U.S. Markets closed

Athleisure is still driving clothing sales

This holiday shopping season, expect to see even more “athleisure” on the racks, and from more brands that you wouldn’t necessarily associate with that category.

The term, a portmanteau of “athletic” and “leisure,” now refers to a lot more than just gym gear that you can wear all day. It encompasses sneakers, outerwear, and even men’s dress shirts and blazers.

“We’re starting to see more and more performance fabrics entering into what I would call classic apparel,” says Matt Powell, a retail analyst with NPD Group. “It’s a different mentality than gym wear. The cadence is different, the colors and design are different. So you can buy a dress shirt today, or even a suit, that has stretch or is anti-microbial. That is a performance characteristic we typically see in activewear. Yoga tights that look more like pants. The world is really blending here.”

NPD Group calls the category “casual sportswear,” and pegs the space at $44 billion in annual sales. Most of the brands making athleisure products avoid using the actual term “athleisure,” but they all know its importance.

In the third quarter of this year, NPD Group says, activewear sales were up 3%. That’s not the same growth as in 2015, but Powell says, “When we compare it to non-active apparel categories — dresses, jeans, etc. — those sales are much worse. My sense is that activewear as sportswear continues to be an important trend.” General fashion apparel still does more in sales, but athleisure is trending better.

The space has grown overcrowded. There’s Lululemon, sometimes credited with popularizing the category. Athleta, which sold to The Gap in 2008, is still thriving. Nike and Adidas make athleisure, and Adidas has done particularly well in the category with retro apparel and sneakers, and partnerships with Kanye West and Stella McCartney.

Puma partnered with Rihanna starting in 2014 on the “Puma x Fenty” line, and Vogue wrote that Rihanna’s “oversize motocross-inspired nylon track pants and anoraks were a nice way to push the athleisure trend out of its current spandex comfort zone.”

Powell has told Yahoo Finance that Rihanna is the only recent example he can think of where a celebrity endorser directly boosted a brand’s sales. Puma’s Fenty Creeper sneaker with Rihanna was the 2016 Footwear News “Shoe of the Year.”

And now even Amazon is selling its own athleisure apparel.

The business is so crowded now that, even though demand is still high, supply is too high, and only the best offerings will succeed.

“Supply is excessive and demand is not quite what it once was,” Neil Saunders of GlobalData Retail told CNBC in July. As a result, “Pioneers and innovative retailers like Lululemon continue to do well, even if the edge has come off growth,” but new players will have a tough time.

Rihanna, in New York City, wearing Vetements and Puma. (Footwear News)
Rihanna, in New York City, wearing Vetements and Puma. (Footwear News)

Pressure on sports brands to jump into athleisure

Sitting out from athleisure has particularly hurt Under Armour.

One year ago, Under Armour reported its 26th consecutive quarter of 20% revenue growth or higher. But on that earnings call, CEO Kevin Plank, discussing the brand’s appeal, said, “It’s not about what people are conveniently referring to as athleisure. It’s the simple truth that people around the world are raising what they expect from athletic apparel.”

But in the apparel business right now, actually, it is about athleisure.

And that quarter proved to be the end of Under Armour’s hot streak. The company has now had four consecutive quarters of missed earnings; in the most recent quarter it had its first ever year-over-year revenue decline; and its stock is down 56% in 2017.

Shares this year of some of the apparel brands that make athleisure: Lululemon, Gap, Nike, Adidas, Under Armour.
Shares this year of some of the apparel brands that make athleisure: Lululemon, Gap, Nike, Adidas, Under Armour.

“Under Armour has won, for years, making sport-wear, but they have failed to make sportswear, and they really don’t have a sportswear business,” says Powell. “They have tried to make some product that’s more sportswear driven, but it’s not an easy transition to make.”

Back in 2015, at an analyst day, Plank acknowledged the hole in Under Armour’s product line by displaying a chart that showed “sportswear” made up 25% of Nike and Adidas sales; it was 0% of Under Armour sales. Two years later, the brand still didn’t act fast enough.

In other words, apparel brands can’t ignore athleisure and hope it will go away. Even though the space is crowded, brands must offer athleisure-type products. Powell expects Under Armour to quickly try to catch up.

Big logos and bright colors are “not going to be appropriate for your whole day”

Overcrowding didn’t stop Joe Teno from launching a new athleisure brand, QOR (pronounced “core”), in 2014. Teno, former CEO of Athleta, steered the brand to its $150 million acquisition by The Gap in 2008.

“Athleta was exclusively for women,” he tells Yahoo Finance. “What about something for men? What would it be like, and how would it be? What we thought was we’d like to encourage guys to be more active — not at the basketball court, not on the tennis court, but all day.”

QOR, though still small and not well known, is an example of how athleisure is widening. The brand’s pitch: clothing for an active person, with “active” generously defined. “What we’re trying to do is not be involved so much in a specific activity. We’re about performance-wear all day long. The person who bikes to work, takes a walk at lunch, bikes home, goes out to dinner. Or a person who travels a lot.” Last month, QOR, which sells direct to consumers, online only, added its first women’s line.

The old cliché image associated with athleisure was a woman wearing her Lululemon yoga pants all day long. Now the image is broadening to include a man wearing a wicking, stretchy-material blazer at the office.

But to make products like that, it can’t look like athletic clothing, Teno says. “If you were going to build sports-specific things, you might have bright logos or colors. Well, that’s not going to be appropriate for your whole day. So we have to come up with something a little more muted, classical styles, modern designs, that fit, and have to be functional, and they have to be made with performance clothing.”

To describe that all-encompassing formula, Teno prefers the term “active fashion,” though he’s fine with “athleisure” too.

Call it whatever you want: it isn’t going away yet, and athleisure is likely to dominate holiday clothing sales.

Daniel Roberts is the sports business writer at Yahoo Finance. Follow him on Twitter at @readDanwrite.

Read more:

Adidas has nearly doubled its US sneaker market share—at Nike’s expense

3 big reasons Under Armour has cooled off

Why Amazon will have success in athleisure

Under Armour CEO: ‘It’s not about athleisure’

Adidas is Yahoo Finance sports business of the year for 2016