Below, we reviewed the most relevant takeaways from the Q2 2023 updates from several of the leading athletic & lifestyle apparel and footwear brands.
Decker’s star brand HOKA grew +27% for its June quarter, but that was down from +59% for the prior year. Moreover, unit sales were up less than +20%. HOKA’s growth is now direct-to-consumer led, compared to wholesale previously being the key channel of distribution. Decker’s other brands, which are primarily wholesale, all experienced declines; UGG’s wholesale revenue declined -15%, the other brands declined between -20% and -34%.
The wholesale results reflect lower orders by U.S. retailers given soft trends. On the overall athletic wholesale market, Deckers CEO David Powers said, “There's some noise out in the wholesale channel with markdowns and promotions from other brands, a lot of inventory in the channel. We're managing that tightly by purpose.” These comments align with our comments following Nike’s recent results and our outlook for the category (“Athletic Footwear: Air Pocket Ahead”).
Regarding UGG, Powers shared, “We have been particularly excited by the interest of consumers who are shopping in person, especially during the spring and summer seasons. We believe this dynamic is partly attributable to the development and greater adoption of transitional franchises that embrace the brand's heritage DNA and have greater year-round wearing occasions. By maintaining this momentum, the entire UGG product portfolio benefits, especially in our stores where consumers can feel and directly engage with the broader product offering.”
Over the next year, HOKA is likely to grow by about +$375M to $1.8B, with 80%+ coming in the U.S. Longer term, Powers noted that the company wants ”to make sure that we have the operations...to take this business to $5 billion- $6 billion over the coming years...[Additionally] there is more aperture and appetite for HOKA to be meaningful in the lifestyle space, whether that is color ups or fabric changes or design details on some of our franchise styles.” For context, Nike Running represents about $5.4B in revenue and On Running will grow to over $2.7B this year.
HOKA is seeking to develop a full owned-retail business. To this end, Powers noted that company “expect[s] to continue testing potential permanent locations through pop-up doors...The brand is as visible as it's ever been with connected TV advertising, billboards, special running events, and several compelling activations in the pipeline...Fortunately, we know how to run retail stores based on our legacy of running UGG retail stores over the last 20 years.” HOKA’s first permanent store in the U.S. is in New York. On that and more, the company noted, “We're looking at holding events and run clubs and making sure that there is engagement with the community in these stores as well to drive renewed interest or repeat visits from existing customers, but also creating awareness and showing the full breadth of the line for new customers to the brand. We're off to a good start, small in the scheme of things at this point, but we see upside here. And as far as size of stores and how many, we don't have a number put on that yet. It all depends on how the marketplace evolves. But DTC is our primary objectives here and using our stores to grow online and vice versa. But you'll see a handful of key stores being opened in key cities and locations as we go and continuing to leverage our pop-up and test model before we make long-term commitments.”
Adidas, which is still trying to recover from its Yeezy relationship, reported that its go-forward U.S. business was down -16% during Q2 2023. The company's quarterly update quoted adidas CEO Bjørn Gulden “The market is still very volatile, and we continue to see a lot of uncertainty for the rest of the year. As there is still a lot of inventory in the market, retailers are very cautious in their pre-orders...Our story is the same as we said at the beginning of the year: We are using 2023 to clean inventories, work on future products, improve the way we work, build better partnerships, and lay the foundation for a better 2024... 2023 is not about trying to show short-term results.”
VF Corp’s Q2 2023 results were reflective of mixed trends: The North Face saw sales increase +12% on a global basis, Timberland decreased -6%, Dickies fell -19%, and Vans declined -22%. Each brand was impacted by wholesale in the Americas--down an astonishing 40%--as the turnaround work continues at the brand. Relatedly, order books softened further in the 2H with retailers becoming more cautious with their inventory plans. Recall that Vans has now been a struggle for two years. Dickies' decline is U.S. wholesale; we suspect not only are its retailers cautious in their orders, but the brand continues to lose heat to Carhartt. VF’s new CEO is Bracken Darrell, who came from Logitech.
Columbia Sportswear's Q2 2023 results also reflected a softening in U.S. wholesale orders and softer DTC trends, with the company lowering their outlook for the year. Its Q2 2023 update, CEO Tom Boyle noted, “During the quarter...the U.S. environment proved more challenging… Additionally, elevated inventory levels, particularly in footwear, have contributed to heavier clearance and promotional activity...Our inventory reduction plan is on track, and we are positioned to reduce year-end inventory by over $200 million, compared to last year...Based on year-to-date performance, and the trends we are seeing across the business [softer replenishments and reorders by U.S. retailers] we are taking a more conservative approach to planning the balance of the year...Columbia brand's spring selling season performance is down slightly compared to last year. After a stronger start to the season, driven in part by better inventory availability, sell-through trends slowed in the second quarter...I believe there are long-term opportunities to accelerate our DTC growth and improve efficiency and profitability. Under the leadership of our new SVP of North America DTC, David Lawner, we are actively identifying growth opportunities and operational improvements that can further elevate the Columbia brand.” (New leadership is also coming to SOREL and prAna."