Throughout the small economic blips of the last 10-12 years (the mini recession in ‘99, SARS in 2003), it has been generally accepted that the sporting goods industry has been recession proof. And the logic is easy: no matter what disposal income one has, they still need to continue to do their sports, running, basketball, etc. It’s important for mental as well as physical health, particularly during stressful economic times.
It would seem that the current Great Recession has certainly bucked that trend. Nike’s Q210 results show the sportswear giant down 4% from last year, and adidas group earnings are down 7% from its previous year. Granted, these drops are not as large as many other companies, but with financial targets usually exceeding 10%, such a drop is very damaging. The sports brands are progressively becoming healthier, though, with Nike reducing their inventory by 10% and adidas reducing by 8%, putting them in a healthy position to introduce new and interesting product through 2010 and 2011.
The US, though, is still having difficulty recovering, as the 14.8 million unemployed can attest to, but other key markets around the world, while not out of the recession, seem to be getting out quicker. Asia has a particular amount of potential, with two of the world’s leading economies, China and Japan. China’s expected GDP for 2010 is up 46% from 2009 to 9.5% Japan is planning to be back in the black this year with a 1.1% GDP, after being down last year by more than 15%.
The question is: when will consumer trends get back up to pace, or, even more importantly, simply improve a little bit? The answer may be: in the US? Not for a while. But Asia, after only a small blip, is still cruising.
The fact is that brands in the US export products that Asia desires: basketball is China’s number one participation and spectator sport (except when the World Cup is on), running is positively enormous, as you can see from participation numbers for the 2009 Singapore (over 50,000), Hong Kong (over 24,000), Tokyo and Beijing (over 30,000) marathons, and snowboarding in Korea and Japan is unsurpassed – and they draw tourists from all over Asia.
As Americans, it’s time to open up our eyes a little bit, understand the needs of consumers overseas. In the short term, it will kick start our economy. In the long term…we might learn something.
