I am more pessimistic today than I was in December about the short-term prospects for the U.S. athletic footwear and apparel markets.
Late last year, my expectation was that 2017 would be an average year, with a weak first half offsetting a strong second half. The anticipated soft sales in February occurred, but the rebound has not materialized.
Then I discovered the Hispanic spending slowdown, as I wrote about recently. Athletic footwear sales to Hispanics have been quite soft, after several years of good growth. As Hispanics represent more than 20 percent of the U.S. athletic footwear market, this slowdown has had a significant impact on the business, and I expect that it will contribute to a soft back-to-school performance for athletic footwear. All brands and channels are affected by this Hispanic slowdown, but Nike, Brand Jordan, Vans, and Skechers are hurt the most.
Classics, lifestyle running, and casual athletic will remain the strongest growth categories. Performance footwear will remain soft for back-to-school, although the declines in basketball will moderate with easier comparisons. In line with this, technical running brands will continue to struggle. Nike has had soft sales results in the U.S. and there is nothing to suggest that this trend will get better for the back-to-school season. Representing about half of the total athletic footwear market share in the U.S., Nike sales impact the entire industry. My expectation is that Under Armour footwear sales will struggle for back-to-school, even with the expanded distribution.
All in all, I expect that athletic footwear will post a low to mid-single digit decline for the back-to-school season. Given the changes to advertised pricing policies, we can expect this to be the most promotional back-to-school in the 17 years I’ve been doing research.
I also expect that the U.S. activewear market will be challenged, but for different reasons. Since the beginning of the activewear movement, hundreds of fashion brands have rushed into the category to try and grab some of the gold. Retailers are now filled to the rafters with sweatshirts and yoga pants, most of which are made by brands that don’t know how to make performance apparel, and sold to retailers who don’t know how to sell performance apparel.
This push has caused a glut in the market that will take time to flush out. The core activewear brands and retailers are getting crushed under the increased and inferior competition.
Both Nike and Under Armour apparel will most likely struggle for back-to-school, while Adidas will thrive. The more mass brands should also fare well this season.
I expect that activewear sales during back-to-school 2017 will decline in the low single-digits.
As in athletic footwear, this will be one of the most heavily promotional environments seen in decades.