Real Estate Journal — Shopping Centers — October 28 - November 10, 2016 — 11A
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M id A tlantic
S hopping C enters
By Michael McGrail, Tiger Capital Group In sporting goods retail, there can only be two
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t first glance, it might seem that national sporting goods chains
buying sporting goods in the United States is through on- line shops and mail-orders, with sales on these platforms amounting to almost $10 bil- lion in 2014.” ‘There Can Only Be Two’ Retail consolidation has been a fact of life for a decade or so, thanks to the tremen- dous amount of overbuilding that occurred in U.S. retail during a far-simpler era. (Con- sider that The Home Depot built 900 stores from 2000 to 2005, an expansion rate that would be unthinkable today for such a large-format concept.) In the early years of
the consolidation process, as Linens ‘n Things, Circuit City, Borders Books & Music and several other larger-format specialty chains fell by the wayside, one of my mentors predicted that there would eventually be room for just two leaders in each category. Increasingly, it seems that his prediction was on target — so long as you count the Internet as one of the two. Instead of Linens ‘n Things and Bed Bath & Beyond, in other words, it’s Bed Bath & Beyond and the Internet, with smaller players here and there to pick up the balance. It’s a pattern that has
been replicated across several retail categories — sporting goods included. Here, Dick’s has clearly emerged as the other leader along with the web. Dick’s not only has more stores than other chains — 600 as com- pared to Sports Authority’s former 450 and Academy Sports’ 190 — but Dick’s loca- tions have benefitted greatly from significantly more capi- tal investment than those of debt-ridden Sports Authority or Sports Chalet (47 stores). As a result of this investment, the customer experience at Dick’s is superior to that of its
rivals. Dick’s has even started hiring certified fitness trainers to provide a higher level of customer service in its stores. Today, the shopping experi- ence is important across all of retail, but it is especially im- portant whenever the product is essentially the same across a variety of channels, as is true of sporting goods. If you lived in a town with an un- derstaffed, barebones sports store and a shiny new Dick’s Sporting Goods brimming with equipment, staff, interactive displays, etc., where would you go, given the general sameness continued on page 12A
should have the wind at their backs: U.S. person- al income is expected to rise or hold t h r o u g h 2017, and researchers
Michael McGrail
at Morgan Stanley cite dra- matic growth in sports par- ticipation in North America, particularly among young people. According to IBIS World, in fact, the compound annual growth rate of the retail sporting goods market will be 3.4% from 2015 to 2020, driven largely by rising incomes. If the category is growing, then why are we seeing such consolidation among brick- and-mortar chains? Sports Authority and Sports Chalet have gone out of business, leading to the closure of close to 500 stores. Back in De- cember, meanwhile, Cabela’s engaged a financial advisor amid increasing pressure from activist hedge fund Elliott Management Corp. BassPro/ Goldman Sachs are reportedly interested in buying the chain. Simply put, the days have long since passed when most Americans bought all their sporting goods from a local big-box chain. Credit Suisse describes the category as over- stored, with 13,400 sports- related chain stores as of 2015 (up 11% from 2011). Adding to this oversupply, sporting goods retailers are also facing tough competition from a host of specialty stores and nontra- ditional competitors offering sports-related merchandise. Staple brands such as Nike and Under Armour, for ex- ample, have been ramping up their direct sales through a variety of channels. The avail- ability of so-called athleisure apparel has expanded from ex- pensive Lululemon to the likes of Forever 21, Gap, Walmart and Target, where more af- fordable workout clothes are now more prominently dis- played. Parents and athletes can also find discounted sports equipment at various retail- ers, including Big 5 Sporting Goods and Modell’s. But of course, the biggest factor here is the Internet: According to Statista, “the second-most popular way of
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