As of the moment, the answer is “yes.” In fact, denim and activewear are replacing more formal fashions for business and pleasure.
“Denim has a lot more room to become a fixture in the American wardrobe that’s beyond the Sunday outfit. It’s really become the work uniform,” said Eric Fisch, the national sector head of retail and apparel at HSBC. “That means a nice pair of jeans, for a guy, with a button-down; a similar equivalent for women with a blazer.”
And Fisch would know. Last year the retail analyst, who is based in Los Angeles, traveled to more than 20 cities for work. It was only in New York City that he was forced to wear dress pants and a tie. “People aren’t buying suits anymore,” he added.
For instance, Tailored Brands, which owns men’s suiting retailers Men’s Wearhouse and Jos A. Bank, continues to struggle. Total sales during the most recent quarter fell 8.6 percent to $785.8 million, down from $859.9 million a year earlier.
Now retailers and fashion designers are duking it out in the battle over casualization.
Last month, Chip Bergh, chief executive officer of Levi’s, rang the opening bell as the company took to the public playing field for the second time in its 166-year history. Wall Street met the denim maker’s return with excitement, even loosening up its strict suit and tie dress code for the day as traders walked the floor of the New York Stock Exchange in denim pants and jackets. The company’s stock shot up 32 percent that day to $22.41 a share for an $8.1 billion valuation. The stock closed up 6.77 percent Monday to $23.97 a share.
The results shouldn’t be too much of a surprise, though, considering the demand for denim hasn’t been this hot in years. The jeans market — from fashion looks to classic blue jeans — grew 3 percent in the U.S. last year, according to The NPD Group’s Consumer Tracking Service. That’s on top of a 2 percent gain in 2017. The one exception is sales of premium jeans, which have been hurt by ath-leisure.
That could be why on the same day as Levi’s initial public offering, athletic sportswear maker Nike reported another impressive quarter, improving on top and bottom lines and passing the $1 billion earnings mark for a single quarter.
Nike’s success can be credited to many things, but above all the continued strength of the ath-leisure and activewear movements. And it’s not just Nike’s footwear that is in demand. Consumers are buying yoga pants and jeans to stay comfy.
The U.S. activewear market, which includes athletic and athletic-inspired apparel and footwear, is expected to gain roughly $21 billion in the next four years, reaching a total of more than $138 billion, according to market research firm Euromonitor International. Globally, that number is expected to jump to around $413 billion.
“On the weekends, people want to be super comfortable,” Fisch said, pointing out that casualization creates an opportunity to replace the traditional weekend outfit of jeans with yoga pants. “There are some ath-leisure brands that are obviously meant to look like workout clothing. [As a result], people have sort of a designation in their closets for yoga wear that is meant for wearing to the market and yoga wear that’s for doing yoga.”
Throughout the entire retail sector, apparel is growing faster than footwear, 10 percent compared with 6 percent, respectively. In Nike’s case, the growing demand for apparel is taking share from some of fashion’s biggest players — like Levi’s.
“Think [Nike] apparel Monday through Friday as well as on court, in the gym and over the weekend,” Andrew Campion, executive vice president and chief financial officer of Nike, told analysts on the company’s most recent conference call. “We see a pretty extraordinary opportunity to both catalyze the growth of athletic apparel within the broader apparel industry and also extend the offerings that we’re bringing to market.”
The company plans to “accelerate” its women’s apparel business over the next year with an expanded line of yoga pants and sports bras.
Mark Parker, chairman, ceo and president of Nike, added that the company’s expansion in apparel for both men and women is “a balance between both performance and sportswear.”
At the same time, ath-leisure brands like Under Armour, Lululemon and Adidas continue to take market share. Even big-box stores like Kohl’s and Burlington have recently revealed their push into extended activewear apparel.
But denim is trending too. In 2018, American Eagle Outfitters sold more than $1 billion of its popular AE jeans. Denim sales are also strong at Target, the Gap and Madewell, to name a few. VF Corp. is gearing up to launch Kontoor, a spin-off company that will house the parent company’s denim brands.
There is the boom in sneaker culture too — a staple in almost any ath-leisure or jeans ensemble. Sales of nonperformance, athletic-inspired adult sneakers grew 17 percent during the 12 months ending April 2018, according to The NPD Group.
Foot Locker, which carries nearly all of the top brands in athletic and athletic-inspired sneakers, also recently released strong quarterly earnings results, crediting Nike as one of its biggest growth drivers.
Nike’s Parker pointed out that for the quarter, the brand’s sneaker traffic and revenue were up triple digits, and 17 of the top 20 sneakers launches had 100 percent sell-through rates. It’s reasonable to assume, then, that when shoppers head to Nike’s web site to buy sneakers, they’ll stay to buy apparel as well.
Even so, the biggest opportunity for both Nike and Levi’s — and both ath-leisure and denim in general — might be abroad.
Parker told analysts that Nike’s momentum in apparel and footwear is not limited to North America, but can be felt around the world. Major cities in China, Japan and South Korea have been especially lucrative, and both ath-leisure and denim are just starting to pick up outside North America.
“China earned its second quarter of high-quality double-digit growth as the Chinese consumer increasingly makes sport a part of their daily lives,” Parker said on the call.
Rival Lululemon has about 40 stores in the same part of the world, which is just a fraction of its store count in North America. Baltimore-based sportswear maker Under Armour opened its first brand store in India this month. It’s easy to assume, then, that as the casual trend continues to spread around the globe, so too will the opportunity for both denim and ath-leisure brands to profit.
“For both ath-leisure and denim, global expansion is nowhere near what it can be,” Fisch said. “There’s even further demarcation and opportunity between the two, with direct-to-consumer, ath-leisure brands and yoga brands. That’s the bet that everyone has: That there’s a lot more room to grow, especially out of the U.S.”