At Ispo, Arne Arens, The North Face’s sales director for the EMEA region, announced that the brand plans to expand its retail network strongly in the region this year. While TNF wants to add seven doors to its present 25 corporate stores, there will also be a major increase in the number of fran- chised stores: Currently, 47 stores are run by retailer partners across Eu- rope, and there should be 22 more of that type by the end of this year.
On top of this, The North Face is expan- ding its offer directly to consumers via the internet to six more countries. For the moment, the brand’s e-commerce has been limited to France, the U.K. and Sweden, but in the course of this year its online shop will also be acces- sible from Italy, Germany, Ireland, the Netherlands, Austria and Spain.
According to Arens, own retail still makes up less than 10 percent of sales for The North Face in the EMEA region, but it could be around 20 percent in
the long run. On the other hand, there are no plans to reduce the turnover generated via wholesale customers, as the company’s growth plan fore- sees strong increases with existing or new retail partners. Currently, TNF’s online sales in Europe correspond to the annual sales of one single-brand brick-and-mortar store.
Furthermore, TNF wants to see a shift in the breakdown of sales by geogra- phy in the EMEA region of Europe. As of 2011, 40 percent of the turnover was made in northern part of Europe, which comprises Scandinavia, the Bri- tish Isles and the Benelux countries. Thirty percent comes from the Ger- man-speaking countries as well as the Czech Republic, Slovakia, Hungary and Poland. Twenty percent of sales come from Italy, Spain, France and Portugal. The remaining 10 percent is made in eastern and southeastern Europe as well as the Middle East and Africa.
The North Face has already recorded an improvement over the past few years in terms of a stronger share of sales in markets outside the northern European zone, but the brand really wants to push the business elsewhere, notably in the emerging markets, to achieve a more sensible spread of sales across the region. Besides, Arens sees still a high potential in mature outdoor markets such as France and Germany, followed by Italy and Spain.
On the product side, TNF has joined forces with ABS, the German supplier of avalanche ball rescue systems, in presenting a backpack called “Patrol 24 ABS” at Ispo. With this pack, the ABS device is removable to give you more backpack space when you’re not in avalanche-prone areas.
Meanwhile, The North Face is accele- rating its program to provide ecolo- gically and socially more sustainable products. The company reports that 27 percent of its merchandise already meet the standards of Bluesign, of which TNF is a partner, and it aims to reach a ratio of 37 percent this year and 65 percent by 2015.
Slow Start to 2012 for Outdoor Retailers
Boulder, CO (February 14, 2012) Continued warmer than average temperatures dampened outdoor product sales for the second straight month in January. Preliminary Outdoor RetailTRAK™ data from Leisure Trends Group report that January 2012 sales declined 1% from January 2011. “The US monthly snow cover extent was the 3rd smallest on record in the past 46 years”, states Leisure Trends Retail Analyst JJ Rudman. “Basically, Mother Nature has been working against outdoor retailers for the past two months.”
Outdoor specialty stores posted the greatest losses, down 9% from January 2011. The South’s 18% drop led the dollar decline while specialty retailers in the West fell a more modest 4%. Chain store sales fell 3%. On a positive note, the warmer temperatures benefitted paddle sport sales. The category enjoyed double-digit growth at chain, specialty and online retailers this January.
Following a December increase, online sales of outdoor products gained 21% in dollars over January 2011, on a huge 38% bump in units sold. Average retail selling price plummeted 12% for the same period. Equipment accessories, apparel and footwear all contributed to both the dollar growth and ASP decline. Rudman cautions that high sales do not necessarily equate to healthy sales. “The high unit sales and low ASP in January 2012 suggests that retailers are discounting to move seasonal product out of stockrooms. The good news is that it is working; online sales in January were the highest recorded by LTG thus far. The bad news is that margins are likely taking a hit.”
With similar weather patterns predicted for February, outdoor retailers may need to plan for an early Spring.
About Leisure Trends Group – LTG is the leading provider of consumer research, retail market intelligence (retail sales tracking) and integrated CRM/Direct Marketing services for the sports, recreation, hospitality, travel and entertainment industries. Suppliers, retailers, associations, resorts and financial analysts rely on Leisure Trends Group for actionable consumer insights, accurate retail sales data that includes margins and inventory, and innovative targeted marketing solutions. Leisure Trends Group is headquartered in Boulder, Colorado. For more information, contact Julia Day, 303-786-7900 x107/ info@leisuretrends.com or visit www.leisuretrends.com.
Overcoming balmy winter conditions in its Western states, Sport Chalet, Inc. reported sales grew in its fiscal third quarter ended Jan. 1 as robust online sales made up for a dip in same-store sales. The loss slightly widened in the period. The retailer did warn that comps in the current its current quarter may impacted by continued warm weather.
Net sales increased 1.5 percent to $97.2 million in the quarter. According to the company’s 10-Q filed with the Securities & Exchange Commission, the increase was primarily due to a calendar shift increase of $5.2 million and an online sales increase of 14.5 percent, partially offset by a comparable store sales decrease of 2.0 percent and a store closure decrease of $2.1 million.
The comp decrease was primarily due to the unseasonably warm and dry winter weather, which significantly affected snowfall at the resorts close to its store base in California, Nevada and Arizona. It also has one store in Utah. The poor weather resulted in a 21.8 percent decrease in winter related merchandise, which was partially offset by a 6.6 percent sales increase in non-winter categories.
Online sales of winter related merchandise decreased 13.0 percent while online sales of non-winter categories jumped 30.9 percent.
The impact of the calendar shift is primarily the result of the week following Christmas being included in the third quarter of fiscal 2012 compared to the fourth quarter in fiscal 2011. In October 2011, one store was closed to complete the store’s relocation to a larger store in an area with more appealing customer demographics.
Gross margin eroded slightly, down 40 basis points to 27.1 percent of sales, primarily due to an increase in promotional activity from the week following Christmas being included in Q3 of fiscal 2012 compared to Q4 in fiscal 2011. SG&A expenses increased 0.8 percent, overall due to an increase in advertising costs, partially offset by savings in other expenses. As a percent of sales, SG&A decreased slightly to 25.1 percent of sales from 25.3 percent due to sales leverage.
The net loss in the period was $1.04 million, or 7 cents a share, steeper than from a loss of $861,000, or 6 cents, accrued in the year-ago quarter.
In a statement, Chairman and CEO Craig Levra said the “the unseasonably warm and dry winter weather” led to the 2.0 percent comp decline in the quarter but also noted that it followed three consecutive quarters of positive and sequential improvements. Its comparable- stores sales grew 1.3 percent in its fiscal fourth quarter, 2.3 percent in its fiscal first quarter and 3.1 percent in its fiscal second quarter.
“We are working diligently to minimize the negative effects of the weather while capitalizing on the merchandise categories that respond well to warm and dry conditions,” said Levra.
Despite the slightly wider Q3 loss, the net loss in the first nine months of its fiscal year was reduced to $1.3 million, or 9 cents per share, from a loss of $3.3 million, or 23 cents, a year ago. Sales increased 1.4 percent with comps ahead 1.0 percent and online sales vaulting 26.1 percent.
After finding the area it serves among the hardest hit by the severe downturn in the macroeconomic environment, Sport Chalet embarked a turnaround effort that in- cluded expanding specialty brands, emphasizing the availability and expertise of its sales staff, and cutting expenses. That helped reduce the fiscal 2011 loss to $3.0 million from $52.2 million in fiscal 2010.
Regarding its financial condition, Sport Chalet noted that on Jan. 1, the company’s bank credit facility had a borrowing capacity of $65.0 million, of which the company utilized $31.1 million, including a letter of credit for $2.6 million) and had $33.9 million in availability. That compares to $27.3 million in availability for the same period ended last year.
Sport Chalet warned that the fiscal fourth quarter may be negatively impacted by a further decline in comps due to continued warm and dry weather, a relative increase in the amount of winter related merchandise sold at lower margins during the quarter, and the potential need for future retail price reductions on the additional remaining winter inventory. Also affecting comparisons is the fact that the week following Christmas, a high sales volume week, was included in fiscal Q3 rather than the fourth quarter as in fiscal 2011, and the fourth quarter of fiscal 2012 consists of one less week than fiscal Q4 2011.
A 50 percent decline in the snow cover in December caused inventory at spe- cialty snow sports shops to swell by 16 percent compared to their level at the end of last year, according to the latest monthly report released by Snow-Sports Industries America. Specialty shops sell-through was down 10 percent overall through December as consumers waited for more snow to fall.
Still, sales remained above the four-season average and a mid-January change in the storm track may help the retailers recover some of the sales lost in December.
August through December 2011 sales reached $2.2 billion. While that was 2 percent below last season’s record sales, it was above August-December sales in the 2008/2009 and 2009/2010 seasons. Sales during the 2011 period were down 10 percent overall in units with big drops in accessories, such as goggles, wax, and gloves. Equipment and apparel sales, which consumer normally acquire earlier in the season, fared better with increased sales in alpine and AT/Randonee equipment and insulated tops.
SIA said the drop in sales correlated directly to the lack of snow, but noted that as of Jan. 24 snow covered 41 percent of the lower 48 states, compared to 23 percent in December 2011 and 48 percent in December 2010.
Despite the lack of snow, sales of reverse and mixed-camber skis reached 87,000 units, up 75 percent, and accounted for 23 percent of all alpine skis sold August through December. In-Season AT/Randonee boot sales are up 12 percent in units and dollars, and skins sales are up 10 percent in units sold and 12 percent in dollars sold. Rocker snowboard sales accounted for more than 70 percent of all in-season snowboard sales. Sales of rocker boards increased 13 percent in units and 11 percent in dollars sold through December.
The Outdoor Retailer Winter Market show in Salt Lake City again drew record attendance, busy aisles, and warm smiles – even after one of the toughest Decembers retailers had to endure. It was hard to notice that many attendees were suffering through the toughest winter at least since the Great Recession arrived in 2008/2009.
The mood on the Salt Palace show floor was surprisingly upbeat considering the complete lack of snow in the lower 48 states in a 180 degree change from the 2011 show. While there was clearly less energy on the floor on the first day, retailers and reps were upbeat on the future of outdoor recreation. This in part reflected the diversity of the activities at the show. Buyers for hook and bullet and climbing shops, for instance, told The B.O.S.S. Report that the warm weather was actually boosting their business, while several apparel and footwear vendors said their growing distribution outside of out- door specialty and internationally assured continued double-digit growth in 2012. Nor did events in Europe seem to cast much of a pall over the show. Companies are clearly moving forward with innovation and new programs.
This time the weather was the culprit with many regions of the country reportedly experiencing their warmest winters in some say over two decades.
The shortfall hit particularly hard in December, resulting in heavy discounting already arriving in stores by January to clear bloated inventories of outerwear, insulated boots, skis and other cold-weather goods. Those high inventory levels have already set off concerns among vendors about open-to-buy dollars on spring pre-season and whether cancellations should be expected. Other vendor worries included whether winter 2012/13 orders may be guided down in a kneejerk reaction to a poor winter 2011/12.
At the same time, after two strong winter seasons in which many stores ran short on inventory and missed opportunities, some retailers may be in the lurch after having ordered too aggressively this past winter season.
Vendors will certainly get an opportunity in coming weeks and months to support the specialty channel, which will certainly experience liquidity issues. Rocky Mountain retailers were already discounting ski equipment and outdoor apparel in early January and if the snow that started last week does not persist, the regular post-Presidents’ Day markdowns are expected to be especially deep.
Closeouts, which became virtually absent last season, will return, as vendors move to liquidate inventory they had expected to sell as reorders. Vendors will also likely take back some inventory on a case-by-case basis.
“As a snowboarder and skier I’m really bummed out about the weather,” said Cec Annett, chief merchandising officer for theclymb.com, a private sale site that specializes in helping vendors liquidate surplus goods. “But as a business, I’m happy. In the last two weeks, the phone calls have been pouring in.”
Whether the business will recover or not will depend on the weather, both here and in Europe. The good news is that the equipment makers, particularly alpine ski, continue to be much more disciplined. They are ordering much closer to pre-season and the emergence of private sale sites like theClymb.com has given brands a more discrete way of liquidating excess inventory. One Japanese retailer told BOSS that Hokkaido is getting good snow this year, so presumably there is good demand there – a welcome opportunity after the issues resulting from the earthquake and Tsunami this year.
SALT LAKE CITY VENUE PUSHED TO LIMIT
Exhibitors and attendees again surpassed record levels and the overall floor space was again bursting at the seams. While some missed the show due to a storm in Seattle, the 21,000 pre-registered attendees marked an all-time record for the Winter Market show. Roughly 10-12 percent every year are new exhibitors.
Indeed, Frank Hugelmeyer, president and CEO at Outdoor Industry Association, said at OIA’s industry breakfast Thursday morning that a lack of space at the Salt Palace would drive an effort to solicit the industry’s opinion on whether a new place for the show was needed. The space constraints are limiting the ability of the show to attract new product categories as well as to support on-site demos. He said, “There’s a danger that within a couple of years of moderate or even conservative growth, we will outgrow the logistical structures here in Salt Lake City.”
That certainly put some fear into officials at Salt Lake City, which indicated that the show brings in $20 million for the local economy and stands as its largest convention. A decision on extending the contract past 2014 will likely come later this summer. Just expanding the Salt Palace isn’t the answer either as show management wrestles with lack of available hotel rooms to support the growing event.
EXHIBITORS LOOK FOR THE SILVER LINING
But many in the outdoor industry saw the demand for space by exhibitors from a wide range of active pursuits, including several in the running, snow and surf space, as a sign of strength in the industry and of the strong momentum globally for the outdoor lifestyle.
“The brands want to come,” said Hi-Tec CEO Ed Van Wezel. “They see how busy it is. The new surf brands are here. The industry has become a lot more sporty and it’s appealing to the active consumer. It’s no longer just the outdoor guy. It’s everyone and that is the exciting thing. It’s not just the niche that outdoor was ten years ago.”
“I always think this is the healthiest trade show out there,” said Todd Spaletto, president, Americas, The North Face. “It’s people who are incredibly passionate about the activities that they represent. And I think there’s more and more outside interest, whether it’s lawmakers or Wall Street analysts or consumers. The outdoor industry in general is an area where a lot of people are intrigued and interested in what we’re up to.”
Still, he said many attendees surely had “December on the brain.”
Heavy Discounting May Not be Enough to Lessen Impact on Pre-Season Orders
Miller was more certain that 2012 winter orders would be impacted overall, believing many buyers naturally tend to order based on the memory of sell-throughs on the prior season. Miller said 2011 “was the strongest season I saw in 10 or 20 years. It was record breaking and that was the frame of reference that was in their mind so when they came into this year the expectation was really high. But it’s a dangerous game when you base your forecast just on what you did last year in this business. It doesn’t always go well.”
Miller still believes the outdoor industry is healthy in a still challenging economic period because the industry’s products and accompanying activities offer fulfillment to consumers.
“With the recession, people got a lot more thoughtful about what they were spending money on but that works both ways,” said Miller. “Some people said, ‘I’m going to invest in a good quality, durable boot or I’m going to do something that makes me feel good because nothing else right now is making me feel good.” So we’re still seeing that for sure.”
Chris Miller, Vasque’s sales manager, believes the bigger box stores – having the capability to pack and store product this year and the leverage to force vendors to take back product that doesn’t sell – can manage sales shortfalls better than the smaller independents.
“They [Independents] don’t have that big club so their only recourse is to discount product and what that creates is a huge flood in the marketplace at half off,” said Miller. He also said that despite the eye-popping deals, consumers may still not need the winter product in their region and are savvy enough to wait for even steeper markdowns that may be required to clear merchandise for spring.
“I think it’s demoralizing to walk through stores right now – even here in Salt Lake it’s 30 percent off, 40 percent off and 50 percent off this early in the game. It’s not a situation that you want to see so I think at the end of the day, it’s going to hurt the smaller independent dealers more than its going to hurt the larger big box retailers and that’s unfortunate.”
At the same time, Miller said many independents, along with the entire outdoor industry, learned valuable lessons coping with quick descent into the Great Recession in 2008/2009. He’s hoping most of the independents wound up being smart enough not to over-aggressively buy coming into the season.
“Throughout this recession the cream has risen to the top,” said Miller. “We’re in the outdoor industry, which is a fantastic gift to be in a marketplace that were all passionate about and we want to be part of. But the reality is in the last few years we’ve all had to become incredibly strong business people as well and we aren’t making as many emotional decisions as we have in the past. We’re making good solid business decisions and I think that has allowed us to weather this storm better than we would have three years ago.”
Miller’s biggest concern is how it will impact open-to-buy dollars coming into spring, especially if late wintry conditions continue into May and June like last year. Indeed, he noted that last spring “wasn’t great either” as late snow last year prevented hiking and backpacking until August and September in some key areas.
Said Miller, “We’ve effectively missed winter regardless of how much snow we get in the next two months. It’s a bad winter. But don’t let us start getting white stuff in May or June because if we start getting snow in May or June, it’s going to be a tremendous challenge to get the train back on the tracks.”
Tom Berry, VP of global sales, marketing and merchandising for The Tecnica Group, believes the winter weather dramatically impacted sales. “It’s terrible,” said Berry. “If anybody tells you it’s not a huge drag, they’re crazy or unrealistic. You can still have a lot of success but your success would have been that much bigger if there was snow.”
Tecnica is still expecting its sales will climb 60 percent this year, particularly helped by a successful re-launch of its Moon Boots line as well as some excitement around fur that is leading to a boom in its après boots business. But that’s still less than internal expectations.
“If the weather was normal, our plan was to double our business,” said Berry. “So it’s great that it looks like we’ll be up 60 percent, but it’s also a disappointment.”
He hopes retailers weren’t reactionary following a strong winter season last year. Said Berry, “You never plan for a good year and you never plan for a bad year. You plan for the average year. Last year was the best winter around. So if you’re in trouble, I guess it’s a sign that you should have left a little bit of cushion.”
Catherine Cook, Kamik’s marketing director, said having production in Montreal helps not only in refilling retailers’ orders when business comes in better than expected but also helps manage inventory risk when sell-throughs come up short. But she said there’s little you can do about the weather.
“It’s part of the business,” said Cook. “You have good winters and you have bad winters. We were lucky we had an earlier snow and New York got hit. An early snow always helps. But would we have liked to see more snow? Absolutely.”
Oboz VP of Product and Marketing Josh Fairchilds said he’s heard across the board from small retailers to big retailers that most had a “good 2012″ and will show gains, with footwear standing out as an outperforming category. But the tough winter season has many worried about the weeks ahead.
“People are sitting on a lot of insulated product, a lot of shell products and to some extent hard goods,” said Fairchilds. “I think that’s definitely going to have some impact on open-to-buy dollars on spring pre-reason.”
Noting that 50 inches of snow had just plopped on western Montana, Fairchilds was hopeful that “winter is starting to happen” and that will help clear bloated winter stocks across retail. But he still anticipates some overhang and spring orders may wind up being cancelled for some.
“Our expectation is that because footwear is footwear, we’re going to be fine,” said Fairchilds. “But I think all retailers in the outdoor space are going to struggle with some excess inventory for the next six to nine months.”
Regarding winter 2012 order patterns, Fairchilds was confident that dealers would recognize they’re “going to need new inventory next fall and winter so they’ve got to write orders” and wouldn’t shift overly conservative after one warm winter. He also believes the industry’s overall strength over the last two years should provide some confidence in the growing sales opportunity in the outdoor space.
“I think the outdoor industry is a shining spot in an otherwise sour economy,” said Fairchilds. “Lots of people in whatever industry say their industry is recession proof but the outdoor industry does tend to weather recessions fairly well because access to the outdoors is an inexpensive thing to do when times are tight. And it tends to attract an affluent, well-to-do professional and consumer base that aren’t going to be as prone to job losses as other groups would be.”
