Action sports apparel is emerging as a potential bright spot in a troubled industry landscape.
The $7.48 billion sector that targets enthusiasts who careen on asphalt and snow as well as ride waves — or dress as if they do — is reaping the benefits of a strategy that combines trend-driven fashion, casual dressing and retail prices that hover below $100 for jeans and swimsuits and less than $30 for T-shirts.
Wal-Mart Stores Inc. this month jumped into surf as the exclusive seller of pastel-tinted corduroy shorts and rainbow-printed T-shirts from iconic brand Ocean Pacific, backed by a print, radio and online marketing blitz that includes Kristin Cavallari of “Laguna Beach” and rocker Pete Wentz.
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Macy’s Inc., which carries action sports apparel brands such as Roxy, Quiksilver, Hurley and O’Neill, sponsors surf competitions in Hawaii and California as a way to market to Millennials, the influential consumers born between 1979 and 1999.
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Amid declining sales at other apparel vendors and retailers, revenue at several action sports companies is trending higher.
Volcom Inc., an apparel maker based in Costa Mesa, Calif., raised its 2008 sales target to $343 million to $347 million, from previous estimates of $339 million to $344 million. Everett, Wash.-based Zumiez Inc. said first-quarter revenue grew 14 percent to $78.7 million from $68.8 million, while net income fell 13 percent to $1.4 million from $1.6 million on higher expenses. Buckle Inc., a Kearney, Neb.-based teen retailer that specializes in jeans mixed with a wide range of board sports clothing, said first-quarter net income grew 53 percent to $18.7 million from $12.2 million as revenue increased 32 percent to $160.3 million from $121.1 million.
“Through all of these economic difficulties, the board sports have sustained a good sell-through at retail,” said Debra Stevenson, who follows fashion and retail at her consultancy firm Skyline Studios in Los Angeles.
Aside from aesthetics, action sports apparel helps fill a void on the sales floor, as Macy’s, Buckle and Pacific Sunwear of California Inc. phase out urbanwear. “They’re going after action sports in a big way,” said Kurt Schleicher, director of sales at Fox Head Inc., a manufacturer based in Morgan Hill, Calif. “The timing is great.”
The key to staying buoyant is offering fresh product that quickly reaches the sales floor.
“The action sports business is pretty quick to pick up these new trends,” said Lian Murray, former creative director at Costa Mesa, Calif.-based Hurley International, who designs a surf-meets-street line called Aqua VI.
Newcomers want a piece of the action. Adrenalina, a fledgling action sports retailer that operates a store in Orlando, Fla., and another in Miami, recently signed leases for six units in locales such as the new Meadowlands Xanadu mixed-use center in East Rutherford, N.J., as well as in Houston and Denver. With plans to open 10 to 15 stores in 2009, the Miami-based company aims to launch its first shop in the action sports industry hub of California in the next two years.
Action sports designers aren’t afraid to pile on the details. Reef, the Carlsbad, Calif.-based sandal and apparel maker owned by VF Corp., spruced up a top-selling $49 halter dress with a polyester crepe printed in contrasting wave patterns, leather straps and smocking. It helped Reef to exceed sales expectations for the first spring season of its women’s sportswear line by 35 percent.
“The younger girl is getting more fashionable,” said Tandi South, Reef’s national sales manager.
With an emphasis on directional styles and moderate prices, action sports labels can find a niche in stores that want to round out their offerings of contemporary fashion and pricy denim. Insight landed in better specialty shops such as American Rag Cie and Barracuda with a $28 tank printed with artist Jonathan Zawada’s watercolor painting of a donkey sporting shades and a bow tie.
“There aren’t many brands out there that are fun and fresh with the price point,” said Vanessa Chiu, who handles national sales and fashion publicity in the Los Angeles office for Australia-based Insight.
At Roxy, the $800 million beach-inspired junior label owned by Huntington Beach, Calif.-based Quiksilver Inc. that is projected to grow 8 to 12 percent in the next few years, there was a common thread in the spring assortment of sportswear, swim and bags. “It’s color, print and pattern,” said Deanna Jackson, Roxy’s senior vice president for sales.
To be sure, like other businesses in a soft retail market, action sports companies face challenges.
Although New Albany, Ohio-based Abercrombie & Fitch Co. reported that first-quarter earnings rose 3 percent to $62.1 million as revenue increased almost 8 percent to $800.2 million, same-store sales at its surf-inspired division, Hollister, fell 8 percent.
PacSun, the Anaheim, Calif.-based retailer that is trying to find its footing after shuttering its urbanwear and shoe businesses, said its first-quarter net loss widened to $37.1 million from $5.1 million as revenue dropped to $266.9 million from $268.1 million. PacSun has set a goal of refocusing on its core business, including a revamped juniors section offering more fashion. Volcom and other surf companies are also eyeing overseas markets for expansion.
Fox Head said it will launch a women’s swimwear line exclusively with PacSun next year and offer it to other retailers in the following year.
Quiksilver is looking to retain an older, more sophisticated customer who grew up with — and possibly out of — Roxy. It is aggressively pushing this fall’s debut of its young contemporary line that will be sold under the parent brand at fashion retailers such as Nordstrom and E Street Denim. Rather than promoting sun and surf, the board sport behemoth is showing its artsy side by sponsoring free concerts in Los Angeles’ Silver Lake neighborhood. The first show was for The Submarines, a trio of feel-good indie rockers who filled a loft this month with scruffy dudes sporting bold eyeglasses and girls in vintage-inspired dresses accessorized with Vans slip-ons.
“We’ve been impressed with how creative they are as a company and what great people we’ve met there,” said Blake Hazard, The Submarines’ lead singer who donned a prairie-style frock that coordinated with the daisies decorating her keyboard.
That image helps in an uncertain economy.
“Retailers are taking a conservative outlook, but they are looking to brands, solid brands, strong brands, stable brands in this kind of an environment,” Martin Samuels, president of Quiksilver Americas, said during a recent conference call. “People know we’re going to perform.”