Event: Summer Outdoor Retailer 2019
Report by: Ryan Budlong, a managing director in Harris Williams' Consumer Group and Chris Neils, a vice president in the firm's Consumer Group
Event Overview: Outdoor Retailer focuses on the outdoor sporting goods industry, including gear, apparel, hard goods, footwear and accessories.
Why is this industry on your radar?
Budlong: “Outdoor recreation is among the United States’ largest economic categories, with many attractive sub-sectors and growth segments. Consumer spending and participation rates are on the rise, and brands are responding with continued investment in product development. They are also finding new ways to differentiate and connect to their customers.”
Neils: “Historically, the outdoor products industry has been dominated by several smaller companies alongside large, brand-name companies, which provides runway for consolidation. Over the last year, we have seen a number of larger players reorganize and restructure through divestitures and other initiatives in an effort to focus on their core competencies and growth initiatives. As a result, these strategic buyers are far better positioned for near-term acquisitions, and we expect activity to pick up over the course of the next year.”
Which trends, companies or business models were top-of-mind at the event?
Neils: “Sustainability was top-of-mind, as the world seems to have heightened awareness of waste, specifically plastics. Several businesses are beginning to use recycled plastics to manufacture a variety of apparel items, namely shoes. We are already seeing some of the largest athletic gear companies in the world introduce recycled ocean-plastic shoes.
“Brands across the outdoor sector continue to search for ways to differentiate their products in crowded sub-sectors. A number of things jumped out at us, including personalization (e.g., custom hydration packs) and various forms of digital media content.”
Budlong: “Tariffs and trade developments between the U.S. and China continue to be a key focus area in a sector where a vast majority of products are manufactured in China. While there is a clear level of uncertainty in the air, many believe tariffs will be temporary or repealed, while others are evaluating their supply chains, relationships with key partners and pricing models.”
What opportunities are they creating for strategic buyers and private equity investors?
Budlong: “With the breadth of brands in the market, it’s an industry ripe for consolidation for both private equity and strategic buyers. While several private equity investors are currently building meaningful platform businesses with plans for exit down the road, a significant opportunity exists for accretive add-on acquisitions of small-to-medium-sized businesses. While M&A activity across the outdoor industry has been relatively quiet over the last several months, we expect it to pick up over the next year.”
Published July 2019