In the category of Sports, there have been some major changes with the players that are effecting retail real estate in a big way. Between Sports Authority’s bankruptcy and growth strategies from Dick’s Sporting Goods and Hibbett Sports, we are seeing a great deal of activity for new development and filling of second generation space.
Sports Authority filed for Chapter 11 bankruptcy on March 2 of this year. When a retailer suffers from poor financials and aggressive competitive pressure, it will often result in stagnate growth and underwhelming sales results. Competitive pressure from the new category leader, Dick’s Sporting Goods, as well as Amazon, and the ever changing dynamics of the retail industry likely affected the demise of Sports Authority. It is the opinion of many that Sports Authority did a poor job of “brand differentiation”.
“From a high level, Sports Authority failed to differentiate itself as a brand over the last few years,” said Lee Peterson
“From a high level, Sports Authority failed to differentiate itself as a brand over the last few years,” said Lee Peterson, executive vice president, brand, strategy and design, at WD Partners, a customer experience expert for global food and retail brands. Peterson said, “that strategy miss allowed the big box stores such as Wal-Mart and Target, as well as Dick’s and brands such as Nike (which has its own stores), to push Sports Authority towards irrelevancy.” Other examples of sporting goods companies that have done an admirable job differentiating themselves include: Under Armour, lululemon athletica, Nike and Footlocker. Each of these companies have perfected the experience-based store model that appeals to ‘millennials’. In this day and age, “If you still have over 450 stores in dire need of a refresh, you’d better have a great private label brand, wonderful sales people, and a great store environment. Sports Authority has none of that,” Peterson said. As a company, they failed to appeal to a younger, digitally-native customer which is crucial today.
What does this mean for the Sporting Goods sector? Per Lara Ewin of retaildive.com, “Dick’s is likely to pick up both real estate and market share in the wake of the bankruptcy.” Due to recent success, “Dick’s has the liquidity and sales figures to weather market fluctuations, and Amazon, is taking away market share from many big box stores.”
While Dick’s Sporting Goods is today’s market leader in the US Sporting Goods industry, Hibbett Sports is among the fastest growing retailers in the USA. With 50 planned openings in 2016, and a long-term goal of 1,500 stores, (currently 1,020 stores), Hibbett Sports is optimistic about its future. Per CEO Jeff Rosenthal, “Our retail strategy of convenience and availability makes it much more attractive given the high cost of commuting and the fact we predominantly draw from a much smaller radius around our stores.” Expect Hibbett to keep growing primarily in small to midsized markets throughout the South, Southwest, Mid-Atlantic and Midwest. The Hibbett Sports retail footprint is approximately 5,000 square feet, and they target strip centers that are either anchored by or very convenient to a Wal-Mart Supercenter.
Many of the same principles and pressures affecting the Sporting Goods industry also apply to Hobby and Crafts. Expert opinion is that the Hobby and Crafts industry is at risk of decline. According to IBIS World, “the biggest risk factor facing this industry is the fact that the industry is in the decline phase of its life cycle. During this time, demand shrinks, causing markets and revenue to shrink as well. Firms often struggle to survive under the lower profit margins prevalent during this time.” Hobby Lobby and Michael’s are widely regarded as the market leaders in this category, followed by Jo-Ann Fabric & Craft Stores, AC Moore, and Hancock Fabrics. Just this week, Hancock Fabrics announced the closing of all stores, chain wide. While there is not much public information available on Hobby Lobby (privately held), they are widely considered to be a strong, well-healed, retailer. Hobby Lobby’s future growth plans are aggressive estimating 50+ store openings in 2016. Their current growth plans make them a desirable Jr. Anchor/ co-tenant among the other national Jr. Anchor tenants.
In closing, drastic business decisions are often forced when situations such as with Sports Authority occur. Industry professionals have seen numerous retailers that were once market leaders, close their doors. Consumers and investors can expect this to continue as long as technology changes the way consumers buy certain products, as new and stronger competitors enter markets, and as retail nodes shift with emerging populations. Whether it be examples like Sports Authority or any other retailer that may have closed in your town, it is important to focus on the opportunity (not the void) that the closing retailer leaves in your market. If this is your community, you now have a strategic and underutilized real estate asset. For example, within a few hours after the Sports Authority closure announcement our team had already made contact with landlords of the centers with Sports Authority and contacted potential end users that would look at occupying a former Sports Authority box. Our advice is to align the community with a trusted real estate professional that knows your market and has a pulse on the national retail landscape and strong retailer relationships. Your real estate confidant will be able to provide a list of realistic retail prospects that should be targeted to occupy the vacant space.
“There are too many sports stores, not enough customers.” by Tonya Garcia, MarketWatch, April 7, 2016
“Sports Authority is bankrupt and closing 140 stores”by Chris Isidore, CNN Money, March 2, 2016
|Sporting Goods||2016 New Stores||Areas of Expansion|
|Hibbett Sports||50||South, Southwest, Mid-Atlantic, Midwest Markets|
|Dick’s Sporting Goods/Field & Stream||35-50||Nationwide– with AL, CA, IL, NC, OH, PA, TX and WI getting multiple locations|
|Academy Sports and Outdoors||15-20||Big expansion in TX but looking at FL, MS, OK, AR, GA, IN, KS, KY, MO, TN|
|Dunham’s Sports||15-20||Midwest and South Markets|
|Gander Mountain||10 to 15||TX, CO, PA, OH, and Western States in the near future|
|REI||10 to 12||FL, OH, DE, IA, CA, AZ and one store in TX this year, Opening distribution center in Goodyear AZ expected to be catalyst for growth in SW and further east, especially TX.|
|Cabela’s||8||Slow growth for 2016|
|Bass Pro Shops||6 to 8||SC, OH, NY, FL is main focus|
|Big 5 Sporting Goods||5 to 8||TX, CO, PA, OH, and Western States in the near future|
|Hobby-Craft||2016 New Stores||Areas of Expansion|
|Hobby Lobby||50||CA, OKC, AL, IA, NE|
|AC Moore||0-5||East Coast, NY|