SGMA declares state of industry "pretty darn good," forecasts '07 growth up to 6%

With gross domestic product estimated at about 3.6 percent, the sporting goods industry can indeed gloat at growth of 5.8 percent in 2006, with apparel paving the path but exercise equipment not far behind.
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With gross domestic product estimated at about 3.6 percent, the sporting goods industry can indeed gloat at growth of 5.8 percent in 2006, with apparel paving the path but exercise equipment not far behind.

"The news in terms of growth is pretty darn good," Tom Cove, Sporting Goods Manufacturers Association president and COO, told SNEWS®. "And the home exercise business is as good as any … in terms of demographics, the quality, and the spectrum of opportunity."

Cove presented the annual report at SGMA's Industry Leaders Summit in Washington, D.C., an executive conference that proceeded the group's annual lobbying and educational event, now called the National Health Through Fitness Day, which hit Capitol Hill March 7. The report had traditionally been presented at the former Super Show event in January or February.

"Annual expansion that exceeds the growth rate of the economy is not always possible in a mature market such as ours," Cove wrote in the report itself. The group pointed to technological innovations and design advances as one reason the sporting goods market continued to grow.

In 2006, manufacturers' sales of all sporting goods in wholesale dollars was $66.4 billion, topping 2005's total of $61.7 million. Although the smallest overall segment, exercise equipment still had the second-highest growth percentage, reaching $4.7 billion in 2006, up $0.3 billion from a year earlier.

And despite an odd blip showing Lacrosse as THE hottest sport for 2007, many fitness-oriented activities are next in the group, showing in declining order of ranking, fitness walking, aerobic training, soccer, yoga/Pilates, running, fitness cycling, football, basketball, golf and strength training.

Fitness equipment sales rise
Including home and commercial equipment, sales rose 5.3 percent. Home equipment sales were up 5 percent to $3.5 billion and commercial sales up 6 percent to $1.1 billion. According to the report, the commercial market is forecast to expand by about 5 percent in 2007.

The home market slowed to single digit growth in the early 2000s after explosive growth in the '90s, partly due to an oversupply that led to prices being driven down. Although the home market grew by about 12 percent in the past two years, growth in 2007 is expected to reach about 4 percent because of less discretionary consumer spending and lower housing starts.

But that doesn't mean a pessimistic overall forecast. In fact, with the aging baby boomers and the country's increased emphasis on fitness and wellness, the SGMA stands behind its forecast that fitness is one of the strongest future growth areas. That assumes the industry is able to reach newcomers and not just current enthusiasts.

"You have to have people who are entering the market, who aren't just avid participants," Cove said. "Your core customer is your core customer, but we need to make sure there is new inflow."

Perhaps worthy of note is the report's point that rising club memberships are seen as an indicator of increased sales of home equipment. That's because consumers get familiar and comfortable with equipment in clubs and then can decide to purchase it for the home. To achieve a "health club feel" in home equipment, prices have generally and successfully risen again and features of higher-end machines have in part been incorporated into less expensive equipment.

2007 forecast

In addition to aging demographics that are said to be one spur for increased sales, technology will make equipment more entertaining, motivating and welcoming. And Internet sales will continue to grow. This will help feed a forecasted growth rate for the entire industry this year of between 5 percent and 6 percent.

In addition, thoughts about the environment will spread beyond fibers and softgoods to delivery, shipping, packaging and overuse of non-renewable energy resources.

"Besides trying to increase market share," the group stated in a report, "the next two biggest challenges for vendors in 2007 will be keeping tabs on material costs and acquiring new technology."

The SGMA's annual State of the Industry report (30 pages) is available to members for free and to non-members for $525. Click here to view the report.

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