Sunday, December 18, 2016 4:48 AM EDT
The News
Department of Commerce advance data released on December 14th shows that sales for the Sporting goods, hobby, book & music stores category fell 1.4% y/y and dropped 1% m/m. Despite a reasonably good Black Friday, the total month’s category sales were unimpressive. Total U.S. retail and food sales for November jumped 3.8% y/y and climbed 0.1% m/m, though. According to the Department of Commerce,
“Retail trade sales were virtually unchanged (±0.5%) from October 2016, and up 3.6 percent (±0.7%) from last year. Non-store retailers were up 11.9 percent (±1.6%) from November 2015...”
Thus, the Sporting goods, hobby, book & music stores category appears to have been a laggard, especially in comparison to online retailers. This fact is why we believe that our covered retailers must invest in e-commerce capabilities. Online, and especially mobile sales, are the future.
Fresh Department of Commerce data also indicates that October sporting goods retail sales fell below our forecast. November sporting goods sales will be broken down in January, but we don’t expect them to be positive y/y. Charts 2 and 3 below present updated sporting goods retail sales data.
Chart 2:
Chart 3:
The Forward View
Last year, people across much of the country didn’t need to wear a jacket to holiday parties. Not so this year. December has been very cold and snowy thus far, and we’re optimistic about sporting goods retailers breaking the trend of y/y sales declines. 4Q earnings should show that November was on-par with October but that December was very strong overall. We look forward to watching the weather through the end of February. For sporting goods and sports apparel retailers, a long, frigid winter will ideally transition to a warm spring, beginning in March.
One final note for investors is that November boat sales actually rose over 4% against a strong y/y comp, according to preliminary data. Key U.S. powerboat segment sales rose 2% y/y in November against a very tough comp. This is great news for Brunswick (NYSE: BC), a company we just began to cover. In addition to Brunswick, Malibu Boats (NASDAQ: MBUU), MCBC Holdings (NASDAQ: MCFT) and Marine Products (NYSE: MPX) will also benefit from strong November demand. The recreational boat industry should end the year with 5–6% overall growth, as noted here. December, while likely a good month for sporting goods retailers, won’t be helpful to boat sales because many marine markets will be iced-in. Still, 2016 was a solid year for boat demand, and 2017 should be strong, too. We’re especially optimistic about the high-end of the marine market.
As always, we welcome your feedback and comments on our research. We wish you a happy holiday season and a successful 2017. It should be an exciting year ahead!
Analyst Certification: I, Nathan Yates, certify that the views expressed in this publication accurately reflect my personal views about the subject companies and their securities. I ...
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Analyst Certification: I, Nathan Yates, certify that the views expressed in this publication accurately reflect my personal views about the subject companies and their securities. I also certify that I have not, am not, and will not be compensated directly or indirectly in exchange for expressing any specific recommendation in this report.
Recommendation
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Expected Return
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Buy
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Shares are expected to deliver alpha
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Hold
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Shares are expected to match the market's risk-adjusted return
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Sell
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Shares are expected to underperform the market
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Required Disclosures: Nathan Yates may or may not own long or short positions in securities mentioned in this report. As a matter of principal and ethics, he will not trade for three days in any security to be mentioned in any report. Occasionally, the time gap between a personal trade and an unanticipated event may be less. There is no known affiliate ownership in subject companies of this report. The firm does seek to sell research descriptions to publication corporations. No other known conflicts exist.
Important Disclosures: Forward View Consulting employs various equity valuation methodologies to develop investment ratings, target prices and conclusions. Certain risks to our ratings, target prices and ultimate investment conclusions exist which include, without limitation, a company’s failure to achieve financial results, product risk, regulatory risk, general market conditions and volatility, interest rates, political factors, acts of God, terrorist activities and changing economic conditions. Forward View Consulting is not a registered investment advisor and is not acting as a broker-dealer under any federal or state securities laws. Notable compliance policies include (1) prohibition of insider trading or the facilitation thereof, (2) maintaining client confidentiality (3) appropriate use of electronic communications, amongst other compliance-related policies.
Disclaimer: Material provided in this publication is for educational purposes only, and was prepared from sources and data believed to be reliable, but we do not guarantee its accuracy or completeness. We cannot and do not guarantee the adequacy, accuracy or completeness of this information or the suitability or profitability of any particular investment. This publication does not consider the specific investment objectives, financial situation, or particular needs of any specific person or business, or any investment laws and regulations, regulatory capital requirements, or other restriction applicable to investments by certain institutional investors. Accordingly, you are responsible for your own investment research and decisions, and should seek the advice of a qualified fiduciary, and perform your own due diligence before investing. You should also consult your own legal advisor in determining the legality and consequences to you of the purchase, ownership, or sale of any investments. No information in this or any of our publications is intended as tax, accounting, or legal advice, as an offer or solicitation of an offer to sell or buy, or as a sponsorship of any company, security or fund. Past performance does not indicate or guarantee future performance and no representation or warranty is made regarding future performance. This publication reflects a judgment at its original date of publication by Forward View Consulting and is subject to change without notice. The price, value, and income from any securities or instruments mentioned in this report can fall as well as rise as a result of a host of factors including, but not limited to, economic, financial, and political factors, interest rates, stock market volatility, commodity price and exchange rate movements, weather, regulatory changes, changes in credit quality, acts of God, or terrorist activities.
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