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Another month of strong sales and unit growth for basketball footwear, marking the fourth in a row of positive increases.  This should not be too surprising given the resurgence in excitement surrounding the NBA (TNT ratings season-to-date are up 40% y/y), the launch of UA’s basketball shoe, and recent wave of new product introductions (Lebron VIII, Reebok Zig, Hyperdunk 2010, etc…).  Importantly, we remain confident that this remains the beginning of a longer term trend. 

As shown below, the category suffered declines in 14 of the prior 16 months beginning in April 2009.  While comparisons remain easy, the emergence of key product and technology launches coupled with increased marketing  keeps us especially bullish on the prospects for Foot Locker .  Importantly, year to date unit sales remain below levels recorded over the past couple of years, leaving room for further recovery.  FL is the biggest the beneficiary of the hoops recovery given its industry leading penetration of the category.  However, this is not a zero sum game and we believe the rising tide will also benefit additional retailers including DKS, HIBB, and FINL with exposure to basketball.

No Longer Just a Hoop Dream - basketball

Eric Levine