Gen X and Millennials driving trends to wear athletic-inspired clothing that crosses over into the casual wear category. Major fashion retailers are losing customers to nimble athleisure brands such as RYU Apparel Inc. (TSX.V:RYU) (OTCQB:RYPPF) who are winning over consumers with high-quality sports apparel that can also be worn as casual wear even at the office. RYU, short for Respect Your Universe, charges fair prices for its models and achieves higher margins, resulting in fewer inventory issues than fast fashion brands like H&M or Zara. RYU prices are highly competitive when compared to established brands like Lululemon or the top lines of Nike, such as NikeLab, Nike Tech Pack, and Adidas Originals.
Gen X and Millennials Driving The Death Of Fast Fashion
Major retail brands such as Hennes & Mauritz AB (H&M) and Macy’s Inc. have been forced to shut down stores and cut prices this year to shift unsold inventory reaching into the billions of dollars. The industry has labeled the trend the “death of retail”, spelling the end of a profitable spell for companies that embraced fashion trends with high-volume, low-cost products, and high inventory turns.
Photo credit RYU featured via Mosnar Communications
The company’s entire product line is under 100 items, compared to the many thousands offered at any one time by fast fashion retailers. This high volume approach has backfired on retailers like H&M, who is reportedly sitting on more than $4 billion of unsold inventory according to Bloomberg.
The athleisure boom has not been lost on the major brands in the industry. Nike has captured part of this market through its Off White x Nike label endorsed by tennis star Serena Williams. The label gained notoriety earlier this year when the French Open banned Williams from wearing a black catsuit that helped the athlete prevent blood clots. Under Armour, Inc. has captured market share from both Adidas and Nike by straddling the space between conventional athletics apparel and urban athletics trends.
An athleisure-led strategy has helped RYU Apparel Inc. (TSXV:RYU.V) (OTCQB:RYPPF) achieve sustainable growth at an early stage in its development. The company reported a gross profit margin of 46%, or $3.01 million in 2017, versus C$1.4 million in 2016. That trend continued into 2018, with a Q1 gross profit of C$907,815, or an annualized rate of C$3.6 million. These numbers are generally unheard of in the sportswear space, where retailers often require years to establish a brand and build a customer base.
Major Brands Catching Up To Athleisure
Under Armour (NYSE: UA): Under Armour has reacted to the sweeping athleisure trend by creating their own athleisure line, Threadborne, to cater to the new segment. The company signed NBA Star Steph Curry, tennis star Andy Roddick, and ballet dancer Misty Copeland to promote the line. While Under Armour CEO Kevin Plank has kept the company’s athleisure sales numbers private, he has addressed the trend by stating Under Armour is hitting their internal benchmarks for the segment.
Foot Locker Inc. (NYSE: FL): Foot Locker is a New York-based sports footwear retailer that has expanded to 28 countries. The company, the successor corporation to retailer F. W. Woolworth, sells a collection of footwear from major brands including Adidas and Nike. The company recently announced a strategic investment of $15-million USD into women’s activewear maker Carbon38 in order to serve the growing athleisure space. Foot Locker’s second quarter revenue rose 3.9% to $1.78 billion, much of which was driven by online sales.
Skechers U.S.A. Inc (NYSE: SKX): Skechers is a global lifestyle and performance brand specializing in footwear. The company has begun targeting the athleisure market through their signature ‘YOU by Skechers’ collection which offers functional performance wear for women on the go. Skechers has responded well to the athleisure trend, posting $1.25 billion in sales in Q1 of 2018.
PVH Corp. (NYSE: PVH): PVH is one of the world’s largest apparel companies with almost $9 billion in revenue last year. PVH holds Calvin Klein, Tommy Hilfiger, Van Heusen, Izod, Arrow, Speedo, Warner’s, Olga, Geoffrey Beene and True&Co. in its portfolio. PVH boosted its second quarter by 13%, driven by strong demand for the company’s designer lifestyle brands including Calvin Klein, which has targeted the trend through its athleisure-inspired ‘Calvin Klein Jeans Established 1987’ line.
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