Why Athleisure Wear is a Winner for Apparel Firms like Nike



Recent trends in athleisure wear

Firms like Nike (NKE), Under Armour (UA), and Lululemon Athletica (LULU) are benefiting from the shift to athleisure wear among consumers (XLY). Activewear sales in the US rose 8% year-over-year in 2014. In contrast, apparel sales as a whole were flat in 2014 compared to 2013.[1. Source: Marshal Cohen, the NPD Group.]

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Recent trends in athleisure wear

The trend is particularly strong among Millennials and tweens. The lifestyle typified by casual bottoms and tops is appealing for multiple tasks—from workouts to lounging with friends. The trend for activewear is also gaining momentum, perhaps due to the waning demand for denim wear.

Nike’s women’s wear goals

As we’ve mentioned in a previous series, Nike (NKE) and Under Armour (UA) are actively targeting the women’s wear segment. Currently, both Nike and Under Armour derive most of their revenues from men’s wear and gear. In contrast LULU derives most of its revenue from women and is actively targeting menswear.

Sales of women’s apparel, footwear, equipment, and other products made up less than 25% of Nike’s revenue in fiscal 2013. Nike has targeted this area as a growth opportunity. For this $4 billion business in fiscal 2013, the company plans to grow its women’s division by ~$3 billion by fiscal 2017. That’s faster than the company’s overall growth rate. In fact, Nike’s Women’s Training segment is growing faster than the company’s Men’s Training segment.

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New entrants

Apparel firms like The Gap (GPS) with its Athleta stores have launched their own activewear lines. However, NKE’s global competitor Adidas (ADDYY) has faced recent setbacks. DICK’s Sporting Goods (DKS), a major sporting goods chain, announced that it was planning to stock American Idol winner Carrie Underwood’s new range of fitness wear, named “Callie.” DKS plans to make room for the new offering by reducing the amount of space it allotts to the Adidas (ADDYY) and Reebok brands.

This comes as a blow, particularly to the Adidas-owned Reebok. Reebok is targeting a fitness demographic, as opposed to hardcore athletes. This may also widen the gap between Nike (NKE), Under Armour (UA), and Adidas (ADDYY) in terms of market share. Last year, ADDYY was displaced from the number-two spot in the US by UA.[1. Sources: SportScanInfo, Sterne Agee, Wall Street Journal] To learn more, read the Market Realist articles Where Nike And Under Armour Win In The Market Share Stakes and Market Share Gain Spurs Nike’s North American Footwear Revenues.


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