There is further retail consolidation among retailers, as well as manufacturers. Internet sales strengthen. Licensed sales gain momentum. Federal funds back P.E. Those are just a few of the topics in the 2004 SGMA International State of the Industry report. The highlights of this annual document were delivered by SGMA International President/CEO John Riddle during the 18th Annual Financial Day International at The Super Show®/2004. SGMA’s State of the Industry report provides a look inside the sporting goods industry, nearly a $50 billion industry (at wholesale).

This document highlights events that occurred in 2003 and provides a forecast for 2004. Two of the largest segments in the sporting goods industry, athletic footwear and fitness equipment, grew in the second half of 2003 and seem to be accelerating into 2004. Unfortunately, a decline of 3.7% in the sports apparel category offset the gains in athletic footwear and fitness equipment. Consequently, according to SGMA’s current analysis, U.S. manufacturers’ shipments of sporting goods declined by 0.5% in 2003 to $49.8 billion. Sports licensed products had a banner year in 2003 and sports-related looks continue to be “in fashion.”

SGMA’s projection is for sales to grow by only 1.3% in 2004. The drop in average selling prices, excess retail capacity, and consumers trained to “buy on sale” are constraining more robust sales growth. However, the companies that participated in the State of the Industry report believe that the industry will do much better in 2004 than 2003.

The excess of sporting goods retail space continues to plague the industry. This excess results in severe price competition, mergers and acquisitions, and a threat of bankruptcy for many companies. Consolidation was rampant in 2003. The biggest merger combined Gart Sports and The Sports Authority, creating the closest to a national chain for a sports retailer.

On the manufacturing side, Nike purchased Converse; Rawlings bought Worth, Inc.; Fotoball and Brass Eagle were acquired by K2; Russell Athletic bought Spalding’s team sports division; Spalding’s Top-Flite and Hogan golf interests were acquired by Callaway; Amer Group built its portfolio with ATEC; Technica purchased Rollerblade; Land ‘N’ Sea and Navman NZ Ltd. went to Brunswick Corporation; Tunturi was acquired by Accell Group; Leonard Green and Partners bought Varsity Brands; and Camelback was purchased by Bear Stearns.

Retailers are increasing the percentage of private labels in their stores, putting manufacturers in the position of competing with their own customers. Private labels are mainly in sports apparel, but the retailers are putting their labels on equipment, as well.

With the pressure to reduce costs, manufacturers are sourcing their products from independent factories in developing countries. Many manufacturers no longer “make” their products, thereby becoming suppliers and not manufacturers.

With sports participation on the wane, many industry groups have joined forces to launch campaigns to win new participants. Some of the groups are bowling, billiards, tennis, golf, baseball, softball, hunting and fishing. P.E.4LIFE is an industry-wide effort to restore physical education programs in the Nation’s schools.

Athletic Footwear
In 2003, unit sales for athletic footwear rose 4.9%, while spending was up 4.5%. The dominant fashion for several years in athletic footwear has been for “retro” or classic styles. However, retro might be replaced by a “sleek, low-profile Euro fashion look built on track and field, wrestling and motor sports,” according to Sporting Goods Intelligence. These are casual, not performance shoes. Basketball styles have returned to popularity and accounted for about 22% of the market at mid-year 2003. More and more athletic footwear companies are utilizing affiliations with the music/entertainment industries to market their products. Despite the aging of America, teens and young adults remain the foundation of the athletic footwear market.

Basketball
Basketball is, by far, America’s most popular team sport, with the number of frequent players growing by 14% since the mid-1990s. The number of frequent female basketball players has risen from 2.0 million in 1990 to 2.4 million in 2002. Basketball attracts about five million new players every year. Increased public demands for better quality recreational facilities are helping sales of institutional basket systems. Without a doubt, long term growth for sales of basket systems and basketball is tied to participation.

Baseball
The baseball community is working hard to attract new players. Major League Baseball and its players association jointly sponsor The Baseball Tomorrow Fund, which restores fields and provides equipment for worthy local programs. The numbers for organized youth baseball participation are steady – though sandlot/pickup play is down considerably since the early 1990s.

Billiards/Pool
Manufacturers’ sales of billiard table and equipment rose 5% in 2003. The average player today is more affluent (than in the past), younger and more likely (than in the past) to be female. Between 1990 and 2002, the number of players who called billiards their favorite sport increased by 24%. The televising of billiards/pool is winning strong ratings.

Bowling
Bowling is America’s favorite sports activity, with 53.2 million participants in 2002. More young people are bowling and the bowling center operators are turning their facilities into entertainment centers that offer video arcades, billiards, darts, enhanced food service and a variety of special bowling programs. Ball manufacturers are successfully marketing a variety of novelty balls with cartoons, brand labels and photographs imprinted on the surface. Bowling at the high school and college level is on the rise.

Fitness Equipment
Health club memberships have continued to grow. This growth has occurred among convenient, studio-like clubs, such as Curves for Women. Total club memberships have more than doubled since 1987. Colleges and universities are upgrading and expanding fitness facilities – which help attract and recruit new students. Baby boomers and seniors have swollen the membership rolls of health clubs. Exercise with free weights is the single most popular workout in the U.S. Treadmills are the number one consumer expense for home exercise equipment. More people are realizing that exercise is about more than muscles – it’s also about health.

Golf
Manufacturers’ sales of golf clubs rose 3.7%, mainly due to strong demand for putters and fairway woods. The number of frequent golfers has increased by 30% between 1990 and 2002. “Play Golf America,” “Link Up 2 Golf,” and “The First Tee” are just three of many programs geared at providing playing/instructional opportunities for golfers of all ages and abilities.

Outdoors
SGMA International, the Outdoor Industry Association, the National Council of Youth Sports and other organizations have lobbied vigorously for Congress to allocate spending for the Land and Water Conservation Fund, which helps states purchase land for wilderness areas and to create parklands and develop playing fields. Congress has earmarked $450 million for such efforts, which include the allocation for 2004. Manufacturers’ sales of equipment used in hiking and camping rose 5% in 2003, but the outlook for 2004 calls for growth at a somewhat lesser rate. Although camping and hiking are among the most popular sports activities in the U.S., most people do them infrequently. However, they are usually family experiences and are highly valued.

Skateboarding
Skateboarding has gained national attention from television coverage of extreme sports, video games and from the movies. The average age of a skateboarder is 13.6 years, who loves the sport for its athletic challenge and participates an average of 51 times a year.

Skating – Inline and Roller (2×2)
Inline skating is developing a series of marathons that are proving popular. Inline marathons require far less training than running marathons, are completed in half the time, and the basic attraction is fun, not competition. The average age of an inline skater is 19. Traditional roller skating has remained stable in this decade.

Soccer
SGMA International estimates that wholesale shipments of soccer balls and equipment increased 4% in 2003 and expect a similar increase in 2004. In each of the past four years, soccer was voted the hottest sport in the U.S. by respondents to the SGMA International Industry Survey. Soccer’s popularity can be measured by the 78% increase in frequent participation since 1987 and the 85% increase in the number of high school varsity players between 1990-91 and 2002-03. Soccer is extremely popular with females. They represent 43% of all players and 47% of all high school varsity players.

Softball
Fast-pitch softball is the second fastest growing high school sport for girls after soccer. Women’s fast-pitch softball is an Olympic sport and there are hopes that the 2004 Games in Athens, Greece will spark interest among young audiences. SGMA International’s Baseball/Softball Participation Committee launched a coed program – “Summer Fun Softball” – for 7- to 14-year olds that stresses the fun of slow-pitch softball. Hopefully, this program will stimulate the recreational side of slow-pitch softball.

Sports Apparel
Consumers bought an estimated 24% more items of sports apparel in 2003 than they did two years earlier. Sporting goods retailers are aggressively expanding their private label collections, making manufacturers work harder to develop innovative products, improve their brand management techniques and better understand their consumers. The team segment has remained strong. This segment supplies uniforms and accessories to schools and organized sports teams. Comfort is still the feature that consumers seek most often in sports apparel.

Sports Licensed Products
The sports licensed product business enjoyed robust growth in 2003 and licensors are bullish about their prospects for 2004. Apparel is the largest single category of sports licensed products, accounting for more than 30% of total sales. The NBA reported a 60% gain in sales for its fiscal year ending September 30, 2003. Sports logo garments are back in style, especially “authentic vintage replica jerseys.”

Tennis
In 2004, the tennis industry will launch a new campaign designed to attract beginners to facilities that promise consumers they can “Learn to play tennis…Fast.” Although overall participation in tennis has declined, the percentage of females who are frequent players has increased.

Water Sports
Water skiing and wakeboarding participation are driving sales in the water sports industry. The growth of wakeboarding has been a ‘shot in the arm’ to the water sports industry and is one of the few water sports that could be called “hot.”

The 2004 SGMA International State of the Industry report can be obtained ONLINE