Canada: Athleisure’s heyday may be over, but sales are still surging


For many consumers, Lululemon and the “athleisure” movement reached its cultural peak when Oprah put the Canadian company’s pants on her coveted annual “favourite things” list in late 2010.

Oprah’s benediction came more than a decade after the Vancouver-based brand’s inception, but Lululemon Athletica Inc.’s origins-making role in taking athletic wear beyond the walls of the gym to the street has helped fuel the apparel company’s meteoric growth and worldwide expansion.


It also spawned a slew of competitors that have had an accordingly dilutive effect on Lululemon’s sales velocity and brand clout.

Now almost ubiquitous, athleisure — the word made it to the Merriam-Webster dictionary this year and everyone from actress Kate Hudson to country singer Carrie Underwood is cashing in on a proprietary line of stretchy tights — has had industry analysts worried the trend is as good as dead.

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“We view athleisure as a trend, and like all trends, it will come to an end at some point,” Stuart Haselden, Lululemon’s chief financial officer, told analysts last week during the retailer’s third-quarter conference call.

“And those competitors who are not in the business in a high-quality manner, they are going to go away.”

Lululemon has enjoyed the biggest upside from the category it helped define: months after Oprah cooed over its pants on her now-defunct daytime television show, the retailer reported 2010 revenue of US$453,000 at 137 stores. After years of aggressive expansion, the company has 389 stores and more than five times the revenue, estimating it will rake in up to US$2.34 billion in 2016.

Still, bearish sentiments have been plaguing its investors for months. Before surprising analysts last week with an unexpectedly strong quarter, Lululemon’s shares had slid 25 per cent since late August.

On the surface, the overall category is still surging after years of growth, despite the high number of competitors, from specialty players such as YogaSmoga, Lole, Under Armour and Nike to mass lines at Walmart, Gap, H&M and Joe Fresh.

Even luxury players such as Tory Burch, Versace and Chanel have picked up the spirit by pairing stilettos with cashmere-blend sweatpants and marketing high-end leather sneakers.

The category also appears in the apparel aisles of department stores from Target to Kohl’s to Hudson’s Bay Co., which also owns Saks.

“The beauty of the department-store concept is that we are able to shrink businesses that get weak or that are in a cyclical weakness and we can grow businesses that are getting strong,” department store and real estate wunderkind Richard Baker, executive chairman of Hudson’s Bay Co., said last week during the retailer’s third-quarter conference call with analysts.

“Things like athleisure are growing, and we’re allocating more of the square footage in our stores to athleisure.”

Canadian sales of athleisure have annually grown by an average of seven per cent since 2010 to an estimated $4-billion market in 2016, up from $2.7 billion six years ago, according to NPD Group Inc.

At the same time, sales of denim, often characterized as the victim of yoga pant mania in the battle over casual wear, have slid to $1.8 billion in Canada in 2016 from $1.9 billion in 2010.

“The Canadian apparel market is a $26-billion industry, up two per cent from a year ago, and when you look at athleisure, it is still up seven per cent in 2016, so it is outperforming the market,” said Tamara Szames, fashion and footwear analyst at NPD Canada.

“We are seeing the rate of growth slow, but there is still steady growth.”

A nascent and related trend has the technical properties of athletic wear being adapted to formal and career wear, Szames said.

“It’s a more formal tailored look, however, it has added technical properties such as moisture wicking and stretch,” she said, adding the shift is largely being driven by millennial-aged consumers.

Sandy Silva, Toronto-based fashion retail consultant, said she believes the athleisure market is now oversaturated.

“You won’t find a retailer that doesn’t participate in it in some way right now,” she said.

As the trend fades, the brands that made a name in the category might recede, but they often survive.

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“Brands in general have peaks and valleys,” Silva said. “If you look at Levi Strauss, or brands that had their heyday in the late ’80s and early ’90s like Doc Martens, you see them having an uptick again. And this category is as relevant as denim was 20 years ago in that peak-and-valley analogy.”

As for Lululemon, it continues to grow though the rate of its sales growth appears to be slowing along with the broader athleisure category.

The retailer anticipates its 2016 same-store sales will be in the mid-single digits, a far cry from the 30-per-cent same-store sales spike in 2010 after Oprah recommended people put the company’s yoga pants under the Christmas trees of their nearest and dearest.

Source: Financial Post 


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