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For the Activewear Market, There’s No Way But Up

A range of retailers, from H&M to Tory Burch, are following the likes of Lululemon and Nike into the fast-expanding fashion-meets-fitness sweet spot.
H&M activewear | Source: H&M
  • Lauren Sherman

NEW YORK, United States — Wearing gym clothes beyond the gym has never looked more appropriate. Indeed, in many of the world's style capitals, it's difficult not to notice the rise of the post-workout look. Yoga pants are no longer restricted to yoga class; instead, they're worn with a fancy fur vest for lunch with friends or a visit to Wholefoods. Sporty moisture-wicking zip-up jackets are layered between wool coats and cashmere sweaters. Even at fashion weeks on both sides of the Atlantic, Nike's woven Flyknit running shoes, paired with trousers or flippy skirts, are amongst the most popular accessories in sight.

In the 1980s, the aerobics craze spurred people to sport sweatbands, bodysuits and legwarmers outside of class. But this time around, the rise of the post-workout look reflects a more fundamental shift. “This is not a fashion trend, it’s a lifestyle trend,” said Marshal Cohen, chief industry analyst at Port Washington, N.Y.-based market research firm NPD Group. “The difference here is that there’s functionality mixed with fashion, not just solely fashion.”

A 2012 study conducted by the highly respected, San Francisco-based publication Yoga Journal estimates that 20.4 million Americans practice yoga, a 29 percent increase from 2008, when 15.8 million were attending classes. Indeed, practitioners of yoga in the US spend more than $10.3 billion a year on classes alone. Factor in the rise of other specialty exercise classes, including (but not limited to) SoulCycle, CrossFit, Pilates and a variety of ballet-inspired barre courses and it's easy to see why the activewear market has become a major point of interest for retailers. (Soul Cycle, which launched in 2007 and now has more than 20 studios in the US and one in London, recently launched a line with the Amazon-owned fashion site Shopbop).

Lululemon, established in 1998, was the first to see and seize the opportunity in activewear in a major way. Founded in Vancouver, Canada, by longtime surfer-turned-yogi Chip Wilson, the company went public in 2007, raising $327.6 million. From 2008 to 2013, sales increased by more than $1 billion, hitting $1.4 billion in the 2012 fiscal year. Gross profit has also continued to climb to $762.8 million in 2012, up from $569.4 million in 2011 and $179 million in 2009. And despite a slew of bad press resulting from the recall of a version of its popular Luon yoga pants, which consumers complained were too see-through, Lululemon’s projected sales for the 2013 fiscal year are about $1.6 billion (though, on Monday, the company announced that its fourth quarter sales projection will be off by around $20 million, due to weak January sales).

But Lululemon was far from the only company to target the activewear category. Sweaty Betty, the UK's first fashionable take on fitness gear, was also launched in 1998, as was Athleta (which was acquired by Gap Inc. in 2008). In 1999, a group of former Nike executives launched women's activewear company Lucy (which was acquired by VF Corporation in 2007). And in 2004, Adidas kicked off its sportswear collaboration with Stella McCartney, which, ten years later, has grown into a full-fledged brand available at 790 points of sale, worldwide, with a product range aimed at surfers, runners and, yes, practitioners of yoga. It was also in 2004 that global sportswear giant Nike increased its focus on the women's market with the launch its first female-targeted catalogue.

And there is still plenty of room for new players. The global sports apparel market — which includes women's activewear — is set to grow to $178 billion by 2019, according to Boston-based research firm Trefis. In 2013, in the US, sales of women’s activewear alone reached $11.5 billion, a 9 percent jump from 2012, according to market research firm NPD. “It’s hard to fathom how much more it can grow because it’s already grown so much. But as more and more consumers accept activewear as street wear, it will continue to keep growing,” said Cohen, who expects the women’s activewear market to keep up a similar pace for the next 2 to 3 years.

On a recent conference call, Kevin Plank, the chief executive of Under Armour, known for its weather-appropriate workout gear, predicted that the company's women's business would reach $1 billion by 2016 and that it "has the potential to be larger than men's." What's more, in its latest annual report, Nike specifically cited women's training products — which generated $1.1 billion globally in 2013, up 6 percent from 2012 — as helping to boost overall sales, particularly in North America.

“Over the past two-three years, the growth of athletic apparel companies has consistently outpaced the growth of traditional apparel companies,” said Camilo Lyon, managing director at Canaccord Genuity, in a recent note to investors. Lyon cited four key factors driving the shift: the availability of better athletic fabrics thanks to advances in technology, the “ever-increasing fashion component” found in activewear, fantastic brand focus and, last but not least, the fact that people are exercising more.

Perhaps it's little surprise, then, that traditional apparel retailers have begun targeting activewear. Back in 2010, American fast-fashion retailer Forever 21 launched a line of activewear. In 2011, Gap Inc began opening brick-and-mortar stores for Athleta, previously sold only online. The company has also launched its own Gap-branded workout line, Gap Fit.

Further upmarket, "accessible luxury" designer Tory Burch has indicated her desire to launch activewear, rooted in golf and tennis; this past summer, the company introduced chic rash guards to its collection. Sweaty Betty, with 36 stores in the UK and a healthy online business known for targeting "yummy mummies" (the British euphemism for attractive, wealthy, young mothers), has recently expanded to the US, opening two stores in New York's Soho and Greenwich, Connecticut. And just this past fall, New York fashion publicist Robyn Berkley launched Live the Process, another high-fashion, high-performance collection.

Some of the world’s largest fast-fashion companies are also moving into activewear. Earlier this month, H&M launched H&M Sport, designed with input from the Swedish Olympic team and conceived to be a real competitor to brands like Lululemon. Uniqlo, too, has stepped up its presence in activewear, hiring tennis player Novak Djokovic in 2012 as a spokesperson for its performance wear line.

But for fashion brands targeting the space, authentic credentials in developing performance wear may be critical to success. “There needs to be an element of legitimacy to it,” Cohen said. “Consumers need to believe it’s at the same level as Nike and Lululemon, even if the vast majority aren’t going to be using it to work out.”

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