Exercise equipment sales up slightly: SGMA State of Industry

Although overall sporting goods sales in 2003 were basically flat compared to 2002 (-0.5 percent), exercise and fitness equipment sales jumped ahead by about 3 percent, according to the latest Sporting Goods Manufacturers Association "State of the Industry Report."

Although overall sporting goods sales in 2003 were basically flat compared to 2002 (-0.5 percent), exercise and fitness equipment sales jumped ahead by about 3 percent, according to the latest Sporting Goods Manufacturers Association "State of the Industry Report."

Like other categories, the market improved in the second half of the year as the uncertainties from a spring war in Iraq and the future of the economy seemed to wane, summarized the report, released at The Super Show.

"The market for exercise equipment edged ahead by 3 percent as the industry worked through some excess inventory and struggled to lure price-conscious consumers," the report said about the fitness category, which encompasses about a quarter of sporting goods sales in dollars and is the single largest activity segment overall.

"Many industry segments reported that sales picked up during the second half of 2003, and this trend is expected to accelerate in 2004 as the economy continues its strong recovery," it said.

With that in mind, the SGMA has forecast overall industry growth of 1.3 percent in 2004 and about 3.7 percent in the exercise equipment category.

"Our projections for growth in 2004 are deliberately conservative," SGMA President John Riddle wrote in the report. "The companies that participated in our State of the Industry survey believe they -- and, by inference, the industry -- will do much better in 2004 than 2003."

Comparing to the national economy, the report pointed out that the economy grew 3.8 percent in 2003, up slightly from a growth of 3.2 percent in 2002. In 2004, the gross domestic product (GDP) is expected to be up 4.1 percent. The reason sporting goods lagged behind, the report said, is because there was extreme price pressure partly due to "an excess of retail space displaying more products than consumers need or want. The result is brutal price competition."

This is the sixth consecutive year sporting goods overall has failed to meet GDP. In 1997, GDP was up 2.1 percent, while sporting goods was up 5.2 percent. The market has only once barely eked to just over half of that 5.2 percent in growth since then, with the highest growth year being 2.7 percent in 2000. 2003 was the first year that hit negative growth.

Excess wares also result in mergers, acquisitions, and also bankruptcy and demise: "The industry has been consolidating at a furious pace for several years, and there was no letup in 2003."

Other points in the report:

>> There is continued pressure to reduce costs and source products outside the United States. In the survey, 47 percent of respondents said they would do more sourcing offshore, and only 9 percent said they would increase in the United States.

>> During the first half of 2003, the customs value of goods increased 8.8 percent over the same period a year earlier (to $4.58 billion), which was the sharpest increase since 1997. That rise is attributed to increased offshore sourcing and the weaker U.S. dollar.

>> Exports for the first half of 2003 decreased 2.1 percent (to $975 million), compared to an increase of 1.4 percent a year earlier. The causes: soft international markets and increased sourcing overseas.

>> Survey respondents said their international sales had increased 14 percent in the past two years. This is possible because even if sourced overseas, the brand, design and image come from the United States.



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