Photo: Dick’s Sporting Goods
Is Sporting Goods a Clear Pandemic Winner?
Sporting goods is increasingly solidifying its position among the “pandemic winners,” with sales for the three major publicly held chains, Dick’s Sporting Goods, Academy Sports and Hibbett Sports, remaining well-above pre-pandemic levels.
Sales for the channel surged early in the pandemic as people embraced outdoor activities, including biking, hiking, hunting, golf and running, at a time when they were largely confined to their homes. Since then, team sports have rebounded strongly after initially facing pandemic-related cancellations. Another growth contributor has been people embracing active lifestyles amid heightened health awareness tied to the pandemic.
Sales growth in the sporting goods vertical was expected to be challenged in 2022 as people returned to socializing and other pre-pandemic activities. Still, sales have re-baselined at significantly higher levels versus 2019 as many Americans — though not all — have stuck with the outdoor habits they discovered or rediscovered during the pandemic and continued to prioritize exercise.
According to 2022 results:
- Dick’s sales inched up 0.6 percent year-over-year and are up 41.3 percent versus 2019;
- Academy’s sales declined 6.4 percent year-over-year but grew 32.4 percent versus 2019;
- Hibbett’s same-store sales decreased 2.2 percent in 2022 but vaulted 41 percent compared to 2019.
Each chain’s progress also reflects internal transformation efforts set before the pandemic. Academy made investments in inventory management and localization. Hibbett heightened its focus on fashion. Dick’s believes it has become more differentiated with improved allocations and new in-store experiential elements such as batting cages and golf simulators.
For the current year, modest growth at best is expected. Comp predictions range from negative two percent to positive one percent for Academy, flat to positive two percent for Dick’s and low-single digits for Hibbett. On quarterly calls, officials expressed confidence that consumers would continue to invest in their newfound active pursuits and lifestyles to help offset inflationary and economic pressures.
“What we’re finding is that people are prioritizing health and wellness and active lifestyle, team sports… they’re even more popular than they were before the pandemic,” said Lauren Hobart, Dick’s CEO, on Dick’s call. “People really have decided with whatever they have in their wallet, they’re prioritizing these categories. They’re coming to life more as necessities rather than discretionary.”
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DICK'S Sporting Goods Reports Fourth Quarter and Full Year Results - DICK'S Sporting Goods
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Academy Sports + Outdoors Reports Fourth Quarter and Fiscal 2022 Results - Academy Sports + Outdoors
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Hibbett Reports Fourth Quarter And Fiscal 2023 Results - Hibbett
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Dick’s Sporting Goods Inc (DKS) Q4 2022 Earnings Call Transcript – AlphaStreet
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Hibbett Sports Inc (HIBB) Q4 2023 Earnings Call Transcript - AlphaStreet
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Academy Sports and Outdoors, Inc. (ASO) CEO Ken Hicks on Q4 2021 Results - Earnings Call – Transcript – The Motley Fool
Discussion Questions
DISCUSSION QUESTIONS: How confident are you that sales in the sporting goods space will continue to re-baseline significantly higher in the years ahead versus pre-pandemic levels? How sticky are habits around outdoor pursuits and embracing active lifestyles picked up over the pandemic?
Poll
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It seems like sporting goods has been prioritized differently by consumers than general apparel in the face of inflation.
It’s been marked more as “essential” than discretionary. This make sense when you think about a family buying equipment — if your kid is playing soccer or hockey, you are going to get them the equipment. You might trade down slightly, but you aren’t going to defer the purchase.
I think Dick’s in particular has done two things that are smart:
I believe that relying on pandemic data remains a fool’s errand. The pandemic has been like a tsunami of sales for many retailers, increasing sales as it came ashore and decreasing them as it pulled out to sea. I hope that the pandemic re-baselines the active lifestyles that are driving the growth in the sporting goods space but I’m not confident that it will be significantly higher. I believe outdoor pursuits and active lifestyles are as sticky as New Year’s resolutions; however as an avid outdoors person, I hope I am completely wrong on this one.
It makes sense that many consumers who took up a sport or exercising during the pandemic, would continue with their newfound activity. To that extent, sporting goods stores may have established a new baseline.
The pandemic cured some shoppers of being inactive. Good for them, and good for sporting goods, too. I believe these gains will be sustained. Habits formed are hard to break, and going back to the office seems to be a corporate fantasy as once the “work from home” genie is out of the bottle, it is tough to put it back in. I see people leveraging their waisted time commuting and putting it to more healthy pursuits. It doesn’t mean they aren’t working, just that they are being more productive, better parents, healthier and better, more focused employees.
Sure, some of those who bought tents will end up selling them, but now there’s circular retailing for that.
And some outdoor brands have already brought this in house. (That sounds like an oxymoron, doesn’t it?) In any case, Millennials and Gen Z shoppers are much more into camping than baby boomers and even Gen X. The trail signs all point to growth.
The opportunity for sustained growth in the sporting goods sector is real. Once people realize how much better they feel when they are active, they tend to be open to encouragement to continue the behavior. The winners will be those whose marketing programs best capitalize on shoppers’ behaviors with personalized outreach, recommendations and offers to encourage them to sustain or revive their outdoor/active habits.
One of the silver linings of the pandemic is that consumers are connected with the outdoors. Many also connected with their health, pursuing healthier lifestyles, more exercise, and new active hobbies. My personal opinion for many people have found they enjoy these activities, and many will continue to do them. This is good news for sporting goods retailers. I
Sporting goods sales will stay above pre-pandemic levels. Now more consumers value the social, physical and mental health benefits of sports. The pandemic inspired us to prioritize an active lifestyle.
Sports have become a sticky, life-enriching alternative to TikTok, Roblox and social scrolling.
Discovering outdoor sports like pickleball, kayaking, stand-up paddling and other sports that have built-in social distancing turned out to be a revelation for some and a great family activity.
I don’t think the indoor gym sports will be as “sticky.” They’re good for isolated people in the winter. Otherwise, the attrition rate at fitness centers really does tell the tale.
Overall though, yup, sporting goods are fun!
Sporting goods has become a strong recession proof sector for the industry, aided in no small way by our continued move into work from home’s more casual attire. With renewed interest in managing stress, sleep and overall well-being, exercise in all its forms has started to reenter the cultural mainstream in the U.S. As more and more health experts and influencers prescribe even moderate activities like walking or disc-golf, Americans are staying with their more active lifestyles than past data shows, which will continue to fuel the stability of the sporting goods sector.
The increased interest in sports and exercise in general seems to have legs. As Ken Morris mentioned, the increased number of people that work remotely has increased the amount of non-working/commuting hours in the day and many have opted to use some of that time for sports. Prior to the pandemic, some sporting goods retailers were challenged by the increased online purchases from other chains or directly from manufacturers. Dick’s Sporting Goods has made significant changes in their store format to be more experiential, which help them maintain customer loyalty.
It’s an oversimplification to say that sporting goods is a pandemic winner. The pandemic may have been the impetus, but the in-store experiential elements along with the physical and emotional benefits put an exclamation point on all of the above. It’s tough to say that grocery and apparel retailing have evolved as much as sporting goods retailing (if at all). Yes, the whole category of sporting goods lends itself to experiences more easily than other categories, but all I seem to read about in apparel and grocery concerns inventory and supply chain issues, not in-store experiences. Sporting goods retailers seized their opportunity and and are now enjoying the benefits of their investments.
Sporting Goods sales will stay above pandemic levels but also face the challenge that many of the big-ticket purchases over the last 30 months are once-in-a-decade items. The brands must continue to make themselves a destination for the accessories and apparel, as well as the big-ticket purchases, to keep the increase going.
The pandemic was long enough for new habits to really take hold, so I’d expect a certain carry over into future years, especially in the apparel and consumables space. However it’s important to note that many pandemic-driven sporting goods purchases were one-off purchases of durable equipment, so sales growth for these items will likely stall in the future.
Many pandemic-driven sporting goods purchases are now on the trash pile.
Sadly I think this is less of a trend and more of a moment for sporting goods. As the country gets “heavier” the overall outlook is going to be more “things” in the garage collecting dust than actually being used. I hope I am wrong.
The 2022 actuals and the 2023 projections do not suggest to me that sporting goods should be looking at a new baseline. If we go back and do a statistical analysis of the sporting goods trendline, we will see the pandemic anomaly and a return to a modest growth baseline.
Though sporting goods are not experiencing inflationary price increases like the economy as a whole, if goods are measured rather than dollar revenue, 2022 actuals and 2023 projections are actually down.
Sporting goods had serious outperformance during the pandemic and the baseline is now much higher. That said, it is likely that growth will slow right down as things normalize and as consumers moderate spending thanks to various financial issues. However within sports I expect Dick’s to outperform — it has new formats which are driving growth and it is still picking up market share in apparel, including from department stores and clothing specialists.
There are numerous pieces of research that suggest people are more health conscious since the pandemic. Consequently the focus on doing sports and outdoor activities is likely to increase. Combine that with less formal work-wear requirements and the market is likely to keep growing.
Sports stores offer a huge opportunity differentiate by providing experience type environments to differentiate from online – where products can be tried – but also customers can be educated about how to use them.
The more we stare at big and little screens, the more people crave the relief of physical activity. The more we self-isolated behind masks and closed doors, the more people wanted to get outdoors and BREATHE.
Once this might have seemed counter-intuitive, but it’s self-evident now. Sporting goods retailers are well-positioned to capture an increasing share of discretionary consumer dollars.
I’m quite bullish on the potential for used gear sales as well. The ability to trade in gently used items like golf clubs, back-packs, kayaks or skis can help encourage trade-ups and simultaneously create entry market opportunities for new customers. This kind of buying and selling is consultative and can be the foundation of relationship marketing for retailers who embrace it.
“Habits are the compound interest of self-improvement”― James Clear, Atomic Habits. Habits once formed are hard to break. Consumers have invested and have developed a taste for fitness, running/walking, yoga, workout/home/studio, team sports, tracking, recovery, biking, hiking, golfing and active lifestyle activities. Growth drivers for sports brands will be stay laser focused on customer centric assortments, promotional executions, speed to retail, brand exclusive programs and omni-channel experience.
No clear data exist historically to use as a prediction for what will occur in sporting goods 2 years post-pandemic. Have consumers actually changed their behaviors in meaningful, lasting ways? Difficult to say, but I am a bit skeptical. Fundamental changes in consumer behavior do not occur in one big shift, but slowly and incrementally over time. As a result, I would hazard a guess that consumers will return to their 2019 behavior, but with a small upward tick.
These numbers are very misleading, since comparing any performance during a pandemic period (which we have never experienced in modern retail sales) has nothing to compare it with. Until we can get better detailed pandemic data, this is just another set of numbers with no contrasting examples. All of these numbers should be taken with a grain of salt for any comparison….