Market Overview

Athleisure Wear Fad A Rapidly Growing, But Crowded Space

Athleisure Wear Fad A Rapidly Growing, But Crowded Space

Sales of yoga apparel have risen 45 percent year over year, according to analysts at SportsOneSource. During the same time period, yoga participation also grew... by 4.5 percent.

Analysts at Barclays may have noticed the same trend. Those analysts stated that the U.S. athletic apparel market (or "athleisure wear") will rise by nearly 50 percent to more than $100 billion by 2020.

Many retailers and manufacturers sell athleisure wear, but the big players include Lululemon Atlethica (NASDAQ: LULU), Nike (NYSE: NKE), Under Armour (NYSE: UA) and The Gap (NYSE: GPS).

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Analyst Commentary

Brian Sozzi of Belus Capital Advisers told Benzinga that "the apparel industry is ripe for innovation, the last real beneficial piece of clothing that was created was compression gear."

Sozzi also stated that specialty retailers now have an opportunity to "re-excite" consumers with the athleisure trend.

However, Sozzi isn't convinced that the trend is headed towards a $100 billion market.

According to Sozzi, a leading jeans manufacturer such as VF Corp (NYSE: VFC) needs to commit more capital to the category while its retail partners need to devote "stores inside stores" and not just tables towards the line.

Retail and apparel analyst Kristin Bentz noted that the athleisure wear market is becoming "more integrated" into daily and corporate life. Bentz pointed out that corporate America sees the value in fit and healthy employees, an attitude which supports the growing apparel trend.

However, Bentz stated that the market is getting "painfully" crowded and only a few names in the space stand out.

"Lululemon was lucky to occupy a niche between yoga freaks and gear-a-holics," Bentz told Benzinga. The Lululemon brand is "technically precise to give it studio credibility and expensive enough to pass muster to the higher-end. However, Nike and Under Armour can come in and accomplish both faster and cheaper."

Bottom line, according to Bentz, retailers and manufacturers that aren't Nike and Under Armour need to "be very afraid" of the competitive threat.

  • Lululemon First To Market

    Lululemon is considered to be the first yoga-inspired athletic apparel company and was founded in 1998. The Canadian based company has been on the receiving end of negative media attention following product recalls and upsetting comments from its former CEO Chip Wilson.

    According to Lululemon’s website, the company’s mission statement is to “create components for people to live longer, healthier, fun lives.”

    Lululemon is best known for engaging its client base with in-house yoga studios and community wide events, such as a free yoga class in historic Wrigley Field.

    Lululemon sells products ranging from yoga pants, yoga shorts, skirts and dresses, tops, jackets and hoodies. Its products are on the higher end price range. As an example, the cheapest pair of yoga pants the company sells online is $82. Non-yoga apparel such as long sleeve shirts sell for a minimum of $68 on the company’s online store.

  • Nike: Financial Power To Dominate The Category

    Nike certainly has the financial power to dominate the athleisure wear market. Consider the fact that Nike ended its recent quarter with $5.1 billion in cash and short-term investments compared to Lululemon’s market cap of roughly $5.79 billion.

    In the recent quarter, Nike grew its women's revenue by 12 percent to nearly $5 billion. The company hopes to achieve $7 billion in annual sales to women by 2017.

    Unlike Lululemon, Nike is a wholesaler and its products can be found at many leading retailers such as Dick’s Sporting Goods (NYSE: DKS), J.C. Penney (NYSE: JCP) and Macy’s (NYSE: M.

    Nike has recently taken a page out of Lululemon's book and began hosting informative and interactive events at retail partners like Macy's.

    Nike sells its athleisure wear in three lines: “In The Studio” provides essential gear for pilates, yoga, dance and barre. “At The Gym” is intended for functional training, core work and other gym workouts. Finally, Nike’s “High Intensity” line provides “unrivaled style for boot camp, kettlebell exercises, kickboxing and interval training.”

    As is the case with Lululemon and all other athleisure wear manufacturers, the client doesn't have to participate in any of the activities to purchase a product.

    Nike hopes to compete against Lululemon in the upper-price category and at the same time attract clients at lower price points. A pair of Nike Sculpt Dri-FIT Capri Leggins is selling for $100 on while lower priced Capri Leggins sell for $40 on

    Nike’s shirts and tank tops sell at reasonable price points. The cheapest tank top sells for $22 to $36 while higher priced items like zip pullovers sell for $65 or less.

  • Under Armour Gaining Momentum

    Under Armour CEO Kevin Plank stated during the company’s second quarter conference call that he believes the women’s business can be as large if not bigger than men’s. To achieve this goal the company has signed well-known women athletes like Lindsey Vonn and Sloane Stephens as brand ambassadors.

    Under Armour’s slogan “I will what I want” is “a reminder that you don’t need permission, advice, or affirmation when you have WILL. It’s a celebration of who you are. As an athlete. As a woman. As everything between an beyond. It’s a reminder that the best things in life aren't given. They’re earned. And there’s one reason you are where you are today. That reason is you.”

    Under Armour's yoga pants range in price. On the company’s website, the most expensive pair of yoga pants were selling for $89.99 while the cheapest pairs were selling for $59.99, offering consumers good value at various price points.

    Under Armour’s tank tops are also sold at various price points, such as a Stretch Mesh Tank for $29.99 or a more fashionable Rave N’ Flow Tank II for $69.99.

  • The Gap Fights To Gain Market Share

    The Gap continues to expand its women’s athletic line with a standalone business named Athleta. By the end of the year, the company expects to have 100 Athleta stores to better serve the needs of its clients.

    During The Gap’s second quarter conference call, the company’s CEO Glenn Murphy stated:

    "I've also said many times our key competitor is Nike [and] all those other competitors who get a lot more air time. At the end of the day Nike is the big player here and the person we look at the most."

    Athleta is a "premier fitness fashion brand for women who see being healthy and fit as vital to life. Power to the She."

    Athleta’s products are sold at the lower end of the spectrum, although the company tries to remain competitive in the higher-priced market through nine different lines including “The Metro”, “Chaturanga”, “Kickbooty” and many more. With this strategy, Athleta hopes to take market share away from Nike and other brands.

    Athleta’s website showed capri pants on sale for $29.99 from $79.00. On the higher-end, Athleta sells a pair of “Breakthrough Laser Cut” Capri pants for $84.

    Athleta also sells athleisure wear in other categories like “skorts”, a unique combination of shorts and skorts. Skorts range in price from $23 on the low-end up to $64.


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