“Practical fashion” has become popular with millennials, benefiting outdoor, utility-focused brands like Patagonia, The North Face (VFC) and Fjällräven. The latest shift in fashion trends have consumers seeking out durable clothing that serves a purpose, even if it carries a higher price tag; as opposed to cheap products, made by fast-fashion retailers, only designed for a single season of wear. The sustainable fashion trend is being attributed an age group of consumers that struggled through the most recent recession, becoming more conscious of their spending in the process.
Howie Long-Short: While VF Corp. (VFC) reported Q4 ’17 sales grew 20% YOY (to $3.6 billion), the company reported a quarterly net loss of $90.3 million ($.23/share) after a one-time charge related to new tax legislation. Excluding one-time items, the company earned $1.01/share. As for 2018, the company intends on becoming more direct-to-consumer and digitally focused; projecting 85% of their overall sales growth to come from those initiatives. VFC shares are up 39% over the last 12 months. For information purposes, Fjällräven is a subsidiary of Fenix Outdoor International AG, which trades on the Stockholm Stock Exchange under the symbol STO: FOI-B. Patagonia is a privately-held enterprise.
Fan Marino: The North Face is “fashion” again, with apparently “everyone wearing North Face jackets at (New York) fashion week”. At least one publication (Fashionista), is crediting Kanye West with bringing the label back into the public consciousness. West was photographed wearing a North Face puffer jacket following the birth of his 3rd child, back in January.
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Outdoor gear sales are declining, as millennials opt for less expensive, more versatile athletic wear over rugged clothing designed for extreme conditions. The trend remains the same with athletic equipment sales, where versatile products (i.e. mountain bike you can also ride on road) are outselling specialty equipment (i.e. road bikes). The NPD Group reported total outdoor industry sales declined 6% between December ’16 and November ‘17 (to $18.9 billion).
Howie Long-Short: Looking for a positive trend within the outdoor sector? Nearly 1/3 (29%) of all online apparel shoppers bought outdoor gear within the last 12 months, with the average customer spending $178 (+3% YOY). The North Face (VFC, 8% of all buyers), Patagonia (6%) and Columbia (COLM, 3%) are the most popular outdoor retailers within the e-commerce space. Canada Goose (GOOS) and Lands’ End (LE) have also found success online; GOOS consumers increased their spend per purchase 14% YOY, while LE buyers increased their average annual spend 10%. Here’s some more good news for outdoor enthusiasts, Camping World (CWH) is re-opening 69 Gander Outdoors stores. CWH acquired Gander Mountain Company & Overton’s in a May ’17 bankruptcy auction.
Fan Marino: One exception to the trend has been snow industry sales (skis, snowboards, boots, bindings), up 7.8% YOY (to $2 billion) over the first four months of the ski-season. Relatively surprising, considering the historically low snowfall totals across the western U.S.
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Professional Bull Riding (PBR) and VF Corp/Wrangler (VFC), partners for a quarter century, will open the NYSE this morning. Launched in 1992 by 20 rodeo cowboys (each put up $1 million) looking to establish an organization that would oversee bull riding as an individual sport; PBR has made it possible for bull riders to earn a living. Going in to the start of the 25th anniversary season, 34 riders have made over $1 million in career earnings. The silver anniversary season kicks off (no pun intended) tonight at Madison Square Garden (MSG).
Howie Long-Short: Since being acquired by Endeavor in ’15, PBR has increased event attendance 11% (annual audience of 3 million) and television ratings on CBS by 12% (average of 1.3 million viewers/event). Endeavor is privately held, but VF Corp/Wrangler (VFC) is publicly traded. The company, which owns a couple dozen brands including The North Face, Majestic Athletic and Vans (revenue +26% in Q3 ‘17), has seen its share price increase 41% over the last 12 months; with the growth driven by its highly productive DTC business (+17% in Q3 ’17).
Fan Marino: Wondering how PBR scores bull rides? Rules require riders to ride for 8 seconds with one hand in the bull rope and one in the air to earn a score. If the rider makes the 8 second buzzer, he receives a score. If he does not make the 8 second buzzer then he receives no score for that attempt. After each 8 second ride or attempt, PBR judges award scores (up to 100) both to the bulls (up to 50, based on difficulty) and the riders (up to 50, based on control); the combined number becomes the official ride score. The rider with the most points at the event’s conclusion is the winner; the rider who accumulates the most points throughout the season is the PBR World Champion — winning the coveted gold buckle and million-dollar bonus.
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Under Armour (UAA) investors have expressed concerns that CEO Kevin Plank is focused on Plank Industries, his private investment firm, and not on the struggling athletic apparel manufacturer. While “2017 sucked” (Kevin’s words, not mine) for UAA shareholders, Plank Industries (which includes a horse breeding and racing operation) opened a boutique hotel, a whiskey distillery and raised $233 million for a real estate venture in Baltimore. In June, UAA hired Patrik Frisk (former ALDO Group CEO) as President and COO. Frisk has since taken on a more public leadership role, speaking on the October earnings call; offering further evidence to those that believe UAA is no longer Plank’s top priority. Plank insists his “job is running Under Armour, period”; with Plank Industries’ Chief Executive Tom Geddes saying that Plank only reviews his outside investments on a quarterly basis.
Howie Long-Short: In 2017, UAA posted net losses in consecutive quarters, a quarterly sales decline (for the 1st time since going public) and laid off 300+ employees (and a handful of C-level executives) as the stock declined 45.7% YTD; so it’s understandable shareholders are looking to assign blame. For comparison purposes, NKE who had its own set of struggles in ‘17 is up 24% YTD (ADDYY is +13.2%). Regardless of Plank’s involvement, the company is in good hands with Patrick Frisk. Frisk has 30+ years of experience in apparel and retail, having led VF Corp. (VFC) brands The North Face and Timberland before joining Aldo Group.
Fan Marino: Under Armour has agreed to a 10-year deal with Major League Baseball that will make the brand the league’s official uniform supplier beginning with the 2020 season. UAA will be the exclusive provider of all on-field uniform components including jerseys, base layers, outerwear and training apparel. While it’s the company’s first professional uniform deal, they’ve been partners with MLB since 2000; initially as a base-layer supplier (2000) and then becoming a footwear partner (2011).
Under Pressure at Under Armour, CEO Says His Eye Is on the Ball
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