Footwear Insight

next 12 months and is forecasting 2 percent consumption growth on an increase in nominal wages, lower inflation, and a solid jobs market that encourages spending. e Federal Reserve currently projects year-end unemployment at 4.1 percent. Citing simmering geopolitical tensions, the frequency of extreme weather events and tight financial conditions, the latest United Nations World Economic Situation and Prospects Report paints a more sobering picture of the global economic landscape in 2024 that could hamper global trade and industrial production. e organization is forecasting global GDP growth to decline to 2.4 percent in 2024 from approximately 2.7 percent last year with U.S. GDP falling 110 basis points to 1.4 percent and European Union GDP only up by 1.2 percent. India leads nine countries in GDP growth expectations at 6.2 percent due to domestic demand and growth in manufacturing and services. For footwear companies in particular, India also represents an important market in the year ahead given expected moderating growth in China at 4.7 percent versus 5.3 percent in 2023. III. Industry, Business Impacts if there is Another Trump Presidency ree financial changes likely to occur if the U.S. saw a return of Donald J. Trump to the Oval Office would be a continuation of the tax cuts he signed into law during his first term that are slated to expire in 2025, a possible 10 percent tariff on all imports that would likely disrupt supply chains, and the likely implementation of more trade barriers on Chinese imports. Small business owners, wealthy households and the real estate industry would benefit most from keeping the 2017 tax rate cuts in place, reports suggest. IV. The Retail Landscape e National Retail Federation, which says most pundits currently describe the U.S. consumer landscape as "uncertain," has offered up numerous retail predictions for the next 12 months. Foremost is recent research that shows positive impact on retail results by embracing artificial intelligence and machine learning. An IHL Group study, for example, suggests that retailers who have already adopted some form of AI into their respective business plan experienced 2.3x growth in revenues and 2.5x growth in profitability in 2023. e benefits of AI are all over the map, ranging from the optimization of product sourcing, demand planning and inventory forecasting to analyzing data collected by store cameras to make changes to a store's size and layout. For sure, technology and convenience are being demanded and is already taking hold at retail. DoorDash recently added Camping World, Golf Galaxy, JD Sports, and Finish Line as clients, making on- demand delivery for their respective customers a reality. And customer interaction in physical stores today is as important as the transaction, points out the trade organization. Shopper expectations "are elevated and moving toward lo," so retailers planning to open new door or renovate existing locations should take heed. Other key retail trends in 2024 include: • Likely Congressional passage of the Combatting Organized Retail Crime Act that will expand federal enforcement of ORC offenses. • A further increase in the use of deepfake fraud through video and voice, which may signal trouble for retailers and brands. • Some retailers will earmark capital for technology that assists with scheduling, hiring, and training to help with the onboarding of new help. V. The M&A Market May Heat Up Again Aer a terrible M&A year in 2023 and a monthly deal volume of approximately $250 million over the last 18 months, the pace should be maintained this year with the health care, technology and industrial segments posting increased activity, according to Bloomberg research. How much the footwear industry participates in M&As is uncertain at this point. VI. The Footwear Segment Numerous trends are likely to emerge here or at least gather traction ahead of 2025, including a renewed focus on innovation to spark consumer interest particularly ahead of the Paris Olympic Games this summer. Some wonder if the mature U.S. footwear market will merely be about jockeying for market share or share of consumer closet rather than growth this year and whether there are new brands on the verge of major relevance that can spark expansion. In athletic footwear, will performance and new silhouettes for training and tennis gain considerable new interest from consumers? VII. Athletic Footwear Prognostication e longtime industry analyst Matt Powell, now with Spurwink River, expects 2024 will be "a challenging year" for athletic footwear. "e big brands have had to promote to clear overstocks, and they will find it very had to get back to full-price selling. And the lack of newness from the big brands will also be a headwind," he says. Powell is bullish on seven footwear brands this year to outperform the segment. ey are Asics, Birkenstock, Brooks, HeyDude, Hoka, New Balance, and On. n footwearinsight.com January/February 2024 ~ Footwear Insight • 15 The benefits of AI are all over the map, ranging from the optimization of product sourcing, demand planning and inventory forecasting to analyzing data collected by store cameras to make changes to a store's size and layout.

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