Analysis: The latest inventory levels in the Sporting Goods Industry, Q2 2024

• Year-over-year inventories at Q2 end were again down across segments and regions. 
• 28 of 32 tracked companies reported lower year-over-year inventories with 23 down by double-digits. 
• Aggregate inventories, compiled in reported currency, fell by more than 16 percent in Q2, higher than a 15 percent drop in Q1.

Trump tariffs or not? And if so, what will the effect be on global trade? 

Most vendors have been working diligently to diversify their respective supply chains and steadily reduce inventory levels since 2021. Footwear companies have been cleaning up their inventory levels over the past 12 to 24 months and are moving to construct more full-priced, premium collections for consumers in 2025 and beyond. Emerging supply chain strategies have been rooted in both building product closer to the geographies where they will be ultimately purchased by consumers and protecting against political and macroeconomics issues that may emerge.

Now, with gross margins ticking upward as inventory levels come down and helping companies land more full-price dollars for their premium products, a couple of potential threats to lower inventory levels have emerged. If these fears come to fruition, some vendors and retailers alike will be forced to re-align their respective product flows to avoid either having no key products available as needed or to adjust pricing due to higher costs related to new or higher tariffs. These are moves that may leave some consumers suddenly “off the market” for new sneakers, sporting goods, or a microwave.

US President-elect Donald Trump has threatened to implement the most expensive tariffs in nearly 100 years as he looks to rebalance global trade and lend his support to an extensive domestic manufacturing agenda. These actions could commence as soon as he officially takes office for his second term as president on Jan. 20, 2025. They may include up to 60 percent tariffs on all US imports from China and 10 to 20 percent tariffs on products coming into the US from other countries.

The US-based National Retail Federation contends Americans could lose $46 to $78 billion annually in spending power if new tariffs are levied on US imports. The trade organization estimates that under current tariff proposals, US consumers would pay $13.9 to $24 billion more annually for apparel and $6.4 to $10.7 billion more for footwear. Adding more proverbial “fuel to the fire,” a US East Coast/Gulf Coast port strike in mid-January would create more problems in getting imported products to stores for the Spring 2025 shopping season in a timely fashion.

Key Wall Street members, including JP Morgan’s Chief US Economist and Steve Madden CEO Edward Rosenfeld, don’t believe new tariffs are necessarily imminent from a Trump administration. Procedural reasons stand a strong chance of delaying Trump’s universal tariff proposal beyond 2025.

“I think it’s really difficult to quantify the potential impact here,” Rosenfeld told analysts last week. “And especially if we are contemplating a new policy where there are significant tariffs on China. That’s going to have all sorts of wide-ranging implications, not only on the supply chain but the overall economy, supply and demand impacts in all these countries where we would be sourcing from.”

Alex Buck, group president of supply chain solutions at Houston-based Quantix, told the publication Freightwaves that the impact of tariffs on a company’s bottom line could largely depend on the demand for shipping capacity across the supply chain.

Companies talk inventory matters during recent earnings calls

• Yeti, which expects to end its FY with an essentially flat year-over-year inventory level, continues to drive efficiencies in its global inventory planning strategy. The company has opened a second drinkware facility outside of China and is looking to open a third.
• Wolverine Worldwide, which lowered its Q3 end inventory level by 40 percent year-over-year, told analysts, “We prefer to miss some demand than find ourselves in a big inventory situation again.
• Canada Goose made significant progress in right-sizing its inventory level in Q3, after it fell by 9 percent in Q2 and by 7 percent in Q1. “All of our efforts are contributing to improved inventory health within our operation and across our channels,” it commented.
• At Under Armour, FY24 end inventory is forecast to be flat year-over-year. It was down by 3 percent at Q3 end. Aging UA inventory is said to be in “good shape” despite significant differences by region and product type.