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WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 1
IBISWorld Industry Report 31621 Shoe & Footwear Manufacturing in the US May 2019 Devin Savaskan
Best foot forward: A protective tariff will alleviate external competitive pressures
2 About this Industry 2 Industry Definition
2 Main Activities
2 Similar Industries
3 Additional Resources
4 Industry at a Glance
5 Industry Performance 5 Executive Summary
5 Key External Drivers
7 Current Performance
10 Industry Outlook
12 Industry Life Cycle
14 Products and Markets 14 Supply Chain
14 Products and Services
15 Demand Determinants
16 Major Markets
18 International Trade
20 Business Locations
22 Competitive Landscape 22 Market Share Concentration
22 Key Success Factors
22 Cost Structure Benchmarks
24 Basis of Competition
25 Barriers to Entry
26 Industry Globalization
27 Major Companies 27 New Balance Athletics Inc.
28 Red Wing Shoes
29 Allen Edmonds Shoe Corp.
30 Timberland LLC
32 Operating Conditions 32 Capital Intensity
33 Technology and Systems
33 Revenue Volatility
34 Regulation and Policy
35 Industry Assistance
36 Key Statistics 36 Industry Data
36 Annual Change
36 Key Ratios
37 Industry Financial Ratios
38 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | [email protected]
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 2
This industry manufactures footwear for men, women and children. They may manufacture rubber and plastic footwear, protective footwear, house slippers and slipper socks. Operators also manufacture
men’s or women’s footwear designed for casual, formal and work environments. These products also include men’s or women’s shoes with rubber or plastic soles and leather or vinyl uppers.
The primary activities of this industry are
Rubber and plastic footwear manufacturing
House slipper manufacturing
Athletic shoes manufacturing
Ballet slipper manufacturing
Cleated athletic shoes manufacturing
31310 Textile Mills in the US Industry operators manufacture yarn, thread and hemp yarn for the production of ropes and bags.
31522 Men’s & Boys’ Apparel Manufacturing in the US Operators in this industry manufacture men’s and boys’ apparel.
31524 Women’s, Girls’ and Infants’ Apparel Manufacturing in the US Companies in this industry manufacture women’s and girls’ apparel.
31691 Leather Good & Luggage Manufacturing in the US Industry operators manufacture leather goods including leather bags, suitcases, wallets and belts.
33911a Medical Instrument & Supply Manufacturing in the US Companies in this industry manufacture orthopedic extension footwear.
Industry Definition
Main Activities
Similar Industries
About this Industry
The major products and services in this industry are
Men’s footwear (except athletic)
Rubber and plastic footwear including athletic footwear
Women’s footwear (except athletic)
Other footwear
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 3
About this Industry
IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com
Additional Resources For additional information on this industry www.wewear.org American Apparel and Footwear Association
www.mfgnewsweb.com Manufacturing News
www.textilesocietyofamerica.org Textile Society of America
www.textileworld.com Textile World
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 4
%
32
28
29
30
31
2410 12 14 16 18 20 22Year
Import penetration into the manufacturing sector
SOURCE: WWW.IBISWORLD.COM
% c
ha ng
e
12
-12
-6
0
6
2511 13 15 17 19 21 23Year
Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2019)
50.0% Men's footwear (except athletic)
26.3% Rubber and plastic footwear including athletic footwear
20.5% Women's footwear
(except athletic)
3.2% Other footwear
Key Statistics Snapshot
Industry at a Glance Shoe & Footwear Manufacturing in 2019
Industry Structure Life Cycle Stage Decline Revenue Volatility Low
Capital Intensity Low
Industry Assistance High
Concentration Level Medium
Regulation Level Medium
Technology Change Low
Barriers to Entry Medium
Industry Globalization High
Competition Level High
Revenue
$2.0bn Profit
$105.4m Exports
$632.2m Businesses
921
Annual Growth 19–24
0.4% Annual Growth 14–19
0.1%
Key External Drivers Import penetration into the manufacturing sector Trade-weighted index Per capita disposable income Demand from footwear wholesaling
Market Share New Balance Athletics Inc. 24.3%
Red Wing Shoes 11.7%
Allen Edmonds Shoe Corp. 5.0%
p. 27
p. 5
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 36
SOURCE: WWW.IBISWORLD.COM
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Key External Drivers Import penetration into the manufacturing sector Imports satisfy a dominant portion of domestic demand for footwear. Since manufacturing in this industry is highly labor intensive, domestic operators source many of their products from low-cost suppliers in foreign countries. Import penetration into the
manufacturing sector is expected to decrease slightly in 2019.
Trade-weighted index Movements in exchange rates have a significant impact on the industry’s global competitiveness. An appreciation of the US dollar makes imported footwear less costly and, thus, more price
Executive Summary The Shoe and Footwear Manufacturing industry has only experienced marginal growth over the five years to 2019, with revenue expected to rise at an annualized rate of 0.1% to $2.0 billion. Despite improving downstream demand conditions, the industry has been limited due to increasingly high import penetration and falling exports, both of which have been influenced by the appreciation of the US dollar. This is represented by an increase in the trade- weighted index (TWI), which is expected to rise an annualized 2.3% during the current period. However, a recent
depreciation of the US dollar has led to a surge in total exports in both 2018 and 2019. This trend, along with increased consumer spending, has caused revenue to grow 1.0% in 2019 alone.
Imports have maintained dominance of domestic demand over the past five years, comprising 95.4% in 2019. The majority of imported footwear is manufactured in developing countries, where labor costs are significantly lower compared with the United States. Foreign operators are able to leverage lower production costs to price their goods more competitively. In response,
domestic footwear companies have continued to offshore production, effectively decreasing employment. Meanwhile, fledgling industry operators have specialized in the production of premium footwear products, opting to compete on the basis of quality rather than price. These wage-shedding measurements, coupled with a decline in the input prices, have boosted profitability during the period.
Over the five years to 2024, two potential developments could positively affect industry revenue. The first is a potential tariff hike on footwear imported to the United States. By reducing import penetration into the domestic market, a protective tariff would alleviate external competitive pressures experienced by industry operators. The second is the potential effects of the implementation of the Berry Amendment to include domestically manufactured footwear, which would directly expand the industry’s consumer base, stimulating revenue growth. Overall, industry revenue is forecast to rise an annualized 0.4% to $2.1 billion over the five years to 2024. Footwear imports are anticipated to contract, while industry exports are projected to increase. The closing of the trade gap is forecast to be the result of a declining TWI, which is expected to fall an annualized 0.2% during the outlook period. Furthermore, a depreciating US dollar will likely support revenue growth.
Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
The majority of imported footwear is manufactured in developing countries, where labor costs are significantly lower
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Industry Performance
Key External Drivers continued
competitive. Conversely, when the dollar depreciates, domestic products become more attractive on the international market. The trade-weighted index is expected to decrease in 2019; however, its general volatility presents an ongoing threat to the industry.
Per capita disposable income Disposable income plays a major role in the spending decisions of individuals and households. If disposable income is low, consumers will buy far fewer discretionary items. A decrease in disposable income also causes consumers to prefer less-costly
imports to domestically manufactured footwear, which are usually more expensive. Per capita disposable income is expected to increase in 2019, representing a potential opportunity for the industry.
Demand from footwear wholesaling The industry is affected by downstream demand from footwear wholesalers. In times of high footwear consumption, wholesalers demand more shoes from manufacturers to sell to retailers, driving industry sales growth. Demand from footwear wholesaling is expected to rise in 2019.
In de
x 95
70
75
80
85
90
2410 12 14 16 18 20 22Year
Trade-weighted index
SOURCE: WWW.IBISWORLD.COM
%
32
28
29
30
31
2410 12 14 16 18 20 22Year
Import penetration into the manufacturing sector
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 7
Industry Performance
Current Performance
The Shoe and Footwear Manufacturing industry designs footwear for men, women and children. Styles range from footwear for casual, formal and work environments, and products are crafted from various materials such as rubber and plastic. Over the five years to 2019, operators have continued the historic practice of offshoring production activity to developing countries, such as China, Vietnam and Indonesia, to reduce labor costs and offer more competitively priced footwear. Consequently, imports are expected to account for an estimated 95.4% of domestic demand in 2019. This sustained operational restructuring has proved to be highly determinantal to the industry.
While improved economic conditions, such as falling unemployment, rising per capita disposable income and growing consumer confidence, have undoubtedly spurred demand for industry products over the past five years, both the sustained dominant import competition and falling exports have limited revenue growth. The trade-weighted index (TWI), which measures the strength of the US dollar relative to the currencies of its major trading partners, is expected to grow at an annualized rate of 2.3% during the current period. An appreciating US dollar has boosted import penetration by making foreign goods more affordable for
domestic consumers, further strengthening the competitiveness of footwear manufactured abroad. Additionally, an appreciating US dollar has caused industry exports to contract by making domestically produced footwear more expensive for foreign consumers, leading them to turn to footwear produced elsewhere. Consequently, industry revenue is anticipated to increase only marginally, rising at an annualized rate of 0.1% to $2.0 billion over the five years to 2019. This includes an estimated 1.0% increase in 2019 alone, largely due in part to a more recent uptick in export values, which are expected to grow 12.6% over the same year.
% c
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12
-12
-6
0
6
2511 13 15 17 19 21 23Year
Industry revenue
SOURCE: WWW.IBISWORLD.COM
Import penetration The economic advantages of outsourcing production to developing countries with low labor costs have been embraced by the industry for more than a decade. By 2014, foreign-made goods accounted for over 95.0% of domestic demand. As aggregate import revenue is expected to rise at an annualized rate of 0.8% to $28.7 billion over the five years to 2019, footwear imports’ share of domestic demand is anticipated to remain stable at 95.4% in 2019. This trend indicates that
foreign-sourced shoes are relatively less expensive than domestically produced industry footwear in the US market, making them preferable to US consumers. The relatively inexpensive price of footwear manufactured abroad explains the increase in total import revenue, as domestic consumers have consistently opted for less expensive, foreign-produced footwear.
China remains the largest exporter of footwear to the United States, accounting
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Industry Performance
Import penetration continued
for an estimated 54.4% of total imports in 2019. In addition, countries in East Asia have emerged as major hubs for US footwear manufacturers. For example, imports from Vietnam are expected to account for 24.1% of total industry imports in 2019, up from 13.9% in 2014, making it the second-largest exporter of footwear to the United States. Imports from Indonesia also represent a growing force, increasing from 4.8% of imports in 2014 to 6.5% in 2019. These Asian countries are vital import sources due to their relative comparative advantage in various manufacturing factors. These countries can typically source footwear using relatively less expensive labor and materials, while also offering inexpensive suppliers for domestic markets. Conversely, Italy is known for its production of high-end formal footwear, using fine leathers and craftmanship in its production process. Italy is expected to account for 4.9% of industry imports in 2019.
Increased outsourcing has restructured the industry, leading remaining operators to focus on high value-added activities, such as designing, marketing and distributing shoes. For example, Nike Inc. (Nike) outsources nearly all of its production, opting to use its domestic capacity for design and retail functions.
However, over the past five years, consumer preference of domestically manufactured shoes has resurfaced in line with expanding per capita disposable income. As a result, certain industry operators, such as New Balance Athletics Inc., have experienced strong sales growth during the current period. Furthermore, enterprises such as Red Wing Shoes, which specializes in work-function footwear, have experienced rising sales due to decreasing unemployment. This phenomenon has encouraged many nonemployers that produce handcrafted and other specialized shoes for niche markets to join the industry. Additionally, some major global players, such as Nike and Adidas AG, have recently opened US-based manufacturing facilities as a means of streamlining its supply chains. Nonetheless, intense price-based competition stemming from footwear import penetration has hindered revenue growth and constrained profit margins. In line with generally increasing competition and fluctuating demand for domestic manufacturers in recent years, industry establishments are expected to grow slightly, rising at an annualized rate of 0.3% to 932 locations over the five years to 2019.
Industry profitability and structure
Industry profit, measured as earnings before interest and taxes, has increased from 4.7% of revenue in 2014 to an estimated 5.2% in 2019. Strong import dominance of domestic demand has limited margin growth as companies that outsource manufacturing benefit from lower overall input costs due to inexpensive foreign labor. Since imports are generally priced lower than domestically manufactured goods, domestic operators have to decide whether to lower their selling price to
compete with foreign goods or keep prices higher to salvage profit. During the current period, strong macroeconomic conditions, such as increasing levels of disposable income, have encouraged the later strategy, since consumers have been
Strong import dominance of domestic demand has limited margin growth
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Industry Performance
Bad news for exports Unfortunately for operators, demand for industry products on the global market has declined over the past five years. Although domestically produced shoes are traditionally held in high esteem throughout the world, the appreciation of the US dollar has caused industry products to become less affordable abroad, forcing foreign consumers to look elsewhere for their footwear needs. The increased relative cost of US-produced footwear has exacerbated the struggles of the industry. Over the five years to 2019, the total value of exports is expected to decline at an annualized rate of 0.7% to reach $632.2 million.
Of the industry’s export destinations, Canada accounts for the largest portion of export values, primarily due to the North America Free Trade Agreement
reducing trade barriers between Canada and the United States. Consequently, exports to Canada have increased from 21.4% of total industry exports in 2014 to an estimated 26.0% in 2019. In addition, China has emerged as a significant consumer of industry goods, as expanding per capita disposable income in China has driven increased industry exports to the country. Exports to China are anticipated to grow from 2.4% of total industry exports in 2014 to an estimated 18.5% in 2019.
Industry profitability and structure continued
more willing to spend on footwear. This in part has helped prop up profit margins, despite inconsistent demand. Furthermore, strong economic conditions have encouraged niche producers to enter the industry, with these companies generally averaging higher margins. Additionally, declines in the prices of major industry inputs during the period, such as world rubber and leather prices, have led to further decreases in purchase costs for industry operators; this has placed upward pressure on profit margins.
Such a shift has enabled industry operators to compete on the basis of quality rather than price. However, the
shift toward premium footwear production has not done enough to offset the negative effects of outsourcing on industry employment. Industry employment has contended with intense pressure from outsourcing, as borderline stagnant revenue has driven industry players to continue to transfer manufacturing operations from the United States to countries with lower labor costs. Due to the labor-intensive nature of shoe manufacturing, labor remains a significant cost component for the industry. Overall, IBISWorld anticipates industry employment to decrease at an annualized rate of 1.2% to 10,644 workers over the five years to 2019.
The appreciation of the US dollar has caused industry products to become less affordable abroad
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 10
Industry Performance
Potential effects of increased protectionism
In early 2017, the United States formally withdrew from the Trans-Pacific Partnership (TPP). If ratified by the United States, the agreement would have adversely affected the industry. Relevant to this industry were the TPP’s proposed tariff reductions and the elimination of other trade barriers imposed on goods from Vietnam. If the agreement had been ratified, it could have placed domestic manufacturers under considerable stress and encouraged significant import penetration.
A potential future import tariff would benefit the industry by effectively reducing the price competitiveness of imported footwear in the domestic market, ultimately causing a decrease in imports’ share of domestic demand. Reduced external competition would present a significant opportunity for industry operators to grow their share of the domestic market, while also boosting profit margins. However, the Shoe and Footwear Manufacturing industry is currently not expected to be affected by recently announced US tariffs.
Furthermore, IBISWorld expects the high prevalence of imports within the US shoe market to persist over next five
years. Domestic producers will likely struggle to compete against low-cost imports and are expected to increasingly offshore production or carve out niche segments, such as work-specific or premium high-end footwear. Decreased downstream demand from wholesalers and retailers will likely pressure manufacturers to provide low-cost footwear, further motivating the move to less-expensive production locations. However, IBISWorld forecasts that imports will decline at an annualized rate of 0.5% to $28.0 billion during the outlook period, largely driven by an anticipated depreciation of the US dollar. A depreciating dollar makes imported footwear less affordable and, therefore, less attractive to domestic consumers. In addition, the narrowing of the trade gap is expected to benefit the industry over the next five years. Despite this forecast
Industry Outlook
Over the five years to 2024, the Shoe and Footwear Manufacturing industry is projected to experience tepid revenue growth. During the outlook period, industry revenue is forecast to rise at an annualized rate of 0.4% to $2.1 billion. This slight acceleration is primarily attributable to an anticipated depreciation of the US dollar; over the next five years, the trade- weighted index is expected to decrease at an annualized rate of 0.2%. Consequently, industry exports are expected to rise at an annualized rate of 1.2% to $670.3 million over the five years to 2024. Furthermore, exports’ share of industry revenue is projected to increase as well, comprising 32.4% of revenue in 2024.
While favorable trade and economic conditions may help the industry stabilize during the outlook period, outsourcing of production to low-cost countries is forecast to continue to adversely affect industry revenue as domestic manufacturers struggle to compete with their overseas counterparts. Producers will likely seek out new sources of low-cost labor in untapped overseas locations, such as the Philippines, Thailand and the Dominican Republic. Over the next five years, industry revenue may further benefit from increased protectionism and the implementation of the Berry Amendment to the industry.
Domestic producers will likely struggle to compete against low-cost imports
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Industry Performance
Potential effects of increased protectionism continued
contraction, imports are expected to retain a dominant share of the domestic demand, satisfying more than 95.0% in 2024.
Anticipated revenue increases could bode well for market entrance moving forward. Meanwhile, companies that operate in a niche space in the industry, or those anticipating increased protectionism, will likely remain operational. Therefore, IBISWorld
forecasts the number of establishments to largely remain stable, growing at an annualized rate of 0.3% to 944 locations over the five years to 2024. Additionally, marginal export growth, coupled with sustained import dominance, will likely stabilize industry employment. As a result, industry employment is projected to stagnate over the next five years, rising at an annualized rate of less than 0.1% to 10,659 workers.
Potential effects of the Berry Amendment
Over the past few years, lobbying has increased pressure on the US government to implement the Berry Amendment to the Shoe and Footwear Manufacturing industry. While the application of the Berry Amendment was approved in principle in 2013, full rollout from the Pentagon is still forthcoming. If this implementation is successfully carried out, the Department of Defense will be mandated to procure 100.0% domestically manufactured shoes and footwear, meaning that any current exceptions by the US military will end. According to a 2017 study by the The Wall Street Journal, the military spends between $65.00 and $70.00 on footwear per soldier annually. If all military footwear is sourced from domestic manufacturers, the study estimates that it could boost industry revenue by $147.0 million, representing a 7.3% increase from its current value. In support of this legislation, industry players such as New Balance Athletics Inc. (New Balance) have confirmed that they can produce footwear for the military in that price range. In March 2018, New Balance was awarded the first contract of the Berry
Amendments implementation. The contract, worth $17.3 million, is for 18 months and will be used to provide athletic footwear to new military recruits.
Upstream industries, such as those that produce soles for athletic footwear, are also gearing up for the implementation of the Berry Amendment. Furthermore, industry operators have also started upgrading their manufacturing infrastructure in the United States in anticipation of increased demand from the military. Some of the challenges that operators may experience are related to producing footwear compliant with the Berry Amendment, all of which need to be manufactured in the United States with raw materials procured from US businesses at a cost the military is willing to pay. Efforts are already underway in this regard, and this could benefit the industry in the years to come.
Operators started upgrading their manufacturing infrastructure
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Industry Performance The industry’s contribution to US GDP is projected to shrink over the 10 years to 2024
The number of domestic footwear manufacturers is anticipated to rise marginally over the 10 years to 2024
The industry experiences a high level of internal and external competition
Life Cycle Stage
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Industry Performance
Industry Life Cycle The Shoe and Footwear Manufacturing industry is in decline, most notably defined by its diminishing contribution to the domestic economy (measured through industry value added). Over the 10 years to 2024, IBISWorld forecasts that industry value added (IVA) will contract at an annualized rate of 0.1%. Meanwhile, US gross domestic product (GDP) is anticipated to grow at an annualized rate of 2.2%. Declining IVA, indicative of a declining industry, is the result of strong price competition from low-cost importers. Many companies, unable to sustain profit margins have opted to offshore manufacturing operations to low-wage countries, perpetuating the industry’s decline.
Additionally, the domestic market for “Made in America” shoes is saturated. Downstream shoe wholesalers and retailers choose to source their inputs from importers rather than local companies to cut costs. On the international front, the industry outlook is also bleak. Over the 10 years to 2024, industry exports are anticipated to increase at an annualized rate of 0.2%, as an overall strong dollar has reduced export competitiveness during the period.
While product innovation in shoes comes about each season, domestic
manufacturers do not always reap the benefits. Offshore factories can make the same styles at much lower costs, making the foreign product much more attractive to US retailers. Although imports are anticipated to only increase at annualized rate of 0.8% over the 10 years to 2024, they are still expected to satisfy the clear majority of domestic demand for footwear, maintaining substantial limitations on industry growth. Imports are expected to satisfy 95.2% of domestic demand in 2024.
However, the number of footwear manufacturing establishments is expected to rise during the 10-year period from 919 establishments in 2014 to 944 establishments by 2024, representing an annualized increase of 0.3%. Leading global footwear manufacturing companies, such as Nike Inc. and Adidas AG, have recently transferred some of their manufacturing operations from low-wage countries, the majority of which are in Asia, to the United States, to achieve streamlined supply chains. Furthermore, the success of specialized domestic manufacturers, that satisfy a niche market consumer base, has also spurred this marginal growth. Nevertheless, this development is not anticipated to be enough to generate growth within the industry.
This industry is in Decline
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Products and Services
Men’s shoes Men’s footwear (excluding athletic shoes) makes up the largest segment, with an estimated 50.0% of revenue for the Shoe
and Footwear Manufacturing industry in 2019. This segment’s decline over the period has been slow, relative to other product segments. Slower changes in the style of
Products & Markets Supply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
42434 Footwear Wholesaling in the US Manufacturers provide wholesalers with various footwear items that are sold on to retailers.
44821 Shoe Stores in the US Manufacturers sell footwear directly to retailers.
45111 Sporting Goods Stores in the US Athletic footwear items are sold to sporting goods stores.
45211 Department Stores in the US Footwear manufacturers often directly supply footwear to department stores.
45291 Warehouse Clubs & Supercenters in the US Warehouse clubs generally sell shoes to small businesses and consumers. However, usually an annual membership fee is charged and products are generally sold in bulk.
KEY SELLING INDUSTRIES
31611 Leather Tanning & Finishing in the US Leather and finished leather can be key inputs for shoe manufacturing.
32221 Cardboard Box & Container Manufacturing in the US Industry operators use cardboard boxes and other containers for packaging products.
32522 Synthetic Fiber Manufacturing in the US Synthetic fibers such as nylon are used for manufacturing shoelaces.
32619 Plastic Products Miscellaneous Manufacturing in the US Plastic can be a key material input for shoe manufacturing.
32629 Rubber Product Manufacturing in the US Rubber can be a key input in shoe manufacturing.
Supply Chain
Products and services segmentation (2019)
Total $2.0bn
50.0% Men's footwear (except athletic)
26.3% Rubber and plastic footwear including athletic footwear
20.5% Women's footwear
(except athletic)
3.2% Other
footwear
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
Demand Determinants
The premium paid for US-made footwear relative to imported footwear largely determines demand for industry products. As low-cost imports increasingly penetrate the US market, downstream buyers are more likely to purchase imported shoes over domestically made shoes. Likewise, as
the value of the US dollar increases, wholesalers and retailers can more easily stock imports due to its relative low price compared with their domestically made counterparts. The dollar has appreciated over the past five years, making imported shoes less expensive relative to domestically made footwear. This trend
Products and Services continued
men’s shoes enable existing machinery, equipment and inputs to be used each year. Such a characteristic distinguishes this product segment from others, such as women’s shoes, which regularly change in style, potentially opening new doors for foreign footwear manufacturers to start expanding operations.
Rubber and plastic shoes including athletic footwear Rubber and plastic footwear, the industry’s second-largest product segment, is anticipated to account for 26.3% of industry revenue in 2019. These products have vulcanized, molded or cemented soles and fabric uppers. The category includes children’s, women’s and men’s shoes, and typically includes rubber boots, canvas shoes, rubber sandals and galoshes. This segment’s growth over the five years to 2019 has been aided by a decrease in the world price of rubber between 2014 and 2016, which enabled manufacturers of these products to lower selling prices. However, IBISWorld expects rising import competition and rebounding rubber prices to limit this products segment growth during much of the five-year period to 2024.
Women’s shoes Women’s shoes (excluding athletic shoes) are anticipated to account for 20.5% of industry revenue in 2019, making it the third-largest product segment. Its share of revenue has increased over the five- year period, as domestic manufacturers
of women’s footwear have increasingly specialized its product offerings to serve high-quality niche consumer markets. Nonetheless, the penetration of imported women’s footwear into the domestic market poses a significant competitive threat to the performance of this product segment. Shoe manufacturers in Italy provide a significant share of premium import substitutes, while most competitively priced women’s footwear imports come from developing countries, such as China and Vietnam. Over the five years to 2024, IBISWorld expects this segment to remain relatively constant.
Other footwear The remaining segment is expected to account for 3.2% of industry revenue in 2019. Footwear included in this segment includes specialized athletic shoes, protective coverings, work boots, water shoes and house slippers. This segment has declined over the past five years as major operators have moved their manufacturing facilities to low-cost producing countries. Industry operator Nike, for example, states in its latest annual report that 97.0% of its footwear is produced in offshore third-party factories. However, this segment may grow considerably as a share of industry revenue. The application of the Berry Amendment to the industry sometime over the five years to 2024, this segment may grow considerably as a share of industry revenue.
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Products & Markets
Major Markets Footwear retailers Footwear retailers have increasingly begun operating their own distribution facilities. These manufacturers supply footwear directly to stores to avoid unnecessary costs incurred through wholesaling. Vertically integrated companies, such as major industry player New Balance Athletics Inc., take advantage of their supply chain power. The largest market segment is also an increasing one and is expected to account for an estimated 43.5% of revenue for the Shoe and Footwear Manufacturing industry in 2019.
Footwear wholesalers The second-largest market segment for footwear manufacturers is still the
wholesaler market, which is estimated to account for 21.2% of industry revenue in 2019. Manufacturers distribute footwear items directly to wholesalers that market the goods to specialty retailers, mass merchandisers and department stores. Wholesalers’ share of revenue is anticipated to remain relatively stable over the next five years.
Exports Exports are anticipated to account for 31.2% of industry revenue in 2019. Industry exports are anticipated to contract at an annualized rate of 0.7% over the five years to 2019. Falling exports have been strongly influenced by the appreciation of the US dollar over the past five years, which has made industry
Demand Determinants continued
has decreased demand for lower-margin industry products. Conversely, price also plays a less measurable role in quality perception. Several product lines benefit from the high price premium paid for domestically produced footwear, as it is believed to signal a difference in quality.
Another major factor affecting demand for products from the Shoe and Footwear Manufacturing industry is the level of real household disposable income. This determines the quantity, quality and frequency of footwear purchases. As the level of real household disposable income increases, it can potentially prompt greater demand for industry products. Concurrently, as real household disposable income declines, so does the frequency at which consumers purchase discretionary items such as footwear. Furthermore, higher discretionary income influences consumers to purchase more domestically made products sold at premium prices.
Brand recognition also plays an important role. Established products such as Nike and Adidas can limit the
effect of new footwear styles on the market as they hold such a large portion of the market. As a means of maintaining market concentration large companies have increased their spending on advertising. This is attributed to the rising importance of branding. Generally, the larger the manufacturer, the greater the ability to create a strong and popular brand. Brand recognition and popularity can change along with fashion trends. Fashion trends affect design trends and ultimately lead to demand sensitivities for certain footwear styles. For example, the popularity of sporting activities affects sales in athletic footwear.
Seasonal factors like weather conditions affect sales. For example, during the cold winter months, sales of sandals will decrease and sales of boots will increase. A change in population demographics is also a demand factor. For example, changes in birth rates affect sales of juvenile footwear. A rise in couples with high disposable incomes has caused increased spending on luxury children’s footwear over the past five years.
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Products & Markets
Major Markets continued
goods less affordable to foreign consumers. Over the next five years, industry exports are anticipated to increase at an annualized rate of 1.2%, as the US dollar is projected to depreciate. Major export destinations include Canada, Hong Kong, China and Japan. For more information of international trade, please refer to the International Trade section of this report.
Manufacturers’ sales outlets Some footwear manufacturers also have their own sales outlets and sell directly to consumers, businesses and government agencies. Companies, such as major player Allen Edmond, while using department stores such as Macys and
Nordstrom, also have their own retail locations to sell directly to consumers. Industry nonemployers are also engaged in selling their products directly to consumers and businesses to cut out middlemen, reduce transactions costs and improve margins. Such sales are expected to generate 4.1% of industry revenue in 2019. Manufacturers’ sales outlets’ share of revenue has remained relatively stable over the past five years but has declined considerably from prior years due to contracting industry participation and the inability of domestic manufacturers to compete with retailers that import low-cost shoes from Asia and higher priced shoes from Europe.
Major market segmentation (2019)
Total $2.0bn
43.5% Footwear retailers
31.2% Exports
21.2% Footwear wholesalers
4.1% Manufacturers’
sales outlets
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 18
Products & Markets
Imports From ...
Total $28.7bn
4.9% Italy
6.5% Indonesia
10.1% Other
24.1% Vietnam
54.4% China
Exports To ...
Total $632.2m
43.1% Other
26.0% Canada
18.5% China
7.7% Japan
4.7% Hong Kong
Year: 2019 SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC
International Trade Imports While total import revenue has fluctuated throughout the period, strong import competition has been a constant factor influencing this industry’s decline for over a decade. Due to the labor-intensive nature of industry operations, footwear manufacturers have increasingly sought to minimize production costs by either moving manufacturing facilities abroad or establishing contracts with foreign manufacturers using inexpensive labor. Operators that implement these outsourcing practices benefit from a considerable advantage in cost structuring. These companies pass on this cost saving to consumers in the form of lower prices, further hurting domestic operators, who charge premiums to remain profitable. The tax incentives, along with lax health and safety regulations, and workers’ compensation regulations, also reduces manufacturers’ overhead costs in export-oriented countries. With reduction in trade
barriers post 2005, the domestic industry also lost most of its protection against foreign competition. These factors have put domestic manufacturers at a considerable disadvantage.
IBISWorld estimates import revenue to increase at an annualized rate of 0.8% to $28.7 billion over the five years to 2019. Imports have been limited by a
Level & Trend Exports in the industry are High and Steady
Imports in the industry are High and Steady
$ bi
lli on
10
-30
-20
-10
0
2511 13 15 17 19 21 23Year
Exports Imports Balance
Industry trade balance
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 19
Products & Markets
International Trade continued
marginal decrease of the trade-weighted index, which measures the strength of the US dollar relative to the currencies of its trading partners, starting in 2017. The decline may also be attributable to the generally lower price of imported footwear during the period. Furthermore, while declining in aggregate, imports share of domestic demand is anticipated to be a dominate 95.4% in 2019. Over the five years to 2024, continued declines in the trade-weighted index are anticipated to lead to falls in import revenue.
Main sources of footwear imports are China (54.4%), Vietnam (24.1%), Indonesia (6.5%) and Italy (4.9%). China’s share of imports has decreased over the past five years. Chinese imports accounted for 68.8% of total imports in 2014. Constant wage increases, increases in freight costs and rising competition in China have resulted in manufacturers looking for other major sources of low-price labor and lax regulations. This has caused China’s share of imports to fall. The main beneficiary of this has been Vietnam. The Vietnamese dong is not only significantly weaker than the US dollar, but it has consistently depreciated over the past five years, making imports from Vietnam less expensive for US consumers. This factor coupled with rising costs in China has resulted in Vietnam increasing its share of footwear imports from 13.9% to 24.1% over the five years to 2019. Imports from Indonesia and high-end footwear from Italy have remained relatively stable during the current period.
Exports Exports represent a major market segment, with sales abroad expected to collectively account for 31.2% of total industry revenue in 2019. Domestically
manufactured shoes have a good reputation in the global market, both for their high quality and their durability. However, industry exports are expected to contract at an annualized rate of 0.7% to $632.2 million over the five years to 2019. This export decline has been driven by a rising trade-weighted index, which measures the strength of the US dollar relative to the currencies of its trading partners. The dollar’s strong appreciation over the period has adversely impacted exports, as industry products have become increasingly more expensive for foreign consumers, causing them to purchase more affordable footwear produced elsewhere. Major export destinations for US manufacturers are Canada, China, Japan and Hong Kong.
Given Canada’s membership in the North American Free Trade Agreement, industry operators have been able to freely export to Canada. Therefore, the share of total exports to Canada has increased from 21.4% in 2014 to an estimated 26.0% in 2019. Additionally, Hong Kong and Japan benefit from short freight times and costs because of easily navigable trade routes through the Pacific. However, industry exports to Japan are expected to decline over the period. In 2019, Japan is expected to account for 7.7% of total exports. Over the five years to 2019, China has emerged as a major destination of industry exports, experiencing tremendous growth during the current period. This trend has mainly been the result of rising income throughout China, enabling Chinese consumers to purchase luxury brands made by operators in Europe and the United States. Rising from 2.4% in 2014, the share of total exports to China is anticipated to reach 18.5% in 2019.
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 20
Products & Markets
Business Locations 2019
MO 3.0
West
West
West
Rocky Mountains Plains
Southwest
Southeast
New England
VT 0.9
MA 3.9
RI 0.0
NJ 0.9
DE 0.0
NH 2.6
CT 0.0
MD 1.3
DC 0.0
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ 2.2
CA 19.1
NV 0.0
OR 4.3
WA 4.8
MT 1.3
NE 0.4
MN 0.9
IA 0.4
OH 0.9
VA 1.3
FL 2.2
KS 0.0
CO 2.6
UT 0.4
ID 0.0
TX 14.7
OK 0.0
NC 0.9
AK 0.0
WY 0.0
TN 1.7
KY 0.4
GA 2.2
IL 2.2
ME 6.9
ND 0.0
WI 3.9 MI
0.4 PA 2.6
WV 0.0
SD 0.0
NM 0.4
AR 1.7
MS 0.0
AL 0.0
SC 0.4
LA 0.0
HI 0.4
IN 0.4
NY 7.4 5
6 7
8
3 21
4
9
SOURCE: WWW.IBISWORLD.COM
Mid- Atlantic
Establishments (%)
Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
Great Lakes
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 21
Products & Markets
Business Locations The West accounts for the largest portion of industry establishments at 28.6%. The region’s dominance is largely due to California, which is home to more industry facilities than any other state in the nation, with 19.0% of all US footwear manufacturing establishments. Despite high rent and labor costs, the establishments operating in the region are capable of effectively servicing the industry’s major markets. Given the West region’s large population and relative proximity to Asia, industry players operating in the region are positioned to satisfy both domestic and foreign consumer demand while minimizing shipping costs.
Footwear manufacturers in the New England region benefit from the region’s proximity to international trade ports and access to low-cost inputs. While only 14.3% of industry establishments are located within the region, New Balance, the industry’s largest company in terms of market share, maintains its headquarters in Boston and the majority of its production facilities in Massachusetts.
The Southwest, Mid-Atlantic, Southeast and Great Lakes regions account for 17.3%, 12.1%, 10.8% and 7.8% of industry establishments, respectively. Given their low population density, the Rocky Mountains and the Plains regions include the fewest number of industry establishments, accounting for 4.3% and 4.8%, respectively.
%
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la nd
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So ut
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Establishments Population
Distribution of establishments vs. population
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 22
Cost Structure Benchmarks
Cost structures vary for operators in the Shoe and Footwear Manufacturing industry, depending on product mix, supply contracts and geographical location.
Wages Accounting for an estimated 20.4% of revenue in 2019, wages and salaries are the second-highest cost incurred by the industry. This high figure is indicative of
Key Success Factors Establishment of brand names Brand strength can create consumer demand for a specific company’s footwear products.
Economies of scope Footwear manufacturing companies that produce a wide range of footwear products can satisfy various segments of consumer demand.
Ability to alter goods and services produced in favor of market conditions The quality of footwear manufactured and the ability to adapt to changing fashion trends provide major competitive advantages.
Understanding government policies and their implications Understanding the implications of changing tariff rates and import duties is required to formulate a competitive strategy in this industry.
Economies of scale Producing footwear items at the lowest marginal cost is an important competitive factor.
Willingness to outsource when appropriate To keep input costs down, manufacturers must be willing to source their products from low-priced foreign providers, either by establishing supply contracts with third parties or moving their own facilities overseas.
Market Share Concentration
The Shoe and Footwear Manufacturing industry in the United States has a moderate level of concentration. The three largest players, New Balance, Red Wing Shoes and Allen Edmonds, are anticipated to account for an estimated 40.9% of industry revenue, while the top 4 account for just under 45.0% of industry revenue. This moderate concentration reflects a fragmented market that has a mix of a few large companies and many small industry operators specializing in higher valued- added footwear. In fact, an estimated 74.7% of all industry establishments employ four workers or fewer. Conversely, a mere 0.2% of industry establishments employ 500 workers or more. The largest global footwear companies, such as Nike and Adidas,
manufacture nearly all their products outside of the country. This practice has continued over the past few years as large companies have primarily focused domestic activities on the design and wholesale of footwear. However, some traditionally global companies have recently opened manufacturing factories in the US in recent years as a means to streamline its supply chain.
Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Establishment by employment size (2015)* No. of employees (People) Share (%)
1 to 4 86.2 5 to 99 10.5 100 to 499 3.0 500+ 0.2
*Latest data available SOURCE: US CENSUS BUREAU
Level Concentration in this industry is Medium
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 23
Competitive Landscape
Cost Structure Benchmarks continued
the labor-intensive nature of industry operations. This relatively high cost of labor is the primary reason many footwear companies have chosen to offshore manufacturing operations to inexpensive workers in foreign countries. Wages as a share of revenue has declined over the past five years, down from 21.3% in 2014. This is in part attributable to industry employment declining an annualized 1.2% during the current period, as operators have let go workers with higher salaried positions.
Purchases As with other manufacturing industries, purchases account for the largest expense item, anticipated to take up 51.5% of industry revenue in 2019. This figure represents a negligible increase from 2014 levels. Raw input materials for production typically include natural and synthetic rubber, plastic compounds,
foam cushioning materials, nylon, leather, canvas, polyurethane films and packaging items. This category is anticipated to grow as a share of revenue during the period as industry operators, increasingly opting to compete on the basis of product quality, have purchased larger quantities of high-quality raw materials. The growth in purchases share of revenue can also be attributed to the recent increases in the prices of overall industry inputs.
Profit On average, industry profit, measured as earnings before interest and taxes, is expected to account for 5.2% of industry revenue in 2019. This figure represents an increase in the industry margin, from 4.7% of revenue in 2014. Margins have been particularly helped by declines in input prices. Over the five years to 2019 the price of leather is expected to
Sector vs. Industry Costs
n Profi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other
Average Costs of all Industries in sector (2019)
Industry Costs (2019)
0
20
40
60
Pe rc
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80
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SOURCE: WWW.IBISWORLD.COM
6.8 5.2
19.0
1.6 1.3 1.0
51.5
20.4
21.6
2.3 0.5 2.1
55.1
11.6
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 24
Competitive Landscape
Basis of Competition The price, quality and style of produced footwear are major factors affecting the basis of competition between industry operators. Concurrently, the bulk of competition for industry produced footwear in the United States stems from imported shoes from the rest of the globe. Generally, imported footwear comes from low labor-cost countries, such as China
and Vietnam, giving companies that outsource their manufacturing processes a strong competitive position. Purchasing these imported shoes lets US consumers take advantage of operators’ cost saving through decreased prices. Alternatively, prices may at times be construed to signify the quality of the product. Certain companies are able to charge higher
Cost Structure Benchmarks continued
decrease at an annualized rate of 5.2%. Furthermore, declines in the world price of rubber, another key industry input, was also significant, decreasing at an annualized rate of 2.2% over the past five years. Input price declines have enabled many operators to price their products more competitively, boosting profit margins.
However, high levels of competition from domestic and foreign companies has limited potential profit gains for the average industry operator. Domestic manufacturers have experienced stagnant or declining demand and on average have higher wage costs than foreign competitors, hurting profitability. Over the five years to 2024, IBISWorld anticipates input costs to reverse course, ticking upward and thus placing downward pressure on industry margins.
Depreciation Depreciation is expected to account for an estimated 1.0% of industry revenue in 2019. The level of depreciation reflects the capital tied up in manufacturing equipment. Depreciation costs tend to be lower among industry operators due to the relatively high labor intensity characteristic of footwear manufacturing. Capital for the industry is usually in the form of office equipment, computer technology and low-level manufacturing equipment such as sewing machines. However, depreciation costs are expected to
remain stable during the period, as domestic operators seek to minimize the use of labor for mass produced items to make their operations more streamlined and affordable.
Marketing Marketing and advertising expenditure, as well as costs associated with related promotion activities, is expected to account for 1.3% of industry revenue in 2019. Marketing costs have stabilized during the current period, as this segment comprised 1.3% of industry revenue in 2014.
Rent Rental expenses are anticipated to comprise 1.0% of revenue for the Shoe and Footwear Manufacturing industry in 2019. Rental costs have remained stable over the five years to 2019, accounting for 1.0% of industry revenue in 2014 as well.
Utilities Similar to marketing and rental expenses, utility costs have also remained stable over the past five years. In 2019, utilities are anticipated to account for 0.6% of industry revenue in 2019.
Other Other expenses for operators in the Shoe and Footwear Manufacturing industry include administrative expenses and transportation costs. In 2019, these costs are anticipated to comprise a combined 19.0% of industry revenue.
Level & Trend Competition in this industry is High and the trend is Increasing
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 25
Competitive Landscape
Barriers to Entry The Shoe and Footwear Manufacturing industry is characterized by moderate barriers to entry. Starting up a basic, small-scale footwear manufacturing operation does not require excessive capital investment, which keeps barriers relatively low. However, there are high costs associated with establishing brand names and the inevitable competition from existing large brands such as Nike and Adidas. Many of these costs are in the form of advertising implemented as means of building and maintaining brand awareness. It can also be costly to acquire capital equipment and machinery to manufacture footwear on a large scale.
One way that companies entering the market of footwear manufacturing can generate strong brand approval is by producing goods domestically, capitalizing on the potential patriotic values of consumers. However, given the general availability of offshore contract manufacturing and inexpensive foreign labor, industry
operators will be forced to incur higher costs for being “American made”.
Over the past decade, footwear manufacturers in the United States have increasingly shifted their operations offshore to take advantage of low production and wage costs. This has in turn increased the level of import competition in the industry, which has made it extremely difficult for domestic manufacturers to compete with low-priced imports from developing countries, such as China and Vietnam. While imports have
Basis of Competition continued
prices to consumers without a corresponding decrease in demand because consumers perceive these brands or products to be high-end. Unfortunately for domestic manufacturers, these high-quality footwear products are usually sourced from European countries renowned for their high quality of inputs such as leather and fabrics.
Product branding is a crucial determinant of industry competition. For example, globally established enterprises such as Nike and Adidas have developed strong brand image and recognition through varying marketing activities and successful advertising campaigns. This has in turn created a loyal consumer base, who at times purchase products due to the built brand
identity. While Nike and Adidas barely produce in the United States, they are examples of external competitive forces, with strong branding, placing pressure on local industry operators.
Additionally, product innovation is increasingly becoming a large competitive consideration for manufacturers. Design teams are constantly creating various ranges of new styles of footwear, which include added features such as air pocket soles, mesh netting and gel-arch support. Furthermore, operators compete both internally and externally to keep brand products in line with fashionable trends. This product differentiation is perceived as one of the prominent factors consumers use at the point of purchase, aside from price.
Barriers to Entry checklist
Competition High Concentration Medium Life Cycle Stage Decline Capital Intensity Low Technology Change Low Regulation and Policy Medium Industry Assistance High
SOURCE: WWW.IBISWORLD.COM
Level & Trend Barriers to Entry in this industry are Medium and Increasing
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 26
Competitive Landscape
Industry Globalization
The high level of globalization can be attributed to the high level of international trade and outsourcing that takes place within the Shoe and Footwear Manufacturing industry. Footwear manufacturing is difficult to automate fully and as a result is highly labor- intensive. Consequently, manufacturers seek out countries that have low wage costs to either contract manufacturing work or to establish production facilities offshore. This trend has had downward pressure on total industry wages as operators attempt to mitigate the costs of producing on US soil.
Major global footwear companies, such as Nike Inc., outsource manufacturing operations mostly to Chinese contractors due to the less expensive labor and overall production costs available in the country. Footwear is then imported to the United States and distributed to wholesale or retail outlets for resale to the final consumer. As a means of
remaining competitive, major industry operators are producing a larger share of output overseas.
The globalized nature of the industry can also be attributed to the significance of imports. Import penetration into the manufacturing sector has been steadily growing for decades and the Shoe and Footwear Manufacturing industry has been no exception. While total import revenue has declined over the five years to 2019, imports share of domestic demand is anticipated to remain high at 95.4% in 2019. This external competition only further encourages industry producers to outsource operations to inexpensive labor countries. As demand from footwear wholesaling and retailers increases, industry operators will need to use inexpensive input costs to remain competitive. The Shoe and Footwear manufacturing industry is not anticipated to be affected by the recently announced US tariffs.
Barriers to Entry continued
declined in recent years, they still accounts for more than 90% of domestic demand. Competition from
foreign manufacturing limits potential profit and presenting an increasing barrier to industry entry.
SOURCE: WWW.IBISWORLD.COM
Trade Globalization Going Global: Shoe & Footwear Manufacturing 2003–2019
Ex po
rt s/
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Ex po
rt s/
Re ve
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200
150
100
50
0
200
150
100
50
0
Imports/Domestic Demand Imports/Domestic Demand 0 040 4080 80120 120160 160
International trade is a major determinant of an industry’s level of globalization.
Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.
Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.
Export ExportGlobal Global
ImportLocal ImportLocal
Shoe & Footwear Manufacturing
2003
2019
Level & Trend Globalization in this industry is High and the trend is Increasing
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 27
Player Performance New Balance Athletics Inc. (New Balance) is a Boston-based footwear company. The company was founded in 1906 and is the only remaining major athletic shoe company with a significant manufacturing presence in the United States. New Balance owns six production facilities in the United States, which are located in Massachusetts, Maine and California. New Balance’s domestic manufacturing operations account for an estimated 17.5% of its global sales, with the company’s footwear manufacturing segment accounting for an estimated 57.2%. Much like the rest of the Shoe and Footwear Manufacturing industry, the majority of the company’s shoes are manufactured in China and Vietnam. New Balance also has manufacturing facilities in the United Kingdom.
New Balance shoes carry a price point that is slightly above that of its
competitors’ in footwear, given the premium carried by domestically manufactured products. The company uses value-added features, such as gel arch support, to differentiate its products. Over the five years to 2019, the company has invested in an ongoing advertising campaign that highlights its dedication to domestic manufacturing and value-added craftsmanship. In addition to athletic shoes, New Balance also offers athletic apparel and accessories such as socks, insoles, sunglasses and clothing. Over the past decade, these industry-irrelevant segments have accounted for a growing share of total company revenue.
Financial performance New Balance is a privately-owned company; therefore, it does not disclose financial information. However, in 2019, IBISWorld estimates that the company
Major Companies New Balance Athletics Inc. | Red Wing Shoes Allen Edmonds Shoe Corp. | Other Companies
59.0% Other
New Balance Athletics Inc. 24.3%
Red Wing Shoes 11.7%
Allen Edmonds Shoe Corp. 5.0% SOURCE: WWW.IBISWORLD.COM
Major Players (Market Share)
New Balance Athletics Inc. Market Share: 24.3%
New Balance Athletics Inc. (US industry-specifi c segment) - fi nancial performance*
Year Revenue
($ million) (% change) Employees
(People) (% change)
2014 374.7 N/C 1,252 N/C
2015 411.0 9.7 1,350 7.8
2016 412.3 0.3 1,397 3.5
2017 449.8 9.1 1,506 0.6
2018 4,732 5.2 1,623 4.1
2019 492.8 4.1 1,749 2.3
*Estimates SOURCE: IBISWORLD
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 28
Major Companies
Player Performance Red Wing Shoes is a footwear retailer and manufacturer founded in 1905 in Red Wing, MN. The company was the primary manufacturer of footwear products for US soldiers during World War I and has continued to maintain a strong domestic presence. Red Wing Shoes is one of the few remaining major footwear manufacturers in the United States. The company specializes in leather boots for heavy work and footwear for a variety of work purposes, including slip-resistant footwear for the service industry and boots equipped with metatarsal guards,
ideal for workers in the mining industry. To keep up with recent fashion trends, Red Wing Shoes has recently begun to offer a variety of comfort styles to its customers, such as oxfords and chukkas. Leather hunting boots are also a revenue generating product segment for Red Wing Shoes.
Red Wing Shoes owns two US-based production facilities in Potosi, MO, and Red Wing, MN. Overall, domestic manufacturing accounts for roughly 40.0% of the company’s overall footwear output. The remaining manufacturing
Player Performance continued
will generate $492.8 million in industry- relevant revenue. Over the five years to 2019, the company’s industry-specific revenue is expected to grow at an annualized rate of 5.6%. Athletic shoes are less discretionary than their casual or formal counterparts, making them less sensitive to shifts in consumer spending power, which has risen during the period. Moreover, increasing consumer demand for US-made shoes and apparel has bode well for the company. Consequently, New Balance has increased its presence in the United States, growing its market share to an estimated 24.3% in 2019.
In an attempt to further increase its market share following the implementation of the Berry Amendment, the company invested in a new molding facility in Boston in 2014. The company has also submitted three pair of shoes for testing by the US Department of Defense. In March 2018, New Balance received a $17.3 million contract from the US Department of Defense to provide shoes for military personnel entering basic training. New Balance is hopeful to gain future contracts to supply footwear to the military, which would significantly boost its industry-specific revenue.
Red Wing Shoes (US industry-specifi c segment) - fi nancial performance*
Year Revenue
($ million) (% change) Employees
(People) (% change)
2014 193.2 N/C 577 N/C
2015 201.0 4.0 571 -1.0
2016 210.1 4.5 564 -1.2
2017 218.9 4.2 558 -1.1
2018 227.8 4.1 552 -1.1
2019 236.7 3.9 555 0.5
*Estimates SOURCE: IBISWORLD
Red Wing Shoes Market Share: 11.7% Industry Brand Names Irish Setter Vasque
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 29
Major Companies
Player Performance Founded in 1922, Allen Edmonds Shoe Corp. (Allen Edmonds) is one of the few remaining dress shoe manufacturers in the United States. The company operates more than 75 retail locations across the United States and generates most of its revenue by selling its products to department stores such as Macy’s Inc. and Nordstrom Inc. In 2013, Brentwood Associates bought Allen Edmonds in a deal estimated to be worth $180.0 million. In 2016, Allen Edmonds was acquired again, this time by Caleres Inc.
(Caleres), a global footwear retailer and wholesaler, for $255.0 million. Allen Edmonds is headquartered in Port Washington, WI, and employs over 1,000 workers globally.
The majority of Allen Edmonds’ shoes are produced domestically, with the company’s Port Washington facility manufacturing an estimated 2,500 shoes per day. Outside the United States, the company maintains a plant in the Dominican Republic, which specializes in the production of the company’s slip-ons.
Player Performance continued
operations of company footwear products, along with the production Red Wing Shoes’ various brands, is conducted in China. While Red Wing Shoes also producers various leather products and accessories such as belts, gloves, wallets and bags, footwear and shoes are estimated to generate 92.0% of company revenue in 2019.
Financial performance Red Wing Shoes is a privately-owned company. As a result, financial information about the company is limited. Nonetheless, IBISWorld analysis indicates that Red Wing Shoes has grown
over the past five years. Over the five years to 2019, the company’s industry- relevant revenue is expected to rise at an annualized rate of 4.1% to $236.7 million. Red Wing Shoes has remained favorable with its core consumers by maintaining and highlighting its made- in-America products. Additionally, the recent success of Red Wing Shoes may be in part attributable to the strong job market. As unemployment declines, more consumers are hired for labor in industries, such as construction and service, which may require work boots such as the ones crafted by Red Wing Shoes.
Allen Edmonds Shoe Corp. (US industry-specifi c segment) - fi nancial performance*
Year Revenue
($ million) (% change) Employees
(People) (% change)
2014 107.8 N/C 446 N/C
2015 104.1 -3.4 475 6.5
2016 105.8 1.6 507 6.7
2017 103.9 -1.8 506 -0.2
2018 100.7 -3.1 518 2.4
2019 100.4 -0.3 521 0.6
*Estimates SOURCE: IBISWORLD
Allen Edmonds Shoe Corp. Market Share: 5.0%
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 30
Major Companies
Other Company Performance
Founded in 1952 in Abington, MA, Timberland LLC (Timberland) is a US manufacturer and retailer of footwear and outdoor apparel. In 2011, the company became a subsidiary of VF Corporation (VF), which owns and
manages more than 30 fellow footwear and apparel brands, such as Vans and North Face. VF primarily uses outsourced contractors to manufacturer its branded products. While Timberland is anticipated to generate
Other Companies IBISWorld defines a major player as a company that generates at least 5.0% of industry revenue. The majority of companies operating within the Shoe and Footwear Manufacturing industry do not hold a large portion of the market, since most manufacturing occurs outside of the United States. Domestic companies undertake high-value operations, such as design, marketing and distribution. While Adidas AG (Adidas) and Nike Inc (Nike). were once major players in the industry, they have since exited the industry by offshoring the majority, if not all, of their manufacturing operations.
Adidas, a German-owned global sportswear and equipment designer, manufacturer and distributor, exited the US industry in 1993. In 2005, Adidas purchased Reebok and sold its interest in Salomon to Amer Sports Corporation. Adidas is no longer a
major player in the Shoe and Footwear Manufacturing industry, as nearly all of its shoes are produced outside of the United States. Asia is its largest production hub, representing 97.0% of total footwear production for the Adidas and Reebok brands.
Nike exited the Shoe and Footwear Manufacturing industry in 1984. Nike is the world’s largest shoe company and controls an estimated 40.0% share of the US athletic footwear market. The majority of Nike footwear is manufactured overseas via independent contractors. Offshore, independent contractors manufacture about 97.0% of total Nike footwear. Vietnam makes up 44.0% of Nike manufacturing, followed by China (29.0%) and Indonesia (21.0%). Nike also has manufacturing agreements with contractors in Argentina, India, Brazil and Mexico.
Player Performance continued
However, this product segment accounts for an estimated 5.0% of the company’s total revenue. Overall, Allen Edmonds’ footwear product line is expected to generate 70.3% of the company’s total revenue in 2019. This share has declined slightly over the past five years, as Allen Edmonds has opted to expand its product offerings to include apparel and accessories, both of which are made in the United States.
Financial performance According to IBISWorld estimates, Allen Edmonds has declined over the five years
to 2019, falling at an annualized rate of 1.4% to $100.4 million. Since the company specializes in the manufacturing of premium, high valued- added formal footwear, the company’s products command higher price points than imported substitutes. However, since the company was acquired by Caleres, it has experienced overall and industry-relevant revenue decline. Caleres has signaled an intention to move more of the company’s manufacturing presence offshore and has closed two store fronts due to falling revenue streams.
Timberland LLC Market Share: 1.2%
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 31
Major Companies
nearly $1.9 billion in total revenue in 2019, only a fraction of this can be considered industry-relevant. Out of more than 370 facilities owned and operated by Timberland worldwide, only five manufacture footwear and
shoe products within the United States. As a result, IBISWorld estimates that $25.2 million of Timberland’s revenue can be attributed to company’s domestic shoe-manufacturing operations in 2019.
Other Company Performance continued
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 32
Capital Intensity Operators in the Shoe and Footwear Manufacturing industry are expected to spend $0.05 on capital for every $1.00 they spend on labor in 2019. This ratio indicates a low level of capital intensity. As some major companies anticipate and prepare for the Pentagon’s rollout and full implementation of the Berry Amendment to the industry, a slight increase in depreciation costs and upgrades to existing infrastructure is expected to occur over the five years to 2024. Nevertheless, capital intensity is expected to remain low to moderate. This is primarily due to the fact that footwear manufacturing is largely a labor-intensive process.
Typical industry equipment includes a variety of machinery used for pattern making, component and upper
preparation, stitching, bottoming, lasting and finishing purposes. Although technology such as sewing and cutting
Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital Intensity
0.5
0.0
0.1
0.2
0.3
0.4
SOURCE: WWW.IBISWORLD.COM Dotted line shows a high level of capital intensity
Capital units per labor unit
Shoe & Footwear
Manufacturing
ManufacturingEconomy
Level The level of capital intensity is Low
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Operating Conditions
Technology and Systems
Technological advancement in the Shoe and Footwear Manufacturing industry in the United States is low due to the labor-intensive nature of the industry. Sewing and cutting machines have yet to be automated, still needing to be operated by industry employees. Most advancements in industry technology have stemmed from the upgrading of existing sewing and cutting machines. However, because most footwear manufacturing is completed offshore, it is less beneficial for domestic manufacturers to invest in new equipment or research and development of manufacturing innovations. To remain competitive with the inexpensive foreign labor of international manufacturers, the industry has been marred with a long running trend of players cutting operations or closing down establishments altogether. However, the industry has experienced a rise in establishments in recent years as some operators have valued the faster supply chains that result from manufacturing in the United States.
Tagless labeling technology is expected to enable increased consumer comfort,
branding opportunities, cost savings and security management. The footwear manufacturer or contractor can incorporate brand logos, anti- counterfeiting tools, barcodes and radio-frequency identification technology into labels in one relatively simple consolidated process.
Furthermore, internet technology has connected the world and has enabled companies to communicate product information globally. This has further internationalized supply chains in the domestic Shoe and Footwear Manufacturing industry with companies operating in various international locations. For example, US companies conduct the product design, strategy and marketing, while manufacturing often takes place overseas. While this phenomenon took place even before the advent of internet technology, the speed of conversion from design to manufacturing has increased. Design and product development are expected to further make use of three-dimensional tools that enable footwear to be created in 3D and converted automatically to 2D for traditional manufacturing methods.
Capital Intensity continued
machines can be used to assist the processes, there is still a strong need for human operation due to the intricate nature of the work. Since the footwear production process has been
difficult to automate, many operators have chosen to outsource production processes to developing countries to save on labor costs and price their goods more competitively.
Level The level of technology change is Low
Revenue Volatility Over the five years to 2019, the Shoe and Footwear Manufacturing industry has exhibited a low level of revenue volatility. Any volatility is due in part to domestic consumers strong reliance on international markets. More than 90.0% of domestic demand is satisfied by imported footwear, influenced by factors including exchange rates, foreign supply
chain stability and international geopolitical circumstances. For example, an appreciation of the dollar relative to the currencies of the US trading partners enables domestic downstream wholesalers to purchase imports at less expensive prices, reducing their demand for domestically manufactured footwear and shoes.
Level The level of volatility is Low
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Operating Conditions
Regulation and Policy As with other apparel manufacturing industries, the Shoe and Footwear Manufacturing industry is subject to several environmental laws, requirements and regulations imposed by federal, state, local and international entities.
Footwear manufacturers have consistently used a plethora of chemical substances to produce its goods, some of which are hazardous. As a result, states such as Minnesota and California have recently implemented restrictions or limitations on certain chemicals used by industry operators. Materials used in shoe manufacturing is further federally regulated by the Consumer Product Safety Commission (CPSC) through laws
such as the Consumer Product Safety Improvement Act of 2008 and the Federal Hazardous Substances Act.
Footwear manufacturers are subject to US customs duties for imported materials. In early 2003, the United States began enforcing regulations that require all importers to submit detailed manifests to US customs 24 hours prior to the cargo leaving the country of origin. Footwear manufacturers may be granted concessions, which will depend on the description of the footwear items. For example, generic descriptions such as “shoes” will qualify under the new regulations, but more detailed information will not.
Level & Trend The level of Regulation is Medium and the trend is Steady
Revenue Volatility continued
Changes in footwear fashion trends also create volatility. A change in fashion can make particular shoe styles outdated, which in turn, will lead to weak sales of one style relative to another. Concurrently, other styles may experience surges in popularity boosting sales and contributing to overall industry volatility.
While changes in the cost of raw materials, such as rubber and leather, have a direct effect on industry purchase costs, such costs may also ultimately
influence revenue. As the price of inputs increase, manufacturers may opt to pass on higher costs to wholesalers and retailers in the form of higher prices, preserving profit margins and generating higher revenue. However, high selling prices create a disincentive for consumers to purchase shoes, especially during times of sluggish disposable income growth. As a result, consumers may opt for more affordable import substitutes, driving down industry revenue.
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Operating Conditions
Industry Assistance Operators in the Shoe and Footwear Manufacturing industry benefit from a high level of industry assistance, which comes in the form of tariff protection and industry associations. Duties on footwear into the United States range from 0.0% to 15.0%. This rate depends on the manufacturer and on the principal component of the shoe. For example, leather-made shoes carry different tariff rates than those made from rubber, plastic and pig skin. As of now, recently announced US tariffs are not anticipated to affect the Shoe and Footwear Manufacturing industry.
The World Trade Organization (WTO) sets global rules of trade between nations participating in the Shoe and Footwear Manufacturing industry. WTO agreements establish the legal ground rules for international trade and the market- opening commitments taken up by its members. These agreements are negotiated and signed by all members of the WTO and ratified in their parliaments.
Countries such as Mexico, Canada, Colombia, Chile and South Africa continue to maintain restrictions on footwear imports from China where many US companies manufacture most of their
footwear. However, many domestic manufacturers can serve these markets through exemptions or alternative sourcing from outside China. US companies importing footwear are subject to quotas imposed by bilateral agreements between the US and the countries they are importing from (i.e. Hong Kong and Korea). These agreements impose quotas on the amount and type of footwear that can be imported.
The establishment of the North American Free Trade Agreement enabled increased levels of imports from and exports to Mexico and Canada. Under the agreement, the three North American countries experience duty-free trade among each other. Canada has consistently been the top export destination for US-made footwear during the five-year period. Furthermore, tariff and quota reductions implemented in January 2005 for imported footwear into the United States have led to higher levels of import penetration, resulting in less expensive footwear prices for consumers. Domestic footwear manufacturers will be forced to increase productivity and efficiencies to remain competitive with less expensive imports.
Regulation and Policy continued
Manufacturers must abide by US patent and trademark laws that relate to the protection of intellectual property. Penalties are imposed on the infringement of patents. Penalties are imposed on footwear manufacturers that contravene US labor and wage laws. Companies must also abide by various occupational health and safety legislation.
Companies within this industry are subject to environmental and
anti-dumping laws regarding the discharge of material waste of some footwear inputs such as synthetic and leather made footwear. Additionally, the United Nations strongly urge many corporations in manufacturing industries to embrace the standards set by the International Labor Organization, which are set to protect the human rights of all labor workers globally.
Level & Trend The level of Industry Assistance is High and the trend is Decreasing
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 36
Key Statistics Revenue
($m)
Industry Value Added
($m) Establish-
ments Enterprises Employment Exports
($m) Imports
($m) Wages ($m)
Domestic Demand
Trade-weighted index
2010 2,039.2 609.1 837 815 12,439 581.8 23,900.5 431.7 25,357.9 75.4 2011 2,099.5 517.3 878 858 11,714 674.3 25,516.6 410.3 26,941.8 70.9 2012 2,316.7 552.1 963 944 12,195 687.8 26,316.4 429.2 27,945.3 73.6 2013 2,201.9 524.7 917 899 12,078 644.9 26,825.6 443.2 28,382.6 75.9 2014 2,016.5 545.0 919 902 11,300 653.9 27,575.5 430.0 28,938.1 78.4 2015 1,958.8 562.7 913 895 11,399 640.0 28,909.6 441.3 30,228.4 91.0 2016 1,987.5 470.3 907 895 11,300 550.9 26,890.0 432.6 28,326.6 91.6 2017 1,988.9 527.1 913 902 10,554 531.5 26,272.2 409.8 27,729.6 91.1 2018 2,007.6 537.5 924 913 10,591 561.5 26,809.9 411.7 28,256.0 89.0 2019 2,027.6 539.7 932 921 10,644 632.2 28,702.5 414.1 30,097.9 87.9 2020 2,036.4 538.9 931 920 10,630 657.9 27,524.9 414.1 28,903.4 87.5 2021 2,038.8 536.7 933 922 10,604 666.1 27,498.7 413.3 28,871.4 87.4 2022 2,041.7 535.3 935 923 10,598 668.1 27,332.8 413.3 28,706.4 87.3 2023 2,046.0 535.1 937 926 10,597 668.3 27,330.9 413.4 28,708.6 87.2 2024 2,067.3 538.9 944 932 10,659 670.3 27,956.2 416.2 29,353.2 87.2 Sector Rank 182/193 182/193 86/193 78/193 170/193 149/184 24/184 181/193 77/184 N/A Economy Rank 659/694 662/694 549/694 512/694 638/694 168/216 25/216 655/694 83/216 N/A
IVA/Revenue (%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($’000) Wages/Revenue
(%) Employees
per Est. Average Wage
($)
Share of the Economy
(%) 2010 29.87 94.25 28.53 163.94 21.17 14.86 34,705.36 0.00 2011 24.64 94.71 32.12 179.23 19.54 13.34 35,026.46 0.00 2012 23.83 94.17 29.69 189.97 18.53 12.66 35,194.75 0.00 2013 23.83 94.51 29.29 182.31 20.13 13.17 36,694.82 0.00 2014 27.03 95.29 32.43 178.45 21.32 12.30 38,053.10 0.00 2015 28.73 95.64 32.67 171.84 22.53 12.49 38,713.92 0.00 2016 23.66 94.93 27.72 175.88 21.77 12.46 38,283.19 0.00 2017 26.50 94.74 26.72 188.45 20.60 11.56 38,828.88 0.00 2018 26.77 94.88 27.97 189.56 20.51 11.46 38,872.63 0.00 2019 26.62 95.36 31.18 190.49 20.42 11.42 38,904.55 0.00 2020 26.46 95.23 32.31 191.57 20.33 11.42 38,955.79 0.00 2021 26.32 95.25 32.67 192.27 20.27 11.37 38,975.86 0.00 2022 26.22 95.22 32.72 192.65 20.24 11.33 38,997.92 0.00 2023 26.15 95.20 32.66 193.07 20.21 11.31 39,011.04 0.00 2024 26.07 95.24 32.42 193.95 20.13 11.29 39,046.81 0.00 Sector Rank 61/193 8/184 36/184 178/193 36/193 172/193 180/193 182/193 Economy Rank 395/694 8/216 45/216 436/694 288/694 341/694 476/694 662/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data.
Revenue (%)
Industry Value Added
(%)
Establish- ments
(%) Enterprises
(%) Employment
(%) Exports
(%) Imports
(%) Wages
(%)
Domestic Demand
(%)
Trade-weighted index (%)
2011 3.0 -15.1 4.9 5.3 -5.8 15.9 6.8 -5.0 6.2 -6.0 2012 10.3 6.7 9.7 10.0 4.1 2.0 3.1 4.6 3.7 3.8 2013 -5.0 -5.0 -4.8 -4.8 -1.0 -6.2 1.9 3.3 1.6 3.1 2014 -8.4 3.9 0.2 0.3 -6.4 1.4 2.8 -3.0 2.0 3.3 2015 -2.9 3.2 -0.7 -0.8 0.9 -2.1 4.8 2.6 4.5 16.1 2016 1.5 -16.4 -0.7 0.0 -0.9 -13.9 -7.0 -2.0 -6.3 0.7 2017 0.1 12.1 0.7 0.8 -6.6 -3.5 -2.3 -5.3 -2.1 -0.5 2018 0.9 2.0 1.2 1.2 0.4 5.6 2.0 0.5 1.9 -2.3 2019 1.0 0.4 0.9 0.9 0.5 12.6 7.1 0.6 6.5 -1.2 2020 0.4 -0.1 -0.1 -0.1 -0.1 4.1 -4.1 0.0 -4.0 -0.5 2021 0.1 -0.4 0.2 0.2 -0.2 1.2 -0.1 -0.2 -0.1 -0.1 2022 0.1 -0.3 0.2 0.1 -0.1 0.3 -0.6 0.0 -0.6 -0.1 2023 0.2 0.0 0.2 0.3 0.0 0.0 0.0 0.0 0.0 -0.1 2024 1.0 0.7 0.7 0.6 0.6 0.3 2.3 0.7 2.2 0.0 Sector Rank 99/193 135/193 73/193 68/193 119/193 6/184 12/184 116/193 7/184 N/A Economy Rank 445/694 518/694 361/694 341/694 500/694 8/216 16/216 498/694 10/216 N/A
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Shoe & Footwear Manufacturing in the US May 2019 37
Apr 2017 - Mar 2018 by company revenue Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 2.7 2.0 1.8 2.4 n/a 2.3 2.6 Quick Ratio 1.2 0.9 0.7 0.7 n/a 0.8 0.9 Sales / Receivables (Trade Receivables Turnover) 8.3 9.1 11.2 7.6 n/a 9.5 6.7
Days’ Receivables 44.0 40.1 32.6 48.0 n/a 38.4 54.5 Cost of Sales / Inventory (Inventory Turnover) 3.3 2.8 2.7 2.5 n/a 2.4 2.6
Days’ Inventory 110.6 130.4 135.2 146.0 n/a 152.1 140.4 Cost of Sales / Payables (Payables Turnover) 10.5 12.6 12.8 12.9 n/a 14.7 9.0
Days’ Payables 34.8 29.0 28.5 28.3 n/a 24.8 40.6 Sales / Working Capital 3.7 5.2 7.5 4.5 n/a 5.2 3.5
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) / Interest 5.9 4.8 2.5 6.2 n/a 12.6 9.5
Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt n/a n/a n/a n/a n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 0.2 0.1 0.3 0.2 n/a 0.2 0.2 Debt / Net Worth 0.7 1.4 1.8 1.2 n/a 1.0 0.7 Tangible Net Worth 39.8 17.4 16.2 28.7 n/a 48.0 23.3
Operating Ratios
Profit before Taxes / Net Worth, % 14.8 21.1 14.3 12.9 n/a 32.9 7.9 Profit before Taxes / Total Assets, % 3.7 7.0 3.1 6.4 n/a 10.8 5.4 Sales / Net Fixed Assets 16.4 29.0 14.5 22.6 n/a 34.2 15.4 Sales / Total Assets (Asset Turnover) 1.6 1.5 1.7 1.5 n/a 1.7 1.5
Cash Flow & Debt Service Ratios (% of sales)
Cash from Trading n/a 29.6 37.6 33.8 n/a 33.8 n/a Cash after Operations n/a -2.6 3.2 6.0 n/a 7.6 n/a Net Cash after Operations n/a 4.6 4.4 5.3 n/a 7.3 n/a Cash after Debt Amortization n/a -0.4 -0.2 0.1 n/a 0.1 n/a Debt Service P&I Coverage n/a 1.3 1.2 1.6 n/a 3.6 n/a Interest Coverage (Operating Cash) n/a 1.3 2.5 7.8 n/a 11.8 n/a
Assets, %
Cash & Equivalents 12.3 10.0 9.5 9.3 n/a 12.7 7.4 Trade Receivables (net) 22.1 23.6 17.7 23.3 n/a 22.6 22.2 Inventory 33.1 38.2 40.3 42.0 n/a 44.8 38.9 All Other Current Assets 3.7 4.7 2.8 3.7 n/a 1.5 7.0 Total Current Assets 71.2 76.4 70.3 78.4 n/a 81.6 75.4 Fixed Assets (net) 12.5 11.5 14.2 10.2 n/a 11.4 8.6 Intangibles (net) 8.5 6.7 6.7 6.6 n/a 0.8 11.5 All Other Non-Current Assets 7.8 5.3 8.8 4.8 n/a 6.2 4.6 Total Assets 100.0 100.0 100.0 100.0 n/a 100.0 100.0 Total Assets ($m) 1,734.5 1,929.8 1,426.8 1,446.1 27.4 187.1 1,231.6
Liabilities, %
Notes Payable-Short Term 10.1 15.4 19.0 14.0 n/a 21.1 11.3 Current Maturities L/T/D 1.0 1.2 1.3 1.8 n/a 1.0 0.5 Trade Payables 13.7 16.2 14.4 15.3 n/a 13.5 12.6 Income Taxes Payable 1.4 0.1 n/a 0.5 n/a 0.4 0.8 All Other Current Liabilities 8.0 19.1 21.1 18.3 n/a 5.4 27.1 Total Current Liabilities 34.3 51.9 55.8 49.9 n/a 41.3 52.3 Long Term Debt 8.8 17.9 14.6 5.9 n/a 5.9 6.3 Deferred Taxes 0.7 0.8 1.0 0.6 n/a 0.6 0.9 All Other Non-Current Liabilities 8.0 5.4 5.8 8.3 n/a 3.5 5.6 Net Worth 48.3 24.1 22.9 35.3 n/a 48.8 34.8 Total Liabilities & Net Worth ($m) 1,734.5 1,929.8 1,426.8 1,446.1 27.4 187.1 1,231.6
Maximum Number of Statements Used 31 40 40 37 8 14 15
Industry Financial Ratios
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
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Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
Industry Jargon
IBISWorld Glossary
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) A generally duty-free agreement signed by the governments of Canada, Mexico and the United States, creating a trilateral trade bloc in North America.
OFFSHORING The transfer of manufacturing operations to another country, regardless of whether the work is outsourced or stays within the same corporation or company.
OUTSOURCING Subcontracting process where manufacturing is conducted by a third party company either locally or internationally.
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