SGMA International released their annual State of the Industry report at last weeks Super Show in Orlando, citing a stronger economy for the 4% increase in wholesale deliveries reported by industry manufacturers. The increase was reportedly the largest since 1997 when wholesale sales grew 5.2% and easily beat the 1.3% increase that SGMA projected for the year. The results, which are based on a survey of SGMA members each year, shows a turnaround from the 0.5% decline in 2003 and almost double the 2.2% gain in 2002.
The growth in the industry came pretty close to matching the 4.2% growth in U.S. GDP for the year, a clear sign that the industry may be settling into its new mature industry status after the heady growth of the early nineties that easily outpaced the economy and the late nineties sluggishness that fell short of GDP growth driven by the tech sector.
SGMA is forecasting 3.5% growth for 2005, based on their survey of members, roughly matching the U.S. GDP that is expected to grow 3.4% for the year.
The report pointed to positive results in the five largest categories in 2004. Wholesale shipments of Sports Apparel rose 5% to $24.1 billion in 2004. Athletic Footwear shipments were up 2.6% to almost $10 billion. Fitness Equipment experienced an increase of 4% to almost $4 billion, 80% of which represents equipment for home exercise. Golf Equipment sales rose 3% to $2.5 million. Hiking and Camping Equipment shipments increased 3% to almost $1.8 billion.
Tennis, which is comparatively a much smaller category, reversed a long downward trend in sales, growing by 7% to $225 million on increased sales of balls and beginners racquets.
The sporting goods industry saw a 9.6% increase in the five-year period from 1999 to 2004, and grew 67.5% since 1990. The relative strength of 2004 erased the drag that 2003 had placed on the previous five-year period.
The five-year growth gain was driven by above-average growth in Athletic Footwear (+15.2%), Fitness Equipment (+14.0%), and Softball/Baseball Equipment (+15.6%), offset by a 58% drop in In-Line Skate wholesale sales.
The report clearly implies that the recent lack of innovation in the sporting goods industry has led to the stagnation of growth that is now affected more by a healthier economy offset by declining participation numbers. As SEW speculated after last years report was released, the energy surrounding the sporting goods market will only diminish further as the industry consolidates and once iconic brands are swallowed up and retailers focus more on private label offerings. The industry risks getting trapped in a battle for market share as companies look for growth even as the industry flattens.
In a presentation at a Monday luncheon, incoming SGMA president and CEO Tom Cove said that participation in most sports and outdoor activities, except for fitness and exercise, has been stable or in decline for at least 10 years. Participation studies cited by SGMA show that Team Sports and Tennis have lost millions of casual players but have retained a strong core of frequent players.
Participation in many organized Team Sports has increased while pickup play has declined sharply. About 30% of children aged 6 to 17 dont participate in any team sport, according to SGMA International research.
SGMA emphasized in the report that, despite the increase in participation in many organized Team Sports, the gain has not held pace with population growth and pickup play has declined sharply. Two sports, Soccer and Slow-Pitch Softball, were said to be troubling, as Soccer growth slowed and Slow-Pitch Softball saw shrinking participation in organized play.
The report stated that about 20% of all Team Sports equipment used by players is sold to institutions through the team dealer network, while other related on-field and off-field items for Team Sports use now exceed $1 billion at wholesale.
The team dealer segment was said to have grown in low-single-digits in recent years, not exactly the kind of growth that would precipitate the kind of activity we have seen in the sector over the last year as Collegiate Pacific moves to blanket the U.S. with road salesmen through both acquisitions and organic growth. Sport Supply Group is also very active in the sector, partnering with team dealers to provide online selling resources and direct product to sell to the institutional markets. Even footwear companies are focusing efforts on the sector, with New Balance expending considerable resources to develop cleated product and building a team sports group to land with the dealer network.
On a category basis in Team Sports, the SGMA study reported that sales of Basketball equipment and balls inched up roughly 1% in 2004 to about $380 million. The institutional market for basketball backboard systems is growing in low-single-digits.
SGMA sees little change in the growth rate in 2005 as flat to declining participation numbers put price pressure on the market. Even Basketball footwear, which is primarily a fashion footwear category despite its performance status, has seen pricing pressure. NSGA recently reported that average selling prices for Basketball footwear declined 2.6% in 2004 and decreased 4.4% over a five-year period.
While Soccer was voted as the hottest sport in the U.S. for the last five years, sales of Soccer balls and equipment rose just 4% to 5% annually, resulting in $250 million in shipments in 2004. Participation is growing in both school and league play in Soccer, with girls accounting for 40% of all soccer players and 47% of all high school players. Total high school team participation jumped 88% from the 1999/91 to 2003/04 school years, almost the same rate as the registration growth for the U.S. Youth Soccer Association, but that growth rate may be in jeopardy as SGMA reports that the numbers have stalled at about 18 million, according to American Sports Data. The girls that got started in Soccer over the last 14 years are now fueling participation at the college level, as growth at that level grew nearly 200% since the 1990/91 period.
Much of the growth in girls Soccer may have come at the expense of Softball, a sport that has reportedly lost 16 million participants since 1987 and more than three million since 2000, according to ASD. Still, Softball equipment and balls increased 2.5% in 2004 to about $173 million. SGMA is projecting a similar gain in 2005.
>>> Look for a review of the Footwear and Apparel sector in next weeks issue of SEW…
