US sports retail landscape redesigned as major chains affected by spate of closures
today Mar 21, 2017
In their annual reports, Volcom, Globe, Vans, The North Face and Columbia have all pointed the finger at the woes of multibrand sports retailers in the USA. Shop closures in North America have deeply impacted the business of many major brands in 2016, as nothing short of an earthquake is shaking the foundations of the US sports retail industry, and sports goods paid a heavy price as retail sales in general slumped across the country.
Sports Authority, one of the largest players in the USA, operating as many as 540 stores at one time, was strangled by debt and sought bankruptcy law protection in early 2016, though it failed to find a solution. One of its competitors, the Sport Chalet chain belonging to the Vestis Retail Group, found itself in the same quagmire and was forced to close down its fifty stores across the USA's West. Pacsun, one of the largest US board sports chains, also came close to the brink. Its restructuring plan, put forward by new owner Golden Gate Capital, was approved by the Delaware bankruptcy court, and in September the 583-store chain was back in business with a degree of confidence, though according to US sources it then had to close down about twenty stores.
In the meantime, the US sport goods market topped the $65 billion mark in 2015 according to business intelligence agency Statista, and has grown slowly but steadily in the last few years. So who has benefited from these chains' troubles?
Their direct competitors are the prime suspects. Zumiez, another board sport specialist and the owner of European retailer Blue Tomato, reported a revenue of $836 million in 2016, up 4% over the previous year, though comparable sales were stable. The US number one sport and outdoor retailer, Dick's Sporting Goods, which operates 675 stores across the USA and has taken over some of Sports Authority's stores, reported a 9% sales rise in its latest fiscal year, closed at the end of January, reaching $7.9 billion. Comparable sales were also up, though only by 3.5%. Hibbet Sports, with over 1,000 stores, grew at a similar rate, rising 3.2% to reach a revenue of $973 million, though its comparable sales where unchanged. Cabela, which targets the outdoor market, grew by a mere 1%, reaching $4.13 billion. Other leading retailers, such as Academy Sports + Outdoor and the REI cooperative are not stock exchange-listed, and failed to provide information on their results.
It is clear however that the spate of closures has not driven flocks of consumers to direct competitors’ stores. Why? Because purchasing habits are changing. Consumers are increasingly less willing to make their way to multibrand shops in retail parks, which offer neither a satisfactory customer experience nor advice. The drivers of growth are therefore entry-level chains, Wal-Mart dominant among them, and of course online retailers. Amazon cornered a large market share with its Sports & Outdoors section, and the same is true for all the sport brands which thrive on e-tailing. Adidas for example has forecasted a massive growth in online sales in the next three years.
Some of the long-standing names have of course realised the wind has turned and are busy investing in omni-channel projects. Hibbet is ready for home delivery, Zumiez strengthened the link between brick-and-mortar and online stores and Dick's Sporting Goods is powering up its website, which was overhauled last year. But will these super-tanker-sized chains be able to manoeuvre fast enough in responding to consumer expectations?
It is not a challenge all of them will be able to take on. In mid-February for example, the MC Sports chain went into receivership and had to close down all its 68 stores.
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