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Sports footwear makers, which include Berkshire Hathaway’s Brooks, are projected to have solid growth over the next five years.
A new report “Global Sports Footwear Market 2017-2021,” is projecting that the global sports footwear market will grow at a compound annual growth rate (CAGR) of 2.71% during the period 2017-2021.
According to the report, one driver in the market is high operating margin of sports footwear. Sports footwear is usually priced higher than regular shoes. This is because their manufacturing process involves different technicalities that enhance performance at sports. Vendors focus on introducing innovative features in their products that are used for running, tennis, basketball, football, soccer, and other sports. Manufacturers also earn high operating margin from premium-priced sports footwear. This is because the manufacturing cost of these products is low, whereas they are sold at higher prices.
Further, the report states that one challenge in the market is increasing cost of raw materials. Rising fluctuations in the profit margins of the manufacturers of sports footwear are due to the increasing prices of raw material and intense competition among the vendors. This makes executing a proper pricing strategy challenging for vendors. Ethylene vinyl acetate (EVA), an elastomeric polymer, is the raw material used in the production of soles of sports footwear. Increase in the price of this material has a directly proportional impact on the prices of sports footwear. This further leads vendors to increase the prices of their products.
© 2017 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.