Running the Numbers - 01/20/2025
Day 1 of the RTN journey is here; Who knew numbers and running could both be so fun :)
Well, here we are. The inaugural Running The Numbers blog post, and ironic that it's financially driven and on a day that the markets are closed.... Side note, I strongly encourage you to spend some time today honoring the work and sacrifices of Martin Luther King Jr.. The only way we grow as a society and culture is if we learn from our history and the greats that came before us. He was a GOAT and we can all learn a thing or two from how he lead, how he loved, and how passionate he was about human rights and equality.
Back to the digits.... A little primer before we dive into this issue. I've always had an itch to write. I've played around with and scratched it from time to time. Writing about mental health, personal growth, and most recently all things running. However, I still never felt like I found my niche. Until the lovely world of Substack somehow pointed the wonderful Ken Seals towards my 2025 Predictions writing. In there, I sort of complained about the lack of "finance" jobs in the running world. I should be a little more specific in that there are plenty out there, I just need to take some risks and pursue them if that's what I truly want. However, Ken was gracious enough to throw the idea out that I should consider writing about the intersection of finance and running. What a great freaking idea!! Not only that, but he even lent me the name 'Run the Numbers' which I will make sure to pay him royalties once I make it big and Warren Buffet decides to buy me out. I'm going with 'Running the Numbers'. I don't know why, it just seems a little bit more run-ish to me. When I searched "run the numbers", there were way to many accounting firms already using that name and that seemed icky to me. No one likes taxes and most CPAs don't even like being CPAs. Point made.
So with that, we are here! I'm not sure what this will look like or what it will turn in to. After some initial brainstorming, my plan is to start by mixing it up while going with the flow. Our industry isn't loaded with publicly traded companies, and the ones that are public tend to have similar earnings cycles. Meaning there's large gaps in time between when we might be able to dissect an earnings report so we need to be a little more free flowing. That said, I hope to talk about how macroeconomics are impacting the industry, the industry itself, dive into things like DTC versus Wholesale, or even look at the numbers behind things like events, training, or nutrition. I also plan to sprinkle in some stuff on the outdoor industry that isn't specifically running related. Lastly, I'll probably always stay true to my heart and include a brief piece on where my thoughts have been lately. Not that anyone wants to read that but that's what I enjoy writing about the most. Hopefully for you all that means I don't write about the odds of finding a porta potty on your run because that could messy real quick.
Macro - 2024 -> 2025
The elephant in the room is definitely the shifting in administration and what that might mean for things like inflation, tariffs, and taxes in the year(s) to come. I'm not going to go deep here this week and hopefully just point you in the direction of some good double clicks. Lets take a look at the headlines and see what the trends might be showing as we move out of 2024 and into 2025.
December Inflation is hot off the press and allows us to see how the entire year ended up shaping up. Overall inflation rose +2.9%, which is slightly up from the +2.7% in November. Of course we want to tie this to running and the main callout is that everyone is talking about eggs (up 37% from a year ago), which we all know is the breakfast of champions and podium performers. Apparel is really the only basket of goods to look at heavily related to running and those prices only increased +1.2% from last year, more inline with a healthy increase.
Tariffs are a big one and everyone has an opinion about which way this will go. My take is that it's way to early to know how this will exactly play out, but it will no doubt be a headwind to businesses and/or consumers in near-term. We'll make a point to go deeper here in the coming weeks.
Retail sales are positive and shine some light to weaker November data. The Sunday after Thanksgiving and Cyber Monday both fell in December this year, skewing the data to show larger growth in December and weaker in November. Seasonally adjusted, December saw retail sales (excl. autos and gas) up +7.2% from last year and Apparel and Accessories being the largest contributor, up +14.5% from a year ago.
Earnings Catch-Up: Lulu and Amer Sports
In the past 4-6 weeks we've had a slew of earnings releases and we'll use this newsletter to do a high-level nod to where some of the heavy hitters in running are tracking.
Lululemon released their Q3 (August - October) earnings on 12/05 and gave an early Christmas present to shareholders. With revenues +9%, comp (same store) sales +4%, and margins from gross margin down to EBIT margin all expanding, the stock almost immediately traded +10% after hours and is currently up nearly +14% from when it the market closed on 12/04.
Even more late breaking was an update to their Q4 guidance that came out on 01/13 ahead of the annual IRC conference (a premier consumer insights conference where a lot of investors and shareholders attend). Lulu raised their Q4 top-line guidance from a range between $3.48B and $3.51B to between $3.56B and $3.58B. CFO Meghan Frank cited "during the holiday season, our guests responded well to our product offering". They also re-guided gross margin to expand +30bps instead of deteriorating -20 to -30bps
Lulu has had a couple rocky quarters as it seems we're seeing the athleisure market start to soften while the likes of Vuori and others continue to grow and take share. Like mentioned, this earnings was viewed largely as a success by both the company and shareholders, I still find some cause for concern in their results. The main number for me is North America same-store sales being down -2% vs LY. Their +9% growth is largely driven by international growth at +33% and then obviously some new stores (+28 doors in the quarter) and distribution. North America is their biggest market (~75% of their business), comps are usually a strong indicator of where the consumer is shopping, and given Lulu's lack of wholesale business in North America I'm surprised this isn't a bigger concern.
And the main reason we're here....there has been no comment I can find anywhere on their progress in running. After what seemed to be a largely successful "FURTHER" event in March of 2024, there hasn't even been crickets from them on the running front.
Further (pun intended), Lulu also launched a "We Made Too Much" section on their website with tons of product heavily discounted. One item included is their Blissfeel 2 running shoe. And while yes, discounting is a natural part of franchise management and product lifecycles, I can't imagine they were manufacturing large units of their running styles during more of a "seed" phase, so seeing these discounted regularly could be another indicator of a dropped baton.
Amer Sports, owners of Salomon and Arc'teryx in the running world, also issued a preliminary revenue numbers ahead of the ICR conference that were positive. The company currently plans to land full-year revenue at the high-end of their previously released guidance, which was in the range of +16% to +17%. CFO Andrew Page also added, "looking forward, led by the continued global expansion of our flagship Arc'teryx brand as well as Salomon footwear, we are well positioned to deliver sustainable long-term growth and margin expansion."
While not technically a running brand, spring of last year marked the first venture of Arc'teryx bringing footwear product creation under their own banner and away from the Salomon partnership. The Arc'teryx Sylan is viewed by many as one of the more pinnacle mountain running shoes, which makes sense given the prestige the brand has already garnered. This will be a fun brand to watch on the trails as rumors swirl that they are looking to build out their athlete roster within their trail running portfolio.
While Hoka and On are usually viewed as the fastest growing brands, New Balance says "hold my singlet". New Balance is the largest privately owned footwear companies, meaning we can't dive too deep. However, this past week they gave a sneak peak to how their 2024 wrapped up and it was beyond impressive. Sales for the year landed at $7.8B, up +20% from last year! On a $6.5B 2023 base, that is extremely impressive when we see other companies of similar size striving to grow even in the single digits.
New Balance is honestly my number one brand to invest in if you could. From performance to lifestyle, they are absolutely obliterating the competition. Investing in the sport and their presence seems to be on par with an aggressive approach to reach $10B sooner than later and they continue taking market share with the recent signings of Parker Valby and Graham Blanks and continued dedication to the most popular running event on the planet, the New York City Marathon.
Interesting Reads of the Week
The Health and Fitness Association (HFA) released the results of a nationwide survey on fitness goals and New Year's resolutions. While the finding are pretty fascinating, what I found most interesting was the coinciding report that HFA released, Reversing the Physical Inactivity Crisis - Fitness Affordability as a Strategic Policy". I've always had opinions about an optimal government support structure with things like daycare, but I hadn't put much thought to the same thing with gym memberships. The study points out how gym members are healthier, cheaper memberships enable 17 million more Americans to participate in gym going, and it could throw some massive stimulus into the economy. Take a peek.
I'd never thought about a company like Brooks having literally no lifestyle presence in the market today, but I'm also the least fashionable person that works at footwear or apparel company, so that checks out. However, this is about to change. No, not my fashion sense, but Brooks digging into the archives to release a retro lifestyle shoe. I found it interesting how the company is taking a "30-50 year strategy" perspective as they invest in expansion and reaching new consumers. Most companies talk the talk about planning long term but almost everyone walks straight into the expectations of shareholders and the next quarterly earnings release. We'll see if they can keep pace with this one or if they blow up like your friend Joey running his first marathon on a 20 mile per week training plan. The one point I'm not so sure on is that retro running has been hot for a couple of years now. Will this fad begin to turn soon or will it continue in lockstep with overall running as the boom continues?
Speaking of lifestyle and retro running, StockX released their 2024 fastest growing brands and there were some pretty heavy hitters from the running world that cracked the top 10. This article focuses specifically on Anta and Suacony, but Asics also cracked the top 5 and the top 5 overall best-selling brands were Nike, Jordan, Adidas, New Balance, and Asics. Maybe a deep dive in the future for a brands ability to compete in lifestyle being driven by their presence in performance...?
So with that, we wrap up the first addition of RTN. There was a lot to fit in since this was the first one and I wanted to capture way too much, but this is a start and a regular cadence will allow us to dive a little deeper into the numbers in subsequent additions. Let me know your thoughts or how I can better tailor to the interests of the running industry nerds out there.
Much Love.
Derrick
Wow, what a first issue! This is filling a clear gap, and I’m stoked to follow along. Honored to have played a small part in getting the ball rolling here ✌🏼