The News
Department of Commerce advance data released on December 14th shows that sales for the Sporting goods, hobby, book & music stores category fell 1.4% y/y and dropped 1% m/m. Despite a reasonably good Black Friday, the total month’s category sales were unimpressive. Total U.S. retail and food sales for November jumped 3.8% y/y and climbed 0.1% m/m, though. According to the Department of Commerce,
“Retail trade sales were virtually unchanged (±0.5%) from October 2016, and up 3.6 percent (±0.7%) from last year. Non-store retailers were up 11.9 percent (±1.6%) from November 2015...”
Thus, the Sporting goods, hobby, book & music stores category appears to have been a laggard, especially in comparison to online retailers. This fact is why we believe that our covered retailers must invest in e-commerce capabilities. Online, and especially mobile sales, are the future.
Fresh Department of Commerce data also indicates that October sporting goods retail sales fell below our forecast. November sporting goods sales will be broken down in January, but we don’t expect them to be positive y/y. Charts 2 and 3 below present updated sporting goods retail sales data.
Chart 2:
Chart 3:
The Forward View
Last year, people across much of the country didn’t need to wear a jacket to holiday parties. Not so this year. December has been very cold and snowy thus far, and we’re optimistic about sporting goods retailers breaking the trend of y/y sales declines. 4Q earnings should show that November was on-par with October but that December was very strong overall. We look forward to watching the weather through the end of February. For sporting goods and sports apparel retailers, a long, frigid winter will ideally transition to a warm spring, beginning in March.
One final note for investors is that November boat sales actually rose over 4% against a strong y/y comp, according to preliminary data. Key U.S. powerboat segment sales rose 2% y/y in November against a very tough comp. This is great news for Brunswick (NYSE: BC), a company we just began to cover. In addition to Brunswick, Malibu Boats (NASDAQ: MBUU), MCBC Holdings (NASDAQ: MCFT) and Marine Products (NYSE: MPX) will also benefit from strong November demand. The recreational boat industry should end the year with 5–6% overall growth, as noted here. December, while likely a good month for sporting goods retailers, won’t be helpful to boat sales because many marine markets will be iced-in. Still, 2016 was a solid year for boat demand, and 2017 should be strong, too. We’re especially optimistic about the high-end of the marine market.
As always, we welcome your feedback and comments on our research. We wish you a happy holiday season and a successful 2017. It should be an exciting year ahead!
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