Dive Brief:
- Almost all (90%) sporting goods leaders expect sales and margins to remain stable or improve in 2024, according to a report by the World Federation of the Sporting Goods Industry and McKinsey & Company. However, 81% said inflation, inventory levels and cost of capital are a continuing challenge.
- Around 80% of the 85 respondents said they had a higher inventory peak than a year ago, with more than half saying overstocking was likely to be a “persistent problem” and the same percentage saying inventory peaks increased by more than 20% year over year. The average inventory peak among respondents was up 33% year over year.
- That drove promotions higher as well, with retailers taking an average of 35% off of 25% to 55% of their product assortment. As a result of the lingering challenges, 70% of sporting goods executives listed improving planning capabilities as their top priority for 2024.
Dive Insight:
The sporting goods industry has a mixed year ahead, according to the World Federation of the Sporting Goods Industry and McKinsey. The sector has been “resilient” in the past, but consumer confidence is low and 2023 brought a host of challenges that retailers are still navigating.
“While the year ahead will be marked by uncertainty, it will also offer opportunities,” Alexander Thiel, a partner at McKinsey, said in a statement. “As the global population continues to expand, and more people adopt healthier and more active lifestyles, brands, retailers, and manufacturers have chances to grow. But this potential should be contrasted with continuing political and economic unpredictability, which is playing out in almost every region globally.”
China, for example, will continue to be a difficult market as shoppers trade down in the region. The report’s authors noted that analysts are also relatively cautious on athletics companies for 2024, raising their growth outlook for about half of companies and cutting it for the rest. Adidas, Puma, Columbia and others have lowered growth expectations, while the likes of Lululemon, Deckers, Dick’s and Nike continue to move higher.
“Looking ahead, we believe the most successful players will innovate to address shifting consumer demands, manage supply chain complexity, streamline operations, and seize opportunities in emerging markets and ecosystems,” the report reads. “Through efforts in these areas, and a sharp focus on execution, the industry will be well placed to continue its positive trajectory.”
Even as some retailers struggle, about a third of sporting goods companies have grown sales and margins since 2017, “forming an elite group of super winners that consistently outperform,” per the report.
Operations are coming under scrutiny in other ways as well. About 80% of sporting goods retailers now already have or are “seriously considering” CO2 targets, but 50% are worried about the need to become more sustainable. And despite the shift many athletics retailers made toward DTC in recent years, the pendulum is swinging back the other direction now, as brands reembrace wholesale. Around 70% of respondents operate omnichannel businesses versus selling through a single channel.
