NEW YORK — Athletic retailers, propelled by performance-related apparel and footwear and improved inventory management, are sprinting ahead of much of the rest of the retail pack.
The pace is expected to be brisk in the months ahead as stores look at back-to-school business, analysts and industry executives said.
“We have seen strong momentum in this sector, and we expect it to continue into the fall and back-to-school period,” said Reed Anderson, an analyst with investment bank Friedman, Billings, Ramsey & Co. “Performance items are driving this business. High-technology footwear from brands like Adidas and performance-oriented apparel from companies such as Nike and Under Armour are leading the way.”
The b-t-s period is usually strong for athletic chains, as young people stock up on sneakers and apparel for school team sports and casual attire. Many chains including Finish Line, The Sports Authority, Foot Locker and Hibbett Sporting Goods have aggressive store opening plans this year, which should also help results.
Several chains, including Dick’s Sporting Goods and Finish Line, reported significant gains in sales and earnings in the recent fourth quarter, driven by high-technology footwear, including the new Adidas 1 microchip shoe, Reebok’s pump line and Nike Shox Turbo, which have higher price points.
Matt Powell, an athletic analyst with Princeton Retail Analysis, said the sector has seen higher margins partly because of strong sales of full-price and more expensive merchandise.
“People are willing to pay more for technology,” he said, adding that stores are also not “overbuying,” which is leading to clean inventories.
Athletic retailers also reported strong results from private label apparel. Many retailers have been building up offerings of their own brand merchandise to drive margin growth and pump up their stores’ identities. Urban brands, such as Rocawear and Enyce, were cited as strong performers at Finish Line and Hibbett Sporting Goods. Women’s apparel is also a growing focus at many chains.
There are some challenging areas, however. Licensed jerseys and apparel have slowed and outdoor apparel was also tough for stores, reflecting difficulties in sales of ski and winter sports gear.
Dick’s Sporting Goods, which now owns Galyan’s, said earnings surged 53.6 percent to $39.9 million, while sales climbed 66 percent to $788 million in the recent quarter, and same-store sales gained 1.1 percent. For the year, income climbed 26.7 percent to $66.9 million, while sales were up 43.4 percent to $2.11 billion, and gained 2.6 percent on a same-store basis.
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“During the quarter, we saw favorable results through much of our business, including golf, exercise, athletic footwear and athletic apparel,” Edward W. Stack, chairman and chief executive officer, said during a conference call. “Those favorable results were somewhat offset by a few businesses, including winter outerwear, snow sports, boots and in-line skates.”
Private label apparel is a big push at Dick’s and accounted for 9.2 percent of sales in the recent quarter. The company has been converting the Galyan’s stores to Dick’s Sporting Goods units. Galyan’s corporate office was closed at the end of February. Dick’s now operates 234 units.
The Sports Authority said earnings surged 75.4 percent to $25.5 million, while sales edged up less than 1 percent to $713.7 million, and comps slipped 2.2 percent in the three-month period. For the year, earnings rose 33 percent to $34 million, while sales gained 38.3 percent to $2.44 billion.
The company had robust sales of performance apparel in activewear, executives said on a conference call.
“We have aggressive plans for the expansion of our women’s activewear business, with our key vendors during 2005 being Nike, Under Armour and Adidas,” said David Campisi, TSA’s president of merchandising, who joined the firm in November from Kohl’s Corp.
The company has also been seeking to update its format through a comprehensive store remodeling program and is beefing up its offerings of higher-priced apparel.
Hibbett Sporting Goods, based in Birmingham, Ala., operates 482 stores and had a particularly strong quarter. Net income gained 27 percent to $8.2 million, sales jumped 17.5 percent to $107.1 million, and comps rose 5.2 percent. For the year, earnings increased 25.6 percent to $25.6 million, sales jumped 17.6 percent to $377.5 million, and were up 5.7 percent on a same-store basis.
Jeffry Rosenthal, the chain’s vice president of merchandising, said activewear sales, which include Nike and Under Armour, were up in the high-single digits, led by women’s merchandise.
“Another category where we are having significant double-digit increases is urban apparel,” he said on a conference call. “Brands such as Enyce and Rocawear, and selected items such as cargo fleece pants, novelty Ts such as John Deere, Dickies and that type of product, are doing well.”
The company plans to open 70 stores this year, said Michael J. Newsome, chairman and president.
Finish Line, the mall-based operator of athletic and urban apparel catering to young men and women, has been on a hot streak in recent seasons and its growth track continued in this quarter. The company’s sales went up 18 percent to $361.4 million, and comps gained 8 percent, while earnings increased 33.5 percent to $28.2 million. For the year, sales grew 18.3 percent to $1.17 billion, up 9 percent on a same-store sales basis, while net income rose 29.3 percent to $61.3 million.
The company’s growth is being driven by footwear. Alan H. Cohen, chairman and ceo, said soft goods had a “difficult year,” but private label merchandise performed well.
“We have continued to make progress in our private label business as we get better at developing relevant product and sourcing it more efficiently,” Cohen said on a conference call with analysts. “A turnaround in soft goods at Finish Line this fiscal year will depend on continued improved performance in branded and private label apparel and the accessories category.”
Finish Line had a strong reaction to the new Maddie collection produced with Nike. The line includes brightly colored footwear, apparel and accessories for teenage girls. The chain, which operates 598 Finish Line units, plans to open 70 stores this year. In addition, the company intends to open 10 to 15 Man Alive stores this year and is bowing a prototype for this 37-unit division.
Foot Locker Inc., which operates almost 4,000 stores under its various nameplates, said earnings rose 21 percent to $89 million, on a 15.1 percent jump in sales to $1.5 billion, as comps gained 2.5 percent. For the year, income gained 41.5 percent to $293 million, while sales jumped 12 percent to $5.36 billion, and same-store sales rose about 1 percent. The company’s results were helped by the acquisition of the Footaction chain.
The company, which celebrated its 30th anniversary in 2004, had a higher average selling price in footwear because of increased sales of high-priced technical footwear, said Matthew D. Serra, president and ceo.
“While our apparel business was more difficult, we continue to generate solid sales gains from our private label and branded offerings,” Serra said on a call with analysts, noting that the chain is expanding aggressively overseas and is rapidly opening stores in Eastern Europe. “We believe Europe continues to offer the most exciting opportunity for sales and profit growth over the next several years.”
Sports Chalet, which operates 36 stores, said earnings increased 23.2 percent to $3.8 million on a 20.3 percent gain in sales to $95.9 million, while same-store sales grew 6.8 percent in the recent quarter. In the nine-month period, earnings gained 38.6 percent to $5.8 million, while sales went up 18 percent to $229.9 million, and comps rose 6.1 percent.
Craig Levra, the company’s chairman and ceo, said Sports Chalet is investing in new stores and plans to open units in Arizona in coming months.