Regional Retail Reports: 2004 1Q report and 2nd Q projections for the Midwest, West Mountain and West Pacific Coast

Welcome to part two of our second SNEWS® Retailer Regional Report – a quarterly look at the retail climate designed to help the industry gauge what is affecting sales and the overall outdoor market in different regions around the country. This week, we bring you a look at the 1Q and projections for the 2Q retail climate in the Midwest, West Mountain, and West Pacific Coast regions of the United States.
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Welcome to part two of our second SNEWS® Retailer Regional Report – a quarterly look at the retail climate designed to help the industry gauge what is affecting sales and the overall outdoor market in different regions around the country. As we promise with our annual SNEWS Retailer Survey, we will not release the names of those who agree to speak openly and honestly with us. The retailers who have agreed to contribute to our regional reports on a quarterly basis are key retailers in each region.
This week, we bring you a look at the 1Q and projections for the 2Q retail climate in the Midwest, West Mountain, and West Pacific Coast regions of the United States. As always, we appreciate your feedback and commentary and welcome emails to: regionalreports@snewsnet.com.

Midwest
Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, and Kansas

In the Midwest sales for the Q1 were up nearly 10 percentage points on average, though it's not clear whether the industry should be proclaiming that it is once again "strong." Certainly, a cold January helped sales spike for winter apparel and related snow gear, and in some areas the cold weather continued to boost consumer interest in winter gear through February and even into March. While a weather-boost to sales is certainly good news, it isn't anything we'd hang our fleece hat on as a market indicator. Had the weather been warm, it's just as likely sales would have mimicked a cold front and chilled down considerably. Several retailers told us that their sales increases were as much a result of competition going out of business as any other factor. So, as we congratulate the survivors and hail the healing effects of Darwinian economics on the weak, we toss in a word of caution -- sales increases for some do not mean sales increases for an industry when the same volume of sales is now being represented by fewer stores. Several retailers pointed out to us that while their sales were basically flat, their profits were up, thanks to better inventory control and higher margins -- read ordering selectively and lean.

Things slowed down dramatically for everyone, though, as we wrapped up the 2Q, thanks in large part to cool and wet weather in many of the states, keeping customers out of the stores and out of the buying mood. June appeared to start a recovery for many, but others felt that increased sales in June were too little too late to save the quarter reports. Estimates are that when final numbers are in, sales compared to last year will be flat to slightly up at best. In many cases, though sales increased slightly, last year's numbers weren't anything to write home about. Several store owners/buyers voiced a concern with us that if other retailers in the region were buying less, as they were, that manufacturers were then making less, meaning that if sales did pick up going into late June and July, reordering could become a nightmare if products are not available.

As for what folks were asking for when they walked in the doors, stores in the upper Midwest sold snowshoes and cross-country ski gear at a brisk clip. In general, retailers across the region sang selling praises for the MSR Miox (even with the high price tag), Jet Boil, Crocs, Splash Guard -- see our review in the SNEWS® Product Reviews section if you don't know what a Splash Guard is -- and Keen sandals more often than any other. Surprisingly in some areas, larger volume packs from Gregory, Dana and others appeared to be selling well. Even tent and sleeping bag sales seem on the rise in many states in the region, with Kelty, Mountain Hardwear and The North Face getting the most brand name mentions. Footwear sales are up in almost every category, though retailers were at a loss to explain why, exactly. Perhaps everyone's shoes wore out at the same time? In apparel, stores that were carrying anything The North Face, Marmot and Ex Officio, especially their sun-protective and bug protective clothing, were ringing up strong sales. Thankfully, hot pink appears to have had its short run of fame and glory.

For boats, Bell Canoe, Hobie, Current Designs appear to be generating the most consumer attention.

In the left-for-dead category, a number or retailers across the region were bemoaning the fact that despite their best efforts to offer an alternative product choice, if it did not say CamelBak the label, the hydration pack sat on the shelves.

West Mountain
Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, and Nevada

In the West, Q1 sales increases depend almost entirely on the weather and whether or not the region gets good snow in late January and the first few weeks of February. This year it did, except in Colorado. Many reported that consumer confidence also appeared to have returned to the region. This, combined with colder weather and adequate snowfall, meant that retailers in the West (except those in Colorado's Front Range and New Mexico) celebrated first quarter sales increases over 2003 by an average of 10 to 15 percent. Much of the increase can be attributed to a very sorry state of economic affairs in Q1 of 2003, so this quarter's report isn't cause for sending up fireworks in celebration just yet. As for Q2, retailers tell us they are anticipating sales to be either flat or slightly up.

In the Western region, cross-country skis and AT gear slid out of the stores almost as fast as sales staff could tap fingers on the register keys. Apparel success stories were again tied to a few brand names, including The North Face, Horny Toad, Life is Good, Royal Robbins and, more selectively, Patagonia. One trend that boggles the imagination is that capris anything were hot, hot, hot -- even for guys. Now we KNOW people have been watching way too much Queer Eye for the Straight Guy! As was the case in the Midwest, footwear sales were padding retailer ROI's, with Chaco, Keen and Croc's garnering the most consistent mentions. Unlike the Midwest, sleeping bags, large packs and tents were, how shall we say it, moving slow enough that it appeared the products were trying to set up camp themselves?

And the grim reaper of sales points to, telemark? Across the region, retailers chimed in with the same tune -- telemark is dying. Not that tele skis weren't selling mind you. But it does appear that consumers are buying the vast majority of their tele gear online and then turning to the retailer for mounting services. And if a consumer did buy from a retailer, it was only after the retailer agreed to match a much-discounted online price. It is going to become increasingly difficult for manufacturers to convince retailers to support a category if it is not one they can rely on to generate profit and sales anymore.

West Pacific Coast
Washington, Oregon, California

In the West, the reports we received read as if stores had been copying from each other's study notes -- flat sales, lousy economy, less then perfect weather conditions. On the bright side, a number of retailers told us that, like their brethren in the Midwest, profits were up, despite sliding sales, simply because they were ordering leaner, meaner, and with a much keener eye toward selling higher-end, higher-margin items. For Q2, things might be turning around, as better weather, an improving consumer confidence level and, perhaps, improving retailer confidence indicate that sales will be up between 5 and 10 percent.

Hot items were much the same as the ones mentioned above in the West region report. Brands most often mentioned as strong sellers were The North Face, Arc'Teryx, Mountain Hardwear, Columbia and Marmot. Interestingly, though, retailers said the buzz over snowshoes had faded, though sales have remained healthy in other regions of the country. In fact every retailer we spoke with in the West Pacific Coast region told us snowshoe sales were off considerably. Retailers were left scratching the collective noggin in search of a reason but none could be found other than perhaps, finally, consumers who wanted to buy snowshoes had, finally, done so and demand had tapered off. As with other parts of the country, footwear sales were hot, and we finally had one retailer who has been analyzing sales tell us that he thinks it is because footwear is now a two-year selling cycle. He contends that vendors are victims of their own success -- everyone's building better shoes that last longer. Old shoes are just fine, until they wear out, which many have this year. So, consumers are back to re-shoe the feet. Other hot items include recreational and touring kayaks -- what else is new? Sales for packs, tents and sleeping bags remain slow to stagnant, unless priced to move.

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