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By Bob McGee What major business stories will we be talking about in 2022? In the past two years we've seen the impacts of COVID shake up the footwear business, impacting retailers and brands large and small. Casual and athletic footwear has been hot, e-comm has evolved and inventory/supply chain challenges have been a constant talking point. Here, we look into our crystal ball to forecast five key trends and stories to watch in the new year. Mergers & Acquisitions More footwear brands and retailers will be acquired in 2022. Surging momentum in M&A activity—a 22 percent year-over-year increase to almost 60,0000 transactions in 2021—is forecast to continue into 2022 and likely for another 5-7 years, according to experts. A KPMG survey of 345 corporate dealmakers suggest the increased activity is being fueled by historically low interest rates, ample investment capital and a rebounding global economy. Transaction levels will remain high largely for two reasons: KPMG respondents suggested companies "need to remain on the offense with the competition" and "feel pressure from investors to raise their own valuations." Also, one-third of those surveyed believe M&A's will be used to acquire talent given the widespread labor shortage. How many of these deals involve footwear companies, however, remains to be determined. But the sector will certainly be touched by M&A activity before year's end, more likely sooner than later given looming, planned interest rate hikes this year by the Federal Reserve Bank. In 2021, there were eight major deals in the footwear segment that were split between retail and brands. e latest involved Crocs' $2.5 billion offer for the $570 million HEYDUDE business, which it hopes to grow to a $1 billion label in short order. Another pending deal of note, also $2.5 billion in size, involves Authentic Brands Groups' acquisition of Reebok from adidas Group that is expected to close in Q1. On the retail side, large businesses got bigger through M&A activity in 2021. Foot Locker gobbled up WSS and Atmos; JD Sports acquired both DTLR and Shoe Palace; Shoe Carnival increased its door count by purchasing Shoe Station and Fleet Feet bought JackRabbit, and its ecommerce business, in mid-December to create the nation's largest run specialty retailer. l Stronger Bonds Between Vendors and Retailers, Vendors and Consumers Independent retailers have told us throughout this past year that communication and relationships have been key to their strongest vendor relationships during the course of the pandemic. is will accelerate if more major footwear brands follow Nike's Digital-first strategy and pare back their respective rosters of worldwide wholesale partners to chase higher-margin digital and direct-to-consumer sales. Such a development would create more opportunity for newer, small brands or revival labels, such as Etonic and Prince, to forge stronger bonds with networks of smaller independent retailers to increase their fortunes and a create a sense of brick-and-mortar retail exclusivity for their respective labels among consumers. In what may become a blueprint for other "power" brands, Nike has a different retail strategy — and it does not involve a lot of retailers. e Swoosh, which says it cut its North American strategic wholesalers list by 50 percent since 2017, grew its year-over-year North American digital busines by 40 percent in the quarter ended Nov. 30. More recently, the folks in Beaverton are showing a new coziness with partner Dick's Sporting Goods along with the retailer's growing premium footwear departments and focus on women. But Nike is showing seemingly less warmth to longtime affiliate Foot Locker. Meanwhile, Reebok's soon- to-be parent Authentic Brands Group has already struck a tight bond with U.K.-based JD that guarantees distribution for the Vector brand in 2,800 JD-owned banners, including Finish Line, JD Sports, Shoe Palace and SportZone this fall in North America and Europe. According to a recent Forrester Research report on 2022 retail predictions, retailers will continue to look for and form new partnerships to diversify "everything from revenue sources to customers and channels." Also, the same research suggests more retailers will embrace the "circular economy trend" that promotes resale and re-purposed clothing and other items. l TRENDS TO WATCH IN FOOTWEAR 1 2 40 • January/February 2022 sportstyle • sportstylemag.com 2022 OUTLOOK

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