NY Times Apparel Sales Story 2005

 AS THE National Basketball Association playoffs hit their stride, a season marked by superstar slumps and fights between players and fans has dampened once-booming NBA apparel sales.

After years of strong sales pegged to the popularity of players like Kobe Bryant, retail sales of NBA licensed apparel -- including jerseys, T-shirts and jackets -- have taken a low double-digit drop in 2005 so far, according to the NBA. The league declined to provide the exact figure, but says it is an estimate of apparel sales through all channels and compares with a 30% sales jump in each of the past three years. Market research firm SportScan Info sees an even greater drop of about 33% in retail sales so far in 2005, compared with the similar period a year ago.

The drops reflect a season that has been more air ball than slam dunk in many respects. A year ago, the NBA had all the ingredients for an all-star season: the marquee appeal of the Los Angeles Lakers, who made it to last season's finals; and young stars LeBron James and Carmelo Anthony, whose shoe deals with Nike Inc., Beaverton, Ore., made them famous before play even began.

This season, however, the NBA has weathered a brawl between fans and players in Detroit that resulted in the season suspension of Indiana Pacers forward Ron Artest; the decline of the Lakers' performance; and a class of rookies with no clear standouts. Mr. James's team, the Cleveland Cavaliers, missed the playoffs, and Mr. Anthony's Denver Nuggets made a swift first-round exit. Mr. Anthony's image was also dinged by a drug bust that was later dropped and an incident in which he appeared in a gang DVD titled "Stop Snitching" that was distributed in Baltimore and other cities to intimidate witnesses testifying in trials. Mr. Anthony has said that he was unaware of the video's intent.

This year, "maybe the shine has worn off on LeBron and Carmelo a little bit," says SportScan director of marketing Neil Schwartz.

The league's apparel efforts also have other problems. Team jerseys, which make up a large part of licensed apparel sales, have lost some of their fashion appeal, says Sal LaRocca, NBA senior vice president of global merchandising. Sales often move up and down based on the cultural profile of NBA goods at any given time, he notes. "When we are a relevant component to what hip-hop musicians, movie stars, TV stars view as fashionable at the time, that triggers a marketplace reaction that really spikes our business forward," Mr. LaRocca says.

That's especially true with retro items like "throwback" jerseys -- remakes of classic uniforms from big stars of the past. When the spotlight shifts -- as when rapper Jay-Z released a song in November 2003 declaring: "And I don't wear jerseys/I'm 30-plus" -- NBA apparel sales eventually fall. "There's no low-hanging fruit now," Mr. LaRocca says. "You've got to be much more tactical and strategic." He points to categories like videogames and the league's international business, which he says will grow about 20% this year.

Reebok International Ltd., Canton, Mass., the league's main apparel licensee, says that it is now focusing its attention on a different consumer demographic -- sports fans who tend to be older rather than fashion followers. "These are fans who just have a deep-rooted passion for a team for a variety of reasons, whether it is because they went to the same college or university or whether they happened to have caught a game when they were growing up," says David Baxter, president of Reebok apparel, a division that includes all NBA gear. To promote merchandise in these markets, Reebok has taken some of its advertising dollars from national media and used it for in-store displays at retailers regionally to reach those fan-based targets.

Other retailers are altering their game plan in a similar fashion. After years of stocking jerseys from national stars, sporting goods retailer Sport Chalet Inc., La Canada, Calif., is focusing on carrying "local teams in local markets," says company Chief Executive Craig Levra. Sport Chalet has more than 35 stores, mostly in California and Nevada. The customer now is the "authentic fan," Mr. Levra says.

Reebok said it is optimistic about apparel sales, and retailers seem optimistic as well: Wholesale sales of Reebok's NBA apparel -- which have hit the stores for the playoffs -- grew by double digits in the first quarter, Ken Watchmaker, Reebok's CFO noted in a conference call with analysts last month. Mr. Baxter says he expects momentum to continue as the playoffs advance. (The playoffs hit the halfway mark this weekend.) Reebok doesn't break out sales of its NBA merchandise.

In August 2001, Reebok received a 10-year license from the NBA to supply the league's 30 teams with uniforms and to market the clothing and other items -- such as hats and head bands -- to consumers. Such deals can bring in royalty rates from 5% to 20%, with the highest rates for individual players' jerseys.

The NBA's Mr. LaRocca also points out that the success of lesser- known teams that are advancing, like the Miami Heat, will likely lead to a spike in sales in those local markets. Indeed, SportScan's Mr. Schwartz says that Heat merchandise outsold all other teams in the league for the two weeks ended May 15. The team's young guard, Dwyane Wade, had the best-selling jersey for the week ended May 15, according to Mr. Schwartz.

In Phoenix, where the NBA's Suns had their best season in recent memory, sales of NBA merchandise have doubled both for the season as well as the playoffs at the Phoenix Suns Team Shop, a stadium and regional chain in Phoenix. The Team Shop, which is independently owned, operates two mall stores, a flagship store at the America West stadium where the team plays and 10 kiosks at the arena. The Suns routed the Memphis Grizzlies in the first round of playoffs, compared with last season, when the Phoenix team didn't even make it to the postseason.

Jeremy Owen, vice president of merchandising at the Seattle Supersonics Shops, says season sales are up 69% during a surprisingly strong Sonics season, and playoff sales are even higher. Seattle eliminated the Sacramento Kings from the playoffs in five games and faced the San Antonio Spurs in the second round. "Kobe [Bryant] and LeBron [James] may not be playing in the playoffs but in Seattle they're crazy about basketball," Mr. Owen says.

Still, despite strong performances from many of last season's underdogs, both the NBA's Mr. LaRocca and SportScan's Mr. Schwartz say that NBA licensed apparel sales likely won't meet 2004's numbers. "The hole is way too deep," says Mr. Schwartz.