Consumer and Retail

Outdoor Recreation: Overview & Trends

Outdoor recreation is a large and growing industry across the U.S., generating nearly $900 billion in total consumer spending and fueling economic growth and healthy communities across the country. What was once a niche category for the dedicated enthusiast now attracts a wide range of consumers seeking the latest in apparel, gear and accessories for their increasingly active lifestyles.

Through our attendance at key tradeshows and ongoing conversations with strategic buyers and other investors, Harris Williams has identified the following key trends shaping the sector:

Sustainability: Consistent with their heightened concern for the environment generally, consumers increasingly consider sustainability when purchasing outdoor recreation products.  Many top brands have responded in kind by testing and launching different variations of eco-friendly goods. Adidas, for instance, produced more than 5 million pairs of shoes made from recycled ocean plastics in 2018 and is planning to double down on its efforts in 2019; Body Glove recently debuted a new eco-friendly activewear collection designed in collaboration with professional surfer Tatiana Weston-Webb; and Igloo has introduced a compostable cooler made from 100% biodegradable materials.

Further illustrating the importance of sustainability is the burgeoning popularity of Rothy’s, the women’s shoe made from recycled plastics that promises eco-conscious comfort. On the heels of generating $140 million in sales in 2018, Rothy’s announced plans to open more retail store locations in its most highly penetrated markets. The company also recently received $35 million in funding from Goldman Sachs.

Strategic Activity: While M&A activity has been largely quiet in recent months, opportunities exist for strategics in the sector. With the solid recent performance of its outdoor brands and strong overall sales growth, VF Corp is proving that the outdoor sector is alive and well. And as one of the largest strategics in the space with a collection of leading brands (including such prominent labels as North Face and Timberland), the company is well-positioned to acquire other promising companies that fit its core competencies. While Vista Outdoor continues its trend of divestitures with its recent sale of Savage brand, the business will use the proceeds from that sale to pay down debt to increase financial flexibility, which in turn should better position the company for future M&A opportunities.  

Tariffs: While tariffs have been a popular buzzword across the outdoor sector in recent months, uncertainty still exists about their impact going forward. The industry has certainly felt the ‘tariff-burden’: According to the Outdoor Industry Association, outdoor companies and consumers paid an extra $1.1 billion between September 2018 and April 2019 (compared to tariffs on the same products last year) on such products as backpacks, camp stoves and chairs, hats, and bikes. However, some corporations with significant exposure to the U.S. market don’t appear to be as concerned about tariffs going forward.  Nike’s CFO Andy Campion, for example, indicated during the company’s most recent earnings call that tariffs to date have had no effect on Nike’s business, and that the company plans to continue manufacturing in China. Given the uncertainty, Harris Williams will continue to closely monitor these developments and the resulting impact on our clients and the industry at large. 

^{Source: 2017 Outdoor Industry Association National Economy Report}

Public Markets Overview

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M&A Overview

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^{1. FactSet}