Analysis: Sporting Goods Scorecard Q3 2022 – The top performers by sales and profit

For the first time, we have broken down the results by sector – Apparel, Footwear, Equipment, and Diversified/Retail. The quarterly return on sales (RoS) declined in each segment year-over-year but was highest in Diversified/Retail due to Lululemon’s strong revenue and profit contribution at 10.18 percent versus 11.86 percent in Q3/21. In the footwear segment, RoS came in at 8.41 percent against 12.57 percent, as six of 16 companies reported lower profitability. Apparel segment RoS came in a 2.19 percent against 12.37 percent in the year-ago period, with Columbia Sportswear as the only entrant to report higher year-over-year profitability. In the equipment segment, aggregate profitability fell nearly 56 percent, and RoS declined to 4.95 percent from 11.76 percent. Six companies had lower year-over-year profitability, with fitness companies Peloton and Nautilus being the biggest contributors to the falloff.

For the first nine months of 2022, 41 sporting goods companies generated an aggregate 17.0 percent increase in total sales to more than €135.74 billion versus nearly €116.0 million in the year-ago period. But nine-month industry profits in 2022 fell by 18.7 percent year-over-year to more than €10.78 billion from €13.27 billion during the same 2021 period.

In the summer quarter, industry profitability declined by double-digits for a third consecutive period to their highest falloff in 2022 at -29.6 percent. As for sales, the third quarter’s increase of 19.3 percent was the industry’s largest this year, following a 13.24 percent gain in Q1 and a 15.7 percent increase in Q2. Only four companies – Newell Brands, Nautilus, Thule Group and XXL – reported lower year-on-year revenues during the period. Only three firms – Allbirds, Nautilus and VF Corp. – reported a quarterly loss. But 20 entrants suffered a year-over-year drop in profitability. The biggest profit declines on a percentage basis belonged to VF Corp., Allbirds, GoPro, Hanesbrands, Thule Group and Adidas Group, which will have a new CEO in 2023 in Bjørn Gulden.

Among the key Q3 developments:

• Allbirds, which warned of “choppy” trading conditions in the run-up to Christmas, forecasted a Q4 that would be impacted by inflation and high levels of promotion in the U.S., a weaker consumer backdrop in Europe and fiercer currency headwinds.
• VF Corp., earlier this month, replaced retiring CEO Steve Rendle, who had the top post for five years, with independent director Benno Dorer and lowered its FY financial outlook on several factors that included the higher-than-expected impact of inflation on consumer spending in the EU and ongoing Covid-19-related disruptions in China.
• Puma, which has a new CEO in Arne Freundt, is accelerating its collaborations with Foot Locker and is elevating Maria Valdes, GM of its sportstyle segment, to chief product officer on Jan. 1.
• Canada Goose lowered its FY revenue and profit outlook in early November due to lower traffic trends and consumer sentiment in China. But brand sales have shown strength in the EMEA and U.S. on its ability to ship winter orders earlier than in previous seasons.
• Deckers Brands is evaluating the category approach for its successful Hoka business as it aims to make the brand the next multi-billion-dollar player in performance athletics.
• Topgolf Callaway Brands remains confident that off-course golf will continue to be a key growth driver in the game’s modern ecosystem.
• Under Armour, which is focusing on making the “16- to 20-year-old team sports athlete” the brand’s target consumer, is introducing a customer loyalty program in 2023. The company is also expected to name a permanent CEO next year. Colin Browne has been serving as interim president and CEO and could land the position permanently.
• Foot Locker is exiting joint ventures in Benelux and Eastern Europe at year-end and abandoning plans to enter the Japanese market.
• Wolverine Worldwide is shedding its Keds’ business and looking for more savings within its supply chain.