Feed the Beast

For some in America, September 1st signals the unofficial end of the summer season.  For others, particularly in athletics, it’s the beginning of another 12-month campaign for youth sports.

The days of one season leagues still exist, but only at the recreation level.  Sadly, though, many of these casual-athletic leagues seem to be dissolving by the week due to the rapid decline in participation rates.

According to The Washington Post, kids ages 6 through 12 playing youth sports has dropped almost eight percent over the last decade, according to data from SFIA and The Aspen Institute, and “children from low-income households are half as likely to play one day’s worth of team sports than children from households earning at least $100,000.”

The Aspen Institute also added, going back to 2008, participation is lower across several categories, including baseball, basketball, flag football, and soccer; and in some cases, by quite a lot.  For example, baseball is down about 20 percent.

But not all kids are hiding the soccer ball and opting for limited physical activity.  For wealthy families, youth sports participation is on an upward trend and doesn’t appear to be slowing down anytime soon.

As reported in The Atlantic, just 34 percent of children from families earning less than $25,000 played a team sport at least one day in 2017, versus 69 percent from homes earning more than $100,000.  In 2011, those numbers were roughly 42 percent and 66 percent, respectively.

“This isn’t a story about American childhood; it’s about American inequality,” said Derek Thompson, staff writer at The Atlantic.

The business of Youth Sports is a nearly $17 billion industry, which makes it larger than the business of professional baseball and approximately the same size as the NFL.  Despite the decline in participation rates, the bulk of the money is used for those athletes playing on elite travel teams, which includes purchasing high-quality gear, equipment and, sometimes, private clinics.

“Kids’ sports has seen an explosion of travel-team culture, where rich parents are writing a $3,000 check to get their kids on super teams from two counties, or two states, away,” said Tom Farrey, the executive director of Aspen’s Sports & Society program, to The Atlantic.  “When these kids move to the travel team, you pull bodies out of the local town’s recreation league, and it sends a message [to those] who didn’t get onto that track that they don’t really have a future in the sport.”

As The Atlantic pointed out: “The result is a classist system, the travel-team and the local leftovers.”  It’s also a trend that doesn’t appear to be leveling off any time soon.

Colleges are just as guilty of feeding the beast as those who create elite travel clubs.  Prospect camps costing hundreds of dollars to participate, including so-called private camps and clinics, place additional pressure on parents to pay the tab in hopes of getting their child maximum exposure to the Division-1 program of their choice.

The youth sports phenomenon isn’t just about fees and dues.  It’s also about the player owning the best, and usually most expensive, equipment and gear.  Since parents are already paying thousands of dollars for access to coaches and college evaluators, it doesn’t make sense for them to go on the cheap pertaining to the tools necessary for optimal productivity.

No store in America is better positioned to take advantage of this hysteria than Dick’s Sporting Goods (NYSE: DKS).  The retailer’s partner brands, Adidas and Nike to name a couple, provide exclusive merchandise to Dick’s, enabling parents to use the stores for one-stop shopping.

Shoes, sporting equipment, workout clothes, even water bottles can be purchased in one location; and the exclusives offered give a sense the parent won’t find a “better” item at a solo-dedicated Adidas or Nike store.

Dick’s reports its second quarter earnings on Thursday and the company is expecting Same-Store-Sales to rise 2 percent, versus a 3.1 percent decline last year.  The sudden SSS drop can be attributed to upset customers at the recently initiated corporate policy of banning the sale of certain firearms.  Also, according to The Motley Fool, “earnings are expected to grow to between $3.20 to $3.40 per share, up from the $3.15 to $3.35 per share it previously guided to”.

The Fool also made mention of the retailer opening seven new stores this year.  While the company refuses to provide quarter-over-quarter earnings guidance, its growth prospects lie within the expansion of the youth sports movement.  And as parents with large discretionary budgets continue to push their children onto uber-competitive teams, look for Dick’s Sporting Goods to be the biggest benefactor of them all.

By: Todd M. Schoenberger of Wellington & Co. Hedge Fund Research and Author of No Lie Lives Forever

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