SBJ/January 19 - 25, 2004/Marketingsponsorship

Sporting goods forecast affects retailers, manufacturers at Super Show

While licensed apparel and athletic footwear are performing well, some forecasts released at the Super Show in Orlando last week have to concern retailers and manufacturers alike.

SGMA International's annual forecast is for U.S. sporting goods manufacturers' wholesale revenues to increase just 1.3 percent this year, after sales decreased by 0.5 percent to $49.8 billion in 2003.

One of the factors holding back growth is the overcapacity of sporting goods retail. That's why another finding is equally disturbing: the Sporting Goods Intelligence annual survey, which found that America's sporting goods retailers plan on adding another 10 percent in retail floor space to an already over-retailed market. That sounds like a recipe for more rampant discounting that is already eroding margins.

"The square-footage growth is concerning, as is the amount of promotional pricing," said Sports Authority CEO Doug Morton. "There's still too much square footage, especially when it comes to [athletic] footwear, so there has to be a contraction there."

A CAMPAIGN WITH AUTHORITY: Sports Authority, now the country's largest full-line sporting goods retailer with 387 "big box" stores in 45 states, recently hired Cliff Freeman and Partners as its new ad agency.

Speaking for the first time about his new agency, Morton said Freeman was selected from a list of 50 agencies that responded to RFPs and earned the assignment based on its creative strengths and strategy.

Freeman's mission is to help firm up the Sports Authority brands, both in regional markets, where the chain is replacing the Gart brand, and nationally. A large portion of the retailer's $110 million-plus in ad spending this year will be local and regional, but Morton said Freeman is expected to produce a national brand campaign that will air in the fourth quarter.

MAS MASS: The NBA's stable of licensees is doing well enough that Sal LaRocca, the league's licensing impresario, is projecting the fourth consecutive year of double-digit growth, along with retail sales of around $3 billion. Nonetheless, he's busy building a mass merchandise licensing program for the likes of Wal-Mart or Target.

NBA hard-goods licensees such as Huffy, Spalding and Electronic Arts count Wal-Mart as their biggest customer, not to mention NBA corporate sponsors like Coke, which also bows down to the boys from Bentonville.

Apparel will be trickier since much of the NBA's current success has come from sales in urban retailers and better sporting goods stores. But if the NBA can sufficiently segment its lines, a mass merchandise program would give it a good hedge when the fashion wave that has lifted licensing inevitably ends.

There also could be an opportunity for moderately priced footwear, similar to the one a Spalding licensee sold at mass merch with an endorsement from Hakeem Olajuwon years ago. LaRocca said a program could be in place as early as this fall, but given the long lead times and exacting specifications (some might say demands) insisted upon by mass merchandisers, 2005 seems a more likely scenario.

FORECASTING THE SUPER BOWL: Licensees and retailers of NFL apparel kept a close eye on the run toward the Super Bowl.

Northeast-based retailer Mitchell Modell's group abandoned its dinner table to watch Fox's broadcast of the Philadelphia Eagles' overtime victory over Green Bay on Jan. 11. After Philadelphia converted a key fourth-and-26 during the fourth quarter, diners throughout the steak joint heard Modell exclaim, "That catch just saved me a couple million dollars."

Among licensees, the difference between a New England-Philadelphia matchup and one between the smaller markets of Charlotte and Indianapolis varied from a low of 10-1 from Majestic Athletic President Faust Capobianco to "infinite — the biggest ever" from a senior executive at one of the NFL's largest apparel licensees.

NFL licensing chief Mark Holtzman preached caution, noting that the Tampa Bay Bucs' championship merchandise last year far exceeded expectations.

"If it's Indy and Carolina, there will be some unhappy licensees initially," he said. "But you never know what teams the country will adopt and what the story lines will be."

The fact that there are two weeks between the NFC and AFC championship games and Super Bowl XXXVIII also should be a boon to sales.

Meanwhile, Holtzman is predicting 5 to 6 percent sales growth for the NFL's apparel licensees, which no doubt will be helped by the introduction of a new NFL jersey after the season priced at $95 — somewhere between the retail price of an authentic and a replica jersey.

NEW & NOTABLE: Some of the new licensed products we liked at Super Show included the fashionable apparel offerings from Moonlight Graham, along with 5th & Ocean's licensed women's togs.

On the more fanciful side were two new NBA licensee offerings: the team-specific facial tissues from Pro Tissues, appropriate for use when your favorite NBA squad loses a tough game, and the licensed pet products from the aptly named Sporty K-9, NYC, which is offering team-specific doggie jackets, doggie jerseys, bandanas and plush toys for pet play.

SUPER SHOW SMACK: The 2005 season will mark the big changeover when MLB licensee Majestic Athletic will have uniform rights for all 30 MLB teams. This season, it adds the San Diego Padres to its roster, giving it 16 teams. Not coincidentally the Padres will have new uniforms to go with their new ballpark this season. ... Attendance seemed sparse during Super Show's first year of a three-year stay at Orlando's Orange County Convention Center. Those reminiscing of the days when Nike's booth was a separate show unto itself wondered about the future of the show in an age of retail and manufacturer consolidation and with increased competition from apparel shows like Magic and various footwear-specific gatherings. "We're seeing the end of an era," said former Sports Authority Chairman Jack Smith, now helping to run one of Italy's biggest sporting goods retailers. Just as the three top sneaker brands have left the Super Show in recent years, so have some of the biggest sports properties. The NFL, which shared a booth with MLB for the past several years, took a meeting room, a practice the NBA adopted a few years back. Still on the show floor were the NHL, NASCAR and MLB.

Terry Lefton can be reached at tlefton@sportsbusinessjournal.com.

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