Over the past week, dozens of executives across the active lifestyle industry shared their outlook for 2019 with SGB. We reached out to large, medium and small brands and retailers in sporting goods, footwear, apparel, outdoors and tactical with two simple questions that were fairly open-ended: What gives you optimism and what causes concern in the coming year?
This is the first of a two-part series that gauges what the industry’s key players think will or won’t happen in 2019. Look for Part 2 on Thursday.
Ken Hicks, Outdoors Chairman, President and CEO, Academy Sports: “We view 2019 as a challenging year with substantial changes in the marketplace and increasing competition; however, we are cautiously optimistic about the future. While offering value will still be important, the customer demands more with innovation, experience and convenience at the top of their list. The winners in 2019 will have to work hard to get all of the elements correct.”
Adam Blumenfeld, CEO, Varsity Brands (BSN Sports, Varsity Spirit, Herff Jones): “Our outlook for 2019 is mixed between headwinds from macro-economic risk factors and our myopic focus on the industry.
“Macro, we think tariff resolution as likely in 1H19 which will be a net neutral for costs (although a significant positive for capital markets). We think rates stay here or slightly higher so no tremendous, incremental pressure on borrowing costs – thus a fairly robust M&A market. And we believe the deceleration of the Chinese economy is real, possibly resulting in government subsidies for manufacturers.
“Within industry, we expect the labor markets to remain tight with firm wage pressure and a hot market for top talent. We also see consolidation continuing as a major theme for 2019 and beyond with a premium on businesses that can build and manage a robust consolidated platform; scalable infrastructure and an Amazon-resilient strategy. We believe digital innovation and enablement, of employees and customers, will continue to be the greatest driver of efficiency in the marketplace. And we believe streamlined overhead, sophisticated and transparent supply chain, and above all else obsessive service of the customer will win the day.”
Ryan Martin, CEO, Yakima: “Traditionally, our category as a whole does not experience large swings up or down. Favorability or decline are typically the results of new product introductions or the phasing out of older SKUs. In 2019, while most economic indicators seem healthy, we are concerned with future auto sales and consumer spending. On a positive note, shifts within the auto sector align very well with our new truck rack collection launching in mid-February. In addition, activities like kayak fishing and overlanding continue to show positive growth and are key focuses for our spring 2019 product launch. Overall, we are excited about 2019 and are planning for growth.”
Ric Cabot, President and CEO, Darn Tough: “I find the best way to run our business, or likely any business for that matter, is to be cautiously very optimistic. There are so many dynamics affecting business; some you can control, most you can’t, that you need to pick and choose what to go after and what not to be distracted by. What we choose to go after we really go after and are always optimistic about our efforts and expected results.”
“We want to grow. We want to better the relationship with the customer. We want to rid our process of waste. We want to attract and retain the best people. We want to continue to innovate. We want to provide the best socks possible knowing we have yet to produce our best sock. We are driven by this last concept, that we have yet to produce our best sock.”
“Presidents come and go. The economy fluctuates. Tastes change. Prices go up and prices go down. Things change.”
“For 2019 Darn Tough Vermont will continue to focus on what we can control and take caution by what we can’t, and by so doing, I am cautiously very optimistic.”
Jay Hampton, CMO, Cotopaxi: “2019 will be a really interesting year for specialty outdoor and the economy in general. At Cotopaxi we are paying attention to macro-level events that have potential effects on consumer confidence and spending. Mounting trade tensions, a potential bear market on Wall Street, and political instability in Washington concern us, and we’ll watch and respond accordingly to any potential slow down as a result of these conditions. We’re also paying attention to the ongoing evolution of retail and how that impacts specialty outdoor. Bottom line, there is a lot to navigate through.
“For brands in specialty outdoor, I think 2019 will show a continued focus on omni-channel distribution development and optimization to support growth. If there is a looming slowdown in consumer spending, a strong omni-channel presence will enable brands to be more versatile in dealing with sluggish sales growth in one or more specific channels.
“We founded Cotopaxi on a core belief that business can be a force for good. In 2019, I think we will see an increase in specialty outdoor brands taking increased steps to becoming change agents for social and environmental causes. Whether it be a continued focus on sustainability in the outdoor goods supply chain, improving livelihoods for workers, or advocating to protect the lands we play in, there are myriad causes to support. I firmly believe today’s outdoor consumer expects the brands they know and love to do some good in the world.
“Giving has always been core to our company, and in 2019 we will launch the Cotopaxi Foundation. This improvement to our giving model will enable Cotopaxi to broaden the footprint of our impact, and allow us to deliver greater support toward our core causes. We hope to see more brands get involved, and become conduits for their customers to take action.
Matthew Tingler, Managing Director, Consumer & Retail Investment Banking, Baird: “We expect the industry will continue to perform well driven by growing participation in outdoor and fitness related activities. Consumers are increasingly focused on their health and wellness and outdoor activities offer attractive options for everyone from individuals to entire families to enjoy. Retailers are increasingly carrying outdoor related products as consumer demand migrates to the category.
“We also expect industry deal activity to remain robust. Deal activity is being driven by buyer demand for growing companies that are providing innovative new products or services such as Hydro Flask in hydration, Osprey in packs, Goal Zero in lighting and Cairn in subscription boxes. More established, legacy brands are also viewed as attractive acquisition targets as they provide larger consolidators like Amer, Wolverine Worldwide and VF Corp. access to new products, markets, geographies and consumers, while also allowing for potentially meaningful cost and revenue synergies.
“We expect companies will continue to develop omni-channel strategies so they can better compete, and more importantly, connect with consumers in an ever-changing retail landscape. Companies that are able to develop a direct-to-consumer sales channel have the benefit of “owning” the customer relationship rather than relying on a third party retailer to communicate their brand and value proposition. They also tend to have more brand advocates and greater influencers on social media, which has become an increasingly important marketing vehicle. Factors that could harm industry growth or deal activity include enactment of trade regulations and tariffs, further or greater political instability, and a slowdown in domestic economic activity, however we do not foresee that as a current risk.
Allison Gettings, VP and General Manager, Vasque: “The outdoor market is exciting and dynamic, and the brands that excel will be those who are able to deftly balance their own strengths and assets with the ever-evolving competitive landscape and consumer demands. We have a real opportunity to lean in to the voice of our consumer because that will lead us to the best product, the best marketing, and the best distribution strategy for sustainable success. The biggest challenge for us and for everyone is to be selective and decisive about who our consumer is instead of trying to be everything to everyone.”
Matt Liddle, COO, Snow Peak: “In 2019, outdoor recreation will continue to gain steam as an economic engine, driving $800+ billion dollars in US consumer spending with a unique urban-rural multiplier effect. More states will form offices dedicated to growing their outdoor economy, and more brands will speak up in favor of policies that strengthen outdoor life in America.
“The outdoors will stay on trend. Experience strategies will grow as brands look for engagement and monetization along an entire product value arc, from point-of-sale to point-of-use. The intersection of food and the outdoors will be a hot spot. The millennial audience in particular will look to the outdoors for experiences that allow them to be intentionally digitally disconnected. Brick and mortar retail will get more interesting and build spaces for people, not just product. The brands that seek to understand how outdoor culture emerges in urban spaces will be on the leading edge. And the chorus of voices challenging traditional narratives of who goes outside and how will grow louder and more important. All in all, 2019 is going to be a blast if you’re ready for change.”
Bill Kirkendall, CEO, JackRabbit: “The running specialty channel of distribution stabilized and reversed its negative trend of the past few years. Consumer spending trends were much improved and remain strong entering 2019 for the active lifestyle consumer. To be successful though you must be extremely customer centric and digitally competent. The innovation pipeline continues to accelerate and we are seeing exciting new products. Inventories are healthy so I expect less off-price merchandise in the marketplace in 2019, boding well for margins. I continue to believe disciplined distribution by our vendors is key for continued success in the running specialty channel. By providing a very positive customer experience, innovative and exciting product assortments and digital expertise we are anticipating continued growth in 2019.”
Peter Sachs, General Manager, Lowa Boots: “In general we feel good about 2019. The economy seems ok. Bankruptcies in the outdoor world have slowed. Consumers seem to be active. So, overall conditions are poised for a solid 2019. However, the wheels could come off the bus with the government shutdown, Mueller results, and all the other potential headwinds that are way out of our control. So, cautiously optimistic might be the phraseology du jour.”
C.B. Tuite, Chief Sales Officer, OrthoLite: “Having visibility into the forecasting and production needs of over 350 global brands gives OrthoLite an unfiltered perspective into the trends and growth trajectories by brand, category and region. Based on the forward view that we have, OrthoLite is extremely optimistic and sees continued market growth year-over-year. For some brands, 2018 was a reset year, but they have pivoted their focus to regain momentum. We also see the continued swell in brands focusing on the importance of sustainability in both product and process. OrthoLite shares in this mission; we have dramatically increased our portfolio of eco-comfort technologies and have made continued investments into our recycling facilities and other initiatives to reduce our overall carbon footprint.
“At this point we have no major concerns heading into the new year. Our brand partners are equally encouraged about 2019, and based on the production volumes that we have visibility into, the industry has significant tailwinds pushing everyone forward.
“What gives me optimism? Despite the global production shifts taking place at numerous footwear brands, OrthoLite is well positioned to accommodate these production movements due to our expansive global footprint. As the global leader in our category, we have enough installed capacity to more than double our production from 500+ million pairs of insoles annually to 1+ billion pairs annually. We will also continue to make investments to properly navigate these manufacturing shifts by our brand partners.
“We also see a resurgence in ‘investment engineering’ vs. ‘cost engineering.’ Some brands tried to reduce costs and that backfired on them when quality was comprised. These brands learned their lesson and are getting back to investing in the quality and performance of their product. This is an investment not only in their product, but also an investment in their brand and consumer. You can never underestimate the importance of delivering value and quality to the consumer. At OrthoLite, it has always been our mission to help brands sell that second pair of shoes to the same consumer by making sure they have the most comfortable pair of shoes year after year.”
Isaac Alvear, Head of Sales, 361 Degrees: “As 361 Degrees looks forward to 2019, we continue to see nothing but growth opportunities for our brand in the U.S. market and specifically in the segment of the industry we chose to be in, the RSA Channel. The awakening of leading run specialty retailers in nurturing true authentic brands that demonstrate disciplined premium distribution, has resulted in sustainable growth for both.
“All the while our mutual end-consumer continues to be inspired investing in performance footwear due to three drivers. First, health Insurance costs, where it’s becoming common place for employers to pay for health clubs or fitness studio classes, as long as an employee can show they actually use them. Second, demand for healthier food, which translate into a more conscious individual about what they eat, will have a runoff effect of making them more interested in fitness. Last, but not least, innovative wearables are accelerating engagement. As people adapt to interfacing with their wearables to the smartphone they have the ability to personalize all their health biometrics and track activities, which can be posted and shared. In fact to bring this full circle, I read where John Hancock, one of the nation’s oldest insurers, announced that in the future they will only sell interactive policies that track fitness and health data through wearable devices and smartphones.
“At 361 Degrees, in addition to our successful growth in the running category, we are also experiencing high demand for our premium training footwear product offering. It’s very interesting to note that according to the IHRSA (International Health, Racquet, Sportsclub Association) 20 percent of Americans have health club memberships – a number in my humble opinion that could double of the next 10 years. What would drive that growth is the elevated fitness boutiques and the “High Value, Low Price” athletic clubs that cost only $10-$15 a month to join. In the end, for our end-consumer this creates more awareness to achieving greater health and well-being which can start with a simple walk or run, which leads them to buy great quality performance footwear.
“For 361 Degrees, we are expecting to more than double our business and we have a clear pathway to that growth. We know the industry is ripe for this and we will have to execute against our plan. The primary driver being the engagement and evangelizing the ‘gate keepers’ across the RSA Channel. With the introduction of the 361° Retail Cup, which will finally create a platform for us to identify who is the fastest retailer in North America and a chance to win some serious cash ($50,000), the 361° Retail Cup specific website and social media channels will be another place where good competitive banter exists amongst our RSA Community, which ultimately will finally makes feel all as one! All in all, it will be a year where 361° becomes top of mind of run specialty associates.”
Jamie Smalley, CEO, Runderwear (North America): “We are optimistic that the upward global trend for growth in the running market will continue. As people have less and less free time, we feel running will continue to be the option of choice to stay fit and in shape. More consumers are entering the life cycle of ‘being a runner’ starting with regular small runs and ultimately working up to events and even competing. We have observed a global increase in demand for longer and more grueling endurance challenges, for which Runderwear products are especially beneficial. The huge growth in trail running, for instance, is set to continue in 2019 and well beyond, according to our forecasts.
“The increase in training frequency and volume of consumers is hugely positive for the sports and outdoor apparel market overall as demand increases. The challenges lie in meeting an ever-increasingly high-level of consumer expectations. We will be striving to discover new ways at going the extra mile in satisfying these expectations in both product and service levels.
“2019 is set to be a very exciting year for Runderwear as we further develop our seamless merino underwear collection, as well as our highly regarded running bra range, to meet consumer demand in both the run and outdoor categories across Europe and North America.”
Sophie Coffey, Brand Manager, Sierra Designs: “2018 was the year of Think Outside in many ways, with our National Parks seeing record growth in attendance, and an increasing trend in car camping, bikepacking, and other crossover activities. For 2019, we don’t see this “General Outdoor Recreation” trend going away, but we do see an added emphasis on authenticity and transparency where marketing activities are concerned. We see this as a huge opportunity to tell stories that connect in a more realistic way, and to put a face to Sierra Designs by revealing more behind-the-scenes content. We’re also seeing opportunities to grow our brand with specialty retailers around the U.S., as folks are starting to once again think about the local impact their dollars can have in their communities. By backing up all of these points with new products for 2019 that are beautiful, functional and attainable, Sierra Designs is poised to hit the ground running.”
Jason Badgley, CEO, Phunkshun Wear: “A change that gives me optimism is the gradual shift away from strictly technology/product based marketing to values based marketing, and it’s giving more insight to who the company is, what they believe in, how they give back, who they support, and the biggest question, why. We’ve made it a priority to incorporate our values into our manufacturing and business practices, but haven’t done a great job explaining why or saying that it’s important to us. Our support of Protect Our Winters, our Denver Certifiably Green manufacturing facility, and using fabric made from recycled plastic bottles is fundamentally important to our business model because we play in the outdoors, and believe you don’t have to destroy them to enjoy them.”
Doug Sanders, Vice President, MSR: “Some signs are pointing toward a decline in sales momentum for the outdoor industry, but I’m optimistic for strong brands like MSR. The overall industry may be taking a pause in growth, but there is no shortage of demand for long lasting, high quality, made-in-market products from trusted, cause-driven brands. This year MSR will celebrate 50 years of innovative and trusted gear, and we should fare well with the new discerning outdoor enthusiasts. Of course, there are things that concern me. The retail landscape continues to evolve rapidly, and the full impact of tariffs is still a big unknown. MSR, however, is uniquely positioned to weather these challenges. Our US-based manufacturing provides us with many advantages including quality, sustainability, and speed to market, in addition to limiting our exposure to tariff impacts in the US. We also have a loyal customer base that seeks out our products within the ever-changing retail environment and are proud of our extremely strong retail partnerships. The survivors in this shakeup are going to be those brands that are best at getting their users into the right gear. They will share compelling stories about innovative products that make experiences in the outdoors better.”
Ian Selby, Senior Vice President, Icon LifeSaver Ltd.: “There’s plenty of negativity in the UK press around retail right now, and I believe from our network in the US that the States also has concerns in the sector. Personally I see this as a positive challenge, though an incredibly tough one. We saw good retail growth in the US in the second half of 2019, right up until Black Friday. Our data suggests we are too reliant on e-commerce channels and with our water purifiers being such a technical sell, we really do need the physical stores running product demos to highlight ease of use and USP’s. Therefore brick & mortar growth is actually our core objective throughout 2019. Bearing in mind the likely increasing competitive landscape of retail, we will be incredibly selective over who we work with; natural selection denotes survival of the fittest and I think this will be reflected in retail.
“We are also keen to expand our presence in the Prepper sector – the consumers are educated and do their research and appreciate the synergy between our long term product performance and their requirements. Should there be an economic downturn this sector will actually increase its spend on life saving kit like ours.
“In global terms we should see the tide turn (excuse the pun) on plastic waste and this is definitely something we need to get our heads around both as a brand and as an industry. We genuinely have the product performance where one of our bottles can save 4000 single-use plastics, but we need the outdoor industry to come together more to continue pushing this agenda to consumers. Long term environmental cost is what’s important and I honestly believe that just a handful of brands making a stand will not work; the entire outdoor retail sector needs to champion environmental issues. I would love for the biggest, most centralized booth at the OR show be dedicated to conservation matters.”
Marian Allen, Operations Manager at Watershed Drybags: “Watershed is excited about the new products we’ve released for 2019. (and what we’re developing for 2020!) As all Watershed products are made in the USA, we are positive about the year ahead and are happy that more Americans are recreating in the outdoors than ever before. We hope we can help them enjoy their time outside to the fullest in 2019.”
Pete Flood, Owner/Founder Folding Boat Co.: “I went to the 2018 Summer Outdoor Retailer Show in Denver. It was great! My goal was to find a partner for The Folding Boat Company. Being a small startup, with two patents and production boats ready to sell, and a very sweet 12’ kayak being prototyped, I thought that partnering with a well-established outdoor marine company could yield mutual benefits in 2019. Since then I’ve had great conversations with several outstanding companies in this field. Unfortunately, the new tariffs have most of the folks I was working with scrambling to re-source production, has limited their bandwidth, and the confidence they need to bring in a new partner. I’ll complete prototyping our 12’, 25 pound kayak that assembles from a backpack in just 4 minutes. Hopefully things will settle out by then and we’ll have more opportunities!”
Chris Clearman, Founder and CEO, Matador: “I think 2019 will be a very strong year for Matador and the Outdoor industry as a whole. We’ll see significant growth fueled heavily by social media, especially Instagram. Social media gives smaller brands like ours an opportunity to build an audience and connect with them in a way that larger brands often can’t.
“We’ll continue to see the industry split into two overarching categories: premium and bargain. Some customers want the best of the best while others want the cheapest product that will do the job. This trend has been accelerated by Amazon enabling foreign manufacturers to sell directly to the U.S. consumer with no middle man. Most brands can’t compete with factory pricing so they have to shift focus to innovation and quality instead – neither of which come cheap. Matador has always focused on innovation and quality so we seem to be benefiting from this change more than suffering from it.
“I also expect to see the Travel and Outdoor industries blend heavily throughout 2019. This is happening already with the rise and acceptance of the “Adventure Travel” market, but 2019 will be the year where the blend starts to become obvious to the general consumer. Expect to see luggage stores carry more outdoor products and vice versa. Brands will also cater their product offerings to this blended-use market. Matador has been catering to this market since 2014 and has seen consistent growth every year across every facet of the business.
“As with any period of change and turbulence there’s a lot of opportunity to be found for those willing to look. Staying nimble and creating innovative products will be the key to our continued success throughout 2019.”