According to SGI Europe’s quarterly study of 40 select sporting goods industry stocks, the drop was less than in Q1 (-16.25%) and Q2 (-14.79%) but marked the third consecutive quarterly decline for the segment. But the results were mixed, as the stock prices of 19 companies – led by Xtep Intl., Adidas, VF Corp. and Hanesbrands – suffered double-digit declines in the period ended Sept. 30. And eight entrants, paced by Asia-based firms in Yonex, Mizuno and Fila Holdings, saw their respective stock prices increase by double digits. It should be noted that September, the quarter’s final 30 days, has historically been the worst month of the year for equity markets. On the day Q4 began, Oct. 1, the Dow Jones Industrial Average rose 765 points, or 2.7 percent, scoring its strongest daily percentage increase since Feb. 25.

SGI Index was stronger than established market indices despite overall decline

Sporting goods industry stock results in the third quarter, in aggregate, performed better than established market indices. In the final month, all three major averages – S&P Index (-9.3%), Dow (-8%) and Nasdaq Composite (-10+%) – entered “bear” territory in the period’s final month. The S&P and Nasdaq suffered their first losing streak of three consecutive quarters since 2008’s global financial crisis, and the Dow reported its first drop of three consecutive quarters since 2015. The MSCI World Index, which tracks large- and mid-cap public companies in 23 developed markets, recorded a 6.5 percent decline in Q3. In total, European and U.S. equities have experienced three consecutive quarters of negative performance, with the STOXX Europe 600 Index (-4.8%), S&P Index (-5.2%) and MSCI Asia-Pacific Index (-12.0%) each declining. In Europe specifically, the Stoxx Europe 600 hit a 52-week low in late September, as the quarter was winding down.

According to Franklin Templeton, Spanish and Italian equities performed the worst in September, with French equities “outperforming” but with losses.

Numerous factors weighing on global markets

While there has been good news on the global supply chain front in recent weeks, including declines in shipping costs, numerous negative factors are impacting markets from the U.S. to Vietnam. Inflation, the higher cost of borrowing, the possibility of a global recession and the rising strength of the U.S dollar against most other currencies are four of them. During the period, the eurozone and Germany experienced higher than expected inflation, with France’s inflation rate said to be more in check. With Russia moving to annex parts of Ukraine, the Nord Stream pipeline into Europe reportedly hit by sabotage and the markets in turmoil, the U.K.’s Bank of England was forced to take emergency action to allay fears of systemic risk in some areas of its pension system.

Global currencies being impacted by strong U.S. dollar

Meanwhile, a strong U.S. dollar is reportedly wreaking havoc on currencies across Asia, putting pressure on the region’s supply chains and their profitability and forcing policymakers to stabilize their country’s respective currencies. The U.S. dollar is up almost 20 percent year-over-year against a group of major currencies, including the British pound, the Vietnamese dong and the Japanese yen. Japan is moving to prop up its currency for the first time in 24 years, and China’s central bank has taken action to slow the depreciation of the renminbi, which has been trading at 14-year lows.

Can the holiday season reverse market fortunes before 2023?

In the U.S., where there appears to be mounting consumer worry about personal finances and the state of the economy, there are mixed messages about where the holiday shopping season is headed. Deloitte is forecasting 4 to 6 percent overall sales growth for the November-December period, with market e-commerce sales rising 12.8 to 14.3 percent. According to research firm The NPD Group, however, an estimated 29 percent of American consumers are worried enough to reduce their spending in the holiday season. Market retailers are responding to consumer concerns by offering seasonal promotions early, before Halloween. Amazon, for instance, is offering a “Prime Day Early Access Sale” on Oct. 11-12, with other retailers planning sales for around the same time.

Some specifics on key industry companies in Q3

  • Adidas AG announced in mid-August that CEO Kasper Rorsted, who has been with the group since 2016, will step down in 2023.
  • Yonex, citing a better-than-expected recovery in China, has raised its H1 revenue outlook by 20 percent.
  • Mizuno’s quarter revenues rose by nearly 8 percent, driven by golf and indoor sports, as a period profit increase of 28 percent set a quarterly record.
  • Fila has reported a 13 percent quarterly revenue gain on solid demand from its Acushnet golf and global royalty businesses. The new head of global design Torsten Hochstetter is a former creative director for Adidas and Puma.
  • VF Corp. intends to grow revenues on a CAGER basis by high single- to low double-digits on a constant currency basis and reach a 15 percent operating margin by FY27 on greater contributions from The North Face, Supreme and its three outdoor emerging brands: Altra, Icebreaker, and Smartwool.
  • Hanesbrands has lost $100 million in quarterly sales because of a ransomware attack on its computer systems. This prevented it from fulfilling customer orders for approximately three weeks.
  • Nike margins will take a hit in the coming months as the company looks to reduce inventory levels, which were up 44 percent year-over-year at the end of its most recent quarter, on Aug. 31. Institutional NKE shareholders have been bearish on the stock since earlier this year, with B. Riley Wealth Management slashing 25 percent of its holdings in September, according to MarketBeat.

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