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U.S. Sports Industry: Nearly a $70 Billion Business

Date: 6/9/08

LAS VEGAS, NEVADA - June 9, 2008 - "It's good that the Olympic Games are being held this year. Not only will the games highlight the glory of sports and inspire millions of people to get involved, but they will provide a wonderful showcase for the technological achievements of the sporting goods industry." That was one of many statements made by Sporting Goods Manufacturers Association (SGMA) President Tom Cove during the annual presentation of SGMA's State of the Industry address. Cove's presentation was made today during a luncheon presentation at the Sands Expo in Las Vegas, Nevada - site of the SGMA Team Sports Show (June 9-11).

According to SGMA, the U.S. sporting goods industry is $68.4 billion business (at wholesale) - up 2.9% from 2006. Its growth rate is still greater than the 2.2% rate of growth for the U.S. Gross Domestic Product for non-durable goods. Technology is at the core of product innovation and fitness gear continues to be the number one equipment category. By the end of 2008, the U.S. sports industry is expected to reach $69.6 billion (at wholesale).

Last year's sales in the sports industry would have been stronger, but a weakening economy caused sales to taper off during the last six months of last year. Cove noted that SGMA expects the sporting goods industry to grow by 2% in 2008.

While Americans are involved in more than 100 athletic, recreational, and exercise pursuits, overall levels of participation in this country would be higher if not for the existence and interest in sedentary attractions.

"A big factor which is affecting levels of sports participation is the ongoing attraction of electronic options which are sedentary in nature such as laptop computers, iPods, Internet chat rooms, hand-held games, computer games, and cell phones," said Cove. "While these items are dynamic innovations, they do consume large amounts of our life and, as a result, cut into the time that could have been set aside for recreational or athletic pursuits. People who want to get in shape need to make exercise a daily priority - just as the ancient Greeks emphasized the importance of a 'sound mind' and a 'sound body.'

The Year 2007

In looking back at 2007, the sports apparel industry expanded by 2.4% to $29.5 billion (at wholesale). Since 2000, sports apparel sales have grown by 35.3%. The overall growth of the category is mainly due to the fact that consumers love these performance fabrics that provide compression, moisture management, and temperature control. By wearing this high-tech clothing, today's athletes are far more cool and comfortable at the end of the athletic experience which enables them to perform at a high level - especially when 'the game is on the line.'

As for athletic footwear, wholesale shipments were up 5.1% to $12.9 billion. Since 2000, athletic footwear sales have grown by 44.2%.

The big statistical gainers in sporting goods equipment sales were martial arts (12.1%), tennis (6.5%), and boxing (5.0%). All three categories expected to grow again in 2008. Martial arts sales rose to $314 million, up from $280 million in 2006. It was the fourth straight year that tennis sales rose - this time by 4% to $261 million (at wholesale). Boxing's appeal as a fitness option is supporting that industry.

Wholesale sales of exercise equipment to consumers remained steady at $3.5 billion. Sales of exercise equipment to institutions (clubs, schools, hotels, etc.) jumped 2.7%. The overall exercise equipment category remains very large and strong -- $4.7 billion. The wide variety of user-friendly machines available is sustaining the fitness industry.

There are a number of isolated issues which are also affecting industry sales such as:

  • New Game in Town- The popularity of mixed martial arts (aka, ultimate fighting) was confirmed when CBS featured it as prime-time programming on Saturday, May 31.
  • Looking the Part- Only one third of all sports apparel and athletic footwear are purchased with the intent that it will be used in an active sport.
  • 'The Orient Express-' More than 80% of the respondents to SGMA's annual State of the Industry survey said they used factories in China.
  • Aging Gracefully- There's a strong trend that's continuing: Older Americans are buying and using fitness equipment.
  • School Spirit- From 1990-2007, the number of boys on high school varsity teams has risen 27% while the number of girls on high school varsity teams has risen 60%.
  • The Alma Mater- Despite a 1% drop in sales, retail sales of sports licensed products remained very strong at $13.7 billion, according to estimates by The Licensing Letter.

Sports Participation

While participation in nearly every all sport has fallen slightly among casual participants and remained steady for "frequent" participants, programs are being implemented to get more people involved on the field of play. These initiatives range from team sports to individual sports to winter sports:
  • Golf- A player-development effort began in 2004 in the golf industry.
  • Baseball and Softball- Batters Up USA is a program focused on re-introducing people of all ages, though specifically young people, to both baseball and slow-pitch softball.
  • Football- The NFL is working to expand the sport of football at all amateur levels.
  • Winter Sports- The SnowSports Industries Association has launched "Winter Feels Good," which promotes winter sports to help reverse obesity.

The Year 2008

The SGMA feels that in 2008, the sporting goods industry - like the entire private sector -- will be affected by the weak economy and low consumer confidence. Other factors which are influencing the sports industry include the following:
  • Ladies First- The women's market is biggest in sports apparel as 42% of all spending is for women's items
  • The Senior Set- The existence of publications like Masters Athlete confirms that there is a large number of 'Baby Boomers' who are supporting the sports and fitness industry as active participants.
  • Big Spenders- Nearly one-third of all spending on athletic footwear is by those aged 13-24, who also pay the highest average retail price for sneakers.
  • Fitness Favorites- Free weights are the most common form of fitness equipment found in the home, while people spend more money on treadmills.
  • The Club Scene- Right now, there are 44.1 million Americans who are members of health clubs, which is 21% more than there were in 2000.
  • Games for Girls- More females play basketball than any other team sport, while 90% of all high school volleyball players are girls.
  • Dedicated Dudes- Of the 6.9 million martial arts participants, 69.5% of them (4.8 million) are considered 'frequent' participants (i.e. those who participated 25 days or more).
In response to a survey by SGMA, the five hottest sports for sales growth in 2008 will be yoga/Pilates, fitness walking, lacrosse, running, and strength training.

As the industry moves through 2008, the three biggest challenges are dealing 'slower consumer spending,' 'availability of skilled labor/labor costs' and 'availability of quality materials/material costs.' Without a doubt, the rising cost of oil will impact energy prices. In all likelihood, those soaring costs will be passed on to the consumer.

In Washington, D.C.

The SGMA is active on Capitol Hill generating congressional support for two pieces of federal legislation that can impact, in a positive way, the health of millions of Americans:
  1. The Personal Health Investment Today (PHIT) Bill, a new piece of legislation in Congress, is geared at encouraging physical activity by easing the financial burden to participate. If passed, this bill would expand pre-tax accounts to allow for payment of expenses related to physical activity and team sports, including equipment. The PHIT Bill can empower Americans to be active, healthy, and fit.
  2. The Carol M. White Physical Education Program (PEP) is using federal funds to jumpstart innovative P.E. programs in American schools. To date, PEP has provided nearly $500 million in grants to P.E. programs in schools and community based groups to help them buy more equipment and train more instructors. PEP is teaching children how to live active/healthy lives.
  3. Congress allocated $50 million for the Land and Water Conservation Fund (LWCF) to help states purchase land for wilderness areas and parks to build recreation facilities such as playing fields and trails. The source of funding for the LWCF is off-shore oil leases.
Within the State of the Industry Report 2008, there are individual editorial sections on a number of sports/activities such as baseball, basketball, billiards, bowling, camping, fitness equipment, football, golf, ice hockey, lacrosse, martial arts, soccer, softball, tennis, and volleyball. There are also special sections on athletic footwear, sports apparel, and sports licensed products.

SGMA has published its annual report, The State of the Industry 2008, which discusses business and participation trends in detail.

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