For the bicycle, outdoor and snow sports market, the third quarter of 2009 was one of margin preservation by way of substantial inventory reduction. Following a highly-promotional fiscal 2009 front half, vendors and accounts in the year-ago period slashed inventories to bare minimum levels, depending on at-once orders to compensate in the unlikely event of under stocked product.
Fast-forward to the third quarter of 2010, and the market took the exact opposite approach, rebuilding inventory levels while cutting promotions and focusing on full-priced product to keep margins healthy.
As a result, aggregate margins for the outdoor market improved a respectable 140 basis points for the third quarter and delivered 13.3% profit growth. Top line growth was solid as well, with the industry posting aggregate growth of nearly 13%. Only 2 of 23, or 8.5%, of publically reporting bicycle, outdoor and snow sports companies reported top-line declines for the quarter. This compares to 14 of 24, or almost 60%, that reported revenue declines in the year-ago period. Aggregated earnings for the quarter improved despite an inventory increase that neared 10% versus the year-ago period.
The primary growth catalyst this year was the Hardgoods sector, which saw all seven representative companies report sales growth for Q3 2010 after a year-ago period in which each of those companies reported declining sales – with five of those companies reporting sales up double-digits during the most recent quarter. Among the headliners for the quarter, Amer’s Winter & Outdoor division saw revenues and profits jump double-digits while Shimano saw sales jump 16% (in yen terms) and profits nearly quadruple on strength from its Asia business and heightened demand for its bicycle components.
At Jarden Outdoor, which posted the highest profit number for Outdoor Hardgoods during the quarter despite posting a decline in the bottom-line, sales improved a robust 6.9% on strength from its Coleman brand.
Aggregate profits in the Hardgoods sector were down 1.4% for the quarter, although when backing out an 80% expense-related profit drop from Head NV, earnings were actually up 9.5% for the Hardgoods sector.
Within the Softgoods sub-segment, 13.9% top-line growth was spurred by strength from every company except LaCrosse (-7.6%), which has seen weakness from its integral work segment cut into results in recent quarters. Revenue growth was robust throughout the remainder of the companies, with Deckers (+21.7%), Crocs (+21.7%) and Under Armour (+21.9%) providing the steepest top line improvement.
At Deckers, strength was spurred by its Ugg blockbuster brand as well as an encouraging recovery at its Teva business, while Crocs enjoyed its own revival on the back of newly-introduced models.
Columbia (+16.0%) also turned in a solid quarter, benefitting from strong wholesale and direct revenue in its U.S. region, and Under Armour (+21.9 %) saw its burgeoning e-commerce business supplement already-strong compression sales.
For the Retail sector, very strong growth from GSI Commerce (+49.3%) and Lululemon (+55.7%) boosted somewhat moderate gains for the rest of the sector. Vancouver-based Lululemon has been on fire all year and Q3 sales benefitted from store traffic that increased more than 20% and same-store sales growth that grew by nearly half compared to the year-ago period. At GSI, the inclusion of the recently-acquired RueLaLa business as well as a growing web presence contributed to top line growth for the quarter. Lululemon saw margins widen by 518 basis points to 55.1% while earnings improved by more than half.
Aggregate margins for the tracked retailers improved an average of 125 basis points for the quarter despite Big 5 (-50 BPS) reporting contracting margins related to slower apparel sales.
