Active Outdoor Dynamics Shaping the Industry

Navigating rocky terrain: short-term hurdles, long-term summit views

Driven by changing consumer preferences during COVID-19, the active outdoor market saw a step change increase in consumer participation, representing a fundamental recalibration of lifestyle choices, with lasting implications for the industry. Participation rates and per-participant spending in many outdoor activities increased dramatically over this period with significant growth over pre-COVID-19 levels. As demand outstripped supply, brands were steadfastly focused on trying to maintain stock levels while battling elevated costs throughout their supply chains.

As the supply chain recovered and consumer demand preferences began to evolve, the market had to manage through elevated inventory levels in 2023, leading to significant discounting from brick-and-mortar and e-commerce retailers, or inventory being pushed back onto brands. In response, many companies tried to double down on finding ways to grow their e-commerce presence to avoid potential inventory challenges with retailers. Despite strategic initiatives to reduce the impact, many outdoor brands and retailers, including Columbia Sportswear, Nike, Solo Brands, Revelyst, VF (North Face) and REI are now experiencing significant revenue declines and cost cutting measures as they react to these market difficulties.

While many brands are facing these challenges, several differentiated outdoor product companies continue to take market share within their categories. These companies typically have a similar trait such as an insatiable consumer following (e.g., Yeti, Arc’teryx) or a technical differentiation that provides a competitive advantage over others in the pack (e.g., Gore-Tex, BOA).

While headwinds will persist for some subsectors within active outdoor in the near-term, the long-term view for the industry is positive, with many brands and retailers looking ahead to brighter days. The active outdoor industry will continue to push forward and while the path ahead may be full of switchbacks, the long-term summit views remain promising.

Innovation Fueling the Future of Sports Products

Winning streak: sports sector keeps outperforming the broader discretionary market

Representing a bright spot within the broader discretionary consumer product sector, many sports equipment product companies have continued to deliver impressive financial results, as the recurring nature of this subsector leads to more stable consumer spending trends year over year. These companies are taking advantage of the continued consumer spending on youth sports and the need for consistent innovation within the category. What was once thought of as a category soon to be impacted by generational shifts to video games rather than team sports, is now experiencing increasing average spend per athlete, pricing power and overall category revenue.

While the industry battled similar supply chain challenges as the active outdoor category, the path forward is far less rocky. Companies will be able to lean on their resilient consumer base and bring innovation to a category that consistently craves the “next best thing”. The desire of athletes to gain an edge over their competitors and parents’ willingness to spend money on their kids’ sports endeavors will remain constant symbols of stability for the category.

Future Prospects: 2024 M&A Outlook

Industry Trends

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