SGMA: Sporting Goods Industry Hits $66 Billion

March 12, 2007
SGB Update

According to SGMA’s annual The State of the Industry report, wholesale sales in the sporting goods industry increased 7.6% to $66.44 billion during 2006, up from $61.75 billion in 2005. This top line number includes sales of athletic footwear, apparel and equipment, and for the first time this year also includes optics. Without the optics category, the overall market increased 5.8% to $65.34 billion for the year.

Apparel led sales growth in the industry in 2006, increasing 8.2% to $28.82 billion from $26.65 billion in 2005. In Footwear, sales reportedly increased 3.1% to $12.33 billion at wholesale from $11.96 billion in 2005. The report noted that, while any improvement is good news, the 3% gain posted in 2006 was well down from the 19% growth seen in 2005 over 2004. According to SGMA, footwear units sold in 2006 were relatively flat compared to 2005, but it was the slight up-tick in average selling prices that fueled the dollar sales gain.

The State of the Industry treats the hardgoods market as a two-faceted segment with Sports Equipment on one side and Exercise Equipment on the other. Sports equipment sales improved 4.3% in 2006 to $19.52 billion, but lagged behind the 5.3% growth posted in fitness equipment. Fitness, however, is a much smaller piece of the overall sporting goods pie with 2006 sales totaling $4.66 billion, up from $4.43 billion in 2005. Within Sports Equipment, Soccer equipment posted the largest year-over-year percentage growth, up 7.1% to $300 million. Though up only 2.0%, Golf saw the largest absolute dollars growth, increasing to $2.97 billion from $2.91 billion in 2005.

Though the report is a look back at the year that was, it also projects forward, looking at the year ahead. According to the report, an industry survey found that lacrosse is expected to provide the most growth in 2007, though off a small base, with fitness walking, aerobic training and soccer also expected to be hot spots.

On the sales line, SGMA anticipates that 2007 overall sales in the sporting goods industry will increase approximately 5.9% to $70.38 billion. The overall Sports Equipment segment is expected to post a 5.4% increase in wholesale sales to $21.74 billion. SGMA is forecasting that overall Exercise Equipment will see sales grow 4.6% to $4.88 billion. Sports Apparel should grow 6.5% to $30.70 billion, while the report anticipates that Footwear will grow 6% to $13.07 billion.

SGMA: Sporting Goods Industry Hits $66 Billion

March 7, 2007
SGB Executive SGB Update
by

The U.S. sporting goods industry is a $66 billion business at wholesale. Its growth rate is greater than the national average, technology is at the core of product innovation, and fitness gear continues to be the number one equipment category. Those were a few of the many noteworthy points made by Sporting Goods Manufacturers Association (SGMA) President Tom Cove during his annual State of the Industry address. Cove’s presentation was made today at the U.S. Chamber of Commerce in Washington, D.C. – site of SGMA’s 2nd Industry Leaders Summit.

According to Cove, the U.S. sporting goods industry (sporting goods equipment, sports apparel, and athletic footwear) grew by 5.8% in 2006 while the U.S. Gross Domestic Product expanded by just 3.6% in 2006. Cove noted that SGMA expects the sporting goods industry to grow by 5-6% in 2007.

The Year 2006

In looking back at 2006, the sports apparel industry expanded by 8% to $28.8 billion (at wholesale). That significant rate of growth played a key role in the entire sports industry’s expansion last year. Basically, consumers like to wear performance fabrics that provide compression, moisture management, and temperature control.

As for athletic footwear, wholesale shipments were up 3% to $12.3 billion. In the footwear category, unit sales were flat while average prices rose about 3%.

The big gainers in sporting goods equipment were exercise equipment and tennis. Wholesale sales of exercise equipment to consumers grew 5% and sales of exercise equipment to institutions (clubs, schools, hotels, etc.) jumped 6%. The wide variety of user-friendly machines available is spurring growth in fitness. For the third straight year, tennis sales rose – this time by 4% to $245 million (at wholesale). Why such growth in tennis? It’s because tennis players are buying high-tech racquets at premium prices.

There are a number of isolated issues which are also affecting industry sales such as:

Fashion Rules. Only 33% of all sports apparel and athletic footwear are purchased with the intent that it will be used in an active sport.
Aging Gracefully. There’s a trend of older Americans buying and using fitness equipment.
Home Entertainment. Consumers are spending large amounts of discretionary income on DVD players, TVs, MP3 players, laptop computers, and other home entertainment items – that trend is curbing spending on new sporting goods and exercise equipment.

Shelf Space Concerns. More retailers are producing private label merchandise which is taking away valuable shelf space from manufacturers. Also, one of the side effects of retail consolidation is a reduction in the number of retail outlets which further reduces shelf space opportunities for manufacturers.

Youth Sports. Team sports participation among children is stagnant.

The Licensing Biz. Last year, retail sales of sports licensed products were up 4% to an all-time high of $13.9 billion, according to estimates by The Licensing Letter.

Sports Participation

While participation in nearly every all sport has fallen slightly among casual participants and remained steady for “frequent” participants, programs are being implemented to get more people involved on the field of play. These initiatives range from team sports to individual sports to winter sports:

Golf. A player-development effort began in 2004 in the golf industry.
Baseball/Softball. Play Ball USA is a program focused on re-introducing young people to these two sports, especially softball.

Football. The NFL is working to expand the sport at all amateur levels.
Winter Sports. The SnowSports Industries Association has launched “Winter Feels Good,” which promotes winter sports to help reverse obesity.

Public Policy

The SGMA is active on Capitol Hill generating congressional support for two pieces of federal legislation that can impact, in a positive way, the health of millions of Americans:

(1) The Personal Health Investment Today (PHIT) Bill, a new piece of legislation in Congress, is geared at encouraging physical activity by easing the financial burden to participate. If passed, this bill would expand pre-tax accounts to allow for payment of expenses related to physical activity and team sports, including equipment. The PHIT Bill can empower Americans to be active, healthy, and fit.

(2) The Carol M. White Physical Education Program (PEP) Bill is using federal funds to jumpstart innovative P.E. programs in America’s schools. To date, PEP has provided more than $400 million in grants to P.E. programs in schools and community based groups to help them buy more equipment and train more instructors. The PEP Bill is teaching children how to live active and healthy lives.

The Year 2007

The SGMA is optimistic that 2007 will be a strong and steady year for the industry for a number of reasons:

Shoes, Socks, and More. Sports apparel and athletic footwear will have a solid year thanks to the blend of fashion and performance.
The Senior Set. ‘Baby Boomers’ will continue to support the fitness equipment industry.
For Your Eyes Only. The emergence of the optical goods industry (binoculars, goggles, and sun glasses) bodes well for overall industry sales.
Big Hitter. The emergence of square-headed drivers will be a big boost for golf.
Computer Connection. Internet sales will continue to grow.
The Green Movement. Many manufacturers are producing ecologically sensitive products.

In response to a survey by SGMA, the five hottest sports for sales growth in 2007 will be lacrosse, fitness walking, aerobic training, soccer, and yoga/Pilates.

As the industry moves into 2007, the biggest challenge is how to gain market share in a mature market. The best way to achieve that objective is to offer consumers new or improved products and to open up new distribution channels. Besides trying to increase market share, the next two biggest challenges for vendors in 2007 will be keeping tabs on material costs and acquiring new technology.

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