Work-at-Home Trends Igniting the Athleisure Segment
We live in a world of buzzwords. Some of these words take root in products and services that later become mainstream, such as the Internet of Things (IoT) and bring-your-own-device (BYOD). One buzzword that gained traction in the fashion industry is athleisure, which refers to any comfortable athletic apparel that is aesthetically pleasing and can be worn both while exercising and as everyday wear.
While athleisure has been around since the first yoga pants hit the market in 1997, this fashion trend started to take off around 2010. Its popularity and acceptance gained momentum in 2020 as the COVID-19 pandemic had at-home employees demanding apparel that was both comfortable and suitable for virtual conference calls. This market segment generated $105.1 billion in sales last year, according to Euromonitor International, a provider of strategic market research.
More fashion brands are now jumping on this trend to the point that market forecasts predict a 6.5% annual growth rate to occur up to the year 2030. Let's check out some of the current frontrunners in the space.
Lululemon Athletica Inc. (Tii:LULU)
It's quite possible that Lululemon started the athleisure product trend, thanks to Chip Wilson. In 1997, Wilson attended a yoga class where he saw the instructor wearing a type of slinky dance attire. This inspired him to design form-fitting yoga apparel and build a business around it. That business later became Lululemon Athletica. Promoting itself as an athletic apparel brand, the company recently announced that it expects revenue and earnings to be at the high end of its prior range of expectations for the fourth quarter of fiscal 2020 ending January 31, 2021.
Nike Inc. (Tii:NKE)
While Lululemon may have started the trend, Nike has been reaping the rewards as the leading company in the athleisure industry. Expanding its product line from athletics to athleisure was a simple move considering its massive manufacturing capabilities and marketing machine. To make it simpler for consumers to adopt the athleisure craze, the company also rolled out an e-commerce platform, a new SNKRS app (which provides insider access to the latest launches, hottest events, and exclusive releases), and the NikePlus membership rewards program. These efforts helped contribute to a 9% increase in revenues, including an 84% spike in NIKE Brand digital sales, for the company's fiscal second quarter ended November 30, 2020.
Deckers Outdoor Corporation (Tii:DECK)
While the company's name is not instantly recognizable, its UGG footwear brand is well known to consumers globally. Deckers Outdoors provides footwear and apparel for athletes and people who enjoy casual lifestyles. Combining these two trends has allowed the company to position itself in the athleisure market prominently. That ability to capitalize on a trend contributed to a 15% increase in revenues for a record $623.5 million for Deckers' fiscal second quarter ended September 30, 2020. The company also cited new product launches and the ability to capture demand online as contributors to the strong results.
adidas AG (Tii:ADDYY)
When talking about Nike, the name adidas will usually pop up as a worthy competitor. Operating in the same spaces as its rival, Adidas has also been able to carve a niche of buyers in the athleisure market. For its third quarter, the company reported a 51% year-over-year revenue increase from its e-commerce platform. At that time, adidas CEO Kasper Rorsted said, "…We are even better positioned to benefit from the long-term industry growth drivers accelerated by the pandemic such as health and wellbeing, athleisure and digitization." For the eco-friendly consumer, adidas also recently announced that for the first time, more than 60% of all its products would be made with sustainable materials.
Under Armour, Inc. (Tii:UA)
A relative newcomer, Under Armour is a 25-year-old is a sports equipment company that also offers Athleisure apparel worldwide. While once touted as a worthy competitor to Nike, the company has struggled over the years to gain a better foothold in the market – one reason its stock is down 13% over the last 12 months. Like many others in the retail space, Under Armour shifted its strategy to focus more on digital sales in light of the pandemic. As a result, while wholesale revenue decreased 7% for the company's third-quarter ended September 30, 2020, direct-to-consumer revenue increased 17% to $540 million. The company cited continued strong growth in eCommerce as a contributor.
The athleisure trend is here for now. Whether it will still continue to be popular after COVID-19 is a guessing game, yet these companies are banking on the hopes that consumer demand for comfortable, multi-purpose apparel will continue to hold strong for many years to come.