Hunt or Be Hunted in the Outdoors…Industry

Yes, you read correctly. With more than three out of four Americans regularly participating in active outside recreation in 2013, the outdoor industry has become a $730B giant on the radar of active sectors. Wrought of specialty dealers and small-town shops, the sector seems to be maturing into a battleground for powerhouse players. With plenty of recent action pointing to a narrow future of competitors, many investors are left questioning which companies are poised to survive the bottleneck.

In order for a company to survive the imminent evaporation of market share unaccounted for, it is crucial to define the term “outdoor” so as to decide in what direction the company will barrel on. The broad title “outdoor” is inclusive of everything from jogging shoes and footballs to camouflage coolers and ammunition, but not all companies boasting sizeable wallets have expanded to such a diverse menagerie of products. Could this be a strategy to avoid alienating your clientele and clasping for a splintered branch amid the fall, or a blind spot in the foresight of a company destined to fall behind in a rapidly progressing race to total dominance? It could be that, much like a well allocated portfolio, the secret sauce is in diversification.

Dick’s Sporting Goods (DKS: NYSE $51.19) is a paragon of diversification of product offerings. With a market capitalization at $6.4B, it out-values its closest competitor, Cabela’s Inc. (CAB: NYSE $63.82), by almost 43%. While that gap may not be due to Cabela’s lack of affordable hockey sticks, there’s a strong argument to be made that Dick’s benefits from its varietal array of shelf material. Simply put, the more you can offer a customer in one location, the longer that customer will remain in your store and the more money they are likely to spend.

A veteran of the Wall Street world, Alliant Techsystems Inc. (ATK: NYSE $152.95), is another prime example of a company sticking its hands into as many jars as possible. After seeing its military defense contract division slump 13% YTD at mid-year 2013, it made a bold, if not aggressive, $1B acquisition of both Bushnell and Savage Arms in order to better penetrate the commercial space. With Primos and Hoppe’s in their arsenal of marketable brands, and products ranging from golf gear to performance eyewear, ATK plans to split into two individual companies; one with an emphasis on defense and aerospace, the other a sporting goods provider. Alliant President and CEO Mark W. DeYoung voiced anticipation to see profit from its recent purchase by Q2 2016.

Finally, how could this list be complete without Bass Pro Shop? Though superfluous in store size and racially prejudice by reputation, Bass Pro seems to have quite the stronghold on its loyal fan base. Surveys show that the average customer drives more than fifty miles to the nearest Bass Pro Shop and spends an astounding two hours per visit roaming the gargantuan store. Once again, the longer their feet are on your floor, the more likely they are to break out the credit card. This in mind, many of Bass Pro’s locations now feature full-service restaurants to ensure customers are equipped to spend the entire day traipsing up and down the abysmal aisles of the unapologetically oversized supercenter.

This is only a small sample of the innumerable outdoors competitors in the climb to reign as King of the Hill. With the intimidating buying power and solid, time-tested operational strategies implemented by these players, how is anyone to gain the competitive edge and win the game? Enter technology. Enter innovation. Enter a bright dawn of new marketing strategies and risky usurpation which time-tested strategies no longer apply to. Enter the buying power of the Millennial.



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