Sporting goods shoppers are shifting back to the specialty channel after retreating to mass retailers last year to cope with the recession, the president and COO for Jarden Corp. told analysts and investors last week.
Year-to-date sales of the company’s Coleman, Rawlings and Pure Fishing brands (Shakespeare and Abu) are up 10% to 15% at point of sale, company President and COO Jim Lillie told analysts at the William Blair 30th Annual Growth Stock Conference.
“You read a lot in the Wall Street Journal or you hear a lot on CNBC about retail sales were soft during the month of May,” noted Lillie. “What that information doesn't really give you color on is what's going on at specialty, because it's typically the big box guys that report the numbers to IRI or Nielsen or where people draw their conclusions.”
He cited Rawlings as an example, but said the same is true for its Coleman and fishing brands.
“Rawlings did a lot of its business last year at big box, because I think everybody was going to big box to shop for everything,” said Lillie. “This year Rawlings is essentially flat at some of the bigger box stores, but our sales are up 15% to 30% in specialty stores. This year people are tending to hit the neighborhood stores, the family-owned stores or the smaller regional stores.”
Lillie said Coleman remains Jarden’s largest brand with roughly $800 million in annual sales. He pegged sales of K2 branded snowsports and cycling equipment at $150 million.
Lillie spent much of the presentation dismissing what he called “macro funk assessments” by economists and analysts who he said were exaggerating the impact of turmoil in Europe; soft May sales; commodity prices and even the oil spill in the Gulf of Mexico. He said concerns over the impact of these events on Jarden were overblown and failed to take into account the global nature of the company’s operations.
The oil spill, for instance, could affect Jarden’s sales of fishing gear in the region, which Lillie estimated at about $10 million. But any lost sales will be offset by increased sales of rubber gloves to clean up crews. Jarden bought a French company that makes the gloves in April.
He estimated that about $50 million of Jarden’s sales in Europe were not hedged, which translated to a risk of up to $5 million in EBITDA. That’s roughly equal to what the company pays each year on it euro denominated debt. Moreover the company stands to benefit from the rise of the Canadian dollar and Japanese yen. Finally, products manufactured by the company in Europe are now more competitive in North America.
“I think there's been, from my perspective and our perspective, a lot of overreaction to currency and a lot of overreaction to general things about commodities,” Lillie said. “We're actually very comfortable, as a company, of where our commodities are in actuality versus our standard costs in the budget. So we feel like that is not going to be any kind of significant speed bump for us during the course of the balance of the year.”
Lillie said Jarden has visibility into commodity costs going out a year, in part because it has locked in costs through contracts and in part because managers meet weekly to review resin, energy, natural gas, ocean container, long-haul trucking and short-haul trucking prices. Consumer trends are less visible, but Lillie said POS data indicate consumers are moving back up the value chain to higher price points.
