R3: Aerobics Revisited

R3: REQUIRED RETAIL READING

January 26, 2009

By now, anyone ranging from a casual observer to an industry expert is at least aware of the latest trend in athletic footwear- The Toning Category.  Call it a fad, hype, or just flat out ridiculous.  However, the data supports a picture of a robust and growing trend.  Even with increased competition in the space, both Skechers and Reebok continue to show substantial growth. 

TODAY’S CALL OUT

By now, anyone ranging from a casual observer to an industry expert is at least aware of the latest trend in athletic footwear- The Toning Category.  Call it a fad, hype, or just flat out ridiculous.  However, the data supports a picture of a robust and growing trend.  Even with increased competition in the space, both Skechers and Reebok continue to show substantial growth. 

With limited sales data given the infancy of the product category (which was essentially launched in early Summer ’09), the trajectory makes this one of the more successful footwear launches since Crocs became the fastest footwear brand to reach $1 billion.   While much of the focus has been on SKX given its first-mover advantage at retail, the success of the Reebok equivalent “EasyTone” is notable.  There is no question Reebok has suffered major contraction in the U.S since it was acquired by Adidas in 2005.  However, we wonder if this current momentum can be used to spark a reinvention of the brand?  After all, Reebok made its initial mark in the aerobics category and this trend certainly seems similar.  Does a women’s focused athletic brand make some sense?  Yes, for sure.  But we can’t help but remind investors that there hasn’t been a successful women’s athletic brand… ever. 

Take a look at the charts below:

R3: Aerobics Revisited - Shape Ups and EasyTones

 

R3: Aerobics Revisited - Shape Ups 2

 

R3: Aerobics Revisited - Easy Tones 2

 

R3: Aerobics Revisited - ADI Reebok Tree EasyTones 1 10

Eric Levine

Zach Brown

LEVINE’S LOW DOWN 

  • Despite the economy and any lessons that may have been learned from a Manhattan real estate bubble, retailers are flocking to Times Square to open new flagship locations. The latest addition to the former Virgin Megastore in Times Square is Forever 21, with speculation that the fast fashion retailer is opening a 90,000 square foot store. Disney, M.A.C., and Swarovski will all be neighbors at the old record-store location.
  • Given that Shopper Events LLC is likely to pick up the majority of the 10,000 product samplers laid off by Sam’s Club, it’s interesting to note the power of the in-store sample. According to independent research, a Wal-Mart customer is 15% likelier than an average U.S consumer to be influenced by sampling events. In Wal-Mart Stores alone, 2.8 million samples are given each week.
  • For the first time since 1992, annual coupon usage is set to increase with annual distribution hitting all time highs. According to Inmar, a transaction settlement provider for retailers, 3.3 billion packaged goods coupons were redeemed in 2009, up 27% from 2008. The average face value of such coupons was $1.44.

MORNING NEWS 

Parham Joins Columbia - Susan Parham has joined Columbia Sportswear Co. as vice president of global apparel, accessories and equipment. She succeeds Mark Koppes, who has left the firm, and reports to Mick McCormick, executive vice president of global sales and marketing. Parham was the founder of Lessons Learned, a consulting firm covering disciplines from design to sales, where her clients included Columbia, Nike Inc., Lucy Activewear Inc., Liz Claiborne Inc. and Jos. A. Bank Clothiers Inc. <wwd.com>

Target promotes a technology executive - Target Corp. has promoted Beth Jacob from Target technology services senior vice president and chief information officer to executive vice president and CIO. Jacob oversees Target’s technology service team, which supports Target.com and other e-commerce initiatives. Jacob’s team includes a group working with the retailer’s Target.com team to develop Target’s own e-commerce platform, which is set to launch by the start of the holiday shopping season in 2011. Target announced last year it would move off of Amazon.com Inc.’s e-commerce platform. Amazon, which has provided Target’s e-commerce platform for several years, will continue to support Target.com until the new Target site is launched. Jacob, previously, has held a number of positions within Target, including vice president of guest operations and vice president of guest contact centers.  <internetretailer.com>

Overstock.com expands international sales to 32 more countries - Overstock.com Inc. announced today that it has expanded its international service to 32 new countries, including Bolivia, Costa Rica and Pakistan. The e-retailer now sells to shoppers in 91 countries. International shoppers enter the same URL as domestic customers to shop on the site. Overstock employs geolocation technology to recognize where shoppers are coming from and displays prices in local currency. Prices automatically adjust to the most current exchange rates, Overstock says. The functionality is provided by the FiftyOne Global Ecommerce service from E4X Inc.  <internetretailer.com>

Jo-Ann Stores promotes its chief operating officer to president - Fabric and craft specialty retailer Jo-Ann Stores Inc. has named its chief operating officer, Travis Smith, the company’s new president. Smith will remain chief operating officer and continue to oversee marketing, merchandising and inventory operations for the retailer, which sells through stores and through Joann.com. He will also supervise the company’s information technology.“The promotion of Travis acknowledges the outstanding business results our company has achieved under his inspired leadership,” said CEO Darrell Webb. Webb will remain CEO and chairman of the board of directors at Jo-Ann. Smith, who was named chief operating officer last February, was previously Jo-Ann’s executive vice president of merchandising and marketing.  <internetretailer.com>

Cabela’s puts web and catalog channels under a new chief marketer - Cabela’s Inc., a multichannel retailer of hunting, fishing and camping gear, has promoted senior vice president of merchandising and marketing Patrick Snyder to executive vice president and chief marketing officer. Snyder will be the first executive to consolidate responsibility for the retailer’s catalog and web operations, the company says. Snyder is among six executives promoted last week in a move designed to grow the retailer’s direct-to-consumer channel as well as improve overall multichannel operations, CEO Tommy Millner says.  <internetretailer.com>

Revitalized SharperImage.com hires a marketing chief from Brookstone - SharperImage.com, which relaunched its e-commerce site in October following the 2008 bankruptcy of Sharper Image Corp., has hired another executive from Brookstone Inc. as it ramps up its marketing plans. Steve August will be senior vice president and chief marketing officer for SharperImage.com, overseeing all direct marketing efforts, including through the web, catalogs, affiliates, portals and direct customer promotions. He will also be responsible for customer analytics and database modeling.  <internetretailer.com>

1-800 Contacts names a new marketing chief - Online contact lens e-retailer 1-800 Contacts Inc., which sells online through 1800Contacts.com, has named Joan Blackwood as senior vice president and chief marketing officer. Before joining 1800Contacts, Blackwood was chief marketing officer for Monster.com, an online job listing service. Prior to Monster.com, Blackwood directed marketing for business software company Computer Associates.  <internetretailer.com>

Consumer Web Site Firm Eyes IPO - Everyday Health Inc., which operates more than two dozen consumer-oriented health content Web sites, has filed a Form S-1 with the Securities and Exchange Commission to conduct an initial public offering of stock. The Brooklyn-based company, which recently changed its name from Waterfront Media Inc., has experienced strong revenue growth and heavy losses since inception in 2002. It hopes to raise up to $100 million before expenses from the IPO, with unspecified net proceeds going to the vendor and selling private shareholders. The number of shares being offered and the expected price range has not been determined. Managers of the IPO include Goldman Sachs & Co., J.P. Morgan Securities Inc., Jefferies & Company Inc. and Needham & Company LLC. The company's portfolio of Web sites includes EverydayHealth.com, RevolutionHealth.com, Drugstore.com, CarePages.com, and WhatToExpect.com, among others. The sites combined have 38 million registered consumers and attract an average of 25 million unique visitors a month. Revenues primarily come from advertising, sponsorships, and the sale and licensing of content. <healthdatamanagement.com>

CVC Venture Pays $773 Million to Buy Matahari Department Store  - CVC Capital Partners Ltd.’s Indonesia venture paid 7.2 trillion rupiah ($773 million) to buy the department store unit of PT Matahari Putra Prima, the country’s biggest retailer. Jakarta-based Matahari Putra sold its 90.76 percent stake in PT Matahari Department Store to Meadow Asia Company Ltd., a venture it established with U.K. buyout firm CVC Capital, Benjamin Mailool, president director of Matahari Putra, told reporters in Jakarta yesterday. The retailer plans to buy a 20 percent stake in Meadow, with an option to purchase an additional 10 percent, Mailool said. The CVC venture gains a department-store operator with at least 27 locations in Asia’s third most populous nation, according to Matahari Putra’s Web site. Retail sales growth in Indonesia, Southeast Asia’s biggest economy, accelerated to 33.9 percent in November, the fastest pace in two years.  <bloomberg.com>

Lotte to Acquire Buy the Way for $236 Million - Lotte Group, the operator of 7- Eleven outlets in South Korea, agreed to acquire convenience- store chain Buy the Way from private-equity fund Unitas Capital for 274 billion won ($236 million). Korea Seven Co., more than 50 percent owned by Lotte Shopping Co., said in a regulatory filing today that the acquisition will “strengthen business competence.” Korea Seven will increase its stores by 68 percent as it gains a chain that generated revenue of about 610 billion won last year in Asia’s fourth-largest economy. Retail sales growth in South Korea, where store operators are buying rivals to expand, accelerated to 12.2 percent in November, the fastest in more than a year. <bloomberg.com>

Forever 21 Launches Larger Format - Forever 21 has opened its first department store-style location in an effort to strengthen its customer base and provide more choices. The 85,000-square-foot unit, a former Mervyns space, is in the Macerich-owned Los Cerritos Center in Cerritos, Calif., about 20 miles from downtown Los Angeles. Forever 21 executives said the “emporium” format that launched on Friday permits a larger selection in categories such as lingerie, swimwear, shoes and plus-size apparel, than the fast-fashion chain is able to accommodate in its average stores of about 40,000 square feet. “The new department store concept offers our customers a greater assortment of value merchandise,” Forever 21 founder Don Chang said. “In this difficult economy, we’re happy to be able to offer much more affordable fashion-forward apparel.” Chief operating officer Larry Meyer said the new concept would help the chain appeal to customers over age 24, a demographic that represents more than one-third of Forever 21’s customers, with 45 percent falling between 18 to 24 and 20 percent under 18. Most, but not all, of the larger locations will get the new design, depending on store location and market.  <wwd.com>

The Walking Co. Looks to Close 40 More Stores - The Walking Company is seeking court approval to close 40 additional stores. The retailer filed for bankruptcy in early December with a plan to close 90 of its original 210 stores immediately. A U.S. bankruptcy judge in California last week set a court hearing for Feb. 16 for the company to discuss "post holiday" store closings, according to Reuters. According to a court order filed last week, the company was given approval to begin "holiday" or "soft closing" procedures at those "underperforming" stores during the holiday shopping period beginning Dec. 18.The company said the 40 additional stores it is now seeking to close were "either unprofitable or only marginally profitable." The closing of those 40 stores will bring its store count to 130. <sportsonesource.com>

Wall Street Bonus Babies Could Boost Retail - President Obama might become “visibly angry” when outsized Wall Street bonuses come up, but retailers catering to the well-heeled in New York and other financial centers have a somewhat different reaction — something more like “ka-ching.” Setting aside the propriety of billions of dollars in bonuses to bank executives after the near collapse of the global financial system, the payouts could help luxury retailers. Bonuses can account for 90 percent of a Wall Street titan’s annual take-home pay and should start hitting personal bank accounts in time to boost March sales. Andrew Mitchell-Namdar, co-owner and vice president of marketing at Mitchells/Richards/Marshs, based in Westport, Conn., said, “The bonuses help in two ways — the actual bonus, but then psychologically it also impacts up or down depending on what the bonus is. We are very linked to Wall Street; we can see the trends in our business.” Mitchell-Namdar is optimistic that a strong bonus season bodes well for spring and that customers, particularly men who have curtailed spending, will begin to replenish their wardrobes.  <wwd.com>

China to Lift Luxury Growth - China should help the luxury goods sector bounce back to growth in 2010 after its annus horribilis, but a return to the glory days of the last decade is unlikely, according to a new HSBC report on the sector. “Our analysis is that despite China’s boom and the non-recurrence of the 2009 de-stocking impacts, 2010 will show only decent mid to high single-digit organic growth for the sector – in line with the long term average of 7 percent – and not the mid-teens hyper-growth experienced from 2004 to mid 2008,” HSBC analysts Erwan Rambourg and Antoine Belge wrote. Women, and lower-priced brands and product categories, are likely to become key drivers of the luxury goods market in China, which until now has been sustained mainly by business gift purchasing by men, they said.  <wwd.com>

Gallup Economic Weekly: Self-Reported Spending Declines - Consumer spending down last week more than 20% from the prior week and from a year ago - As the Dow Jones average plunged more than 400 points last week, consumers pulled back, with self-reported spending falling 24% from the prior week and 27% from the same week a year ago. This breaks the positive early January trend that saw spending running slightly higher than last year's comparables. At the same time, economic confidence was about the same as the prior week and Gallup's Job Creation Index showed that hiring remained essentially unchanged.

R3: Aerobics Revisited - G1

What Happened (Week Ending Jan. 24)

  • Consumer Spending plummeted last week to the lowest weekly average Gallup has found since it began measuring consumer spending in January 2008. Self-reported daily spending in stores, restaurants, gas stations, and online averaged $52 -- down 24% from the prior week and down 27% from the same week a year ago. This marks the first time in 2010 that a full week's spending has failed to match its year-ago comparable. It now seems likely that January 2010 spending may simply match the January 2009 average of $64 per day -- reflecting a continuation of what turned out to be something of a "new normal" in spending for most of last year.
  • Economic Confidence was essentially unchanged last week, as Gallup's Economic Confidence Index was at -28 -- virtually the same as the -29 of the prior week. Thirty-six percent of Americans said the economy is "getting better" while 58% said it is "getting worse." At the same time, 45% rated the economy "poor" and 11% rated it "excellent" or "good." Economic confidence is currently slightly worse than it was on average during December 2009 and much more positive than it was a year ago.
  • Job Creation as reflected by U.S. workers' reports of their own employers' hiring/firing activities improved slightly last week, as Gallup's Job Creation Index was at 0, compared to -2 the prior week. Still, hiring remains weak, with 24% of employees reporting their companies are hiring -- essentially the same as the prior week (23%) and a year ago (24%). As has been the case during recent months, the slight improvement from last week as well as the more pronounced improvement from a year ago is the result of fewer workers (24%) saying their companies are letting people go. Right now, job-market conditions are no different than they were on average during December 2009 (24% hiring and 24% letting go).

R3: Aerobics Revisited - G2

Gallup's economic data provide little positive news as the president prepares for his State of the Union address and the FOMC meets this week. Last week's self-reported consumer spending results are somewhat troubling. A modest decline was to be expected because last week was a non-paycheck week, but the extent of the drop fully offset the slight spending gains recorded earlier this month, relative to last year's comparables. While this could be a one-week event related to the plunge in the stock market or something else, it merits careful monitoring in the days ahead. Regardless, right now consumers don't seem to be in the mood to spend more than last year's reduced -- new normal -- levels. <gallup.com>