Why Some Retailers Rode the Activewear Boom and Others Struggled
Consumers gravitate to activewear
The consumer trend for activewear has tested the strength of the business model for chain store apparel retailers over the past few years. While some companies have seen apparel sales decline, others have continued to thrive. Declining sales have as much to do with missed design and fashion calls as with consumer preferences.
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Gap (GPS) and Abercrombie & Fitch (ANF) are facing sales pressures due to poor performances from their higher-priced brands. Lower-priced Old Navy has provided some downside protection for Gap, although same-store sales growth came in negative for the brand in the fourth quarter. Banana Republic has been facing headwinds for several quarters now, as premium athleisurewear appears to be a better option.
Same-store sales growth for ANF’s preppy clothing has been negative for years. This is because the more-than-century-old brand has failed to keep up with design expectations of its largely college-age clientele. The declines have been more pronounced in the US market and for the Abercrombie & Fitch brand.
Sales for lower-priced Urban Outfitters (URBN), which caters primarily to a younger consumer, has been more robust. URBN offers its own activewear line as well as Nike (NKE) products. L Brands (LB) has also provided better-than-average results in both its top and bottom lines.
GPS, ANF, URBN, and LB have floated their own activewear lines, although GPS and LB have had a head start over other retailers looking to enter the space.
GPS, ANF, URBN, and LB together constitute 0.17% of the holdings of the iShares Russell 3000 ETF (IWV).
Next, let’s see why apparel sales are growing faster in e-commerce.