Here's an article from the wall street journal discussing the weakening of sports related stocks due to the internet and other factors.
Heard on the Street
Last Year's Sports Companies
Aren't Impressing Kids Now
By SUSAN PULLIAM
Staff Reporter of THE WALL STREET JOURNAL
Have kids of sports age stashed their in-line skates
under their desks and logged on to the Internet for the
summer?
That's the conclusion that might be drawn from a peek
at sports stocks, which have been striking out lately.
The weakness ranges across shares of companies that
make athletic footwear or apparel, snowboarding
equipment, in-line skates and bicycles.
More and more teenagers in those low-slung baggy
pants, it seems, have jumped off their skateboards to
surf the Net. Stocks related to the Internet and other
more cerebral pursuits, such as shares of bookstore
chains, are zooming. Tuesday, for instance, Yahoo!,
which makes software for Internet searches, hit a new
52-week high, closing up 2 at 50 1/2 . Computer
makers Compaq and Dell and Internet-access provider
America Online all closed within a hairbreadth of their
highs. Barnes & Noble closed at 44 1/2, down 5/8 but
still within hailing distance of its high of 45 3/8 .
At the same time, signs are emerging that sports fads
such as in-line skating and snowboarding have peaked.
"There are only 24 hours in a day, and kids are really
into this Internet stuff," says money manager Elizabeth
Bramwell of Bramwell Capital. In recent months,
athletic-goods companies have played a steady
drumbeat of disappointing news. On Monday, <SPORTS
Authority (17 3/4) <---check into this company))stephen> became the most recent example when it
announced that second-quarter earnings would fall short
of expectations. Part of the problem, the sports retailer
said, was that ab-rollers, the popular abdomen-exercise
machines, aren't selling as briskly as they did last year.
In-line skates weren't great sellers in the second quarter
either, the company said.
That news came on the heels of disappointing
June-quarter results from Nike, for which the slowdown
in sales at its U.S. footwear group has been more rapid
than expected. Shares of other athletic-footwear
companies, including Fila and Converse, also have
declined, as more signs appear that the
athletic-footwear fashion trend may be fading.
Shares of bicycle maker Canondale have fallen from 27
1/4 to Tuesday's close of 19 3/8 as a result of worries
about slowing bicycle sales. Even last year's
snowboarding stock play Ride, which reached a high
last fall of nearly 14, has been skidding downhill ever
since. Tuesday, Ride closed at 3 1/16, down 1/8 .
"There is always a question of how much people are
exercising. Maybe people have just given up on the
exercise and weight-loss thing," says Smith Barney
footwear analyst Faye Landes, who rates Nike "neutral"
but has a "buy" on Converse.
Some say the perception of this year's ennui over
sporting goods is exaggerated by last year's Summer
Olympics, which sparked interest in sporting goods and
apparel. Others blame the weather, which for much of
the country was damp and cool this spring, perhaps
delaying some purchases. Certainly not all Internet
stocks are flying. And short-sellers, who bet on a
stock's decline, have long been circling the
mega-booksellers led by Barnes & Noble.
Still, even some corporate spokesmen admit to a
possible shift in leisure activities. "The fact that Internet
companies are doing well is a sign of the country's
fascination with the Internet. The stagnation in sports
stocks is cyclical and not necessarily related. But in the
long term, there may be a direct correlation," says Mike
May, a spokesman for the Sporting Goods
Manufacturers Association.
Mr. May says that while his organization may have seen
stagnating participation in bicycling, for instance, there's
been a pickup in interest in wilderness activities such as
camping and hiking.
Whether or not the Internet is to blame for the sporting
lull, some analysts and investors say Wall Street ought
to have known better. In the past, the sporting-goods
business was considered too volatile to deserve much of
a multiple on earnings. "So many of these stocks don't
have longevity. But Wall Street forgot that," says Smith
Barney's Ms. Landes.
Nike ushered in the higher multiples as it began turning
out consistently rising earnings growth in recent years.
The sentiment changed when Nike fell far short of Wall
Street estimates for its latest quarter. "These companies,
because of the nature of their business, can't manage
earnings in the same way," says Ms. Landes. But don't
assume that the nerding of America means higher SAT
scores all around. One of the most popular Internet
sites, after all, is run by Playboy Enterprises.
Mind Games
Stocks of computer makers, booksellers and Internet
plays are soaring, while makers of in-line skates and
bicycle helmets fizzle. Coincidence?
UP
% CHANGE*
Dell Computer
+558%
Compaq Computer
+206
Yahoo!
+182
America Online
+107
Barnes & Noble
+ 42
S&P 500
+47%
DOWN
% CHANGE*
Ride
-70%
Fila Holdings
-62
Jumbo Sports
-54
First Team Sports
-21
Sports Authority
-17
*Past 12 months
Source: Baseline |
