Sports Apparel Giants Looking For Holiday Season Turnaround

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The holiday shopping season is now in full flight, but for sportswear retailers and manufacturers, the mood is anything but festive.

Many sporting goods brands have been on the decline lately, entering this critical sales period. Nike, Under the armor, AdidasAnd Puma They all missed Wall Street’s expectations for revenue or earnings declines or overall. It’s a leg lock. Expected to add to the list when it reports earnings on Nov. 29.

Those most recent reports have extended the company’s streak of delays Results They brought with them the feeling of summer and a palpable nervousness.

Looking at the balance of the year, we expect additional contracting in North America, primarily due to pressures on our wholesale business, which have intensified since our last call, Under Armor President and CEO Stephanie Lenartz said earlier this month. The company lowered its fiscal 2024 outlook to a 2-4% decline in revenue from a “flat to slight” forecast.

Companies in the sportswear and footwear space are also to a lesser extent Wasting The latter downtrend, such as Dick’s Sporting Goods, is entering 2023 with a sense of dread.

“We are very pleased with what we have under our control for Q4,” said Dick’s President and CEO Lauren Hobart. “Ours [store] Teams have moved to deliver an amazing holiday experience, but we’re carefully adjusting that to the macroeconomic environment, because we know consumers are in for a lot right now.

Despite nearly three years of uninterrupted operating gains, that area continues to struggle with other factors such as inflation, declining consumer confidence and rising interest rates.

The rise is mixed. expectations For US retail activity in general during the holiday season, particularly for categories such as sportswear and footwear.

“It’s very clear across the retail space that the environment is tight and will continue to be that way through the holidays,” Fitch analyst David Silverman said. They spoke Reuters

Boom and bust

The gloomy mood at sports retailers and brands is a fundamental shift from trends seen during the pandemic.

During the global health crisis, many of these companies posted record earnings and revenue quarter after quarter, becoming Wall Street darlings as consumers flocked to safer activities like fitness, running, golf and tennis.

Dick’s saw a 764% increase between March 2020 and September 2021. Since then, those same shares are down 16 percent, as much as the company has done. He struggled To maintain the same meteoric growth.

Much of the same can be seen with fitness companies like Lululemon Ending Although the once popular mirror sales of fitness equipment and Peloton have enjoyed the epidemic Posted A larger than expected loss this month.

“With limited marketing support, we’ve seen more than 1 million consumers download the free version of our app,” Peloton CEO Barry McCarthy said in a letter to shareholders. “That’s the good news. The bad news is that we have had little success in engaging and retaining free users and converting them to paying memberships.

Peloton’s shares are up nearly 35% in 2023, joining others like Foot Locker, Under Armor and Nike in double-digit percentage declines.

Like many other companies in its category, Dick’s is looking to realign its product and inventory mix more quickly to match new and more competitive market realities.

“Last year … there were a few unusual events,” Hobart said. “There was a spike in outdoor equipment related to the outbreak. In connection with the epidemic there was swelling on the clothes. That is not the story of this quarter,” he said.

Does a question arise?

With sluggish sales forecasts and rapidly changing demand trends, closeouts and other sales are becoming an increasingly worrying reality for many sports retailers and brands.

Adidas is dealing with a rare release of Yeezy inventory following the end of its relationship with controversial rapper Ye, formerly known as Kanye West, due to his anti-Semitic comments. But that company, like many others in the category, is also grappling with major inventory issues that are helping to cut into margins and overall revenues.

“Many retailers still have too much inventory to sell. [and] It is now being sold at a discount,” said Adidas CEO Bjørn Gulden. “So the picture is not as clean as we would like it to be.”

Efforts to streamline those products are further hampered by weak consumer demand.

“I think the industry seems more ready to go into the holidays than last year, which is good,” said David Bergman, Under Armor CFO. However, this does not guarantee that promotional activity will be lower as demand has softened slightly from a macro perspective.

What these companies need for the holidays are better-than-expected sales and a clear sense of awareness to carry them into 2024. But consumers will eventually get their wish.

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