SGB WEEKLY 1111

MARCH 14, 2011

A Weekly Web Magazine for the Sporting Goods Industry

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MARCH 14, 2011

Senior Business Editor Thomas J. Ryan (917.375.4699) tryan@sportsonesource.com

A Weekly Web Magazine for the Sporting Goods Industry

Associate Editor Kyle J. Conrad (704.987.3450 x111) kconrad@sportsonesource.com

FEATURE

Contributing Editor Nancy Prichard Bouchard, Ph. D. Tim Darnell

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Creative Director Teresa Hartford Graphic Designer Camila Amortegui VP Business Development Bill Bratton (409.392.5029) bill@sportsonesource.com VP/GM Specialty Businesses Paul Gagner (720.272.9787) pgagner@sportsonesource.com VP Business Development Barry Gauthier (774.553.5312) barry@sportsonesource.com Business Development Manager Katie O’Donohue (704.987.3450 x110) katieo@sportsonesource.com Circulation & Subscriptions subs@sportsonesource.com Technology Chief Information Officer, Mark Fine VP Research & Development, Gerry Axelrod Manager Database Operations, Cathy Badalamenti

SportsOneSource Publications SGB TEAM Business Sportsman’s Business The B.O.S.S. Report Sports Executive Weekly

Reebok Pro Vero IV Zig Bottom Cleat

NEWS

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DICK'S SG Sees Robust Fourth Quarter On Strong Comp Store Sales Growth MOVERS AND SHAKERS HIBBETT SPORTS Falls Short in Q4; Sales Regain Momentum in Q1 SKECHERS SUES SEARS For Product Infringement MODELL'S Shuffles Senior Management SMITH & WESSON Disappoints In Fiscal Q3 On Struggling Perimeter Security Biz ZUMIEZ Profit Jumps 70 percent in Q4; Outlook Reflects Upcoming Input Cost Troubles NAUTILUS, INC. Swings Back To Fourth Quarter Loss On Flat Sales QUIKSILVER'S Recovery Continues In Fiscal First Quarter ADAMS GOLF Up 13 percent In Fiscal 2010 HEELYS Posts Wider Fourth Quarter Loss As Revenues Evaporate

SGB Update Footwear Business Update PSR Update Sportsman’s Business Update Team Business Update SGB Weekly Team Business Weekly Sportsman’s Busness Weekly Footwear Business Weekly Outdoor Business Weekly

FEATURES

10 SLIDING HOME New cleat patterns, breathable uppers and more comfortable designs

score for baseball retailers

14 POP DECISION Dealers Speak Out On The NFHS’ Ban On Composite Bats and the

Millions in Lost Revenue

DEPARTMENTS

18 TOP JOBS OF THE WEEK Cover photography courtesy of New Balance: Second Baseman With The Boston Red Sox, Dustin Pedroia

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WEEK 1111 | SGBweekly.com

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NEWS

DICK'S SPORTING GOODS SEES ROBUST FOURTH QUARTER ON STRONG COMP STORE SALES GROWTH Dick's Sporting Goods, Inc. posted a bigger-than-expected quarterly profit and forecasted a strong year ahead as it saw margins swell and online sales rise during the holiday quarter. Footwear and apparel strength drove an overall comp increase of 9.4 percent. ​Net income rose 29.9 percent to $87.5 million, or 71 cents a share.

Excluding charges, earnings on a non-GAAP basis climbed 36.0 percent to $94.0 million, or 76 cents per share - exceeding guidance provided during the retailer’s third quarter conference call of 69 cents to 71 cents a share. The fourth quarter included an after-tax charge of $6.5 million, or 5 cents a share, related to its previously-disclosed, fourth quarter settlement of wage and hourly class action lawsuits. ​Sales increased 13.6 percent to $1.53 billion in Q4. The overall comp gain consisted of an 8.6 percent jump at Dick's Sporting Goods (DSG) stores, a 2.2 percent increase at Golf Galaxy and a 36.3 percent increase in the e-commerce business.

MOVERS & SHAKERS GOLF ROUNDS OF PLAY UP IN JANUARY 2011 According to Gold Datatech, golf rounds played for the U.S. were up 7.4 percent January 2011 compared to January 2010.

Public access play was up 7.7 percent for the month and private course activity was up 6.6 percent.

Among the regions showing gains were Pacific, 5.3 percent; Mountain, 9.4 percent; West North Central, 10.9 percent; South Central, 15.4 percent and South Atlantic, 7.1 percent.

Declines in rounds played were seen in East North Central, 23.8 percent; New England, 50.5 percent and Mid-Atlantic, 89.2 percent.

WORLDWIDE BUYING GROUP ADDS FIVE MEMBERS Worldwide Buying Group, a cooperative based in Seattle, concluded its spring show in Reno, NV last week and added five new members – Arlington Ace Hardware - Arlington, WA; Courtesy Ace Hardware- Delta, UT; Davis’ Men’s Store - Bossier City, LA; Harry's Army & Navy Store - Robbinsville, NJ and Omineca Source for Sports - Vanderhoof, BC, Canada.

OF NOTE...

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SGB WEEKLY l MARCH 14, 2011

​The increase at the DSG stores was driven in part by an 8 percent increase in transactions and a 0.6 percent increase in sales per transaction. Comps at DSG stores were driven primarily by apparel and footwear. "Specifically, we saw meaningful growth in both athletic apparel and outerwear as well as athletic footwear and boots," said Ed Stack, chairman and CEO, on a conference call with analysts. ​Golf comps at DSG were down 2 percent, which Stack attributed to extended wintery weather in many parts of the country. Hunting was also "soft," primarily driven by the gun and ammunition business. Fitness was described as "okay, not great."

At Golf Galaxy, profitability improved as expected, driven by occupancy leverage due primarily to the closure of the 12 underperforming stores in the third quarter. The e-commerce gain here was driven by "all but a few categories," said Stack.

Gross margins in the period improved to 31.6 percent of sales from 29.2 percent in the prior-year period. The increase was driven primarily by an increase in merchandise margin of 107 basis points, primarily due to a change in mix at the DSG stores and continued effective inventory management. Occupancy leverage contributed 109 basis points to the GM gain. ​Inventory per square foot decreased 4.1 percent due to lower clearance levels. The company ended the year with $546 million in cash and cash equivalents and no outstanding borrowings under its $440 million revolving credit facility. The prior year, DSG ended with $226 million in cash.

Looking at 2011, Dick's SG expects to generate earnings growth of 16 percent to 17 percent, reaching EPS of $1.89 to $1.91. Comps are expected to increase approximately 3 percent. For the first quarter, EPS is expected to range between 26 to 28 cents a share, up from 22 cents in year-ago quarter.

Same-store sales are expected to increase 4 percent to 5 percent.

• Total Apparel Group, Inc. has added Robert Lineburg as President of TAG's wholly owned subsidiary Kappa North America, and Jeff Sirchio as Chief Operating Officer.

• Times-7 Sport, a New Zealand-based company providing sport timing solutions, announced that Skip Gilbert will become President & Chief Executive Officer.

• Panache Cyclewear, Co. appointed Kevin Burnette to Vice President of Sales.

• Skirt Sports announced its sponsorship of professional triathlete Hillary Biscay.

• Reef signed Shane Dorian to its team of endorsers.

• Legacy Paddlesports, LLC announced that Andy Zimmerman has decided to leave the company to pursue other interests.

• Deckers Outdoor Corp. announced the appointment of Michael Devine, III to its board, effective March 1.

• Eagle Creek hired Lagniappe Sports as its rep group for the specialty outdoor channel in Texas, Arkansas, Oklahoma and Kansas.

• The American Apparel and Footwear Association (AAFA)named Rick Darling as Board Of Directors Chairman replacing Killick Datta.

• Canari Cyclewear hired Andy Jasper to replace Erik DeKold as National IBD Sales Manager.

• Probar has hired eight new rep agencies to focus on the outdoor specialty channel.

HIBBETT SPORTS FALLS SHORT IN Q4; SALES REGAIN MOMENTUM IN Q1 ​ ibbett Sports, Inc.'s fiscal fourth quarter results were slowed by winter H storms, delays in the distribution of tax refund checks, and the hurdle of going against championship runs by the University of Alabama and the New Orleans Saints in the prior year period. ​But sales have reportedly bounced back in early spring, with comps in the first quarter up 8 percent through last Thursday on top of a 17 percent gain in the comp period last year. ​Fourth quarter net income increased 6.0 percent to $12.5 million, or 44 cents a share, coming in at the top-end of recent guidance. On Feb. 8, Hibbett cut its fourth quarter earnings guidance to a range of 42 cents to 44 cents a share after sales slowed in the later half of January. In November, Hibbett had raised guidance a range of 47 cents to 50 cents a share after a strong early start to the holiday selling season. ​Sales increased 3.8 percent to $173.2 million, with comps ahead 1.3 percent and items per transaction in the quarter increasing 1.9 percent. By month, comparable-stores sales grew 15.0 percent in November and inched ahead 1.1 percent in December before tumbling 11.6 percent in January. The Q4 disappointment cut into a stellar 2010 in which earnings increased 42.6 percent, net sales advanced 12.0 percent and comps grew 9.8 percent. ​In the quarter, activewear apparel was the strongest performing department, with comps up in the mid-twenties percent. Its fleece programs were driven by The North Face and Under Armour with

Nike Dri-FIT performance product also strong. Licensed apparel was down double-digits. Excluding NFL and college licensed product, overall comps would have been up 4.5 percent in the quarter. ​Footwear had low-single-digit negative comps in the quarter as lifestyle urban products underperformed. The running category continues to be good across all genders, with standout performances

by Reebok Zig, Nike LunarGlide, Nike Shox, and Nike Max+ 2010. ​In equipment, football was up double-digit in comps; basketball, high-single-digit comps; and soccer, double-digit comps. As expected, fitness did not perform given the lack of “As Seen on TV” items. ​So far in the first quarter, however, all categories across-the-board are generating positive comps in all regions. Particularly strong has been footwear, showcasing a double-digit gain. ​Looking ahead, Becky Jones, Hibbett's SVP, merchandise and marketing, said Hibbett expects to see its activewear business "being very strong," especially in women's and kids’; while running footwear "continues to be big across-the-board" due the lightweight trend. Both footwear and activewear are also benefiting from improved allocation. ​For the current year, Hibbett issued its earnings guidance for Fiscal 2012 with a range of $1.70 to $1.90 per share and an increase in comparable store sales in the low- to mid-​single-digit range. That compares with $1.60 in 2010.

SKECHERS SUES SEARS FOR PRODUCT INFRINGEMENT Skechers USA filed a lawsuit against Sears Holding Corporation for selling footwear that infringes on Skechers' Shape-ups by Skechers, Twinkle Toes by Skechers and Skechers Z-Strap lines. The suit alleges that Sears is selling the infringing products at its Sears and Kmart banners under the TheraShoe, Melrose Avenue, Paris Blues and Athletech labels.

"Skechers has invested tremendous resources into designing, developing and marketing our Skechers Shape-ups, Twinkle Toes and Z-Strap product lines. ​We have obtained more than 150 patents and trademarks on these lines, and have built them into brand names universally recognized around the world as synonymous with Skechers," stated Philip Paccione, general counsel of Skechers, in a statement. "While we value our relationship with Sears, their actions are causing us tremendous damage, and we simply cannot let any company, let alone a company the size of Sears, infringe on our most valuable intellectual property."

The suit, filed in a U.S. District Court in California, seeks compensatory and punitive damages as well as injunctive relief for infringing on Skechers' patents, trademark, and trade dress rights, for dilution and for unfair competition.

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MODELL'S SHUFFLES SENIOR MANAGEMENT ​ Seth Horowitz stepped down as Modell's president to pursue other business opportunities. He had been with Modell's for three years and was promoted to president in January 2009. CEO Mitchell Modell will assume Horowitz's responsibilities. No search for a new president is planned. ​In an interview with SGB Weekly, Modell praised Horowitz and credited him with leading the company's "highly successful" Rebirth effort that has exceeded plan.

But he said that as the family-run retailer was exploring the next step in the remodeling effort, the two had different ideas on the next direction to take the company.

Modell also refuted a report from Crain's NY that Modell's sales were down 10.8% in 2010. "I have no idea where they got that. We were down 1% on a comp basis and that's going against a Yankees/Phillies World Series.

So there was no way we were going to beat that."

Modell also said his company has no debt.

WEEK 1111 | SGBweekly.com

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NEWS

SMITH & WESSON DISAPPOINTS IN FISCAL Q3 ON STRUGGLING PERIMETER SECURITY BIZ

ZUMIEZ PROFIT JUMPS 70 PERCENT IN Q4; OUTLOOK REFLECTS UPCOMING INPUT COST TROUBLES

Smith & Wesson Holding Corporation reported a 1.8 percent dip in overall sales for the fiscal third quarter ended Jan. 31 as slight sales growth from the Firearms segment was more than offset by substantial weakness from its struggling perimeter security businesses.

Total company net sales slipped 1.8 percent to $89.3 million from $91.0 million in the prior-year period, reflecting a 6.0 percent increase in firearms sales partially offsetting the aforementioned drop in perimeter security sales. Gross profit margin was 24.1 percent of sales in the quarter, compared with 30.0 percent in the year-ago quarter, due to reduced volumes in perimeter security sales, planned firearm manufacturing consolidation costs relating to Thompson/Center Arms, and a short-term impact in firearms related to increased distributor incentives and strategic price-repositioning initiatives.

Firearms segment sales grew 6.0 percent to $79.2 million from $74.7 million in the year-ago quarter. Management noted that market demand for the company's new firearm products was strong during the quarter.

Smith & Wesson recorded a $51 million charge from the UCR brand due to the declining value of the business. Net sales for the division fell 37.8 percent to $10.1 million in fiscal Q3 from $16.2 million in the year-ago period.

SWHC recorded a net loss of $52.8 million, or 88 cents per diluted share, in fiscal Q3, including the impairment charge, versus a net profit of $3.1 million, or 5 cents per diluted share, in the year-ago period.

Teen action sports retailer Zumiez, Inc. reported a 70 percent spike in profit for the fiscal fourth quarter ended Jan. 29, but management expressed significant concern going forward as rising material costs, tough comparisons and soaring food and fuel prices paint an uncertain picture for the short-term outlook.

Fiscal fourth quarter sales increased 17.9 percent to $156.2 million from $132.4 million in the prior-year period on comps that improved 13.0 percent on top of a 1.7 percent decrease in the Q4 2009. Sales from the retailer’s website jumped 130 percent during the quarter. Brooks said a “very strong” holiday season capped off a year-end comp improvement of 11.9 percent - the best full-year comp performance for the company in four years. For the quarter, all of the company’s departments - with the exception of boys - had positive comps, with the biggest contributions coming from accessories, men’s and footwear departments, which combined to account for approximately 70 percent of total sales.

Comparable store transactions drove comp store gains, partially offset by a decline in average value per transaction. Dollars per transaction decreased due to a decline in average unit retail, and to a lesser extent a decrease in units per transaction, according to management.

The retailer posted net income for the quarter of $15.0 million, or 49 cents per diluted share, compared with a prior-year period net income of $8.8 million, or 29 cents per diluted share, which included a non-cash charge of $1.8 million, or 4 cents per diluted share, associated with the impairment of store related assets.

Looking ahead, management expects same-store sales for the first quarter to increase in the mid-single-digit to high-single-digit range with total sales between $100 million and $102 million. Operating margins are planned to be in the negative 2 percent to flat range with a diluted loss per share of between 3 cents and breakeven.

NAUTILUS, INC. SWINGS BACK TO FOURTH QUARTER LOSS ON FLAT SALES Nautilus, Inc. swung back to a slight loss for the fourth quarter even as the company’s recently maligned Direct business rebounded somewhat on a stronger credit environment.

Total sales for the quarter were flat at $53.7 million.

The net loss was $39,000, or $0.0 per share, compared to $5.7 million, or 9 cents per share in the prior-year quarter. Gross margins fell 460 basis points to 44.1 percent of sales.

The Direct segment, which consists primarily of the company’s Bowflex and Treadclimber products, slipped 2.3 percent to $28.2 million in Q4 from $289 million in SGB WEEKLY l MARCH 14, 2011

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the year-ago period, a sequential improvement versus the 14.8 percent decline recorded in the third quarter.

Gross profit margin in the Direct business was 52.1 percent of sales for the fourth quarter of 2010, compared to 60.7 percent for the 2009 fourth quarter, primarily due to the company’s decision to offer deep discounts on one specific end-of-life home gym.

For the Retail channel, sales slipped by about half a percent to $23.9 million in Q4. Management said retail channel sales of cardio-oriented products improved 9.6 percent on strength from Schwinn exercise bikes. Gross profit margin in the Retail business was 31.2 percent of sales in Q4 compared to 32.6 percent in the fourth quarter of 2009, due to changes in product mix.

For Breaking Trade News Every Business Day Go To SGBUPDATE.com

QUIKSILVER'S RECOVERY CONTINUES IN FISCAL FIRST QUARTER Quiksilver, Inc. reported that revenues dipped 1.4 percent in the fiscal first quarter ended Jan. 31, to $426.5 million in the year-ago quarter. Sales were better than the mid-single-digit decline the action sports giant had forecast during its fourth quarter conference call and were up modestly from last year in constant currencies, driven by higher-than-expected sales in the Americas and Europe.

The net loss widened to $16.3 million, or 10 cents per share, from a loss of $5.4 million, or 4 cents, for the first quarter of 2010. Excluding charges related to the write-off of deferred debt issuance costs from previous financings, the pro-forma loss from continuing operations was $7.7 million, or 5 cents a share, against a loss of $2.5 million, or 2 cents, in the year-ago period. The steeper loss reflects planned investments, including the launch of the Quiksilver girls line.

In the Americas, sales grew 3.7 percent to $193.8 million, fueled by mid-teens growth in the owned-retail business.

Operating income in the region climbed 39.1 percent to $6.5 million from $4.7 million.

Wholesale revenues in the Americas were a little ahead of plan and essentially unchanged from last year. In wholesale, the outerwear and cold weather apparel and accessories were sold out for the season, and the Canadian business was strong for its three brands. Quiksilver also continues to see strong growth in Latin America. Says McKnight, "Looking forward when we finalize our order books for next fall, we expect to see growth in each of our brands compared to last year."

In constant-currencies, European segment revenues increased 1 percent despite challenging economies and adverse weather. In U.S. dollars, European revenues decreased 7.1 percent to $165.2 million while operating income slid 8.5 percent to $16.9 million.

Gross margins expanded 110 basis points to 52.4 percent of sales, slightly better than expected. Margins benefited from improvements in its U.S. retail stores, and lower levels of discounting in the wholesale channel.

The Americas business delivered the largest improvement in margins, up 290 basis points to 46.2 percent of sales. Europe's margin also expanded 30 basis points to a companybest 58.9 percent of sales.

SG&A, expense excluding special charges, were $213 million in the first quarter, up approximately $13 million from last year, largely resulting from higher spending on product development, and marketing for new initiatives such as Quiksilver girls.

Looking ahead, Quiksilver confirmed that it continues to expect full-year revenues to be slightly above those of fiscal 2010 and pro-forma adjusted EBITDA to be roughly in line with last year.

ADAMS GOLF UP 13 PERCENT IN FISCAL 2010 Adams Golf reported net sales of $86.3 million for the year ended Dec. 31., up 13.4 percent over revenues of $76.1 million in the prior fiscal year.

By product segment, net sales of irons increased 14.4 percent to $58.9 million, or 68.3 percent of total net sales for the year from $51.5 million, or 67.7 percent of total net sales, for the comparable period of 2009. Net sales of fairway woods decreased 2.7 percent to $14.4 million, or 16.7 percent of total net sales, for the year from $14.8 million, or 19.4 percent of total net sales, for the comparable period of 2009.

Net sales of drivers increased to $11.4 million, or 13.3 percent of total net sales, for the year from $9.5 million, or 12.5 percent of total net sales, for the comparable period of 2009. A large portion of the driver net sales was generated by sales of the Speedline F10 driver, which was launched in the first quarter of 2010, along with the Speedline 9064 driver, launched in the third quarter of 2010.

Net sales of products sold outside the United States increased 7.9 percent to $16.4 million, or 19.0 percent of total net sales, from $15.2 million, or 20.0 percent of total net sales, in the yearago period. Net sales resulting from countries outside the United States and Canada increased to 6.4 percent of total net sales for the year from 6.2 percent for the comparable period of 2009.

HEELYS POSTS WIDER FOURTH QUARTER LOSS AS REVENUES EVAPORATE Heelys' fourth quarter losses widened to $3.2 million, or 12 cents per share, from a loss of $1.1 million, or 4 cents, in the prior-year period. Revenues dropped 41.2 percent to $6.7 million in Q4.

Domestic sales fell 38.5 percent to $3.2 million while international sales decreased 43.5 percent to $3.5 million due to excess retail inventory in the European market and the termination of its Japanese distributor. For the full year, sales decreased 30.4 percent to $30.4 million.

Domestic sales dropped 43.0 percent to $8.6 million due to reduced overstock inventory sales heading to discounters of $1.4 million, combined with loss of placement of core product in two sporting goods chains, one department store chain, and two footwear chains totaling $6.8 million. Heelys noted that it had received orders from three of the retailers for the first half of this year. The total net loss last year swelled to $4.0 million, or 14 cents per diluted share, from $5.1 million, 19 cents per diluted share, in the prior year.

WEEK 1111 | SGBweekly.com

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SLIDING

HOME New cleat patterns, breathable uppers and more comfortable designs score for baseball retailers Nancy Prichard Bouchard, Ph. D.

“Take me back to the Ball Game.” An increasing number of Americans are taking this to heart—as players, not spectators. The baseball footwear category hit a home run in 2011, with cleated footwear sales up in high-single-digits and footwear accessories up in low-double-digits. Mike May, spokesman for the Sporting Goods Manufacturers Association (SGMA), reports, “Right now, baseball participation -- among avid enthusiasts -- is not limited to your nearby school team or local league. Many baseball players are engaged in a school team in the spring, a local recreation and/ or travel team in the summer, and some type of travel ‘fall ball’ in the autumn. As a result, there’s a greater demand for accessories of all kinds, not just baseball footwear accessories. “ As May points out, when a baseball player’s "season" covers at least three teams during the spring, summer, and fall, they are more likely to invest in a pair of baseball cleats which will perform day in and day out.

And, in some cases, there’s a demand for a different set of cleats for each new team. Even at the school and local league levels, players buy multiple sets of cleats to accommodate team colors, different

sponsors, and often, the desire to have the best technology. For baseball uniforms as a whole, the category has hovered at about $321 million for annual sales. While there are no firm baseball cleat numbers, estimates are that footwear and footwear accessories are a growing sector of the market. Rawlings Footwear, reports that baseball cleat sales have experienced double-digit growth over last year, with women’s softball seeing double-digit growth this season as well.

According to SGMA statistics, there are 13,837,000 baseball participants in the U.S., with 9,413,000 core players (who are age 13 and older). Participation numbers have been on a slow decline for the past decade (down about 12 percent from 2000) but this year, activity in little league and school sports is reportedly robust. About 84 percent of all baseball participants are male; the number bumps up to 87 percent when you look at the younger demographics—and about half are under the age of 18. Interestingly, nearly half of the people who play ball live in a market the size of 2,000,000-plus.

The Washington Nationals Bryce Harper Photo courtesy of Under Armour

TECHNOLOGY’S COMPETITIVE ADVANTAGE Technology drives the baseball category. Having a visible technology that provides the consumer with a competitive advantage (more energy) over other brands is a category driver, explains Tom Wood, product manager for cleated footwear & equipment, at Reebok.

“Also from a visibility standpoint we have a great classic baseball look in the upper with a twist on the plate which resonates with a broad range of players and consumers,” he adds.

According to Brian Kimberlin, Rawlings product manager, footwear, Spring 2011 customers for high-end product are demanding softfull grain leather uppers, wicking, odor fighting liners, and outsole packages that focus on traction, comfort and flexibility (in particular the Wizard). EVA-midsoles provide lightweight comfort, while the company’s Durability-Armor-tek adds durability to high-wear areas.

For young players, the youth line is seeing strong retail sell-through, with the Youth Clubhouse attracting kids and parents with durable synthetic uppers, mesh tongue, and added reinforcement in high wear areas. Bi-level cleats increase mobility and traction.

Under Armour is focusing on its 4D Foam sockliners that form dual foam footbeds designed to conform to the foot’s exact shape eliminating internal slippage. The responsive bottom layer of foam is designed to maintain comfort and help protect the foot from cleat pressure. Upping the technology story is Under Armour’s Rotational Traction, a forefoot cleat configuration to optimize rotational capability for maximum acceleration and power.

Aaron Kahn, business unit director for Adidas cleated sports footwear and accessories reports that the company is highlighting new lightweight Adizero Diamond King product with key sporting goods and team specialty retailers, with compelling stories to tell around their new Protrax plate and 11.9oz construction.

TALK ISN’T CHEAP Mark Clinard, strategic business unit manager for New Balance team sports, contends that technology drives everything in the baseball category. “Baseball players understand and enjoy talking about their equipment,” contends Clinard. “If it doesn’t work, baseball athletes will find something that will.” According to Clinard, everything New Balance does with their baseball footwear is driven by performance, fit and comfort. “We developed a baseball specific last [a last is the shape that forms the contours of the shoe] engineered to provide athletes the ultimate performance on the baseball field,” he explains. “In the spirit of ‘running shoes on spikes,’ we used the N-ergy cushioning technology originally developed for our running shoes, in the MB1103. As in our high-end NB running product, N-ergy provides a smooth, responsive ride for the athlete. The real benefit is felt by athletes who are on their feet, standing on these metal spikes, for hours at a time.” Clinard adds that one of the key factors that differentiates New Balance from the competition is the company’s dedication to widths. “It might not necessarily be considered technology, “ says Clinard, “but we get customers who 12

SGB WEEKLY l MARCH 14, 2011

Rawlings Youth Clubhouse - Lightweight synthetic leather upper with padded mesh tongue, Tuff Tek for added durability to high wear areas; A3 solid color rubber outsole enhances durability with a bi-level cleated pattern for added traction and mobility. MSRP $25

Under Armour Leadoff III Low Junior - 3/4 length Armour Bound midsole for added comfort, cushioning and dispersing cleat pressure. Rotational Traction cleat configuration optimizes rotational capability for maximum acceleration UNDER ARMOUR BRYCE HARPER and power. MSRP $30

already know about our commitment to making shoes to fit everyone.

We offer wide widths in both adult and youth products because we want all athletes to experience how the game gets easier when you are comfortable. “ Comfort does seem to be king when it comes to increasing cleat sales. Adidas' Kahn, reports that the winning combination in baseball footwear today is a combination of comfort, light-weight, unique design, and rich materials. “Technologies highlighting any of these elements can be a great feature, but attention to detail and quality are more important to kids than anything perceived as gimmicks on their cleats. Simplicity in construction can result in a competitive advantage for players.”

At Reebok, there’s a lot of excitement with the extension of ZigTech technology into the cleat category. ZigTech technology is currently available in the company’s trainer, but will be introduced as a cleat in July 2011. Explains Reebok's Wood, “We are at an exciting time with Reebok baseball because this is the first time we have been able to integrate one of our most successful technologies (Zig) into the product that the consumer really understands and seeks out to purchase.”

Kimberlin sums up the reasons for current demand. “ The category is being driven by style and comfort and technology. Technology, color, upper materials, cleat and sole designs are all helping to bring in customers and move stock. Under Armour’s Josh Rattet, director, on-field footwear, says “We believe that our contemporary, speedy designs paired with new technologies truly connect with that clutch

performer. The success of World Series Champ and National League Rookie of the Year Buster Posey as well as South Carolina winning the College World Series in our cleats, has really helped drive our brand in the baseball category. “

ACCESSORIES ARE A RETAILER’S BEST FRIEND Footwear accessories are helping to increase overall sales. Says Rawlings' Kimberlin, “Add-on sales are always important to retailers—but maybe even more so in the cleat category.” He suggests that the best way to merchandise baseball footwear and accessories is to create a baseball headquarters area within the footwear department, with baseball cleats and accessories in their own specific section within the footwear area.” Rawlings is seeing strong customer approval on Sneaker Cleaner packages with a scrubbing brush to keep cleats looking like new and replacement inner soles for better comfort.

At Under Armour, color card options for adults and youth that allow athletes to customize their shoe with the color of their uniform are helping to drive sales. The company is also seeing strong consumer interest in interchangeable cleats customers have the option of metal and plastic that can be interchanged, depending on the athletes preference (they are available on the Under Armour Twin Bill II MID IC style).

Reeboks' Wood, says that a unified baseball merchandising strategy is something that Reebok is just starting to take advantage of. “We are now showing up as a complete baseball brand and we are seeing the results at the retail level this spring. Reebok is one of the only baseball brands that can show up at retail with the complete package of footwear and equipment. In addition to the footwear Reebok has a very comprehensive line of baseball/softball bats, gloves, batting gloves and protective equipment for all ages," says Wood.

Companies are finding that customers have the tendency to shop in-brand for their baseball needs. For this baseball

season, Nike is unveiling a new Nike Pro combat sliding short featuring high tenacity abrasion resistant fabric and Deflex padding that goes on the knee for impact and abrasion protection. It protects the hips and knees from wear and tear that comes from sliding, diving, fielding the ball, and from player impact (SS or 2B turning two with runner trying to break up throw). The company hopes that players who are sold on Nike cleated footwear will gravitate to the company’s protective gear.

Adidas adizero Diamond King features superlightweight synthetic upper, soft EVA-midsole, feather-light outsole and 8 fixed cleats. MSRP $90

WHY BASEBALL? In a sluggish retail field, you might ask “Why Baseball?” Says Under Armour's Rattet, “Today’s young athlete is looking to combine elements of his fresh personality with the conservative tradition of baseball. This concept enables the Under Armour brand to have more flexibility and speak to the emotions of these athletes when providing innovative, performance solutions with their footwear. We’re excited to provide athletes with the ability to express their personalities and the best performing product on the field.”

Kahn, adds that the baseball category is particularly exciting because players’ appetite for innovation and unexpected designs is increasing at an amazing pace.

Says Kahn, “The current generation of high school age players consider ‘tradition’ boring. “ Rawlings’ Brian Kimberlin agrees. “The Baseball category is exciting because the styles and technologies have really grown in recent years,” he contends. “Materials now make cleats not only look better but they are more comfortable than ever before and the styles are more diverse. “Perhaps New Balance’s Clinard expresses the excitement for the category best. “There is an enormous amount of territory to explore in terms of innovation within the category,” says Clinard. “Our team at New Balance loves to build performance solutions for athletes who want to perform better. Baseball footwear is ripe to be explored further.” ■■

Reebok Pro Vero IV Zig MSRP $110

New Balance 1103, called a “running shoe on spikes,” features high performance running technologies to eliminate spike pressure and give unparalleled comfort and fit. Includes a metal spike outsole for maximum speed and traction. Available in multiple widths and in low- and mid-cut versions. MSRP $90 (lowcut); $95 (mid-cut)

POP DECISION Dealers Speak Out On The NFHS’ Ban On Composite Bats and the Millions in Lost Revenue

By Tim Darnell with Kyle Conrad

The ruling was as shocking as it was clear - no more composite bats.

Just what the sporting goods industry needed, right? A new rule outlawing the use of composite bats in high school baseball is official and, for the most part, final. The decision, adopted by the National Federation of State High School Association’s (NFHS) Baseball Rules Committee, has sent manufacturers and retailers into a frenzy of excessive inventories and questions.

Simply stated, the ruling prohibits the use of composite bats until they can meet the new Batted Ball Coefficient of Restitution (BBCOR) performance standard. The NFHS said it enacted the ban on composite bats because of a concern about the increased performance of the bats after the initial “break-in” that would lead the bats to exceed the current bat standards.

As was outlined last year in TEAM Business, the new BBCOR performance standard is designed to reduce the “trampoline effect” of a bat, thus reducing the speed at which the ball leaves the barrel wall. The new BBCOR standard took effect in January 2011 for college teams and will be enforced as of January 2012 for high school teams. However, citing the “break-in” tendency for composite bats (through normal usage, composite-barreled bats fall out of compliance with safety regulations), the NFHS ruled that any composite barreled bats used in high school play for the 2011 season and beyond must abide by BBCOR specifications. The BBCOR guidelines expand on the specifications of the former BESR (Ball Exit Speed Ratio) standard, which was enacted by governing bodies following 14

SGB WEEKLY l MARCH 14, 2011

the “Gorilla Ball” era of the mid-90s when rapidly-advancing bat technologies led to ridiculous offensive outputs on the college and high school diamonds. The “Gorilla Ball” period is perhaps defined best by the 1998 College World Series, which recorded a staggering 62 home runs hit and saw the final game end with a total of 38 runs scored. Shortly thereafter, the NCAA implemented stringent guidelines to limit the effectiveness of aluminum and composite bats. The “break-in” effect, however, has prompted governing bodies to tighten bat guidelines even further.

One of the biggest questions is just how much the new standards will cost in lost profits and wasted inventory.

“The ruling caught us totally by surprise,” says Mike May, director of communications for the Sporting Goods Manufacturers Association (SGMA), which tracks a multitude of legislative issues. “What it means is that millions of dollars worth of bats are no longer marketable. But this issue is not a done deal, and we’re hoping the NFHS will reconsider.”

Not likely, says Elliott Hopkins, NFHS’ baseball rules editor and liaison to the Baseball Rules Committee. “It’s difficult to refute something when you have solid scientific evidence. We looked at a year’s worth of testing conducted at the Baseball Research Center at the University of Massachusetts-Lowell.

Our baseball rules committee made the recommendation, and with the information we received, we thought it was imperative to make a decision.”

THE DECISION So what does the decision actually mean? Under the new rule, bats with composite handles would still be legal; it’s the barrel of the bat that is the issue. Aluminum bats will still be allowed along with wooden bats; bats with composite handles and tapers also are still allowed. Likewise, it should be noted that in July of last year, the NFHS Board of Directors agreed that if certain types or models of composite bats can produce “consistent results through the life of the bat and remain within the applicable test standard,” a waiver or modification of the rule may be considered.

“While the handles and taper are important components of the bat,” Hopkins says, “the area that we recognized as more susceptible to abuse is the barrel.” Composite bats will not be allowed until they can produce consistent results through the life of the bat, be made tamper-evident and be labeled as a composite product.

The bat manufacturing industry generated $201 million in wholesale revenue in 2010, and 95 percent of the bats sold were made of some material other than wood, according to SGMA figures. Composite bats had been selling for as much as $400, but retailers nationwide have already begun marking down the product last summer, hoping to liquidate inventory and recoup what could be significant revenue losses.

“The rule makes a lot of dealer inventory obsolete, literally overnight,” says Jim Chandley, president of Nation’s Best Sports. “What was a high-end bat is now a practice bat. From a consumer standpoint, a guy has saved his money for six months to purchase his dream bat, and now it’s obsolete.”

“It’s a shame for baseball, because it takes technology out of the game,” added Chandley.

Matt Mitchell calls the ruling a “game-changer.” “We’ll do what we have to do from an inventory standpoint, and hopefully there will be some help from our vendors,” says Mitchell, who buys baseball, softball, volleyball, basketball, soccer and skate products for Hibbett Sports.

Many of the manufacturers of composite bats that TEAM Business contacted for this story did not have comments for the record. Mike Zlaket, executive VP and GM, baseball/softball and hockey for Easton Sports, seemed to sum up their stance. “We were completely surprised by the ruling…” Zlaket says.

A HISTORY OF COMPOSITE BATS Composite bats have been used in softball for the past decade. The baseball community rejected the bats around the same time because they were considered flimsy and easily breakable. But by 2008, composite bats made a comeback and- at least until this past Julywere widely accepted.

In 2009, the NCAA Baseball Rules Committee approved an indefinite ban on the bats after research indicated many of the bats didn’t comply with NCAA standards. It found that 20 out of the 25 composite bats tested during the 2009 NCAA Division I Baseball Tournament failed the BESR (Ball Exit Speed Ratio) test. The tests showed that Photo Courtesy of DeMarini

WHAT IS A COMPOSITE BAT? Composite bats are manufactured using carbon fiber materials producing a bat that is lighter than aluminum. Over time, the carbon builds in one spot, creating a “hot spot.” When the ball hits that portion of the bat, it launches much faster, creating a hazard for the pitcher and other players.

That hot spot also can be created when the bat is put through a process known as “rolling,” which hastens the break-in time, flattens the barrel and stretches graphite fibers so the ball propels 10 to 15 mph faster. “Rolling the bat gives it a higher performance,” says Elliott Hopkins, baseball rules editor for the National Federation of State High Schools. “It can significantly increase the performance and that’s huge in our game.”

Composite bats were banned by the National Collegiate Athletic Association in 2009 due to “performance improvements” that go “above the standards set by the NCAA.”

the balls were actually coming off the bat much quicker than what the specifications stated was legal.

Several accidents over the past several years involving composite bats also appear to be driving the NFHS moratorium.

• A 13-year-old boy in Vermont died after being struck in the head by a ball from a composite bat.

• A 16-year-old high school pitcher in Illinois was hit by a ball coming off a composite bat, putting him in a coma for two weeks.

• Two high school baseball players in California were killed after they were struck by balls hit with composite bats.

According to the National Center for Catastrophic Injury Research, whose annual report covers only high school and college sports, there were 52 catastrophic injuries in baseball from 1983 to 2009.

By comparison, there were 43 in football in 2008.

So far, North Dakota is the only state to have banned metal bats, while Illinois, Pennsylvania, Massachusetts, Montana and New Jersey are considering similar measures. New York City also has outlawed non-wood bats.

“Millions of games are played every year, and while any kid being injured is tragic, that number has got to be a very small percentage,” Hibbett’s Mitchell says. “My concern is that there’s a big difference between an average high school player and an average college player. Where’s the advocate for the 13-year-old? What will this change do to him? No one has ever quit baseball because he was a good hitter. The game’s different levels are supposed to reflect different levels in ability.”

WEEK 1111 | SGBweekly.com

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Some dealers and retailers are feeling the effects of the ruling more than others. “The new ruling won’t affect the typical team dealer sales very much,” says Ken Caravati of Dixie Sporting Goods, noting that many team dealers sell primarily to schools, leagues and teams - entities that typically do not purchase high-end baseball bats.

“However, it will affect those sporting goods companies who sell a lot of bats. Players are always looking for the latest technology to get a competitive edge through equipment and training. Retailers will need to put more emphasis on selling training products that will improve their batting performance.”

For his part, Hopkins has found a mixed reaction to NFHS ruling. “We’ve heard from some people who are shocked and others who are fine with our decision and will do what they need to do,” he says.

“As far as debating wisdom of the ruling, both sides claim to have more than enough stats to support their positions,” Chandley says. “But most players would rather be able to perform at their highest level rather than worry about safety issues.”

POOR TIMING The timing of NFHS’ announcement seems to be as obtrusive as the ruling itself, according to buyers. “We’re talking a low-margin, slow-turn business to begin with,” Mitchell says. “To issue a ruling like this that (took) effect less than two months before school … that was less than ideal.”

Mitchell also says the ruling has caused a great deal of confusion among his customers. “I have several friends who are high school coaches, and they’re confused as to what’s allowed and what isn’t. And when these men are confused … Everyone has done such a poor job of communicating these rule changes. Our concern is that not only will the customer not know what to buy, but that he may not buy anything at all.”

“The rule isn’t good for dealers, retailers or consumers,” Chandley says. “It’s like a seatbelt law, simply for your own good. There is no silver lining for us.” ■

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SGB WEEKLY l MARCH 14, 2011

A SELECTION OF BBCOR-CERTIFIED BATS...

Easton’s BBCOR-certified Omen combines an IMX Composite barrel with Stiff Handle Flex for maximum power through the hitting zone. The patented two-piece ConneXion offers optimized feel at impact while maximizing energy transfer. MSRP $410

Combat Sports’ two-piece Grifter Hybrid utilizes a composite handle and a BBCOR-certified titanium enhanced alloy wall that claims a softer fell and larger sweet spot due to “special tapered geometry” consisting of elongated grooves inside the bat. Features Mongrel Composite Construction, which Combat’s says removes the “whip” feeling consistent with many other traditional two-piece bats. MSRP $250

Combat Sports’ Backbone is designed to behave like a traditional wood bat but features an “unbreakable” composite handle with a hard maple barrel for improved durability. The BBCOR-approved Backbone features a piece of composite material that runs throughout the entire length of the bat reducing the chances of a shattered bat. MSRP $135

DeMarini’s alloy Voodoo bat, manufactured with high-performance Aluminum, is BBCOR-certified and utilizes a proprietary extrusion process that reaches down the entire length of the barrel creating an improved sweetspot. MSRP $300

Mattingly’s Ripped and Demon Alloy Bats are two of four BBCOR-certified bats set to be unveiled this Spring. Each utilizes a onepiece MB5500 Atomic Alloy construction for added performance and increased durability.

Mattingly’s Ripped Bat features patented V-grip technology for improved bat speed while utilizing Tru Balance weighting system and stiff handle technology to increase energy transfer. The Demon features similar technology but with a traditional round handle. MSRP $200 (Ripped & Demon)

Louisville Slugger’s BB12EX2 Exogrid 2 features Exogird technology which utilizes a manufacturing process that starts with a onepiece aluminum ST+20 shell which is trimmed into a grid pattern and filled with carbon inserts that are stronger and lighter than aluminum. Using a combination of heat and extreme pressure, the sleeve, inserts and metal are bonded to function as a single unit. BBCOR approved. MSRP $300

Worth Aluminum barreled Toxic Prodigy features Rapid Edge BBCOR Technology, which the company says combines the strength of lithium alloy with a 30 percent thinner end design to give the batter maximum swing speed.

MSRP $260

Easton’s BBCOR-compliant Surge THT1000 Aluminum barrel bat claims greater durability, strength and toughness along with a lighter swing weight and faster swing speed. Incorporating an IMX Composite tapered handle, the Surge utilizes Easton’s patented two-piece ConneXion technology for optimized feel at impact and maximum energy transfer. MSRP $310

DeMarini’s BBCOR-certified CF5 composite bat features their patent pending Taper Ring Technology which allows the ring to be placed close to the taper instead of the barrel to retain the integrity of the sweet spot. The CF5’s Tri Strut TR3 Composite material utilizes a triangle formation that provides a fixed ratio of sides and angles so it’s “strong, stable and predictable.”

MSRP $400

Rawlings’ BBCOR-certified 5150 Alloy utilizes aerospace grade 5150 alloy formulation to provide “unparalleled durability” even in the most extreme playing conditions.

Rawlings’ Op Technology isolates added weight to a smaller region which they claim translates into a lower swing weight. MSRP $200

WEEK 1111 | SGBweekly.com

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Senior Industrial Designer - Footwear Easton-Bell Sports Senior Industrial Designer - Footwear, reporting directly to the Director of Product Creation Softgoods, will be responsible for developing individual products and complete product lines of moderate to extreme levels of difficulty, complexity or breadth of scope for which few precedents exist. These products will be developed through the use of shape, accent details, color, ergonomics and other design techniques in coordination with other teams in a cross-functional effort.

Regional Sales & Marketing Rep, East Coast Yakima Products, Inc. The Regional Sales & Marketing Rep, East Coast will contribute to driving sales growth opportunities, increasing brand awareness with consumers and delivering retail training to customers. This position will collaborate with the Marketing Manager and the Regional Sales Director in developing and implementing a comprehensive go-to-market plan for their territory in alignment with the company’s strategic marketing and sales objectives.

Footwear Pattern Engineer LaCrosse Footwear, Inc. We are seeking an outstanding Pattern Engineer to support our LaCrosse Footwear team in Portland, OR. Responsibilities include the creation of new footwear pattern designs, while ensuring the manufacturability of the concept within the Danner factory and aiding in final commercialization of new product lines. Qualified candidates will address sustaining engineering issues relating to patterns, processes, and components while consulting with Manufacturing Engineers on production line impact.

Senior Apparel Product Line Manager - Winter Columbia Sportswear As a Senior Apparel Product Line Manager you will work with the GM of Apparel Merchandising to establish the vision, strategies and seasonal concepts for your segment of the global apparel business. You will use your global knowledge of the Columbia consumer, brand values, lifestyle and sport trends, and competition to introduce innovative new products that meet revenue, SKU productivity and initial margin targets that entice our target consumer.

Web Master SportsOneSource SportsOneSource is seeking a Web Master to manage all aspects of the company's web sites including updating content, developing new code and managing the social media aspects of the business. Must possess a strong background in web site development and management, SEO, SEM and application development.

Field Sales Merchandisers - All Territories FitFlop USA FitFlop USA is expanding. We are recruiting for dynamic Field Sales Merchandisers throughout the U.S. FitFlop is a fast-growing, functionmeets-fashion footwear brand, now in its 4th year, with over 7 million pairs sold & distributed in over 50 countries around the world.

PR Manager Burton Snowboards - 3/8/2011 Burton is looking for a PR Manager in Burlington, VT to be an integral part of our Global PR Team.

Reporting to the Global PR Director, the PR Manager will be responsible for managing both endemic and national mainstream media relations, product placement, PR events, including media showcases, PR administration, and help manage and direct outside agencies.

The North Face: Product Director (Performance) VF Outdoor As a member of the RD&D team, the Product Director manages an assigned category to drive the design and commercial development of premium, innovative and technologically enhanced products that meet the needs of the company's customers and end users which drive company sales and profits,provides dynamic, visible and inspirational leadership to positively impact business initiatives and direction.

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