Tough economic times not missing fitness retailers, suppliers: Now Keys files Ch. 11

The pace of cutbacks, layoffs and consolidations is quickening in the fitness industry, but it's not alone as numbers for the month of March proved bleak all around. Aside from the likes of Wal-Mart and Costco still in the black, most non-fitness retailers such as Penney and Gap are also struggling as consumers tighten their belts. The latest blow in the fitness industry came last week when Keys Fitness filed for Chapter 11 bankruptcy protection.
Author:
Publish date:

The pace of cutbacks, layoffs and consolidations is quickening in the fitness industry, but it's not alone as numbers for the month of March proved bleak all around. Aside from the likes of Wal-Mart and Costco still in the black, most non-fitness retailers such as Penney and Gap are also struggling as consumers tighten their belts.

The latest blow in the fitness industry came last week when Keys Fitness filed for Chapter 11 bankruptcy protection. SNEWS® will follow that case in detail this week as financial statements and hearings unfold following last week's flurry of filings and a request to postpone a deadline of April 29 for filing a number of financial documents.

Already hit have been Diamondback, which is moving its fitness division in California to its bike division's home in Washington state; FreeMotion Fitness, which is being consolidated from Colorado to a Utah facility owned by its parent Icon; and Horizon, Vision, Landice, Vision, Precor and Nautilus, among others, all of which have implemented layoffs, cutbacks or have hiring freezes.

Long-time fitness industry insiders have said these are the worst times they have seen in 10 or 20 years, including strong cutbacks and slower sales across the board.

Compounding the slowdown in North America was a batch of issues including higher prices for raw materials such as petroleum and steel, high inflation in China, a stronger Chinese currency and a much weaker U.S. dollar. In addition, U.S. housing starts were reported down 11.9 percent in March -- the weakest in 17 years. The Labor Department has also reported that its index of prices consumers pay jumped 4 percent in the last 12 months.

The U.S. Commerce Department and the National Retail Federation noted weak sales at most retail in March. Still, the federal department noted that in spite of a weak sales environment, some bright spots existed: Sales at stores in the category "health" and "personal care" rose 2.8 percent year-over-year, unadjusted, and sporting goods sales rose 1.5 percent, unadjusted, year-over-year and were up 1.4 percent over a month earlier.

Information just out from the SGMA also showed that manufacturers' sales for the sports and fitness industries grew in 2007 at a rate of 3.3 percent, down by nearly half or more over the prior years' growth rates of 6.8 percent and 5.5 percent. The SGMA noted that forecasts of the gross domestic product and consumer spending by the federal government does not indicate there will be a quick turnaround this year. The group's sales broken down by category show consumer exercise equipment sales in wholesale dollars for the past calendar year were $3.549 billion, or only slightly higher than the previous year's $3.543 billion. Down or even were sales in treadmills, home gyms, exercise bikes, rowing machines, benches, ski machines, gliders, stairclimbers and "other" equipment. Only slightly up were free weights and ab machines. Most of the small gains in the category were sales of elliptical machines, the report found.

Even in fitness we know, however, that not all regions have been hit equally, with California, Florida, Arizona and Nevada often named as the hardest hit. The federal government's so-called "beige book," an anecdotal look at market conditions, reported that economic activity slowed in nine of the 12 districts it names in the United States, with "mixed" or "steady" activity in only three (Boston, Cleveland and Richmond). One spot SNEWS® has heard steady reports from is Texas (11th district along with northern Louisiana and southern New Mexico), and beige book agreed: There, retail sales are still weak but better than in the rest of the country, while auto sales are steady. In Iowa, northern Indiana, northern Illinois, southern Michigan and southern Wisconsin (7th district), the economy did expand, but at a slower pace than the last report.

In the West's 12th district (Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah and Washington), the economy slowed and retailers were seeing less business, the federal book noted, with "dismal" auto sales. On the East Coast in the 5th district (Maryland, Virginia, North and South Carolina, southern West Virginia and D.C.), economic activity advanced but at a sluggish pace, while manufacturers and retailers trimmed payrolls and retail prices moderated. Also in the East (3rd district with Delaware, southern New Jersey and eastern Pennsylvania), retailers reported sluggish sales. And in the Northeast's 1st district (Maine, Massachusetts, New Hampshire, Rhode Island, Vermont and most of Connecticut), retailers said big-ticket items are not moving well.

SNEWS® View: We have heard some reports that higher-priced equipment is still selling reasonably well and, in that same vein, that average tickets are up although volume is down. That follows the same logic that although housing sales and prices are down, those that have the money are finding it is a great time to buy.

Smaller specialty stores, according to some experts, need to do several things in times like these: Stand out in some way, not emphasize low prices, do emphasize value, and remember customers, i.e. take a hard look at what they want and need and consider changing what you offer to meet those needs.

Lastly, other retail and sales experts stress that if you bring people into your store, make sure you respect them and have the right staff and products in place to deliver on any promises. These days, you may only get one shot from consumers to meet their needs, so make it count with a good product mix (think out of the box) and well-trained sales employees. 

Related

TKO files Ch. 11 bankruptcy reorganization

Rumors of financial instability have culminated for TKO Sports in a filing for Chapter 11 bankruptcy reorganization in a Texas court just days before the new federal laws on bankruptcy took effect. TKO Sports Group USA Ltd. quietly filed on Oct. 11 for the court protection plan ...read more

Eddie Bauer caught in Spiegel Ch. 11 filing

Eddie Bauer's parent company, the Spiegel Group, has filed for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Its financial woes are a result of declining sales and a draining credit-card division. Debbie Koopman, vice ...read more