Los Angeles, California (PRWEB) February 10, 2012
Like many retail industries that sell discretionary products, the Hat and Cap Stores industry felt the negative effects of the recession. When unemployment hit an unprecedented high of 9.3%, consumer confidence crashed and per capita disposable income declined for the first time since 1991. As a result, industry revenue fell an estimated 0.1% in 2008 and 2.4% in 2009. Fortunately for industry players, the slowly rebounding economy has aided the return of spending on hats and caps. These small- tickets items are favored by Generation Y shoppers (between the ages of 15 and 29); as this demographic increasingly enters the workforce, demand for industry products will grow. IBISWorld estimates that this factor has largely offset recessionary declines. Industry revenue is expected to grow at an average annual rate of 0.9% per year over the five-year period to 2012, to total $2.1 billion. This includes a 2.6% increase in 2012 alone.
Still, competition from alternative hat sellers has constrained industry growth and profitability. Online retailers are favored for their price comparison abilities and the added convenience of shopping from home. “Mass merchandisers also pose a competitive threat since they offer discount prices on similar items,” according to IBISWorld industry analyst Caitlin Moldvay. “In response, brick-and- mortar retailers are expanding their product selections to invite and retain shoppers.”
Hat and cap stores are expected to experience a solid recovery through 2017. Rebounding economic conditions – leading to increasing per capita disposable income and consumer sentiment – will boost expenditures on discretionary items like headwear. “Despite projected industry recovery, competitive pressures from online retailers, coupled with a decline in leisure time available, will continue to limit growth opportunities for industry players,” says Moldvay.
The Hat and Cap Stores industry has a low degree of market share concentration. The industry’s largest player, Genesco Inc. holds an estimated 26.6% of the market; however, the remainder of the industry is largely composed of small specialty retailers. The average company in the industry operates from one location and employs five full-time employees. Over the past decade, the industry has undergone a period of consolidation as Hat World (now a subsidiary of Genesco) acquired Lids Corp. in 2001, which was previously the industry’s largest headwear retailer with more than 400 stores. Hat World also acquired Hat Zone Inc. in 2002 and Cap Factory Inc. in 2003 before being acquired in 2004 by Genesco Inc. Over the five years to 2012, Genesco has continued to consolidate its leading market position by acquiring Sports Fan-Attic in 2009, as well as Sports Avenue and Anaconda Sports Inc. in 2010.