This issue of Sports News looks at large sporting goods companies, many of which have more in common with other large corporations than with sports start-ups. Often they are publicly held and must pay close attention to the demands of shareholders. Said John Egart, president and CEO of First Team Sports (maker of UltraWheels and Skate Attack brands of inline skates): "That's the problem with being a public company. You have to balance a lot of things and make sure the earnings are strong and at the same time you've got to take what's left in your margins after you give your shareholders their 7 or 8 percent and use that not only for your overhead but also for your product development and R&D. It's a tricky thing to do to make everybody happy." (1)
According to the trade publication Sporting Goods Business, the Merrill Lynch Sporting Goods Equipment Index (comprised of 21 sports equipment stocks) declined by 10% in 1996 (through December 9) compared to an increase in the S&P 500 (a benchmark consisting of the largest American publicly traded companies) of 22%. In 1995, the sports index had an increase of 28% compared to the S&P 500's 34%. Results for individual companies varied, with The North Face doing the best (a 54% increase in 1996). Only nine of the 21 companies (43%) had gains. Six of them (29%) beat the S&P 500. (2)
The sporting goods industry is not considered a growth industry. According to the Sporting Goods Manufacturers Association, overall sales of shoes, apparel, and equipment grew 5.7% in 1996. (3)
It is an industry governed by trends. New recreational activities appear on the scene and are hot for awhile only to falter a few years later. For example, snowboarding and inline skating company stocks did well in 1995 and suffered in 1996.
Sporting goods manufacturing is very closely linked to retailing. Companies which produce apparel and equipment must deal with a variety of outlets including discount chains, large sports retailers, and small specialty shops. Serving the needs of all of them can be challenging. Noted Egart, "It gets tougher every year. At the mass merchant level, the prices are getting tougher, the margins are getting squeezed and we can't afford to spend a whole lot on our SG&As [sales, general, and administrative expenses] to combine with lower margins which would hurt our bottom line." (4)
As sports corporations grow larger, often their top management is hired from the ranks of those who have demonstrated strong management, financial, or marketing skills rather than previous experience with the sports industry. Examples:
Rollerblade is owned by Benetton Sportsystem which also owns Prince (tennis and golf equipment), Nordica (ski boots and apparel), Kastle (skis and bicycles), Asolo (hiking boots), and Killer Loop (snowboard equipment). Benetton is a large Italian company best known for its clothing.
He graduated from Oregon State University (he also received a law degree from Seton Hall in 1972). He served in the Navy from 1960 to 1967 and then went to work for Johnson & Johnson in the information systems division of its Domestic Operating Company. He became an assistant product director in the health care division and then group product director.
In 1978 he went to work for Kimberly-Clark as president of its health-care, infant, and adult-care product operations (brands included Huggies disposable diapers and Depends for incontinent adults) and also served as a director of the company.
He returned to J & J in 1990, serving as chairman of its sanitary napkin business and then in 1992 became chairman of the company's consumer-products business (baby care, first aid, nonprescription drugs, and sanitary napkins). In 1993 he was also appointed to Compaq Computer's board of directors.
In 1995, at age 55, Larson became president and CEO and a director of Brunswick Corporation. At the time he took over, the company had 20,000 employees at 200 locations worldwide. Later that year he also became chairman of the board (only the second outsider in Brunswick's 150 year history to head the company). "My expertise ... is really in growing branded businesses. I think Brunswick has a collection of branded names with exceptional growth possibilities." (5)
He began an aggressive acquisitions plan, buying Roadmaster Industries's camping, cycling, sled and wagon divisions, and Igloo (a cooler maker). His goal is to sell more products to Brunswick's established customers.
In 1996 Larson earned $2,305,483 in cash and received $2,102,212 in options.
Women are slowly moving into top management positions at large sporting goods companies. In 1996 Maria Stefan, executive director of the Sporting Goods Manufacturers Association, estimated that there were approximately 100 women who held positions as vice president or above in SGMA's 2000 affiliated firms. (6)
Said Lisa Kantor (product manager of hard goods for Fila) talking about women in the industry, "We're at the ground floor now." (7)
Most are still being hired to head up the women's divisions. "Companies feel comfortable about having women work in the women's business, but less comfortable about having women work in their men's business. Getting over that would be a huge leap," said Liz Dolan, then vice president of marketing and communications for Nike, making her perhaps the most powerful woman in the industry. (8)
Noted Helen Rockey, president and CEO of Brooks Sports Inc. (an athletic-shoe company), "One of the biggest barriers to women in this [footwear] industry is not having the engineering or footwear building experience." (9)
Rockey graduated from the University of Washington with a degree in economics in 1978. She received her MBA in finance in 1980. She worked as a business analyst and production manager at Boise Cascade, concerning herself with sawmill and plywood production. Then she spent one year working as vice president of Big Toys Inc., a Tacoma company.
After that Rockey worked for Nike for 10 years, going from special sales manager of the apparel section to general manager of sport graphics and accessories. She was able to grow Nike's T-shirt business from $8 million to $120 million in less than two years. About her years at Nike she said, "It was a tremendous opportunity in terms of being given a number of assignments and a wide variety of tasks in a sink or swim environment. And what I found was that as long as you performed well or profitably, you were given more and more responsibility. So it was a great chance to get to know the industry, to get to know the business and have a wide variety of jobs, from sales and marketing to a general manager's strategic planning and profit managing experience." (10)
Brooks was purchased in 1993 by Resource Group International, a Norwegian company with North American headquarters in Seattle. Rockey said that a European company was more willing to hire her even though she was female. "There wasn't the resistance there would have been, had they been an American company." (11)
- In her career Rockey said she had run into discrimination but that the industry is opening up as competition increases. "Whoever can prove the ability to make money will be listened to." (12)
NOTE: I didn't use Nike as an example because the company has been covered so much and so well by others. But anyone interested in the sporting goods industry MUST look at Nike's history: from sports start-up to sports powerhouse. Here is a brief list of resources.
BOOKS
There have been several books written about Phil Knight and Nike, but these are the two which have been discussed the most; they are still available.
Just Do It: The Nike Spirit in the Corporate World. Donald Katz. Hardcover published in 1994 and paperback in 1995.
Swoosh: The Unauthorized Story of Nike and the Men Who Played There. Laurie Becklund and J. B. Strasser. Hardcover published in 1991 and paperback in 1993.
ARTICLES
Here are a few which should be fairly easy to track down:
"The Soul of a New Nike." Linda Himelstein with Peggy Salz-Trautman. Business Week, June 17, 1996.
"Can Nike Just Do It?" Dori Jones Yang and Michael Oneal with Charles Hoots and Robert Neff. Business Week, April 18, 1994.
"High-Performance Marketing; An Interview with Nike's Phil Knight." Geraldine E. Willigan. Harvard Business Review, July /August 1992.