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Nov 21, 2016

Sneakernomics: The State of the Athletic Footwear and Apparel Businesses Heading into Holiday

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U.S. athletic footwear results in Q3 were softer than they were in the first two quarters of the year, with dollar sales growing by only 2 percent for the quarter, compared to the mid-single digits for the first two quarters. Average selling price was down in the low single digits, while units rose only slightly. Activewear sales told a similar story; Q3 was also weak for this industry, with dollar sales down in the low single digits, compared to the mid-single digit increase in Q2. Average selling price declined in the mid-single digits, and units increased in the low singles.

Both of these businesses usually reap the sales benefits of back-to-school, so why did the pace slow down this year? As we step into the holiday season, does such performance foreshadow what’s to come? 

The primary reason for athletic footwear’s growth rate slowdown during Q3 was running. In Q2, running was up in the low singles; in Q3 it was down in the low singles. Since running is the largest category, this change in trend affected the entire business.

Within the running category, both lifestyle and performance slowed. In lifestyle, Jordan had a major impact on the results because a September footwear release was not repeated this year. In performance running, the malaise it’s been battling intensified, and certain major brands were particularly hard hit.

The basketball category continued to be challenged, given the shift in fashion away from the basketball silhouette. Right now, retro is all the rage.

Classics continued to be a force to be reckoned with in athletic footwear, with sales for this category up about a third. Nearly every major brand posted an increase in this category. It’s hard not to be successful here. Drafting off the success of classics and its non-tech sneakers, the casual athletic category also surged up, with high single digit sales growth. The retro trend will continue to be hot through the holidays, at the expense of performance footwear, and be the sales leader through the end of the year.

Looking at channel performance, athletic footwear sales within department stores, national chains, and athletic specialty/sporting goods were all essentially flat for Q3. The shoe chain channel achieved the best results in the quarter; sales were up in the mid-single digits. Shoe chains have never had a large basketball business, so that shift in fashion has not impacted this channel as much as it has the others.

Channel performance has also impacted activewear sales in a big way. Activewear was particularly weak in the athletic specialty/sporting goods channel, with sales down in the high singles for the quarter. Some of the major technical brands including Nike, Under Armour, and The North Face experienced declines in this channel. National chains had a small decline in overall sales, and department stores increased in the mid-single digits. The weakness in athletic specialty/sporting goods, the more traditional outlet for activewear, is part of a broader story which I wrote about last month, and I expect this trend to play into holiday sales as well.

Despite softer Q3 sales for athletic footwear and apparel, the athletic industry continues to be strong. Sneakers—the bright spot for the total footwear market—are experiencing growth. The activewear market remains quite solid, and doesn’t show any signs of phasing out of style. While Q3 is certainly not a tell-all of how the holiday season will unfold for these businesses, it’s important to understand the landscape in preparation of what’s to come.

*Source: The NPD Group, Inc. / Retail Tracking Service, July-September 2016 vs. 2015

Data is collected from the athletic specialty, sporting goods, chain store, department store, and other channels. Athletic footwear includes the following categories: Sport Leisure, Outdoor, Performance, and Work/Occupational/Safety.


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