Change was again the name of the game over the past year both in politics and across the sporting goods retail landscape. While U.S. presidential candidates argue over who represents the most change or the right kind of change, the sporting goods market has certainly seen its share of transitions over the last four years, where Wal-Mart has remained the only constant in the SGB Retail Top 100 report.
Since the last general election year, the market has seen Dicks Sporting Goods move from the #8 spot to the #3 spot this year, while key competitor The Sports Authority fell two spots to the #4 position this year. Outdoor big box and chain store players Sportsmans Warehouse (up 11 spots on the list), Gander Mountain (also up 11 spots), REI (up six spots), The Sportsmans Guide (up five spots) and Cabelas (up three spots) showed some of the biggest growth over the last four years. Meanwhile, the mall saw some of the biggest challenges for retailers versus the stronger years earlier in the decade.
Zumiez moved up the most in the rankings since the Retail Top 100 report was published in the last general election year, followed by Sportsmans Warehouse and GSI Commerce.
The market also saw a few retail brand names disappear from the landscape over the last four years. The venerable Galyans and Gart Sports names were folded in mergers with Dicks Sporting Goods and The Sports Authority, respectively, and Just for Feet, d.e.m.o., Copeland Sports, Tri-City Sporting Goods and Decathlon Sports were shuttered.
The growth of vendor-owned retail as a viable strategy for brands has resulted in the need to cover this segment in a whole new way. The small list that focused on the direct business four years ago has given way to a much broader roster of companies looking to build revenues, improve margins and liquidate excess goods on a much larger scale.
The past year certainly goes down as a sluggish period for the sporting goods industry, marked by recessionary worries, escalating gas prices, and anemic demand for athletic footwear, creating a fertile environment for politicians to pontificate on the merits of their platforms for change.
While many will argue about the current state of the economy and its lasting effect on the retail landscape, a number of retailers embraced strategies that ran counter to conventional wisdom as they focused on ambitious expansion plans and increasing sales.
One of the big winners last year was Lululemon Athletica, which saw sales jump 84.5 percent to $274.7 million in 2007 from $148 million in 2006 on a whopping 34 percent comp-store gain. The yoga-inspired chain, which went public in July 2007, opened 27 stores across the U.S. and Canada that year, and plans to open 35 in 2008.
Another winner was Fleet Feet, which racked up a 15 percent comp-store gain and added seven stores last year. Road Runner, which saw overall sales jump 27 percent to $180 million, opened seven stores last year as it quietly plotted its national expansion. The Walking Co., which generated an impressive 8.1 percent comp-store gain in 2007, opened 27 stores in just the last four months of the year and launched an e-commerce site.
The action sports segment boasted accelerated expansion, as well. At Zumiez, overall sales for 2007 soared 27.9 percent to $381.4 million, with same-store sales zipping ahead 9.2 percent. The company opened 50 doors in 2007, and another 57 are planned for 2008. Tillys, an Irvine, CA-based action sports chain, has added 10 to 15 stores annually since the start of the decade, and now has 83 in operation. Active Ride Shop, based in Mira Loma, CA, ended last year with 29 stores, and plans to add another six this year.
In the outdoor realm, Sportsmans Warehouse-which added 10 stores in 2007 and plans another 12 in 2008-was a star performer, with revenues increasing 34.3 percent. Another standout was REI, which churned out an 8.2 percent comp-store gain last year and added eight stores; the co-op plans to add nine doors in 2008. L.L. Bean opened its ninth store outside of Maine last year, and plans openings in Chicago and Pittsburgh in 2008.
While Cabelas and Bass Pro Shops continue to open mega stores, the biggest version yet will come from Scheels in Fall 2008: the 248,000-square-foot venue in Sparks, NV, will include a customer tram, two 16,000-gallon aquariums, and a 65 Ferris wheel.
In the virtual world, e-commerce proved to be a strong overall growth category. GSI Commerce, which handles e-commerce operations for many major sporting goods retailers, saw a 22 percent increase in sporting goods revenues in 2007, on top of a 47.8 percent hike in 2006. After gaining Nike as a vendor last Fall, Zappos athletic sales catapulted 37.5 percent to $275 million. Backcountry.com racked up a 69.4 percent sales hike to $139.1 million.
While it is certainly difficult for the industrys biggest players to escape notice, many other retailers struggled to drum up store traffic in 2007. The weakness was most pervasive among mall-based chains. Steep same-store declines were experienced by Foot Locker (down 6.3 percent), as well as The Finish Line and Journeys, each down 4 percent. Big 5 Sporting Goods had a rare comp-store decline of 1 percent, and comp-store sales also fell 3 percent at Hibbett Sports and 5 percent at Sport Chalet. Famous Footwear, Shoe Carnival, Payless ShoeSource and DSW also suffered declines.
Dicks Sporting Goods, which delivered a relatively strong 2.4 percent comp-store gain in 2007, was the most active consolidator in a rather quiet year for mergers. In January 2007, it swallowed Golf Galaxy to cement its status as the leader in golf retail. In December, Dicks Sporting Goods acquired Chicks Sporting Goods, giving the chain its first stores in California.
Another significant deal was VF Corp.s acquisition of Lucy, the womens active chain. Lucy represents the first “pure play” retail acquisition for VF Corp., which also owns The North Face, Vans, Reef and JanSport. In other transactions, Gander Mountain acquired Overtons; and Backcountry.com was acquired by Liberty Interactive Group, whose properties include the Discovery Channel, USA, QVC, Encore and STARZ.
But some of the biggest deals of 2007 were launched by private equity firms. For example, Gryphon Investors acquired Joes. Hal Smith, a former president of Bass Pro Shops, became Joes president and CEO as the chain continues its recent accelerated expansion. In March 2008, Highland Capital acquired City Sports. The new investors touted plans to nearly triple the number of metro-area City Sports stores across the country over the next five years. Adding to the mix, North Castle Partners acquired Performance, Inc. The cycling retailer is now being run by Jim Thompson, the former CEO of Golfsmith.
To the dismay of many retailers who rely on established brands to help attract consumers, vendor-owned stores-both factory outlets and full-price venues-were another large area of growth. Nike, Adidas, Puma, The North Face, Patagonia and other vendors continue to open flagship stores in major cities. Several other brands, including Under Armour, Mountain Hardwear (owned by Columbia Sportswear), Teva and Merrell also recently launched flagship stores.
In the mass channel, Wal-Mart-which is by far the nations largest retailer of sporting goods-and its rival, Target, also continued to expand in the mid-single-digit percentage rate, although much of their growth now comes from “supercenters.”
In terms of sporting goods brands, the bigger news in the mass channel is the continued arrival of legendary-albeit somewhat tarnished-sports labels. This year, through Iconix Brand Group, Wal-Mart rolled out the Ocean Pacific brand across its stores. The mega-retailer is also expected to give a much stronger push to Starter, another brand that Iconix acquired from Nike last year.
At Target, the roll-out of the Converse One Star footwear and apparel collection, which includes an expansive jeans line, has begun. Kohls-which bought the exclusive rights to the Hang Ten surf brand, as well as the Fila Sport line of apparel, footwear and accessories-is also prepared to do brand name battle.
Although the souring economy has caused some publicly held companies to slow their expansion, many other retailers-including privately held operations-harbor ambitious plans to add stores in the coming year. For instance, The Sports Authority intends to add 25 stores this year; Dunhams will open 11 or 12; Academy Sports & Outdoors and Modells Sporting Goods each have about 10 on tap; and MC Sports plans to open seven. Combined with the number of stores already in existence-to say nothing of the growth in catalog and Internet operations-it is unlikely that in four years hence, the SGB Retail
Top 100 list will look anything like todays version.