The holiday shopping season is in full swing, but it’s anything but festive for sports apparel retailers and manufacturers.
Many of the sporting goods giants are entering this critical sales period, reeling from recent slumps. Nike, Under Armor, Adidas and Puma are all suffering from declining sales or profits, or generally falling short of Wall Street expectations. Foot Locker is expected to be added to the list when it releases its earnings on November 29th.
These recent reports have added to the series of poor corporate performance since the summer, creating a palpable sense of unease.
“As we look to the remainder of this year, we expect North America to contract further, primarily due to continued pressures in our wholesale business,” said Stephanie Linnertz, President and CEO of Under Armor. “It’s gotten even tougher since the last call.” he said earlier this month. The company has lowered its sales forecast for fiscal 2024 to a 2% to 4% decline from its previous forecast of “stable to slight increase.”
Even companies in the sports apparel and footwear space that have bucked the recent decline, such as Dick’s Sporting Goods, are entering the final stretch of 2023 with some trepidation.
“Dick’s is an exciting addition to Dick’s business,” said Lauren Hobart, Dick’s President and CEO. “our [store] The team is passionate about delivering a great holiday experience, but we know that consumers are going through a tough time right now, so we balance this with caution about the macroeconomic environment. ”
Despite nearly three years of uninterrupted employment growth, the environment continues to struggle with other factors such as inflation, lagging consumer confidence and rising interest rates.
As a result, expectations for overall U.S. retail activity during the holiday season are mixed, particularly for categories such as sports apparel and footwear.
“It’s clear that the environment is volatile across the discretionary retail industry and is likely to remain so over the holiday period,” Fitch analyst David Silverman told Reuters.
boom and bust
The darker tone across sports retailers and brands is a fundamental shift from trends seen during the pandemic.
Many of these companies have posted record levels of revenue and profits quarter after quarter as consumers flock to safer options like home fitness, running, golf and tennis during the global health crisis. , became a darling of Wall Street.
Dick’s stock price rose 764% between March 2020 and September 2021. Since then, the company has struggled to maintain the same meteoric growth rate, with the same share price down 16%.
We’re seeing similar trends with fitness companies like Lululemon, which is discontinuing sales of its once-popular mirror-connected fitness device, and Peloton, which posted bigger-than-expected losses this month despite soaring growth during the pandemic.
“With limited marketing support, more than 1 million consumers downloaded the free version of our app,” Peloton CEO Barry McCarthy said in a letter to shareholders this month. . “That’s the good news. The bad news is that we haven’t had much success attracting and retaining free users and converting them to paid memberships.”
Peloton’s stock price has fallen nearly 35% since the beginning of the year, putting it on par with stocks like Foot Locker, Under Armor, and Nike, which have also seen double-digit declines in 2023.
Like many other companies in this space, Dick’s is recalibrating its product and inventory mix more quickly to match the realities of a new and more competitive market.
“Last year…there were some unusual things that happened,” Hobart said. “There was a lump in outdoor gear related to the pandemic. There was a drop in clothing related to the pandemic. That’s not the story of this quarter.”
Will demand recover?
With weak sales forecasts and rapidly changing demand trends, store closures and other sales have become an increasingly problematic reality for many sports retailers and brands.
Adidas is dealing with the unique situation of liquidating Yeezy inventory after the company ended its relationship with the controversial rapper, formerly Kanye West, following his anti-Semitic comments. However, the company, like its peers, is grappling with major inventory issues that are reducing margins and overall revenue.
“Many retailers still have large amounts of unsold inventory. [and] They are now on sale at a discounted price,” said Adidas CEO Björn Gulden. “So the picture is not as pretty as we would like.”
But efforts to rationalize these inventories also face additional hurdles due to weak consumer demand.
“The industry seems pretty well prepared to go into the holiday season with lower inventory than last year, and that’s a good thing,” said Under Armor Chief Financial Officer David Bergman. Ta. “But demand has also softened a bit relative to the macro, so there’s really no guarantee that promotions will be lower.”
What these companies are hoping for this holiday season is better-than-expected sales and clear momentum heading into 2024. However, in the end, it is the consumer who decides whether or not that wish will come true.