SGB WEEKLY 1133

AUGUST 15, 2011

The Weekly Digital Magazine for the Sporting Goods Industry

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AUGUST 15, 2011

Group Publisher Bill Garrels bgarrels@sportsonesource.com 303.997.7302

The Weekly Digital Magazine for the Sporting Goods Industry Editor In Chief James Hartford (704.987.3450 x104) james@sportsonesource.com Senior Business Editor Thomas J. Ryan (917.375.4699) tryan@sportsonesource.com Creative Director Teresa Hartford Graphic Designer Camila Amortegui Advertising Sales Director Casey Vandenoever (303.997.7302) caseyv@sportsonesource.com Advertising Sales Account 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

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Photo courtesy of Outdoor Retailer Summer Market

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

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NEWS

4 ATHLETA Lands In Manhattan MIZUNO CORP Sees Fiscal Q1 Strength In Softgoods Offset Hardgoods Weakness

5 CANNONDALE and Other IBD Sales Stand Out In An Otherwise Tough Q2 At Dorel

BY THE NUMBERS

6 EASTON-BELL SPORTS Q2 Net Income Cut As Margins Contract On Product Shifts JOHNSON OUTDOORS Sees Fiscal Q3 Results Hurt By Wet Spring, Consumer Anxiety

8 NEW BALANCE Opens First North American Experience Store

9 UNDER ARMOUR Debuts Largest Footwear Campaign MOVERS & SHAKERS

FEATURES

10 OUTDOOR INDUSTRY Regains Mojo

DEPARTMENTS

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18 CALENDAR

Cover photo courtesy of Outdoor Retailer Summer Market Copyright 2011 SportsOneSource, LLC. All rights reserved. The opinions expressed by writers & contributors to SGB WEEKLY are not necessarily those of the editors or publishers. SGB WEEKLY is not responsible for unsolicited manuscripts, photographs or artwork. Articles appearing in SGB WEEKLY may not be reproduced in whole or in part without the express permission of the publisher.

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WEEK 1133 | SGBweekly.com

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Photo courtesy of Athleta

ATHLETA LANDS IN MANHATTAN Gap, Inc. announced the grand opening this week of two Athleta retail locations in Manhattan's Upper East and Upper West Side neighborhoods, marking the brand's entry into the east coast market.

Gap said the openings support Athleta's plan to open 50 stores by 2013. One store will open on Columbus Avenue on the Upper West Side and the other on Third Avenue on the Upper East Side.

"Entering New York is a significant milestone for us as we aim to grow our share of the $31 billion women's active wear market," said Scott Key, senior vice president and general manager of Athleta.

"Thanks to our successful catalog business, we know there's a highly concentrated customer base in the New York metropolitan area and we are excited to bring our loyal and new customers two beautiful stores

where they can build strong, inspiring communities around the athletic pursuits they love."

To mark the opening of the New York City stores, Athleta has partnered with Bent on Learning, a non-profit organization that offers instruction in yoga and meditation to students in grades K through 12 in the New York City public schools and youth centers as a means of reducing stress and improving concentration, selfesteem and overall health.

The New York locations represent only Athleta's third and fourth stores. The other two locations are in the San Francisco area: a smaller test store opened last year and a flagship store opened in January. An additional eight to ten stores are planned is six markets this year.

MIZUNO CORP SEES FISCAL Q1 STRENGTH IN SOFTGOODS OFFSET HARDGOODS WEAKNESS Mizuno Corp. reported that total fiscal first quarter sales rose 0.9 percent to ¥41.5 billion ($509 mm) from ¥41.2 billion ($447 mm) in the year-ago quarter. Net income increased 56.5 percent to ¥1.94 billion ($24 mm), or ¥15.6 million per share, on a year-over-year comparison due in large part to a decrease of an exchange-rate loss and extraordinary loss last year. Operating income was up 6.2 percent in yen terms to ¥3.20 billion ($39 mm) in the fiscal first quarter.

The company said sales of footwear and apparel did well and growth of footwear sales in every region contributed to an increase in profits.

Footwear sales, which grew 5.5 percent in Japanese yen terms to ¥8.5 billion ($104 mm), represented 20.5 percent of total sales in the first quarter, compared to 19.6 percent of sales in the year-ago period.

Diamond Sports (Baseball/Softball) revenues decreased 1.4 percent in yen terms to ¥12.5 billion ($153 mm) and Golf sales fell 12.4 percent to ¥5.58 billion ($68 mm) for the quarter, while Apparel sales increased 3.3 percent to ¥7.28 billion ($89 mm) for the period. While revenue 4

SGB WEEKLY AUGUST 15, 2011

in Europe increased by 0.5 percent in currency-neutral terms, the Americas region, which includes the U.S., Canada and Latin America, showed an 11.1 percent currency-neutral increase in revenue and drove the overall business results. Currency-neutral revenues in the Asia/Oceania region jumped 18.6 percent for the quarter.

In the Americas, sales of footwear increased 25.4 percent, led by running shoes, and apparel grew 23.3 percent, measured in currencyneutral terms. The total region saw revenues increase 0.5 percent in yen terms to ¥6.66 billion ($82 mm), or an increase of 13.5 percent in U.S. dollar terms for the period. In Japan, revenues increased 0.3 percent to ¥29.9 billion ($366 mm) in the fiscal first quarter. Europe revenues totaled ¥2.39 billion ($29 mm) for the period, a one percent decline in yen terms, while the Asia/Oceania region grew 13.0 percent in yen terms to ¥2.62 billion ($32 mm).

The forecast for the fiscal year ended March 31, 2012 remains unchanged at revenues of ¥152 billion and net income of ¥2.50 billion.

BY THE NUMBERS 1 Million

Life is Good reached more than 1 million "Likes" on its Facebook page. During an average month, Life is Good's Facebook page receives nearly 29 million post views and over 127,000 fan interactions. The brand also has more than 36,000 Twitter followers.

CANNONDALE AND OTHER IBD SALES STAND OUT IN AN OTHERWISE TOUGH Q2 AT DOREL

Gloomy economic news may be causing parents to use more hand-me-down baby furniture, but it is not keeping cycling enthusiasts from buying a new ride, according to Dorel Industries, Inc., which owns Cannondale and other bike nameplates as well as several prominent juvenile product and ready-to-assemble furniture brands.

The company’s Cycling Sports Group (CSG), which sells Cannondale and other premium bikes in the IBD channel, continued to power growth at Dorel’s Leisure/Recreational segment in the second quarter, even as the company’s sales of bikes, juvenile and ready-to-assemble furniture products to the mass channel fell.

“The higher-end bikes are selling at a much larger growth rate than the mass market products,” Dorel’s EVP and CFO Jeffrey Schwartz said during the company’s second quarter earnings call with analysts.

Net sales at the Leisure/Recreation segment rose 15.9 percent to $249.1 million for the second quarter ended June 30. Organic revenue increased approximately 12 percent for the quarter and 11 percent year-to-date after excluding the impact of exchange rates.

Gross profit reached $60.5 million, up 17.6 percent from the second quarter of 2010. Gross margin rose 30 basis points to 24.3 percent of sales. Operating profits for the segment reached $21.3 million, up 25 percent from a year earlier.

Operating margins rose 60 basis points to 8.5 percent of sales.

IBD sales grew in all divisions - United States, Japan, Europe and Australia – but were strongest in Europe where they grew 50 percent. ​Dorel said demand growth is coming both from existing dealers in North America and Europe and from new distribution for all CSG brands that includes both additional dealers and cross-selling to existing dealers.

Cannondale’s new Supersix Evo, Flash 29er and Scalpel 29er bikes, Schwinn’s new Vestige and updated Sierra and Voyager models and GT’s new 29ers and graphics are selling well thanks to new designs, technology and increased promotional spending. The plethora of new models enabled CSG to pass through some higher costs during the quarter, something it could not do at its other segments. Moreover, the company took steps to avoid delays that caused late shipments to dealers in 2010 and 2011.

8 a.m.

Sports Authority held grand openings for six new stores simultaneously on August 13 at 8 a.m. in the major markets of Miami, Los Angeles, Salt Lake City, Chicago and Milwaukee. The stores are located in Miami and Vero Beach, FL; Lakewood, CA; Salt Lake City, UT; Orland Hills, IL and Glendale, WI.

5.2 Percent

Heelys' Q2 revenues decreased 5.2 percent to $8.3 million as a 23.3 percent gain in domestic sales was unable to offset a 14.3 percent drop in international sales.

Most of the increase came from delayed Q1 shipments that spilled over into the second quarter.

100 Years

L.L. Bean hired Weber Shandwick to design and execute an integrated cross-platform communication campaign for the company's upcoming 100th anniversary celebration. Returning from a hunting trip with cold, damp feet, Leon Leonwood (L.L.) Bean in 1911 enlisted a local cobbler to stitch supple leather uppers to waterproof rubber boots to create the Maine Hunting Shoe, marking the start of the company.

+25,000 Attendees

Approximately 25,000 retailers, exhibitors and media closed out a record-breaking Outdoor Retailer Summer Market, August 4-7 in Salt Lake City, UT. Net-sold square feet was 456,508, representing the highest netsold square feet for the Summer Market.

The show's overall footprint surpassed 1 million square feet.

+2,500 Stores

Adidas Group China Managing Director Colin Currie told the China Daily newspaper that the company plans to open more than 2,500 additional stores in the next few years in lower-tier cities in China, expanding its coverage to more than 1,400 cities. Adidas' sales jumped 30.8 percent in Greater China in the first quarter to €268 million ($386 mm) and shot up 40.9 percent currency-neutral, supported by strong growth in all major categories.

JOHNSON OUTDOORS SEES FISCAL Q3 RESULTS HURT BY WET SPRING, CONSUMER ANXIETY Q2 NET INCOME CUT AS MARGINS CONTRACT ON PRODUCT SHIFTS Easton-Bell Sports recorded its sixth consecutive quarter of top-line growth for the second quarter ended July 2, although product launch shifts for certain baseball products along with a negative effect of hockey inventory clearances tightened the company’s margins.

Overall sales for the quarter improved 4.5 percent to $211.9 million, up from revenues of $202.8 million in the year-ago quarter.

In a conference call with analysts, management said strength was driven primarily by growth in the Team Sports segment, where the company continues to build market share in football helmets and equipment reconditioning services. Additionally, the company said the Easton brand experienced higher sales of baseball bats across all price points as retailers begin to restock their inventory to align with recent rule changes that will take effect in 2012.

Sales to the Team side increased 9.5 percent to $119.6 million but were partially offset by weaker glove sales as well as the aforementioned reduced revenue from closeout sales of hockey equipment in preparation for upcoming product launches.

Management said the company’s Baseball/Softball business reflected demand growth of 30 percent with “substantial quantities” of high-margin bats set to ship in the back half of the year. For the hockey segment, management noted that the upcoming launch of the RS stick had generated excitement in the market.

The company said Riddell football continues to gain market share at both the varsity and youth level, with total helmet orders up 37 percent for the quarter as demand increased following a recent study by Virginia Tech that ranked three Riddell helmet models as either five star (Best Available) or four star (Very Good) for concussion resistance.

Action Sports segment revenues dipped 1.2 percent to $92.5 million, partially as a result of reduced demand for snow helmets in the European market due to high retail inventory levels resulting from carryover product from last season. Management also pointed to lower sales of cycling helmets and accessories.

Those declines were partially offset by increased sales of cycling helmets in the specialty channel, growth of sales of the company’s Easton brand of cycling wheels and components, increased sales of higher-priced power sports helmets such as the Star, RS-1, and newly released Revolver, and the introduction of the company’s Giro branded cycling shoes.

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Johnson Outdoors, Inc. said a wet and cool spring, consumers’ anxiety over the economy and the federal budget debate hurt its Watercraft and Outdoor Equipment businesses in the three months ended July 1 even as fishing and underwater enthusiasts snapped up innovations created by its more technology-driven Marine ElectronJohnson Outdoors, Chairman and CEO Helen Johnson-Leipold ics and Dive businesses.

The Wisconsin-based company reported total net revenue during the fiscal third quarter reached $122.5 million, a 1.2 percent dip compared to net sales of $124.0 million in the prior-year quarter.

Operating profit was $11.8 million versus $13.4 million, reflecting both lower sales and increased supplier costs. Net income was $8.1 million, or 83 cents per diluted share, compared to $10.4 million, or $1.09 per diluted share, in the prior-year quarter.

Sales at Johnson Outdoors's Watercraft segment, (Carlisle paddles, Extrasport PFDs, Necky, Ocean Kayak and Old Town kayaks and canoes) declined 11.2 percent to $21.9 million while revenues in the company’s Outdoor Equipment unit (Eureka tents, Tech40 and Silva instruments) declined 27.3 percent due to a 68 percent, or $3.4 million, reduction in military sales.

“This year a perfect storm brewed with the weather and economy to stall recovery,” said company Chairman and CEO Helen JohnsonLeipold during the company’s third quarter earnings call with analysts.

“Watercraft had a strong sell-in during the first half of the year and our unique trading partner intelligence data shows product is continuing to steadily sell through; however, the third quarter is all about in-season replenishment and given how late the season started, those orders simply didn't materialize as retailers ratcheted back to keep inventory in check.”

"Paddlesports dealers appear to have taken a very cautious approach. They are just going to be very careful about what inventory they keep on hand,” she said.

More importantly, the company’s flagship Marine Electronics and Diving brands nearly offset declines in the Watercraft and Outdoor Equipment businesses during the quarter. Johnson-Leipold attributed that to the rapid pace of innovation in the two businesses, which has come to rely increasingly on digital technology.

“Outdoor enthusiasts are also early adopters - trend setters,” she said. “They want the newest piece of equipment designed to make their outdoor experience more fun and enjoyable.”

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Photo courtesy of New Balance

NEW BALANCE OPENS FIRST NORTH AMERICAN EXPERIENCE STORE New Balance opened its first North American Experience Store in New York City's Flatiron District on August 11. The 4,000+ square foot store, located at the corner of Fifth Avenue and 20th Street, features a Mondo running track and a unique demonstration area where New Balance associates showcase the company's domestic manufacturing capabilities.

"We are excited to open this store in New York City that pays tribute to our heritage and spirit, celebrates our innovation and continues the high standard of retail excellence we established two years ago with our first-ever New Balance Experience Store in Beijing," said Rob DeMartini, chief executive officer and president of New Balance. "This store invites consumers from one of the world's greatest cities to engage with our brand's story and the passion of our associates that is 105 years in the making."

The store's decor features restored original brick walls, floor-to-ceiling columns, pays homage to their signature grey color while introducing modern day, technology-based offerings amidst a red and grey color scheme and vibrant product photography. A brand DNA ribbon on the store's ceiling extends 60 feet from the entrance to the back of the store taking the consumer through a chronological journey documenting the brand's powerful past, present and future using vintage and modern images.

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Photo courtesy of New Balance

MOVERS & SHAKERS

UNDER ARMOUR DEBUTS LARGEST FOOTWEAR CAMPAIGN Under Armour released its first footwear-oriented campaign entitled “Footsteps" highlighting its Charge RC shoe. The effort uses star athletes, including the NFL’s Tom Brady and Cam Newton, elite track and field runner Monica Hargrove and UFC fighter George St. Pierre.

The campaign was shot by director Peter Berg, who developed the Emmy Award-winning television series Friday Night Lights. TV commercials run on MTV, BET, and ESPN, while online and print distribution will include Facebook, Yahoo! Sports, and STACK Magazine.

"We've captured athletes in their authentic training environment, showcasing Under Armour's commitment to performance and innovation in a voice that is unique to the brand," said Steve Battista, senior vice president, brand, Under Armour. "Our new line of footwear is helping athletes create footsteps, not just hear them."

The Charge RC shoe, which launches in December, combines Under Armour's proprietary HeatGear performance materials along with Micro G foam for a light yet supportive shoe.

A limited distribution of the collection debuts in October at select retailers, including City Sports and Dick's Sporting Goods.

Will Manzer, CEO of Eastern Mountain Sports, has assumed the chairman’s position at Outdoor Industry Association, where he is expected to focus much of his attention on protecting federal funding for public lands, conservation and outdoor recreation infrastructure targeted for elimination by House Republicans. He replaces Dan Templin, CFO at VF Outdoor, Inc.

Brown Shoe Co. has made four strategic additions to the leadership team within its American Sporting Goods (ASG) division, appointing Jim Hoff as VP sales across all ASG brands, Alan Vickers as VP international, Brad Little as VP & brand manager Avia and Nevados, and Jorge Cabrera as VP athletic product development.

Zumiez hired Marc Stolzman as its new chief financial officer and corporate secretary, effective August 8. Stolzman was formerly the CFO of Blue Nile, Inc.

Easton Bell Sports hired KimberlyClark veteran Laura Moore as SVP of corporate communications.

Shock Doctor said that Minnesota Vikings wide receiver Percy Harvin was an endorser.

TAG Heuer ended its endorsement agreement with Tiger Woods when it expired last month.

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OUTDOOR INDUSTRY REGAINS MOJO WHILE MANY A STOCK PORTFOLIO WAS SIDESWIPED LAST WEEK, THE OUTDOOR INDUSTRY BY ALL INDICATIONS REMAINS BULLISH.

By Thomas J. Ryan

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SGB WEEKLY AUGUST 15, 2011

T

he 2011 Outdoor Retailer Summer Market, in its 15th year in Salt Lake City, UT, marked a full recovery from the doldrums of previous shows following the 2008 financial collapse. Running from August 4-7, the event drew crowded aisles and smiling faces serving as a testament to the vitality of the outdoor industry and a renewed vigor around the appeal of the outdoor lifestyle. With new exhibitors showing in the run and action sports markets and traditional outdoor space looking to reach the growing crop of retailers attending the show, it was a hot ticket.

Early returns had the show posting a 10 percent attendee increase over the prior year. A demand for exhibitor space was so strong that Nielson Exhibitions erected a new 25,000 square foot exhibitor pavillion across from the entrance to the Salt Palace for 165 new exhibitors according to Kenji Haroutunian, Outdoor Retailer show director. More than 25,000 buyers were expected to attend for the first time but the number exceeded that by 10,000. Overall, net-sold square feet was 456,508; representing the highest netsold square feet for the OR Summer Market. The show's overall footprint surpassed 1 million square feet.

The show began on a gloomy note. The Dow Jones Industrial Average crashed on the second day -- largely due to concerns over the U.S. debt crisis -- and by Friday night, Standard & Poor's lowered the nation's AAA credit rating, the first downgrade in U.S. history and a dramatic vote of no confidence for the world's largest economy and its political leadership.

James Curleigh, CEO, Keen

Todd Spaletto, President, The North Face Americas

No matter, the mood on the show floor remained upbeat as many of the industry's participants regained their confidence after deftly weathering the recent recession and scoring strong financial gains over the last year. While overall participation in some traditional activities like multi-day hiking, rafting and rock climbing remain challenging, strength in activities like running, hiking and biking as well as the whole multi-sport and done-in-the-day trends are said to be bringing a wider group of consumers to outdoor specialty. The outdoor lifestyle continues to grow in appeal to help brands reach the much-larger casual opportunity. Technical innovation and the welcoming of more color and other fashion touches continued to spark many categories.

Keen's CEO James Curleigh was particularly enthused about the "energy" in the footwear space.

"There's more energy in footwear than I've seen in the last ten years," he said. "Whether it's the toning trend that came - wherever it goes - it was an innovation. And then at the other end of that spectrum is minimalism and that's an innovation. Then you've got all these different dynamics happening with big deals like Timberland -- the great success story of America -- now being purchased by VF Corp. That's energy in itself, or Sanuk, the coolest sandal that isn't a shoe, gets sold to Deckers. There's business energy, there's brand energy, there's innovation energy and there's consumer conversations around footwear. That's awesome."

Todd Spaletto, president of The North Face Americas, said the past two years have proven the resiliency of the outdoors.

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​​​ "I think people love the outdoors and the industry tends not to get as affected by really good times or really bad times," said Spaletto. "If you look over the past two years or even to a 20-year history, when there have been economic swings, the outdoor industry has tended to do better than average both because our core consumer stays with those activities and then others turn to the industry for less-expensive staycations and people get back to hanging more local with their families. Our activities allow people to do that. We're not in the jetliner business with cruises to Europe."

While less expensive, the appeal however is because many outdoor activities "are right outside our back door and easy to access" while providing the potential for vast enjoyment and fulfillment.

"Running, for example, has done great because you just get a pair of shoes and go," said Spaletto. "Hiking and running to me are very similar. They're fairly low-cost of entry and a great escape. Some of my favorite moments are when I'm on a morning run or on a hike to get away from the CNBC ticker at the bottom of the TV screen."

Dan Nordstrom, President & CEO at Outdoor Research, said he made his initial investment in Outdoor Research in 2003 at the time of the recession driven by the dotcom crash and was loudly questioned on the soundness of the timing of the investment.

But, he said, the industry weathered that recession and again somewhat comfortably managed this last one.

"I think the outdoor industry serves a need that people just don’t walk away from," said Nordstrom. "You can walk away from a trip to Disneyland or postpone it but the recreational experience we offer is a huge proposition.

What the typical outdoor experience means to you versus what you spend to do it is just a really good relationship versus spending a lot of money at a resort. And resort-type things got hit hard in this last recession. I

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SGB WEEKLY AUGUST 15, 2011

Dan Nordstrom, President & CEO of Outdoor Research

think we're all very fortunate to be in this business and it's shocked me how the industry in general has sailed through what otherwise globally is the most challenging global economy in our lifetime."

The outdoor industry is coming off a particularly robust year. In 2008, the holiday period was virtually a liquidation bloodbath for most retailers. Stores were packed with inventory but consumers dramatically pulled back spending following the abrupt arrival of the financial crisis. By spring 2009, the consumer started spending again but shell-shocked retailers had ordered too lean, leading to empty shelves and missed opportunities. Holiday 2010 turned out to be the perfect storm as consumer spending gained further momentum and stores were smartly filled with merchandise. Coupled with efforts to cut costs and increase efficiencies to weather the recession, profits appear to have been particularly strong for many players in the outdoor world.

The stubborn labor market and macro-economic challenges splayed across the news pages appear to having some impact on some consumers.

Fran Allen, SVP of global sales at New Balance, said the footwear brand's core specialty accounts "seem to be doing quite well" and look to be positioned for a strong year but he pointed to some caution by a few of the bigger chains that he talked with at the show.

"For example, I asked a bunch of them how back-to-school was doing and they all said, 'It hasn’t started yet,' " said Allen. "That was a common answer and school has actually started at some places in the South. I don't think they were trying to be flip. I think the consumer is waiting before they buy. It casts a kind of malaise over everything despite the fact that there's a lot of great product out there." ​​He still remains upbeat, largely because running remains such a popular activity. ​ "Fortunately, runners keep running regardless of the economy," said Allen. "It's such a simple exercise and you really just need a good pair of shoes and clothing that fits your needs and you're ready to go. It's not like you have to buy a club membership like golf. And it doesn't have to be time-consuming. Not many people can say, 'I'll play golf at lunch-time' because you're going to be gone five hours. Plus add all the discussion about obesity in America and it looks like more and more people are looking to participate in running. I think that's a core reason why Real Run is doing well."

SmartWool's President Mark Satkiewicz also said that while the outdoor industry has seen a strong recovery, the economic rumblings have at least some anxiousness over holiday.

"We had a fourth quarter that was unbelievable," said Satkiewicz.

"Everybody did; we're no exception. The first half has gone well for us. We're extremely excited about the back half of the year but the consumer macro climate is just 'okay.' Most of our customers are doing fine but once it gets to August there's the trepidation about how the weather will play out, how inventories will be, and what they can take, etc. I would say it's not like the back half of 2008 or 2009 and it's not as strong as the fourth quarter of 2010 but who can expect that. People were just so lean and consumers were coming back a little bit."

Nonetheless, he said SmartWool remains optimistic largely because of the innovations they are bringing to market, particularly on the apparel side.

"We still need great weather and all those things but we're providing far more options and solutions for our consumers than ever before," said Satkiewicz. "If someone was a fan of the SmartWool brand, they're going to get more and more opportunity to connect again maybe in a way that they hadn't in the past or in a way they’ve been wanting from us."

Polartec has been growing briskly, and its global director of marketing Nate Simmons attributes that to a variety of innovations in the apparel space as well as operational efficiencies. He noted while apparel may not be finding any "necessarily breakthrough" innovations at the level of Vibram's FiveFingers, it's delivering enough to convince consumers to replenish their closets.

Nate Simmons, Global Director of Marketing, Polartec

"Innovation takes a lot of different forms," observed Simmons. "It can be hitting a certain price point, it can be a different texture, it can be totally aesthetic, or it can be performance-based."

On the performance side, he noted that four different technologies around waterproof breathable were launched in the industry last year. Minimalism also played a role in apparel for technical brands looking to reduce weight and meet multiple-options, he noted. For instance, Polartec's NeoShell has waterproof properties yet breathes enough to span a wider-range of temperatures. Said Simmons, "So you don’t wear a soft shell and carry a hard shell. You can get away with carrying one shell because it gives you enough breathability to do what you want to do."

Finally, more colors, much of it inspired by Europe, are feeding the opportunity around lifestyle apparel.

Mark Satkiewicz, President, Smartwool

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"PEOPLE ARE RUNNING AND THEY'RE BUYING RUNNING SHOES. WE MADE THE CUT" - JIM WEBER

Brooks Sports, President and CEO, Jim Weber

"It's not purely technical, it crosses over to everyday wear," said Simmons. "It's more textures, more colors and more variety but you still have performance."

Equally bullish on apparel was Brooks Sports' President and CEO Jim Weber, who noted ​​that a Wall Street analyst, Jeff Kleinfelter, predicted that a replacement cycle in apparel was ready to spike as consumers had delayed purchases. Brooks is seeing its apparel business running up 40 to 50 percent so far this year. Weber likewise seemed more ​encouraged that running again perseveres during tough times.

"People are running and they're buying running shoes. We made the cut," said Weber. "As consumers are obviously nervous, running and running shoes have made the cut. If you look just at marathon participation, the running lifestyle is in the mix. Because of that, our category is very healthy at specialty and at national accounts."

One concern of Weber's is that many brands are coming into the running footwear space, driven by the barefoot and lightweight trend.

"Three years ago we saw that happening in tech running.

Everybody started showing up at the trade shows and the number of brands that entered the running market three years ago was massive. Now we have all that plus more hitting the lightweight/ minimalist side of things."

Moreover, he said, while "lightweight is here to stay and will influence everything we "build" for runners, a lot of people are turning to lightweight styles as a casual lifestyle option. "A lot of it is not being run on and that's a wave that is big right now but it's going to crest and break. They always do. It's hard to know how long that piece of it will last."

Weber's biggest concern in the current market appears to be ever-increasing sourcing costs. Brooks raised prices on its Adrenaline 14

SGB WEEKLY AUGUST 15, 2011

franchise shoe to $110 for Spring 2012, up from the key price point of $100. "Brooks is being pushed to increase that further for 2013.

"It's brutal," he said.

Geoff O'Keeffe, VP of global sourcing at American Recreation, not unexpectedly had soaring costs on his mind as well.

"There's been unprecedented inflation in raw materials and labor rates in China, Vietnam and elsewhere. Exchange rate is now an issue. Freight costs have gone up. Come spring, consumers are going to be looking at 5 percent to 30 percent price increases across the board on various costs of goods."

He was also upbeat on the state of the outdoor business and particularly "stoked" at all of the new companies such as Neon and Sherpani bringing innovation to protected categories like tents, sleeping bags and packs.

"Big Agnes was one of those not so long ago. I have a lot of respect for those companies because that's a hard go when you're up against the established brands. It keeps us honest," said O'Keeffe.

"That's a sign of vitality in our industry that I really like."

O’Keefe also credited Gregory with helping bring color and other patterns to equipment categories. Said O'Keeffe," I followed a woman into a show who had flowers on her backpack and I thought, 'We've got to wake up.'" He said Kelty has been finding a strong following among younger consumers for its Heritage collection.

O'Keeffe also recognized that car camping and base camping are proving to be an increasingly easy way to experience the outdoors for younger as well as older groups, but believed the longer hike will always remain a cornerstone of the outdoor experience. ​​"There's something transformative when you spend two weeks in the wilderness,” said O’Keefe. "It will change you. It will change your mind and it will show you your heart."

Hi-Tec Sports CEO Ed van Wezel said the increasing arrival of action sports, running, surf and other pursuits at recent shows proves "this is a hot industry everyone wants to be ​involved in." But, he said, it only reflects the bigger opportunity the outdoor industry has become.

"If you walked the Outdoor Retailer show 10 years ago, people were walking around with backpacks and carabineers with ropes and chalk in their hands," said van Wezel. "But now you've got skateboarders, surfers, runners, triathletes, etc. It's basically the outdoors, not just running, hiking and biking. It's that out-of-your-door solution for the enjoyment in your life. And that's this industry."

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"THE BOUNDARIES ARE GETTING VERY BLURRED ON WHAT'S SKATE AND WHAT'S SURF AND WHAT'S OUTDOOR," - ED VAN WEZEL

Ed van Wezel, CEO, Hi-Tec

Van Wezel also believes Hi-Tec is particularly suited to capitalize on what he calls the "sportification" of the industry, marked by the presence of Saucony and New Balance now at the show as well as Merrell's success with its Barefoot series. While some brands come from a heavy backpacking, ski boots or down jackets background, he believes Hi-Tec is well positioned because the brand comes from a sports heritage. Hi-Tec is also positioned just below the big price points to feed today's demand for value. He said the multi-sports trend is helping outdoor brands reach the new breed of outdoor consumer on both the performance and casual side.

"The boundaries are getting very blurred on what's skate, what's surf and what's outdoor. You're seeing a hybrid of outdoor inspired footwear which is great because you're not being defined by a 250-pound backpacker to be an outdoor brand anymore. That for us is a huge opportunity. And for us, the stars are aligning."

Keen's Curleigh also believes the multi-sport trend is opening up opportunities to get people exploring numerous activities that often lead to deeper commitments in many pursuits, including recruiting advocates for traditional outdoor activities like the multi-day hike and rafting tours. The bigger opportunity, he sees, is addressing the overall casualization movement being seen across the world.

"Casual can be driven from fashion. It can be driven by athletics.

It can be driven from outdoor or action sports. I believe it's going to be driven by outdoor," said Curleigh. "I think outdoor has a more authentic casual point of entry. It's not white tennis shoes on the American tourist in Paris. It's the casualization of the color palette, functionality and the durability and comfort that is built in."

Curleigh said whether all the new brands and categories on 16

SGB WEEKLY AUGUST 15, 2011

the OR show floor are good for the industry is really a question of motivation. "If the motive is 'fish where the fish are,' it's just a smart business decision," said Curleigh.

He believes the industry has to be careful that it is not "going through those periods where there's so much noise" and the consumer gets confused. When he was in the ski business in the early 90s, the industry went from straight skis to shaped skis but a variety of terms and marketing approaches left the consumer confused. As a result, at a point of intense innovation in the ski business, industry sales actually declined. He said the same pattern may be occurring around different footwear approaches.

"You can walk into some stores and hear you need an overbuilt dynamic toning platform to do all these things. The next store says, 'Oh no, you need to get your feet closer to the ground and go minimal.'

Finally, the next store says, 'Oh no you need toe protection and metatomical support.' At a certain point, they'll say, 'I'm confused.

I'm just going to wear my Chuck Taylors.' That’s what can't happen."

Curleigh also said one of the core reasons Keen has been successful is because its original Newport model remains one of its best sellers. While it's easier than ever to jump on a trend, he said any brand coming to outdoor specialty and Outdoor Retailer has to bring some iconic product to the market. ​ "If a brand comes here and brings a meaningful point of view, it actually helps provide clarity for the consumer in choice. I'm okay with that. That's the fun fight."

Spaletto said The North Face brand has found an invitation to connect across many outdoor pursuits, including running, mountain biking and traditional outdoor sports including yoga. And, he said, the OR show is proving equally welcoming to a wide range of authentic outdoor activities.

"If you look over a ten-year period at which trade shows have done well and which are almost extinct, the trade shows that have done well have an authentic culture and personality and I would put the Outdoor Retailer show at the top of the list," said Spaletto. "When you look at an outdoor show versus an apparel show or a shoe show, the shows that are doing well are really the ones that stand for a core, authentic, and tangible activity. I think as long as there's relevant core adjacencies to outdoor, it works. Running, for example, makes sense. Some of our climbers are the best runners we have because you need to run to train to be a better climber. I think the outdoor retailer show is one of the best shows out there." ■

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CALENDAR

For full year calendar go to sportsonesource.com/events

16-18

EORA Greenville Primary Expo Greenville, SC

22-24

EORA Killington Primary Expo Killington, VT

22-24 MAGIC Show Las Vegas, NV

SEPTEMBER 7

Surf Expo SUP Demo Orlando, FL

8-10

Surf Expo Orlando, FL

9-11

NBS Fall Semi-Annual Market Ft. Worth, TX

12-13

Interbike Outdoor Demo West Boulder City, NV

12-14

EORA Lake Placid Expo Show Lake Placid, NY

13-16

WDI Worldwide Fall Show Portland, OR

14-15

MRA Paddle & SUP Demo Gull Lake, MI

14-16

Interbike Int. Trade Expo Las Vegas, NV

14-16

Health & Fitness Business Show Las Vegas, NV

OCTOBER 4-6

OIA Rendezvous Portland, OR

2-4

TAG Fall/Winter Show Kansas City, MO

3-4

NBS Fall Market Mobile, AL

12-14

ADA Fall Buying Show Kansas City, MO

20-22

Sports, Inc. Athletic Show Las Vegas, NV

DECEMBER 5-7

MRA December Market Lansing, MI

JANUARY 10-12 ATA Show Columbus, OH 12-14 Surf Expo Orlando, FL 17-20 SHOT Show Las Vegas, NV 18

Outdoor Retailer Demo Solitude, UT

19-22

25-28

Outdoor Retailer Winter Market Salt Lake City, UT

26-29

SIA Snow Show Denver, CO

PGA Merchandise Show Orlando, FL

29-2/1 ISPO Munich 2012

Munich, Germany

NOVEMBER

30-31 SIA On-Snow Demo/Free Ride Fest

Winter Park Resort, CO

FEBRUARY

1-4

1-2

6-7

18

The Retailing Summit Dallas, TX

NASGW Annual Meeting & Expo Reno, NV

SGB WEEKLY AUGUST 15, 2011

NBS Spring Semi-Annual Market Fort Worth, Texas

Athletic Dealers of America 1395 Highland Avenue Melbourne, FL 32935 t 321.254.0091 f 321.242.7419 athleticdealersofamerica.com

TRADE ASSOCIATIONS | BUYING GROUPS

AUGUST

National Sporting Goods Association 1601 Feehanville Dr. / Suite 300 Mount Prospect, IL 60056 t 847.296.6742 f 847.391.9827 nsga.org Nation’s Best Sports 4216 Hahn Blvd.

Ft. Worth, TX 76117 t 817.788.0034 f 817.788.8542 nationsbestsports.com Outdoor Industry Association 4909 Pearl East Circle / Suite 200 Boulder, CO 80301 t 303.444.3353 f 303.444.3284 outdoorindustry.org SGMA 8505 Fenton Street Silver Spring, MD 20910 t 301.495.6321 f 301.495.6322 sgma.com SnowSports Industries America 8377-B Greensboro Drive McLean, VA 22102 t 703.556.9020 f 703.821.8276 snowsports.org Sports, Inc. 333 2nd Avenue North Lewistown, MT 59457 t 406.538.3496 f 406.538.2801 sportsinc.com Sports Specialists Ltd. 590 Fishers Station Dr. / Suite 110 Victor, NY 14564 t 585.742.1010 f 585.742.2645 sportsspecialistsltd.com Team Athletic Goods 629 Cepi Drive Chesterfield, MO 63005 t 636.530.3710 f 636.530.3711 tag1.com World Wide Distributors 8211 South 194th Kent, WA 98032 t 253.872.8746 f 253.872.7603 wdi-wdi.com

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