Fila Sales Rebound with Rerelease of Disrupter II

Fila

Fila, Inc. has returned to prominence with the updated rerelease of the Disruptor II, a bulky sneaker that first debuted in 1996. With the rerelease, Fila has successfully capitalized on two current fashion trends, retro apparel and the stereotypical “dad shoe”; particularly popular amongst women. The Disruptor II’s affordable price point ($65-$70) and widespread availability (think: Urban Outfitters, Journeys) has also contributed to its success. Foot Locker CEO Dick Johnson labeled the Disruptor II one of his chain’s most popular styles.

Howie Long-Short: Fila U.S. (KRX: 081660) sales rose +21% during Q2 ‘18, with the Disruptor II heavily contributing to the record earnings period. The company’s “conversion from wholesale to retail” and a revised sales strategy (see: targeting younger demo) has also been effective. Fila grew sales +10.9% (to $687 million) and operating profit rose +24.1% (to $90.6 million) during the most recent quarter.

Fila, Inc. owns 53% of Acushnet (GOLF), the maker of Titleist golf equipment. For those who missed Monday’s piece on rising golf equipment salesGOLF grew Q2 sales +11.7% YoY (on a consolidated basis); Titleist clubs (718 Irons, Vokey SM7 Wedges) and Titleist golf ball sales were credited for driving the top line growth. GOLF shares are up +60% over the last 12 months; they’ll open at $27.51 on Wednesday.

Interestingly, Anta Sports (ANPDY) owns the rights to use the Fila brand in China (Fila controls 15% of the JV). Anta, China’s largest sportswear maker, reported H1 revenue increased +44% (to $1.5 billion); strong sales of the Fila brand contributed to the growth.

Fan Marino: For those old enough to remember the 90s, Fila was a major player in the footwear and apparel space; in 1997, the company generated $687 in U.S. sales. Grant Hill even signed an $80 million endorsement deal to serve as the brand. Remember these?

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RUSSELL ATHLETIC LEAVING UNIFORM BUSINESS TO FOCUS ON HERITAGE, CORPORATE AND PROMOTIONAL MARKETS

Berkshire Hathaway’s (BRK.A) Russell Athletic has decided to exit the team uniform business (primarily HS and youth leagues) and turn its focus towards a “longer-term, more-healthier place” in consumer retail. A new line of “heritage” styled lifestyle and streetwear clothing, to be launched at Barney’s before to being sold at retailers like Urban Outfitters, will be a part of the company rebrand. A partnership with S&S Activewear (3rd largest U.S. distributor) provides the company with access to previously unreachable corporate and promotional business. Russell plans to maintain its team channel; selling non-uniform items and using S&S Activewear to service those sales.

Howie Long-Short: There is certainly some cache surrounding the “heritage” market, with companies like Champion (HBI), Fila USA (KRX: 081660) and Calvin Klein (PVH) experiencing recent resurgences. HBI reported Champion Q2 ’17 revenues were up 7%, with Fila USA and Calvin Klein up 11.5% ($71.3 million) and 8% ($786 million) respectively, over last year’s figures. It’s been 20 years since Russell Athletic has been relevant, but if you wait long enough, everything comes back into style.

Fan Marino: For those too young to remember, Russell was the largest marketer and manufacturer of athletic apparel in to the early 1990s; when Nike (NKE), Adidas (ADDYY) and Under Armour (UAA) began to pump big dollars into D-1 athletic contracts. Just 2 programs remain with the once dominant brand, Georgia Tech and Southern Miss, both of which have contracts ending with the company in 2018. There has been no word on if their new suppliers will offer cut-off jerseys, the signature look from Russell’s heyday.

Russell Looks To Build On Retail Momentum