Wednesday, May 23, 2012

(BN) Nike’s Hot Punch Running Shoes Spur U.S. Footwear Sales: Retail

Bloomberg News, sent from my iPhone.

Nike's Hot Punch Running Shoes Spur Industry Growth

May 23 (Bloomberg) -- Running shoes meant for marathoners are this era's Air Jordans.

Shoppers more interested in making a fashion statement than actually jogging are scooping up technologically sophisticated running shoes because they're comfortable and trendy. And they aren't afraid to pay up. Exhibit A: Nike Inc.'s $100 Free sneaker in "hot punch" -- aka pink.

Sales of such shoes in the U.S. surged 14 percent to $6.46 billion in the 12 months through March, according to NPD Group. And first-quarter profit gains pushed up shares at retailers from Foot Locker Inc. to Dick's Sporting Goods Inc., evidence that a trend that began two years ago still has legs.

Since the recession, Nike and Adidas AG have tapped into consumers' demand for more value by offering a slew of running shoes that are easy on the eyes and on the feet, according to Marshal Cohen, an NPD analyst.

"We've seen the running-shoe business become a fashion business, as well as a comfort and innovation business," said Cohen, who is based in Port Washington, New York. "When you put that together, that's a positive perfect storm."

Sales of running shoes are driving the entire athletic shoe industry. Ditto for Nike, which in fiscal 2011 generated almost 14 percent of its $20.9 billion in global sales from the running category.

Investors are betting sporting goods retailers and sneaker makers will continue to benefit from the running-shoe boom.

Shares Surge

Adidas, Foot Locker, Dick's, Skechers USA Inc., Shoe Carnival Inc. and DSW Inc. have all surged more than 20 percent this year through yesterday compared with a 4.7 percent gain for the Standard & Poor's 500 Index. Finish Line Inc. and Nike have advanced at least 10 percent.

Athletic footwear has long been worn off the court or field. Sneakers-as-fashion really took flight in the 1980s, when rappers helped turn basketball shoes such as Nike's Air Force 1 and Adidas's Superstar into bestsellers. Later on, Air Jordan basketball shoes became a fixture of urban street fashion.

While running shoes also have been used for everyday wear, sales surged in 2010 with the advent of lightweight shoes that weigh less than 10 ounces and come in a range of neon hues.

Toning shoes have played a part, too. In the depths of the recession in 2009, Skechers and Reebok, a unit of Adidas, released toning shoes that promised to help firm up a women's backside. The Shape-ups and EasyTone brands were a stealth hit.

Sales surged through 2010 until consumers pulled back as regulators questioned the accuracy of ads touting the shoes' health benefits; toners were relegated to the discount bin.

Persuading Consumers

Still, toning persuaded consumers who'd rarely bought athletic shoes to pay $100-plus for fitness-oriented footwear, according to Kerry Jackson, the chief financial officer at Shoe Carnival, a discount retailer based in Evansville, Indiana.

Toning really captured "the consumer's interest in better health," said Jackson, who says shoppers now see lightweight runners the same way. Shoe Carnival now stocks several pairs for more than $100, and Jackson said he expects the summer Olympics to boost sales because brands typically tout new innovations in the leadup to the games.

The continued "casualization" of society has also spurred sneaker sales, according to Chris Svezia, an analyst for Susquehanna Financial Group in New York.

"We're getting more and more casual every decade," Svezia said. "That by itself doesn't translate into good athletic footwear sales, but it helps."

Improved Margins

Demand for running shoes has helped manufacturers and retailers improve margins because they can pass on price increases to shoppers, which in turn helps recoup higher costs for raw materials and labor in Asia.

"We've gone through these price increases like butter," said Matt Powell, an analyst for SportsOneSource in Scarborough, Maine.

The boom in athletic footwear will probably endure as basketball and cross-training shoes become lighter, according to Svezia. Still, consumers may shift purchases to clothes or accessories, year-over-year comparisons will become harder, and the Olympics happens once every four years, he said.

"I can't see anything on the horizon that makes it seem like the wheels are going to fall off," Svezia said. Then again, keeping the growth going next year will be "a much bigger hurdle."

To contact the reporter on this story: Matt Townsend in New York at

To contact the editor responsible for this story: Robin Ajello at

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