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ISSUE 1234 AUGUST 20, 2012

The Weekly Digital Magazine for the Sporting Goods Industry

INDUSTRY EXECS BULLISH FOR SECOND HALF OF 2012


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Group Publisher Editor In Chief James Hartford james@sportsonesource.com 704.987.3450

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

ISSUE 1234 AUGUST 20, 2012

The Weekly Digital Magazine for the Sporting Goods Industry

Contributing Editors Aaron H. Bible, Fernando J. Delgado, Charlie Lunan, Matt Powell Creative Director Teresa Hartford teresa@sportsonesource.com 704.987.3450 (x105) Graphic Designers Camila Amortegui camila@sportsonesource.com 704.987.3450 (x103) Sebastian Restrepo sebastian@sportsonesource.com Advertising Sales Account Manager / Northeast Buz Keenan buz@sportsonesource.com 201.887.5112

Advertising Sales Account Managers / Midwest Barry Kingwill & Jim Kingwill bkingwill@sportsonesource.com jkingwill@sportsonesource.com 847.537.9196 Advertising Sales Account Manager / Southeast Katie O'Donohue katieo@sportsonesource.com 828.244.3043

16

2012 OR Summer Market. Photo courtesy of stylesight.com

Circulation & Subscriptions Subs@sportsonesource.com

SGB QUESTION

NEWS

SportsOneSource Publications Print Magazine: SGB, SGB Performance Digital Magazines: SGB Weekly, TEAM Business Digital Newsletters: The B.O.S.S. Report Sports Executive Weekly News Updates: SGB, Footwear Business, Outdoor Business, Sportsman’s Business, TEAM Business

SportsOneSource Research SportScanInfo, OIA VantagePoint, SOS Research

4 6 8 9

BY THE NUMBERS FINISH LINE Launches Run.com PEP Awards Announced MOVERS & SHAKERS RYU Appoints David Campisi CEO THE 2012 40 UNDER 40 AWARDS – Honoring The Industry's Best And Brightest THE SPORTSONESOURCE Leadership Development Weekend

10 "WHAT IS YOUR OUTLOOK FOR THE BACK HALF OF THE YEAR?"

FEATURES

16 2012 OUTDOOR RETAILER SUMMER MARKET Shakes Off Negatives

DEPARTMENTS

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

22 CALENDAR

Copyright 2012 SportsOneSource, LLC. All rights reserved. The opinions expressed by writers and 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

AUGUST 20, 2012 | SGBWeekly.com

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NEWS

BY THE NUMBERS 24.9%

Dick's Sporting Goods took a pre-tax impairment charge of $32.4 million, or 22 cents a share, to write-off its investment in troubled U.K. sporting goods chain JJB Sports. However, earnings excluding the charge rose 24.9 percent, ahead of expectations, while comparable-store sales rose 3.8 percent. The results prompted Dick's Sporting Goods to slightly raise its fullyear guidance.

43%

Exceed Company, Ltd. said it expects revenues to decline by up to 43 percent in the third quarter as it slashes production to match weakening demand for its Xidelong branded sports apparel and footwear. The forecast came as the company reported a 24.2 percent decline in second quarter revenue.

5.7%

Escalade, Inc. reported that revenues from its Sporting Goods business were up 5.7 percent for the quarter and 9.6 percent for the first half of 2012, compared to the same periods a year ago. The company’s revenues for the second quarter of 2012 were up 3 percent over the same quarter last year, while year-to-date revenues have increased more than 5 percent over the same period last year.

130%

Bauer Performance Sports, Ltd. said that revenues in its lacrosse category skyrocketed by 130 percent during the fourth quarter. Overall, fourth quarter revenues grew by 18 percent to $80.5 million due to strong growth in sales of ice hockey equipment. Revenues from the North American market were up 15 percent while sales outside North America were up 27 percent in the period.

4 SGBWeekly.com | AUGUST 20, 2012

FINISH LINE LAUNCHES RUN.COM The Finish Line, Inc. and Running Specialty Group (RSG) have launched Run.com, an online store and information resource for runners. Run.com is a one-stop destination where runners can access advice, hints, tips, and other resources while shopping for the latest and greatest running gear. Based in Boulder, Run.com operates side-by-side with the digital arm of the Finish Line, majority owner of RSG. The site currently features almost 1,500 styles of running gear currently with new products arriving daily. Additionally, runners can access hundreds of informative articles that cover a variety of topics. Runners can learn, for instance, how to run farther and faster, prevent injuries and speed recovery, and find inspiration. As the site evolves, Run.com will be the umbrella brand for all local store banners that RSG acquires, including its The Running Company banner. Run.com will be a partner resource to all retail stores owned by RSG, including a web-based customer loyalty program that will be developed. “This is not just another online store,” said Julian Millikan, VP of digital with RSG. “We have built this site as a hub for runners and all of their needs. And we’re not finished. We will continue to improve and innovate Run.com to parallel the high-service and high-knowledge experience that exists in our stores.” “Building a national stable of the best specialty running stores will take some time,” added Ken Gart, managing partner of RSG. “With this new site, its innovative concept, state-of-the-art technology, and memorable URL, we have a national presence with the flip of a switch. Our customers now have a 24/7 resource to learn about the sport and get the best gear in the market whether there is a store nearby or not. With customers increasingly shopping online, we want to be available through any channel they prefer.”

PEP AWARDS ANNOUNCED The U.S. Department of Education has released the names of the recipients of the fiscal year 2012 Carol M. White Physical Education Program (PEP) grants. More than $27 million in new PEP grants will be distributed to 56 school districts and community based organizations across the country. The balance, approximately $51 million, will be used to fund 2nd and 3rd years of PEP grants awarded in fiscal year 2010 and fiscal year 2011. The average new PEP grant will be approximately $482,000. PEP funds are used to purchase fitness and sports equipment and to train PE teachers in innovative methods of physical education. “SGMA is pleased that our efforts on PEP have resulted in nearly $80 million for schools to spend on equipment and training in the next 12 months to improve the health of America’s youth,” said Bill Sells, VP of government relations of Sporting Goods Manufacturers Association (SGMA). “The PEP funding has helped hundreds of schools and has affected millions of children. In a nutshell, the PEP funding makes physical activity and physical education a reality.” Click here to read the complete list of the 2012 PEP grant award winners -- posted on the U.S. Department of Education’s website. Click here to see all previous PEP grant winners.


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MOVERS & SHAKERS BH North America appointed Steve Lindenau as president and CEO. The fitness equipment manufacturer owns the BH Fitness, Bladez Fitness and Easy Motion e-bike brands. Freedom Group, Inc. (FGI), the firearms industry leader with brands including Remington, Bushmaster, DPMS and Marlin, has named Scott Blackwell as president. Blackwell, an established industry veteran, has served as chief sales and marketing officer since 2010. The Finish Line, Inc. announced that Greg Beidler has joined the company as senior vice president, store operations. Beidler has more than 20 years of retail experience, and most recently he was a regional operations director for Sam’s Club/Wal-Mart Corp. Vail Resorts, Inc. announced that Jeffrey W. Jones, chief financial officer and president of the company's lodging, retail and real estate businesses, will retire at the end of 2012. Zumiez Inc. appointed Travis D. Smith to the company's board of directors. Smith will serve on the company's audit committee. Nautilus, Inc. announced that Linda Pearce joined the company as chief financial officer following an extensive national search. Pacific Sunwear of California, Inc. announced the resignation of Charlie Mescher as senior vice president, men’s merchandising, and the promotion of Alfred Chang to the same position. Under Armour, Inc. said Janet Fox, senior vice president of sourcing, has resigned from the company to pursue other interests. Her resignation will become effective August 24.

6 SGBWeekly.com | AUGUST 20, 2012

Respect Your Universe announced it has appointed David Campisi as the company’s new chairman and chief executive.

RYU APPOINTS DAVID CAMPISI AS CEO Respect Your Universe, Inc., the mixed-martial arts brand based in Las Vegas, appointed David Campisi, former head of The Sports Authority, as its chairman and CEO. Former CEO Christopher Martens, a former Nike executive, resigned on August 13. Joining the RYU board in March 2012, Campisi was the former chairman, president and CEO of The Sports Authority from 2004-2011 and brings more than 30 years of experience in the retail industry for soft and hard goods, as well as specialty and mass production, to RYU. During his time as CEO at TSA, Campisi was responsible for implementing new strategic imperatives, bringing $100 million in e-commerce business in-house, negotiating long-term, multi-million dollar deals to acquire naming rights for the Bronco's stadium in Denver, and establishing two major foundations for the Sports Authority, including the "Sports Authority Foundation" and "Pass the Good Foundation." Prior to joining RYU, Campisi also served as the EVP at Kohl’s as GMM women's apparel, accessories, intimates and cosmetics, and also held merchant positions at Fred Meyer and Meier & Frank. "With his extensive expertise, experience and knowledge in the retail industry, he will help further accelerate and execute the growth of RYU in the direction we are quickly moving in," said Kristian Andresen, previously residing Chairman of RYU. "I’m very excited about joining RYU, there's something very special happening here,” said Campisi. “It is a premium, high quality training product, with a great story and an edge that's different from all the players in the space. I look forward to working with the team at RYU, and making a significant contribution on building our business together."


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HONORING THE INDUSTRY'S BEST & BRIGHTEST

I

ndustry leaders, SportsOneSource staff, 40 Under 40 alumni and inductees gathered in downtown Salt Lake City on Friday, August 3 during the Outdoor Retailer Summer Market tradeshow to induct and celebrate this year’s SGB 40 Under 40 award honorees. This year marked the fifth annual celebration of the 40 Under 40 Awards and brought a number of past honorees to the event to celebrate with this year’s inductees. “The event was fantastic, “ said 2012 honoree Jeremiah Mackmiller, general merchandise manager for Sierra Trading Post, Cheyenne, WY. “Being surrounded by so many talented individuals was very humbling.” For Mackmiller, the best thing about being included in this growing group of young professionals is the recognition gained for his company. “I have had the chance to be associated with and learn from phenomenal 8 SGBWeekly.com | AUGUST 20, 2012

mentors throughout my life. At Sierra Trading Post our management team and employees are second to none. When you have a team of individuals who work toward the same goal and raise each other up, great things happen. There is no way I could have accomplished what I have done without my team.” Honorees are nominated through a sporting goods industry voting process that takes place through the first part of the year. Leading executives and co-workers nominate those in the industry that, while still under 40 years of age, show exceptional leadership and innovation in the sporting goods world. Nominees span the spectrum from company executives, to marketing leaders, to buyers, designers and leaders of nonprofit groups. According to SportsOneSource VP of Marketing Gregg Hartley, 2012’s honorees showed exceptional enthusiasm and

excellence, representing a wide range of categories and products. “The selection of the SGB 40 Under 40 honorees shows the strength of the industry and provides young, talented leaders great opportunity to work with their peers to develop their network and leadership skillsets,” he said. Continued Hartley, “2013 will expand the horizons of the 40 Under 40 program by the introduction of the Leadership Development Weekend. This expanded program will allow 40 Under 40 alumni to share their skills and competencies with others in the industry.” The first annual 40 Under 40 Awards was presented in 2007 and the event has grown each year. The 2013 awards will be held May 4 in South Beach Miami, Florida, during the first annual SportsOneSource Leadership Development Weekend. (See sidebar on Page 9 for further details.) ■


LEADERSHIP DEVELOPMENT WEEKEND From L to R: 2009 Honorees, Todd Dalhausser, GM Apparel, Saucony and Jason Volk, director of sales, North America at Oregon Scientific with 2012 Honoree, Nicholas Brayton, president Woolrich and guest, Josh Rich.

From L to R: 2009 Honoree Nathan Pund, Managing Director, Investment Banking, D.A. Davidson, 2012 Honoree Peter Ha, associate D.A. Davidson and Matt Powell, Chief Retail Analyst, SportsOneSource

From L to R: Jim Zwiers, SVP Wolverine Worldwide, 2012 Honoree Charlie Bruder, VP Global Retail Merchandising Wolverine Worldwide and James Hartford, president & CEO SportsOneSource

2012 Honoree Mark French, president, Basketball Division & Corporate Development for Mission Athletecare and M&A Inventor for Court Grip with his wife, Meghan French

From L to R: 2012 Honoree David Oksman, Head of Marketing Life Is Good, with John Jacobs CEO Life Is Good and guest

The SportsOneSource Group will present its first Industry Leadership Development Weekend on May 2-5, 2013 in South Beach Miami, Florida, welcoming some of the industry's most celebrated young leadership talent for a multi-day development conference coinciding with sixth annual SGB 40 Under 40 Awards. Based on the annual and highly anticipated SGB 40 Under 40 Awards, the Leadership Development Weekend will capture the skills and talent of the alumni of the SGB 40 Under 40 Awards to create the only leadership conference to speak from inside sportsindustry experience. The weekend will feature a series of SGB 40 Under 40 alumni keynote presentations, SGB 40 Under 40 alumni panels, and facilitated discussions moderated by Richard Luker, Ph.D., founder of the ESPN Sports Poll and author of "Simple Community," focusing on "Leadership Within The Company, Community and World." Open for the first time to broader industry participation, the weekend will also include the SGB 40 Under 40 Awards on May 4. As in years past, honorees and alumni are all successful entrepreneurs, recognized corporate executives, and key decision makers from throughout the industry.

Note: The Leadership Development Weekend and SGB 40 Under 40 Awards will be held at the Shore Club, a premier location in South Beach Miami. For additional information please contact Gregg Hartley, VP Marketing, SportsOneSource, at 561.543.7789 or ghartley@sportsonesource.com, or look for updates in SGB publications. From L to R: 2012 Honorees, MC Neville, SIA Associate Director Marketing & Communications, Sally Grimes, Former Executive Director Outdoor Industries Women's Coalition, Petra Hilleberg, President, Hilleberg, Inc., and Ann Vernon Malik, COO & CFO, Fuelbelt

AUGUST 20, 2012 | SGBWeekly.com

9


SGB QUESTION

2012 OUTLOOK ALL SIGNS POINT TO CAUTIOUS OPTIMISM A recent polling by SGB of a wide range of industry players revealed that most remain fairly bullish about prospects for the second half. But just as many are cautious.

10 SGBWeekly.com | AUGUST 20, 2012

To some, it can’t get any worse than last year, when the warmest winter in decades and scarce snowfall across many parts of the country forced many to hold fire sales on outerwear, skis and other seasonal merchandise at the expense of margins. A return to more typical winter weather is expected to provide a boost to already easy comparisons. The Olympics are also expected to provide a bump in sports participation, as it has tended to do every four years. A healthy pace of innovation across running, golf equipment, and other categories is also expected to buffer the industry’s prospects. On the glass is half-empty side, some are concerned that the deteriorating economies in Western Europe and more recently in China will pull down North America’s prospects. With political hysteria only expected to increase in the coming months, some are calling for a cloud to remain over the consumer until the election is resolved in November. Yet the overall view is upbeat. Having smartly weathered the worst of the recent downturn, many industry execs appear to have grown more confident that consumers won’t give up their favorite sports or outdoor pursuits even if the economy is slowing.


SGB ASKS...

“WHAT IS YOUR OUTLOOK FOR THE BACK HALF OF THE YEAR?” In cold weather markets the priority will be weather. If we have a decent winter in terms of colder temperatures and snow, the industry will likely drive strong growth despite a slowdown in consumer spending than we’ve seen in May and June. Once the election is over I’m confident there will be an uptick in consumer sentiment. Will Manzer, CEO, Eastern Mountain Sports

We feel optimistic. Last year was one of the warmest winters that we ever had with virtually no snow. Obviously in our type of business we need cold weather and a couple of snowstorms so we're encouraged that we'll get it. We're also not too worried about the economy. The customer wants value and we offer that on a day-in and day-out basis. Mitchell Modell, Chief Executive Officer, Modell's Sporting Goods Our outlook is positive. The tough economy and market of the past four years has fortunately (or unfortunately) taught us how to compete and thrive in these conditions. Sport, as it relates to recreational and competitive amateur play, has been relatively immune to the greater economic concerns. With more kids focusing on one or two sports today, we haven't seen any indications their passion or desire to improve their game suffers in tough economic times. They still want to play their best and while there may be enhanced price sensitivity, they are still upgrading and buying new product. Bill Clark, President, Louisville Slugger

We continue to feel pretty good about business as we head into back-to-sports (school), the fall season and the holiday season. We are well positioned to capitalize on the strong trends in athletic footwear, slides and sandals, daypacks, team sports and active and performance apparel for back to school. We see the positive trends in shooting sports continuing into the fall season and with this being an election year, we think those trends will gain momentum. The Holiday last year was impacted by the lack of cold and snow and we feel good about our ability to improve on our comps during that time frame. Dan Winchester, VP, Chief Merchandising Officer, MC Sports

We are approaching the second half with cautious optimism. We are cautious about the outlook for the economy, which continues to be lackluster; however, we are optimistic that our strong brands, backed by great products that speak to our consumers' lifestyles and activities, should continue to perform well. For example, The North Face has invested heavily behind telling its brand story around such product innovations as Flashdry apparel, their new ABS backcountry ski pack and the new Meru Kit of outerwear. We are confident the brand will enjoy a year of solid double-digit growth. Vans, too, has tremendous momentum both here and abroad and we are excited about the recent launch of the LXVI line, marking the entry of new products into a new channel of distribution for the brand. VF believes that continued investments behind its strongest and most profitable brands is the best way to keep its brands growing and gaining share - particularly in these uncertain times. Steve Rendle, Group President, VF Outdoor and Action Sports Americas AUGUST 20, 2012 | SGBWeekly.com

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Seeing how the economy is and everyone holding their breath until after the election, things could be slim. However, being that in our particular area we seem to be nearly the only one left standing, our second half of the year could be dynamite. And next year we may be the only one left standing. Big box stores pulling back in certain categories have opened the door for small retailers to make inroads. And online does not seem to affect this segment; we actually profit more to service products sold online than to sell them direct. Brian Dani, Owner, CBS Boardshop, Lake Forest, CA

We're excited about the back half of the year. Running specialty has been up over 15 percent this year. That's obviously been helped by the early spring but last year we also saw strong growth and we expect that to continue. Innovation is driving demand and interest in the space. And that's bringing people into the store to look at the great new product, whether you look at minimal, lightweight or what we're calling the natural motion trend. There's a ton of innovation in the run industry. We're also excited about the Olympics. It creates an elevated awareness around track & field and the Games have proven to increase participation and inspire people to get out and run more. We'd love to see the cost of goods coming in line to put us in a better position to invest in new innovation or color stores or marketing campaigns. But we're not too concerned about the economy since those lightweight stories are driving excitement and history has also shown that the running category continues to do well in tough times. Running is a part of people's lives and they'll give up other things but keep running to help relieve stress and feel that they're getting in shape. Chris Lindner, SVP and Chief Marketing Officer, Saucony

We expect to be up in the second half. We expect some slow down at big box, but not at institutional. Our optimism stems from the fact that sports equipment is not really discretionary to the serious athlete. Our concerns are related to some international distribution and rising oil prices. Robert Erb, CEO, Schutt Sports

12 SGBWeekly.com | AUGUST 20, 2012

Like most we are concerned about the economy. Our customers have certainly become more conservative. They are watching every dollar they spend. This may be the new normal. Even teenagers are tentative in their spending. We are watching inventory and expenses closer than ever. Jerry Williams, President, Schuylkill Valley Sports

From a macro sense, due to continued economic and political uncertainty, and the polarity that has been created in our country, there can be little that is clear about future policy, except that there will be conflict. Therefore, in general, I expect continued reluctance toward aggressive investment. (Evidence: over $2 trillion in cash on balance sheets). Policy must become clear and a return to a free market approach evidenced, before such reluctance softens. That said, from a micro view, there are nuggets of opportunity that each company will attempt to capitalize upon as we are, by nature, competitive, and always looking for an edge within that which we believe we can control, versus that which we believe we cannot control. Further, there are particular categories, which appear to be driven more by inherent and intrinsic values, such as running, which represent a substantial upside. Bob Puccini, President, Mizuno USA


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I think the industry has worked through the problems of stock overages at both retail and brand level, so assuming both channels are cleaner than they have been in the first half, I see a stabilization of the market for the second half. Therefore retail prices and margins should stabilize as the heavy discounting of closeouts diminishes. Of course some good early winter weather will heavily sway the outlook for all concerned in our industry and set ourselves up well for 2013. Do we expect to see a slowing economy impact the market? In a word, ‘No.’ We have seen the industry leaders continue to deliver positive results and this will not change. People are still playing sports and enjoying the outdoors, even more so when the economy is facing headwinds as people re-address their priorities in relatively low cost outdoor and sporting activities. In tough economic times brands like Hi-Tec also benefit from the trend towards authenticity, heritage and the family values that are core to Hi-Tec’s culture. The economy concerns me but I can’t control it, so why worry about it…all boats rise and fall with the economic tides so it doesn’t concern me. Remember that tough times don’t last but tough people do. My great optimism is that we have worked harder than ever to prepare our business through the economic turbulence for the years ahead. For Spring 2013 we are launching the most designed, commercial, and performance orientated product collection ever. This focus is driven by the rising demands of the consumer living in the new economy, whose demands are greater than ever, forcing us to become better. This opportunity gives me great optimism. Edward van Wezel, Global CEO, Hi-Tec

In the fitness accessory business, we are anticipating a strong conclusion to 2012…solid growth in the 10 to 15 percent range. In home exercise accessories (resistance products, weights, etc.), the first half of 2012 has been very strong. We believe the second half will be even stronger, partially driven by the expected Q4 TV launch of P90X2 and its motivational impact on consumers. In fitness electronics (heart rate monitors, pedometers, etc.), we see a quickly increasing level of adoption by older consumers and a huge level of excitement driven by connected devices and fitness-related apps, which will continue to drive strong growth in our products. Since we sell relatively low-priced accessories used for health and fitness (super important in consumer’s lives), the overall economy doesn’t impact our sales significantly. Brian Anderson, President, EB Sport Group 14 SGBWeekly.com | AUGUST 20, 2012

If the economy in Europe continues to slow our industry, sales in North America for 2013 could be flat or even experience a minor decrease. But we are optimistic that the entire running shoe category will continue to grow for the second half of the year. Also, the category Newton targets (lightweight, level and colorful) will continue to grow therefore allowing Newton to continue on its rapid growth trajectory . That said, if the European economy does not hit bottom and turn around in the next couple of years, we could see our growth impacted. Jerry Lee, CEO, Newton Running


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INDUSTRY SHAKES OFF NEGATIVES AT OR SHOW

W

eather. Economy. Election. Show Move. Those four subjects were heard in just about every conversation on the floor at the recent Outdoor Retailer Summer Market show in Salt Lake City, UT. The show was facing incredible headwinds when it opened its doors on August 2, but once the opening bell rang people were partying like it was 1999. Let’s just hope the bubble doesn’t burst this time. There was every reason for the aisles to be void of traffic. There were a multitude of reasons for retailers and vendors to take a downbeat attitude into the show. There was enough negativity floating about in the world around us to dissuade any rational person from looking positively to the future. But it didn’t happen. The show was more than sold out with many attendees being forced to bunk up or stay more than a half hour away from the Salt Palace. Preliminary figures show that 27,000 attended the show, up roughly 2,000 from OR Summer Market 2011, according to OR Show Director Kenji Haroutunian who stated preliminary figures indicated a 20 percent 16 SGBWeekly.com | AUGUST 20, 2012

increase in the number of stores who sent someone to the show. A large number of exhibitors were pushed off the Salt Palace floor and into tents across the street but were not deterred. It’s not such a bad sign that the most pervasive concern heard in the aisles dealt with whether the show should leave Salt Lake City to accommodate its astronomical growth in recent years. While not optimal, the tents worked great, and exhibitors may have garnered more attention in the tight Pavilion than they would have otherwise found between two large booths on the main show floor. The two tents took on an energy all their own - and were busy up to the end. OR consolidated many SUP vendors in one of those tents and used its industry party, food trucks and guided tours to drive traffic to the site. Vendors said they were pleased with the amount and quality of traffic. But under the surface of the busy aisles and upbeat mood, a layer of uncertainty and realism was affecting everyone in attendance. The consumer has pulled back and is unsure of the road ahead. And there is nothing we can do about it. Mother Nature could play the final card this year if winter actually arrives. Weather has again stepped up this year to wreak havoc on the industry with inventory management playing just as large a part in the discussions between buyers and vendors as product in many booths. The hangover of a mild winter left many retailers stuck with last year’s winter goods. With many holding that inventory


over, buys for Fall/Winter 2012 have been affected a great deal. Spring 2013 orders are also expected to be impacted with the overall inventory back-up at retail, coupled with some caution due to a still sputtering economy and the expected negative impact of mudslinging around the upcoming election. “It’s a fact of life that with the way the weather pattern was, a lot of retailers wound up with a lot of carryover in winter product,” said Walter Brunswig, global director of sales at Keen Footwear. “Some were able to get rid of it but it impacted their bottom line. Others did not get rid of it so they packed it up. So we’re seeing how that comes around for Fall 2012.” Added Peter Sachs, general manager of Lowa Boots in the U.S., “You just can’t sell a winter boot when there’s no cold and no snow and it also affects you on the following year’s booking orders. We didn’t have any reorders like we had in January 2011 when we were able to sweep the warehouse clean, and then bookings are down so it has an affect.” On the positive side, the mild weather led to an early start to spring and a strong spring selling period for the industry. Spring deliveries were even pulled ahead to fill demand at the start of the year. Warm-weather activities such as paddling, running, biking, trail and climbing particularly benefited until spring turned to drought in many parts of the country.

The Penzi Pant with Elastic Cuff from Gramicci. Photo courtesy of stylesight.com

Roxy debuts Outdoor Fitness geared toward the SUP set. Photo courtesy of stylesight.com

THE INVENTORY OBSTACLE Overall, weather continues to challenge the industry for good and bad. Joel Heath, president of Teva Brand, noted that the mild fall/ winter last year followed by a Spring 2011 when cold and rainy weather crushed the sandal season. In meetings at Summer Market, Heath noted that there’s been much more discussion around inventory issues than the economy or the political situation. Said Heath, “You can have a great economy and a great politician but it means nothing if you don’t have the weather.” He joked (perhaps), “We need to do what the ski industry has done and start cloud seeding.” With many retailers carrying over last year’s winter merchandise, finding floor space at least for Fall 2012 has become a much more competitive game. Remarked adidas Outdoor's Greg Thomsen, “It’s been a little heavy-handed because everybody is fighting for limited floor space.” Especially if some cold weather arrives early, the at-once business stands to be much more critical this year. While watching their own inventories in a still uncertain economy, suppliers are promising to be in stock on core styles and working more closely with their retail partners around inventory flow.

“We partner pretty closely with not just the big accounts but also with the multi-door regional accounts to make sure we know what they’re forecasting and what they’re expectations are so we can make sure we can satisfy their needs,” said specialty footwear manufacturer Oboz’s Josh Fairchilds. “And we’re also just continuing to hang our hat on great delivery and great customer service. That resonates strongly with the independent accounts because in troubling times, the last thing they want to do is have a fight with their vendors and suppliers.” Nicholas Brayton, president of Woolrich, said that the company is working closer with stores on determining needs with a goal of helping supply product this fall that they don’t already have in inventory. “We’re trying to be more preemptive rather than reactive and trying to communicate with accounts to figure out how we can offer product beyond what they already have on the floor,” explained Brayton. COST CONCERNS LESSEN One lesser worry this year appears to be the rising input costs. Oil prices have come down sharply over the last year to reduce the pressure on rubber, polyurethane, nylons and other synthetics. Cotton, wool and other raw AUGUST 20, 2012 | SGBWeekly.com

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material prices have also come down. After a tough winter boot season even shearling prices are down. For the most part, the industry seems to have raised prices modestly at a level that hasn’t shocked the market or held even in light of the pressures on the beleaguered consumer. “I think everyone up the manufacturing chain is very cognizant of the world economy and very hesitant to raise prices unless they have to,” said Lowa’s Sachs. He also said the appreciating dollar against other currencies is helping on the cost side but Sachs, along with others, said keeping costs down is a constant challenge. “My health insurance company raised their premiums 18 percent for my employees so it has to get absorbed somewhere and that’s reality," Sachs said. “Our margins are constantly under pressure,” concurred Keen’s Brunswig. Keen hasn’t raised prices for many seasons by continually seeking out efficiencies on the supply chain side. Added Brunswig, “You go through this little cycle up and down, but our overall cost structure is stable at this point.” Timbuk2 CEO Mike Wallenfels called buyers “timid.” His company’s strategy is to continue to educate dealers on brand presentation, to present them with timely and relevant product, while at the same time continuing to grow the company’s direct online sales, which are expected to increase 30 percent this year. Timbuk2’s customization program, where customers go online and customize the colors and features on their bag, and the bag is then manufactured at the company’s California factory, is its fastest growing channel. Wallenfels of course also emphasized continuing to target technology-loving consumers with ways to carry and protect their gadgets. Oboz’s Josh Fairchilds said his company was able to pass some price increases but generally held pricing. He likewise said Oboz benefited from supply chain optimization while adding that sourcing overall will continue to undergo a transformation as labor cost pressures are not expected to abate. A number of manufacturers, including Keen, Yakima, Princeton Tec, Liberty Bottleworks and others, showcased U.S.-manufactured 18 SGBWeekly.com | AUGUST 20, 2012

Click on play icon to view the Live from OR - Open Air Demo

products that have been in development for several seasons. While brands look favorably at the concept, without a supply chain in the U.S., large and medium sized companies will not bring large-scale manufacturing stateside any time soon. What they might do is continue to evacuate China in favor of lower-labor costs in other Asian countries, and even Caribbean countries with lower tax repercussions and less transportation costs. On the supply side, according to Jon Adelman, VP of sales at Polartec, lead times are finally back to normal. Adelman noted extreme disruption of the supply chain in 2010-2011, followed by expansion due to a heavy winter, which left retailers sitting on inventories. New technologies continue to drive the Polartec business, including its NeoShell. INNOVATION STEPS UP Although most vendors weren’t completely reinventing the wheel on the product side, enough innovation could be found at the show to give consumers a reason to buy for the coming year. Lightweight and minimalism are the most common themes across categories but are particularly driving some radical approaches on the footwear side. An example would be the New Balance Minimus Hi-Rez road shoe. Instead of a traditional outsole with lugs, the Minimus Hi-Rez is made with 42 independent midsole pods mechanically bonded to a durable yet flexible fabric base that allows the shoe to move and flex in closer unison with the foot. The zero heel-to-forefoot drop shoe weighs in at a scant 4.3 ounces for a men’s size 9.5. The ongoing talk around barefoot shows that the running enthusiast is still intrigued by the more-extreme models. But scores of brands at the show brought out more supportive models that many feel has turned into the sweet spot for the movement. Brian Moore, VP of global footwear at The North Face, sees three experiences coming from the trials of barefoot, or more extreme minimalist shoes, by consumers. One positive comes from runners with “great biomechanics” that easily take to the slim construction, while a negative quickly befalls runners prone to heel-strike. The third is the “bigger growing middle section of people” that try minimal shoes and love them yet still get hurt. But when they try conventional shoes again, they no longer like that experience either. “It’s almost like someone who had been driving a big, oversized Cadillac and then driving a Porsche but crashing it or realizing they can’t afford it,” said Moore. “I’m getting to know more and more runners and even backpackers and hikers that love the feel of a minimal, low-to-theground shoe but they’re not getting enough protection.” In addition to the omnipresent “fast and light” in hardgoods, camping, apparel, packs and footwear, versatility with a nod to the fashion industry was much talked about. Black Diamond’s 186-gram Vapor Helmet. Photo courtesy of stylesight.com


Š 2012. Yupoong and Flexfit are registered trademarks of Yupoong Inc. All rights reserved. USA Patent #5715540 E.U. Patent #0639338 Australia Patent #671359 Canada Patent #2092362 France Patent #9406840 Korea Patent #082922

New York: 1.800.424.4464

www.flexfit.com

California: 1.866.941.2555

AUGUST 20, 2012 | SGBWeekly.com

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The Updated Drainmaker at Columbia Photo courtesy of stylesight.com

European brands continue to gain traction in the U.S. specialty retail market, and companies such as Deuter, Bergans of Norway, Montane, La Sportiva, Mammut, Salewa, Petzl, Millet and adidas Outdoors are offsetting European losses with increasing distribution and brand acceptance in the U.S. Many companies are also now on the gadget bandwagon with rechargeable products and solar-powered charging units for phones and pads. On the apparel side, consumers are still looking for light weight, protection and other high-tech features expected in the outdoors, but a newer push is “just fast with more of an athletic feel to it,” according to Todd Spaletto, president, The North Face, Americas. This was the same sentiment shared by adidas Outdoor's Thomsen. Noting that The North Face is getting the most traction in areas such as running and biking apparel. Spaletto sees opportunities expanding for the entire industry as outdoor and performance gets closer and closer. “We see a lot of running brands at the show that weren’t here five years ago,” said Spaletto. “I think that speaks to the fact that a lot of outdoor consumers who backpack or hike train for those activities by doing yoga and running and such. Retailers and brands are both recognizing that and they’re representing that outdoor lifestyle to being more than just hitting the Appalachian Trail.” To wit is Patagonia's new line of outdoor-inspired yoga apparel. Ed van Wezel, global CEO of Hi-Tec Sports, is likewise excited because the overall athletic influence is working in Hi-Tec’s favor. He believes that’s reflective of many newer exhibitors attending the show in recent years. OUTDOOR MARKET REACTS TO ATHLETIC AND YOUNGER CONSUMERS “The industry’s moving and getting very sporty, very athletic, very colorful -- which is amazing for our game because we, by birthright, are a sports company,” said Hi-Tec's van Wezel, another member of the 2012 SGB 40 Under 40 class honored in SLC. “We’ve never been really a stiff leather hiking boot, top-of-the-mountain. So we feel the market is coming toward us. But it’s great for Burton and all the 20 SGBWeekly.com | AUGUST 20, 2012

Black Diamond’s 186-gram Vapor Helmet. Photo courtesy of stylesight.com

snowboard brands here because it shows the outdoor opportunity is getting bigger. It’s not just running, hiking and biking, it’s everyday life.” And while younger consumers may not be going on as many weeklong treks in the mountains, the vibrancy of the show indicates that at least the outdoor lifestyle is reaching younger consumers. “I think the younger consumer is more interested in the outdoors today than they ever have been,” said TNF’s Spaletto. “Certainly we embody it. But I think there’s other brands that you’re staring to see more younger consumers get associated with.” Spaletto added that the brand’s goal is to get younger consumers, “to not only wear our logo but to get them to participate in the activities with which we stand for.” For example, if someone comes into a North Face store to buy a jacket or sweatshirt, the associate will let them know the item was designed based on an experience one of its elite runners may have had on the UTMB. Then they ask them if they’ve ever tried trail running and let them know there’s a run club at a store nearby where they can participate. “Younger consumers are interested, intrigued and want to be associated with the lifestyle that outdoor brands represent,” said Spaletto. “And we want to capitalize on that by bringing it to a more authentic, deep experience for a couple reasons. One is that it creates repeat consumers. Another is it’s someone that just wants to wear our logo so it’s good for specialty retail since those are people who weren’t previously shopping outdoor specialty.” The emerging outdoor customer is also causing many brands to rethink what’s possible in the outdoors. Many colors and other fashion flourishes could be found across booths that typically were reserved for a brand such as Salomon in the past. Tighter athletic-cuts are increasingly being seen on tops. Borrowing from the action sports world, many outdoor brands are branching out into vulcanized and canvas styles. Teva’s Heath believes many brands will have to reinvent themselves just as Teva has done with focus on an “action outdoor” customer. Its new Tevasphere trail collection is particularly aimed at those increasingly participating in non-traditional outdoor sports such as adventure racing, obstacle courses and mud runs.


WASSUP! SUP and fishing kayaks continue to buoy the paddlesports market, with even traditional whitewater players such as Jackson Kayaks getting heavily involved. More than 300 exhibitors listed themselves as carrying SUP products at the show, up nearly tenfold from a year earlier. Many of these just carried accessories, but there was a huge number of board vendors. The contrarians in the crowd questioned how many of those board companies would be back again next year, likening them to the snowboard and skateboard deck brands that came and went during the height of the Action Sports Retailer show. Notably absent was Confluence Watersports, the nation’s largest kayak manufacturer, which has yet to enter the SUP fray. Confluence is monitoring the marketing closely and many wonder whether the company will enter the fray through acquisition rather than organically. Company CEO Sue Rechner, in an interview with SGB Weekly, said Confluence is focused on authentic, legacy brands with credibility in the market. Consolidation in the space may come sooner rather than later. Dealers say demand exceeded supply through much of this spring and summer, but to catch up with that SUP board makers will need capital, which is in short supply right now. KEEPING IT CORE — THE ‘MOVE’ DEBATE Another big theme at the show was friction between the ideas of inclusivity and exclusivity –- a motif that ran through discussions on distribution, participation, marketing, retailing and the show itself. In focus groups organized by the Outdoor Industry Association, 20-somethings talked about how they favor brands that are inclusive rather than exclusive. Members of the focus group were all recruited from Salt Lake City by TRU, a market research firm that specializes in "Millennials." Several said that brands like Ambercrombie & Fitch, that project an image of exclusivity in their marketing messages, were a turn off. They preferred brands that welcomed all comers. One avid climber, skier and hiker said he had no problem with a non-skier wearing a ski brand. But as the Millennials discussed their preferences over at the Marriott, many retailers and brands across the street were questioning whether OR itself had become too inclusive. Many expressed concern that the show was in danger of diluting its brand and collapsing under its own weight. “The danger is that you add extraneous elements to the show that are not relevant and it collapses,” said Dan Nordstrom, owner and CEO of Outdoor Research. “That’s the lifecycle of a show. I think it’s a slippery slope and I’m very wary. People have to be very cautious and look at what happened to the Super Show and MAGIC. It’s like a retail store; and if you expand the store too much, it’s no longer relevant to the customer and it becomes very thinly merchandized, and I think the merchandizing on this show is on thin ice.” Las Vegas, Denver and Chicago were mentioned most often as possible future locations, but most show attendees and exhibitors felt a move may strike a potentially fatal blow to the core of the show. The most passionate and heated conversations came out of ongoing

discussions around the possible relocation. Many of those interviewed lamented the devastation Salt Lake City would feel if the city lost the show while also feeling the area worked well with nearby gear testing and the low-key vibe of the establishments and friendly locals. The subject was clearly top-of-mind for those whose livelihoods depend on the show, as cabbies, hotel workers and waitstaff were quick to ask anyone with a badge what they thought would happen to the show. Gregg Hartley, VP marketing and product development at The SportsOneSource Group, suggested that the estimated $140 million annual economic impact that the show delivered in SLC would be coveted by many other larger cities. “We would have loved to have those kind of numbers in Atlanta for the Super Show,” said Hartley, who worked at SGMA during the heyday of the show that brought more than 100,000 people to the Atlanta each year in the late '80s and '90s.

“Not a Vulc” – Crossover Waxed Sneaker from Sanuk. Photo courtesy of stylesight.com

But there were also parallels drawn by many in Salt Lake to that illfated show that grew so large and so fast, and faded away into oblivion when it ended up standing for nothing after the “Super” had clearly separated from the “Show.” The hope was that more rooming and exhibition space could be found so people could avoid trekking to Park City or much farther. Others felt the show was getting overspread with dress shoes and other categories that don’t sell in outdoor specialty stores. While recognizing Nielsen’s need to optimize sales, they pointed to risks around diluting the show’s experience. Others didn’t seem to mind a change of scenery although some felt only places like Denver, San Francisco or San Diego would support the industry’s collective vibe. Ruled out particularly would be not only Vegas, but also Orlando and Anaheim, CA. The North Face’s Spaletto said he just doesn’t know enough to have a strong opinion on the issue. But he believes it would be a shame to lose the show’s sense of community that has made it so wildly successful. “This show is vibrant because of the people’s personal passion for the sports that they do business in and the community,” said Spaletto. “I heard someone complain, ‘Boy, people just stop in the aisle.’ But they stop in the aisle because they like each other. They stop and they talk. I also find they’re doing that at the bar or in the restaurant or at the cab stand. I’d hate to lose that connectivity as an industry. It’s one of our biggest strengths. I think you really feel that when you’re here.” ■ AUGUST 20, 2012 | SGBWeekly.com

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For full year calendar go to sportsonesource.com/events

AUGUST

OCTOBER

20-22 PGA Expo Las Vegas, NV

3-5

OIA Rendezvous Boston, MA

20-23 MAGIC Las Vegas, NV

6-7

The Retailing Summit Dallas, TX

28-31 Worldwide Fall Show Reno, NV

NOVEMBER

SEPTEMBER

3-4

NBS Fall Athletic Market Indianapolis, IN

6-8

8-9

TAG Fall/Winter Show N. Charleston, SC

13-14

A.D.A. Fall Show Las Vegas, NV

18-20

Sports Inc. Athletic Show Las Vegas, NV

Surf Expo Orlando, FL

7-9

NBS Fall Semi-Annual Market Fort Worth, TX

9-11

Sports Inc. Outdoor Show Indianapolis, IN

12-14

Imprinted Sportswear Show (ISS) Las Vegas, NV

19-21 Health & Fitness Business Expo Las Vegas, NV 19-21 Interbike International Trade Expo Las Vegas, NV 27-29

Imprinted Sportswear Show (ISS) Fort Worth, TX

DECEMBER 3-4

Sports Inc. Footwear & Apparel St. Charles, MO

TRADE ASSOCIATIONS | BUYING GROUPS

CALENDAR Athletic Dealers of America 1395 Highland Avenue Melbourne, FL 32935 t 321.254.0091 f 321.242.7419 athleticdealersofamerica.com National Shooting Sports Foundation Flintlock Ridge Office Center 11 Mile Hill Road Newtown, CT 06470 t 203.426.1320 f. 203.426.1087 nssf.org National Sporting Goods Association 1601 Feehanville Drive / 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 nbs.com Outdoor Industry Association 4909 Pearl East Circle / Suite 300 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 Snow Sports 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 Drive / 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 Worldwide 8211 South 194th Kent, WA 98032 t 253.872.8746 f 253.872.7603 wdi-wdi.com 22 SGBWeekly.com | AUGUST 20, 2012


SEE YOU IN

SALT LAKE

Photo Credit: Adam Barker

TRADESHOW | JANUARY 23-26, 2013 | SALT LAKE CITY, UT ALL MOUNTAIN DEMO | JANUARY 22, 2013 | WASATCH RANGE, UT

TRADESHOW | AUGUST 1-4, 2013 | SALT LAKE CITY, UT OPEN AIR DEMO | JULY 31, 2013 | JORDANELLE STATE PARK, UT OUTDOORRETAILER.COM


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