By Thomas J. Ryan

“In 2019, as in the previous two years, we describe our industry market dynamics as ‘okay, not great,” summed up Tom Cove, president and CEO of Sports & Fitness Industry Association (SFIA), in his organization’s recently-released 2019 State Of The Industry Report.

On the positive side, the industry has overcome the spate of retail bankruptcies that landed during the 2015 to 2016 period. Profitability has stabilized over the past two years, with the majority of SFIA members reporting an increase in profitability in both 2017 and 2018.

Inventory had been significantly elevated for a period due to the exits of The Sports Authority, MC Sports, Sports Chalet, City Sports, and others, but are back to healthy levels, presenting a “stable platform for future growth,” wrote Cove in the Executive Summary of the Report. Only a quarter of survey respondents reported inventory increases and 45 percent reported that inventory was down.

The industry survey also found that when asked about the future, a majority report a “cautiously optimistic” forecast of their own performance. Many are also again investing in technology and R&D after pulling back during the bankruptcies phase. Cove wrote, “This type of spending is usually the first to be cut in times of economic distress and its return signals that companies are stable and preparing for growth.”

However, the report found that for just the second time since the 2009 recession, growth in the sports and fitness industry lagged behind the national GDP in 2018. The industry grew 2.3 percent, compared to a GDP gain of 2.9 percent.

SFIA believes that while the additional discretionary spending in an expanding economy has tended to provide a boost to sporting goods purchases, a number of factors — including declining participation rates, the transition of many vendors to direct-to-consumer (DTC) and millennials spending on experiences over product — mitigated the traditional boost.

SFIA also noted that while athleisure remains a strong trend that will likely continue to feed growth opportunities for many industry players in the years ahead, the inherent driver of long-term growth for the industry remains participation and SFIA’s industry survey showed that declining rates of participation have become a top concern. The next two top concerns were increasing market share and slower consumer spending.

The fourth and fifth concerns were material cost/availability and product sourcing with those concerns heightened by the ongoing trade war. The survey found that while many companies are looking to diversify their manufacturing, only 23.5 percent plan to increase domestic manufacturing.

But declining sport participation was by far the biggest concern and the included Topline Sports Participation report featured a few worrisome trends:

  • The country’s rate of inactivity has risen over the past five years, climbing from 26.5 percent of the population in 2013 to 27.3 percent in 2018.
  • Core and Casual participation have effectively reversed positions over the past decade. In 2007, Core athletes comprised nearly 53 percent of all sports participation; in 2018, 54 percent of all participation was Casual. SFIA noted that Casual participants spend less money and buy less often than Core participants.
  • Accessibility to sports remains a hurdle for some as sports participation among America’s lowest-income households declined for the fourth consecutive year. A household earning under $25,000 is almost 30 percent less likely than a household earning between $75,000 and $99,999 to participate in fitness sports and half as likely to participate in team sports. The rising costs of equipment, league fees and insurance were cited as factors.

On the positive side, nearly 36 percent of Americans were active to a healthy level in 2018, up roughly six percentage points from the previous year. Decreasing rates of inactivity among children were also promising. Kids aged 6 to 12 and 13 to 17 both saw five-year lows in 2018.

The study also found that a greater number of leaders are recognizing that “taking a more active role” in increasing recreational sports participation is critical for growth.

Other findings from the Topline Sports Participation report include:

  • The Top 10 fastest growing sports/activities, in order, were Cardio Tennis, Pickleball, Hiking (Day), Bicycling (BMX), Skiing (Cross-Country), Trail Running, Kettlebells, Rowing Machine, Rugby, and Kayaking (Recreational).
  • Among major sports categories, Fitness sports have been the biggest winner, increasing participation by an average of 2.2 percent per year. That was followed by Winter Sports, up 0.6 percent in participants in 2018; Team Sports and Racquet Sports, each up 0.3 percent; and Outdoor Sports, 0.2 percent. Participation declines were seen by Individual Sports, down 1.7 percent; and Water Sports, 2.0 percent.
  • Walking for fitness remains by far the most popular activity, while day hiking (up 6.6 percent from 2017) and yoga (up 5.1 percent) saw big participation gains in 2018. Day hiking has been very strong in recent years, boasting an 8.8 percent average change over the past three years. Participation in most of the top sports and activities increased in 2018, but some saw regression. Dumbbell/hand weights (down 1.8 percent from 2017) and running/jogging (down 2.6 percent) both decreased in 2018.