ATLANTA — Casual lifestyles and technical advances in apparel are pushing the activewear market to another winning year, with more Americans pursuing healthier lifestyles.
Consumer spending on total men’s activewear sales at retail rose 7 percent to $18.46 billion in September 2007 from $17.32 billion in September 2006, according to The NPD Group’s Consumer Tracking Service. That’s not as strong as last year’s increase of 12.9 percent but it’s still significant when looking at a flat landscape for men’s total apparel. Swimwear, in particular, showed a healthy increase of 24 percent to $781 million, which market sources attribute to a warmer climate, as well as various fashion trends in that segment. Sales of bottoms rose 18 percent to $1.35 billion and fleecewear sales increased 15 percent to $2.1 billion.
Unit sales of total men’s activewear rose 5 percent, a positive achievement without a major athletic event like World Cup Soccer, which boosted sales for the soccer apparel and footwear companies, and the Beijing 2008 Summer Olympic Games, which has companies opening locations in China and preparing new, technical materials.
The Sporting Goods Manufacturers Association (SGMA) reports that wholesale sports apparel sales rose 8.2 percent in 2006, which is the organization’s latest data, while licensed merchandise sales rose 4 percent to $8.3 billion.
A renewed interest in fitness and working out has helped drive growth in the activewear segment. Scott Rosen, COO of Equinox Fitness, says his gym has had healthy increases in its member base both in existing and in new clubs. “We’re in a good spot in the market,” he says. “More people are working out. It’s quality of life, longevity and health factors.”
Licensed apparel has also had a good year. The SGMA says that retail sales of licensed product grew 4 percent to $13.9 billion in 2006, an all-time record for the category, which has grown in four of the last five years since 2001. Authentic and replica game jerseys, the SGMA says, make up the bulk of apparel sales.
As Jim Severyn, vice-president of Kurt Salmon Associates, points out, “We have recovered from the strike [the National Hockey League lockout of 2004/2005] and people are more positive about professional sports.”
Marshal Cohen, chief analyst for The NPD Group, attributes the success of active apparel to three things: passion, technology and casualization. “When guys can say, ‘This is new and it fits into my lifestyle and I need it,’ it’s an easy sell,” he says. “It’s new technology advances and casual lifestyles.”
Activewear Goes Casual
In the activewear segment, new casual trends have dominated many of the growth categories, from swimwear, where men are using swim trunks as shorts, to fitness, where Equinox sells micro-twill cargo shorts, hoodies and lightweight, french terry drawstring pants in their gym shops.
“Part of it is the business place has become more casual and it has progressed to the rest of our lives,” says KSA’s Severyn. “The other thing that’s driving it is that a large part of the population isn’t buying apparel to cover their bodies but to achieve a lifestyle or status. They usually pick a brand … because they want to be part of that image, and companies are pushing their brands.”
Many brands are selling both fashion and athletic colors, plaids, color-blocking, stripes and other trendy looks. Men also want their activewear to be multifunctional—something that’s suitable for the gym or as casualwear.
Karyn Riale, retail buyer at Equinox, says, “We have guys who are buying $60 to $80 T-shirts and wearing them with cargo pants and sneakers to work out. People are so much more fashion-conscious when they’re working out.”
Puma takes fashion inspiration for its spring/summer 2008 running line from the Olympic track but the company also says the apparel will have to be dressier than traditional running gear, and will include reflective seams and a drop tail. Key pieces are a long-sleeved, half-zip warmup top, baggy shorts, T-shirts and lightweight jackets.
Men also want the latest and greatest in technology. Moisture wicking is common, but companies are also offering sun protection, water-resistant and -repellent fabrics, odor resistance, ventilation and temperature regulation in their garments, as well as compression webbing technology in running apparel to comfort overworked muscles. Compression tops, which boosted Under Armour to stardom, remain popular with athletes.
This growth in technology is also bolstered by new interest in sporting activities that require such technical apparel. Ryan Dolan, national sales manager of TYR, which is known for its swimwear, points out that triathlons are one of the fastest-growing endurance sports in the U.S. Just three or four years ago, membership in USA Triathlon was 30,000 to 40,000. That has risen to more than 100,000 in 2007, Dolan says, adding that “65 to 75 percent of the participants signing up are beginners, so there’s new blood in the sport.”
TYR has had an entire triathlon line for men since 2000, and it has grown as the number of triathletes has increased. The company’s triathlon apparel is highly technical to improve performance and includes compression panels in the Trisuit bottoms, in the Tracer line, and in some swimwear and other models. Tracer garments also include Teflon coating throughout the fabric, and stitching with hydrophobic qualities and for speed through the water.
Adidas also has compression panels in its TechFit Powerweb apparel, as does CW-X in its running apparel.
As usual, the market has been on the move this year with mergers and acquisitions. Nike recently acquired U.K.-based soccer apparel and footwear company Umbro; Adidas acquired Mitchell & Ness Nostalgia Co., which makes vintage athletic apparel; Dick’s Sporting Goods completed its acquisition of Golf Galaxy in February; and Finish Line was going to buy Genesco but that deal has gotten bogged down in legal skirmishes. Meanwhile, Nike has announced it is looking for a buyer for its Nike Bauer Hockey business.
KSA’s Severyn adds that the spiral of consolidation will continue. “VF [Corp.] is still adding to their portfolio, private equity firms are picking up companies, and smaller companies are purchasing other small companies,” he says. “When you consolidate, you’re just controlling more of the retail space,” he explains. “It makes it more difficult for the smaller lines to get space.”
The sporting goods market itself, also including footwear and equipment, is stable, says Thomas B. Doyle, vice-president of information and research at the National Sporting Goods Association. However, the market isn’t growing much. “It’s a battle of market share … and Dick’s [Sporting Goods] is taking market share from others, especially specialty sports stores,” he adds. “I don’t know that the market can absorb the amount of expansion that’s going on, especially in the outdoors [hunting and fishing] sector. So you’ll probably have some fallout.”
The Athlete’s Foot (TAF) has undergone significant changes this year after its acquisition a year ago by NexCen Brands, which introduced a new store design, logo and merchandising system, as well as TAF branded apparel.
Not only are the major retailers opening more stores but so are the brands. Nike, Puma and Adidas have stores, and newcomers this year include Under Armour, which opened its first store in October in Annapolis, Md., and Tretorn (owned by Puma), which opened one in November in Georgetown, D.C.
“Any big [retailer] buys only a limited amount of a brand’s product,” Doyle says. “So what do you do? You open stores to promote the full line. It gives them control. Nike’s retail stores, for example, are a big piece of their business.”
The brands also want to push their wholesale sales with their own stores, KSA’s Severyn adds. “People used to be afraid of [opening stores] because they thought it would cannibalize their own sales. Now, they want to get out and create their brand image to drive sales. People will actually buy more at retailers, like Dick’s, because their image will be more pronounced out there. Under Armour is a great example.”
A few sporting goods dealers have had a tougher year, despite the upbeat news from The NPD Group, including Hibbett Sports, which recently lowered its earnings outlook for the year to $1.07 to $1.20 per share from $1.30 to $1.35. Sport Chalet’s net income fell in the first six months, ended Sept. 30, to $75,000, from $2.2 million a year earlier. More positively, Dick’s Sporting Goods reported net income for the first six months, ended Aug. 4, up 88 percent to $69.6 million. But Dick’s is projecting comp sales, which were up 4.7 percent for the first six months, to be flat to down 2 percent in the third quarter.
The Summer Olympics in Beijing
The Olympics will be the big event next year, although NSGA’s Doyle points out it doesn’t really affect sporting goods much, except as a post-Olympics effect due to the introductions of innovative fabrics meant to help a sponsoring company’s athlete win. That would include eight-time Olympic medal winner Michael Phelps, who is sponsored by swimsuit maker Speedo.
“The Olympics will provide us with the biggest marketing platform in the brand’s history,” says Craig Brommers, vice-president of marketing at Speedo. “This will be the biggest Olympics of all time for Speedo.”
It has definitely been a good year for swimwear, Brommers continues, and he expects global swimwear sales to peak in 2008 because of the games. It helps that the swimming finals will be held at 8 a.m. in Beijing, which is 8 p.m. on the East Coast of the U.S. “It will be a great boon for swimming and Speedo, because it will be live and on prime time,” he says.”
Nike and Adidas are getting ready for the Olympics by opening retail stores across China. Nike, which opened a flagship store in Beijing in August, has approximately 3,000 stores in more than 300 cities in China. The company has been doing business in the country for more than 25 years, beginning with its sponsorship of China’s national basketball teams in 1980. Nike also is sponsoring 22 of the 28 Chinese sports federations.
Adidas is also establishing clout in China for the 2008 Olympics, which the company says will serve as a platform for Adidas to become the leading brand in China. The company plans to have more than 4,000 stores in 540 cities in 2008, and is opening two stores per day leading up to the Games. Adidas says it will have 5,000 stores in 650 Chinese cities by 2010. “We plan to continue growth in China over the next few years to build our presence in this extremely important region,” says a spokesperson. “By 2010, China will be the second-largest market after the U.S., and Adidas is targeted to achieve 1 billion euros (approximately $1.45 billion) in sales by 2010.”
The Licensing Game
The Collegiate Licensing Co., which represents about 170 colleges and universities, as well as other college-related properties, had a 12.5 percent increase in apparel royalties in its fiscal year from July 1, 2006, through June 30, 2007. According to a spokesman, all apparel categories were up, driven primarily by women’s and youth. One of the reasons professional sports licensed apparel does so well is that companies and the leagues manage their licensed business much better now, plus there haven’t been any strikes since the NHL lockout.
“A lot of it has to do with what I believe is a terrific way of how the leagues are set up,” says Rick Becker, vice-president of sales at VF Imagewear. “It’s a healthy, managed business. You don’t find many businesses that are sold in the mass market, department stores and sporting goods chains.” Also, he notes that retailers set their floors early for a sport’s licensed product—like the NFL, for example—and then increase the space until they have a full assortment available when the season opens.
“Retailers in general are feeling pretty good about licensed business right now,” Becker says.
VF acquired Majestic Athletic, which has several sports licensing agreements, including Major League Baseball, in March. Becker says the baseball business has exceeded VF’s expectations, turning in double-digit increases. “We’re very pleased with baseball,” he says. “We had a terrific playoff throughout all the divisions [this year].””
And the strength of the licensing business, in addition to the activewear’s other segments, has market observers sanguine about the future of the industry. So whether or not the Summer Olympics influences Americans to get active in a sport and buy apparel for it, the sporting goods industry has plenty of opportunities with fashion and advances in technical fabrics, as well as winning teams, to keep the momentum going in 2008.