Active Lifestyle Market 2023 Vision … Part One

Article From：SGB Media

 

 

SGB reached out to key leaders in the Active Lifestyle space to share their outlook for 2023. In the first installment, here are a series of responses that gauge what they see for the year ahead.

 

Laura Armstrong

General Marketing Manager, The Woolmark Company

Among the strong trends I’m expecting are eco-consciousness. Governments, NGOs and consumers are calling for systemic change in the industry and sustainability to become a standard for post-COVID-19 business. Brands are betting on the economic opportunity of reduced impact techniques, such as regenerative agriculture to eco-processing, to meet the demands of an eco-anxious consumer. Wool is inherently sustainable, and a reason we launched the ‘Wear Wool, not Fossil Fuel’ campaign to educate consumers about the eco credentials of wool versus synthetic fibers.

 

The casualization trend should gain further traction. Over the past eight years, the tailored textile market has declined due to reduced demand for suiting globally. COVID accelerated this as daily routines changed, including working from home and commuting on foot and bike. Comfortable, versatile dressing will spur demand for fine and superfine Merino, particularly with easy-care applications.

 

Frugalness should be a major consumer theme as well. As recession looms and loss of income becomes a reality, consumers won’t go back to spending as usual. We will see a more frugal consumer emerge who prioritizes value for money, affordability and durability. Inflationary pressures such as rising energy costs will see consumers looking for cost savings. Merino wool’s benefits of thermoregulation, moisture wicking and its natural resistance to odor and stains mean that it requires less laundering.

 

Finally, generational change will further reshape spending patterns. By 2030, Gen Z will make up almost a third of the workforce and become the engine of consumer spending. They are digitally native consumers who value sustainability and are more aware of greenwashing than any other consumer segment. They are demanding radical transparency and brand accountability for environmental and social impacts; this will be a defining aspect of future business.

 

Tom Dempsey

Founder and CEO, SylvanSport

SylvanSport believes there is substantial opportunity for growth in 2023 in the outdoor industry but that outdoor brands need to stay focused on the customer’s journey—from product design and purposefulness to engagement before, during and after the purchase. Customers are smarter and more inquisitive than ever and care that their purchases benefit the community and planet. SylvanSport is meeting these consumer needs by proactively researching and designing multifunctional products for all types of outdoor enthusiasts and giving back to organizations like Make-A-Wish that are creating access to the outdoors.

 

John Gage

Co-Founder, Appalachian Gear Company

We expect supply chains to remain inefficient, and people will continue finding new directions in leisure and adventure in public outdoor spaces. These trends will favor companies that are flexible and can react to the evolving market.

 

Michael Luscher

Founder & CEO, Point3

The Point3 squad is as excited about our outlook for 2023 as we’ve ever been. That might sound overly bullish for a market that is either already in a recession or headed straight for one, depending upon your chosen definition, but we’ve found that in these times, there’s a flight to quality and a renewed focus from the consumer on what matters.

 

As the largest direct-to-coach team uniform outfitter in the basketball space, we are buoyed by the increased participation numbers seen across a handful of youth sports. And while a recession might impact how often folks go out to dinner or the type of trip a family takes, youth sports has proven to be one of the most recession-proof businesses. We’re thrilled to continue providing best-in-class uniforms that last season after season to basketball teams and now esports teams, and in the year ahead, we’re almost ready to announce a few more category extensions.

 

On the direct-to-consumer side of our business, Point3’s extension into gaming opened our eyes to a misnomer we had believed for years. Why does performance always have to be so serious? Athletes shouldn’t need to sacrifice fun for the sake of performance. Whether on the basketball court or in the gaming chair, athletes can have fun, share their personalities and rock the best performance apparel on the market.

 

Between our collaborations with Activision Blizzard for their Call of Duty and Overwatch titles and some of the exclusive merchandise drops we’ve lined up with creators, our motto for the year is to keep playing and have more fun. And after the last few years we’ve all had, who couldn’t use a little more fun in 2023?

 

Joe Pellegrini

Managing Director, Co-Head Consumer And Retail Group, Baird

Strategic interest in outdoor/sports/wellness categories continues to benefit from long-term structural trends that are not likely to abate. Near term, larger industry consolidators have cash. However, the Fed’s rate hikes to curb inflation, ongoing retail and supply chain disruptions and uncertain consumer sentiment have raised the chances of a recession and temporarily dampened their M&A deal appetite, including divestitures and rationalizations within their portfolios.

 

On the other hand, private equity investors have substantial dry powder and are under pressure to deploy capital, particularly as firms extend deeper into existing tenure; however, they will remain cautious and wait for clarity on a recession may emerge.

 

In Q3 and Q4 2022, PE acquisitions substantially dropped as the cost of leveraged buyouts increased and investors waited for lower valuations. Notwithstanding, several high-quality assets found successful paths forward in 2022, including 14 announced/closed 2022 Baird transactions.

 

For the first half of 2023, we expect transaction volume and M&A valuations to trend flat to slightly lower. However, M&A transactions will get done, and quality will often dictate whether deals are consummated. Attractive subcategories such as team sports and e-bikes/micro-mobility will drive and attract buyer demand and benefit from the scarcity value of actionable opportunities in the marketplace. We also expect large strategic buyers to consider opportunities but, in most cases, they will exert greater scrutiny during due diligence and terms negotiation. Thus, intense preparation is critical to a seller’s success, including detailed financial analysis and positioning.

 

Larger M&A transactions will likely remain on pause, and the focus of most dealmaking will likely center on medium to smaller-scale transactions as industry players look to leverage new technologies/assets or plug portfolio gaps. Expect strategic buyers to pursue smaller-scale deals that help build a more resilient supply chain, augment vertical integration and/or add differentiated services/products to improve the customer value proposition.

 

For the back half of 2023, we hope M&A markets will normalize and see increased activity from PE and strategic buyers.

 

Mark Piagen

Owner & Founder, Tread Labs

Most economists agree that 2023 will be a challenging year for business growth. This is not news. More significant is that 2023 will mark the beginning of a trend toward brand integrity.

 

For years, large companies have been acquiring brands at a rapid rate, especially in the footwear and outdoor industries. VF Corp, Helen of Troy, Deckers and Wolverine are great examples of large corporations that have acquired numerous brands as a growth strategy. In many cases, as the brands are rolled up into the larger organization, what made them special to consumers is lost. When a brand has been homogenized to the point where it has lost its tribe, an opportunity is created. That opportunity is the mind and market share of a segment of consumers hungry for a richly branded experience.

 

In some cases, large companies will understand this and prioritize brand integrity. More frequently, the larger companies will shed the brands that no longer have a shine, as senior management looks for short-term fixes rather than the more complex work of brand building. I’m putting my energy and resources into brand building, the most stable business foundation and the best hedge in a challenging economy.

 

Matt Powell

Senior Industry Advisor, Sports, The NPD Group

I remain pessimistic about sports retail in 2023. The surge of big-ticket items during the pandemic has sated demand for now. Golf and team sports appear to be returning to the anemic trends we saw pre-pandemic.  Pickleball is the exception here. But even pickleball will not be able to grow at the same pace as 2022.

 

There remains far too much inventory, especially in footwear and apparel. This will cause brands to cancel or delay new products to clear the old.  Footwear and apparel already look really tired at retail. These actions will not freshen assortments.

 

We warned that brands that discontinued retailers would have trouble capturing all that business. This is exactly what happened. In order to try to achieve sales plan, brands were extremely aggressive on promotions and the retailers had to follow suit.  If it took 30 percent (or more) to move stale product in 2022, what will it take to move product in 2023?  Every retailer knows the slippery slope of discounting. The brands have yet to figure this out.

 

I expect sales trends and margins will be challenged in sports retail in 2023.

 

Peter Sachs

GM, Lowa

The retailer pendulum has been swinging pretty hard since COVID began between panic buying and fear cancellations driven by participation demand and supply challenges. We think the pendulum curve will flatten, and 2023 will return to close to normal consumer and retailer behavior. Of course, that’s all based on no new extreme influences on the market, including COVID, the war on Ukraine, the economy, and politics, among other things.

 

2023 is Lowa’s 100th anniversary and we want to support our retailers with better delivery of key shoes that have gotten a bit lost due to the supply chain challenges like Camino Evo GTX and in-store displays to help brand identity and sell thru, new product launches including our new All Terrain Run Collection and upgraded Zephyr models with the MK2 series of fully certified duty boots for our professional customers.