollars of new point-of-sale fixtures in U.S. retail accounts to leave a more lasting impression with the consumer. We believe we can drive consumer demand to generate growth for our retail partners and we’re already seeing the upside of these kinds of investments.” Regarding the international opportunity, he says Merrell already has a strong global presence but certain product categories are more important in some markets than others. “For example, our performance sandal business is incredibly strong in Canada, our European subsidiary tends to have a big men’s footwear business, and the USA is building something great around Merrell barefoot,” says Cobb. “Our new structure makes it easier for us to identify strengths in certain markets and then share those best practices with other markets around the world. It allows us to identify the white spaces and then meet those opportunities to drive growth.” But Cobb says that as successful as Merrell has been in the U.S. over the last few years, it still has plenty of untapped opportunities in the States. “We think there’s room to grow every component of our business, but we see the most immediate upside in women’s casuals, kids footwear, apparel, and of course Merrell Barefoot,” says Cobb. Indeed, a particularly encouraging launch for Spring 2011 has been Merrell Barefoot, created in collaboration with Vibram, the maker of the revolutionary FiveFingers line. Year-end backlog for the Merrell Barefoot collection reached approximately 400,000 pairs for the program, exceeding all previous product launches for the brand, even its Jungle Moc in 1998. An early launch in a handful of U.S. stores generated very strong sell-throughs. Zwiers sees a big opportunity around the barefoot/minimal category for not just Merrell but the entire industry. “We believe it’s potentially a big opportunity and it depends how companies pursue it,” says Zwiers. “We have retailers now who are potentially changing the hierarchy on their walls to add a barefoot, minimal or natural area to their footwear
Jim Zwiers, President, Wolverine Worldwide Outdoor Group
departments. Everyone from great running stores to lifestyle stores are considering this category. There have been only a few times over the past decade that that’s really happened at retail.” Even more encouraging is that consumers and retailers are exploring proper fit and form through the barefoot as well as the broader health & wellness phenomenon. “Really the epiphany here is that more and more people are understanding what we at the Outdoor Group and our brands have lived for many, many years,” says Zwiers. “What you wear on your feet can impact your entire body and your entire well-being. That’s becoming more prevalent. So if you look online or talk to consumers, they’re more aware of this than ever before. And that’s positive for the industry overall because it will drive not only sales of minimal or barefoot shoes, it will drive interest in category expansion in many areas. So from an industry standpoint we think it’s very positive and it has some fairly significant implications not just on how retailers show shoes but on how consumers think about shoes. It feels powerful to us.” Beyond Barefoot, Zwiers expects Merrell’s business in the U.S. to get a lift WEEK 1108 | SGBweekly.com
Seth Cobb, VP & General Manager, Merrell
from a new marketing initiative launched in the first quarter to drive up consumer awareness as well as from other consumerdemand creation efforts. “We feel that the Merrell brand is not just aspirational but truly attainable for a very broad range of customers,” says Zwiers. “Between our men’s, women’s and kids focus and between the performance product and the casual product, we feel there are tremendous opportunities that lie ahead. So from a marketing standpoint, were going to really amp that.” Other strategies to drive U.S. growth include the continued benefit from Merrell’s creation of separate initiatives and product development teams around its men’s, women’s and kid’s categories. While also finding success with its recent launch into apparel, Merrell also recently added a third category, Momentum, beyond its Outventure performance and its Fusion lifestyle/ performance offerings. Momentum is even more of a lifestyle approach building off of Merrell’s outside culture. An example of the Momentum lines is Origins, a collection of classic hiking designs that add modern features, technologies and all-day, retro hiking style. “We think we can reach more broadly into the distribution channel but more importantly cover a broader portion of the Merrell consumer’s life,” says Zwiers. “We know they love our product. We know they love the attitude and the comfort and the styling and durability of our product. We want to make sure we’re appealing to an even broader sense of their lifestyle and wearing needs.” Meanwhile, Coe, joined Wolverine in July 2010 as VP of Licensing and Accessories in July 2010, will also be responsible driving Chaco’s growth on a global basis. Before joining Wolverine, Coe was president and CEO at Teko Socks and had previously served as president and COO at SmartWool before the brand was sold to Timberland.
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Chip Coe, VP & General Manager, Chaco
Chaco generated high double-digit growth last year in part due to the successful extension of the traditional sandal brand into closed-toe shoes, including most recently boots. Chaco also added over 200 new U.S. accounts in 2010, mostly in footwear specialty stores. “We acquired the brand in early 2009 and it had very aggressive plans and the team has done an outstanding job meeting those plans and the opportunity now is to really lay the foundation for an even more aggressive future,” said Zwiers. “So we want to address those varied, long-range plans with even more dedicated leadership and that’s where Chip comes in. He brings a tremendous background in global brand development and strategy from his time at SmartWool and his short time at Teko. He’s very familiar with the market we’re fortunate to have a focused leader like Chip driving the Chaco brand for us on a global basis.” Coe told SGB Weekly he was particularly excited about the opportunity to build on Chaco’s loyal followers. “I’m all about the authenticity of the brand and Chaco is so strong and so core in the active outdoor marketplace,” says Coe. “It just has such a super passionate following in the consumer and retail arena.” While citing the potential for Chaco internationally, Coe also plans to build on Chaco’s recent successful expansion into closed-toe offerings. Particularly encouraging has been the response to Chaco’s move into boots this spring. “Our plan to continue to work on positioning Chaco as a four-season vendor partner for our retailers,” says Coe. “We’ve had a pretty significant launch of boots. For Spring 2012 we’ll be coming out with more close-toe offerings and some lighter adventure sandals. I think people are going to be excited about what they see from Chaco over the next few seasons.” ■
Conference Sponsored By
The National Sporting Goods Association presents:
47th Annual Management Conference & 13th Annual Team Dealer Summit
May 1-4, 2011
at Loews Ventana Canyon - Tucson, Arizona
Featuring: • A robust educational track with presentations by industry leaders and other experts • Networking opportunities with top sporting goods executives • The Annual NSGA Golf Tournament and other outstanding entertainment For more information please visit nsgaconferenceandsummit.org, e-mail us at firstname.lastname@example.org, or call 800-815-5422 x127.
Photo courtesy of Saucony
Team Dealer Summit Sponsored By
I AM... PERFORMANCE
JOHN ROGERS Owner, Maine Running Company, Portland, Maine John Rogers has been involved with the running and walking products industry for over 20 years. He worked as an executive in product marketing at Reebok and Mizuno and helped produce some of the “franchise” products in the industry, including Reebok’s DMX and the Mizuno Wave Technology. In 2005 he opened Maine Running Company. WERE YOU INTO RUNNING GROWING UP? I had just moved to Oregon and during my first week in middle school they required us to run a 1.5 mile X-Country race. I won and from that point forward was hooked. WHAT WERE YOUR FAVORITE SPORTS? Definitely basketball. I played all the way through my junior year. I loved the Kamikaze Kids at THE University of Oregon and still remember going to MacArthur Court and how much energy there was at “The Pit.” I also loved track & field and saw all of Pre’s (Steve Prefontaine) meets. I still remember how the crowd willed him to catch (Frank) Shorter down the stretch at the Restoration Meet in 1974 and I was at his last race in 1975. Two days later, I finished second in the Oregon State Meet in 4:12, losing by a yard. WHAT SET THE STAGE FOR YOUR RETAIL CAREER? I worked retail at Marty Liquori’s Athletic Attic in Gainesville, FL while going to the University of Florida. 18
SGB PERFORMANCE l FEB 21, 2011
HOW DID YOU WIND UP ON THE VENDOR SIDE? I was working as a buyer for a six store chain in Raleigh, NC and Reebok needed a tech rep for that region. I worked in operations, marketing, product development and product marketing in running, walking and outdoors at various points. WHO WERE YOUR MENTORS? At Reebok it definitely was Art Carver, SVP of Operations. He was very Bill Parcells-like. Either you did it or you didn’t. “It is what it is.” And executionally he always had a way of being ahead of the curve. Bob Puccini at Mizuno taught me “numbers just don’t lie” and about how to be fiscally responsible. Finally, Tom Raynor taught me to go for what you want and not to look back. WHY DID YOU DECIDE TO OPEN MAINE RUNNING IN 2005? I had reached a point in my life where lifestyle and seeing my kids grow up became more important than traveling all over the U.S., Asia and Europe, merchandising and marketing another shoe line. I had also worked with Kris Hartner at Reebok and Tom Raynor and both would always encourage me to take the plunge. I ultimately found out you can actually make a living doing what you love. HOW DOES YOUR VENDOR BACKGROUND HELP YOU? The biggest benefit is the network of people I have to learn from. I work with some of the best Specialty Running Store owners in the U.S. - Garry Gribble, Curt Munson, Ken Sung, Kris Hartner, Chet James and Tom Raynor at Fleet Feet. You could see that community outreach, good SKU and inventory management, and passion were ways those guys drove their businesses. WHAT SURPRISED YOU MOST ABOUT MAKING THE TRANSITION FROM VENDOR TO RETAILER? That once you get to a certain size, you have to put an infrastructure in place to manage and support all facets and dimensions of the business. For example, you can get to $700K on your own, but to really elevate to the next level or get to $2 million, you need a strong team to manage community outreach, operations, inventory, personnel, etc…and execute. That is what we’ve done at Maine Running. The biggest mistake most retailers make is not putting systems in place to effectively manage inventory, product flow, etc. I am always shocked at how many stores are still hand counting inventory and really don’t have a handle on the numbers or benchmarks to run their business. WHAT DO YOU LIKE MOST ABOUT YOUR JOB? The community aspect, helping our customers achieve their goals and helping our personnel grow.
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