What Is Athleisure?
Athleisure refers to a fashion trend characterized by athletic dress that is both comfortable and esthetically appealing. The growth of athleisure has likewise created huge opportunities for investors.
Athleisure grew out of the dynamic use of the yoga pant. Despite the fact that yoga pants were designed for the rec center, their comfort and simple look led women to begin wearing them in relaxed and formal settings. Initially popularized by women, athleisure has branched into men's clothing too. Increments to the athleisure lineup include leggings, leggings, sweatpants, sneakers, hoodies, and jackets. Improved textiles have allowed sportswear to become more versatile, comfortable, and fashionable.
Lululemon Athletica is regarded as the brand that sparked the athleisure trend, yet it didn't stop there. Other early adopters of athleisure include Nike and American Apparel. Athleisure as a market continues to develop, replacing traditional activewear and, surprisingly, cutting into jeans sales. Companies like Levi Strauss and Co. furthermore, Kate Spade and Company are hurrying to release products to fit the market. Similarly as with any product trend, companies struggled not to be left behind, and investors can capitalize on this opportunity.
The popularity of athleisure led to major gains for companies who followed the trend. Lululemon's stock (LULU) has been volatile, however it rose substantially between 2017 and 2020. To a great extent, Lululemon had considerable success due to the rising popularity of athleisure and the company's position in the center of that trend.
Benefits of Athleisure
As demand for athleisure apparel increased during the mid-and late-2010s, the athleisure sector provided opportunities for growth investors. Growth investors prefer new products, new companies that have strong earnings growth, and stocks that frequently hit new highs.
Starting around 2020, athleisure companies fit that description well. In some ways, the growth of athleisure is like the trend toward quick relaxed feasting. As people become more affluent, they increasingly need to combine quality with convenience. That larger trend could support the continued growth of both athleisure and quick relaxed for quite a while.
Successful growth investors often center around one or two leading companies in an industry to profit from a trend. For athleisure, that stock was Lululemon Athletica between 2017 and 2020.
Athleisure has carved out a niche for itself in the dress industry. The athleisure trend was likewise a primary driver of growth for the apparel industry. Non-activewear sales really decreased in 2017, while the activewear apparel category continued to develop, according to NDP Group. Athleisure sales rose around 2 percent to $48 billion out of 2017.
Likewise, growth in athleisure picked back up. By late 2019, sports leisure footwear was developing at 7% per year, compared to declines for both fashion footwear and performance footwear. Lululemon's stock rallied in 2020, as price targets rose and analysts predicted strong momentum in the midst of reduced impact from the coronavirus crisis.
Analysis of Athleisure
The meteoric rise in the stock prices of numerous athleisure companies since 2017 has created a high degree of potential downside risk. There are the typical reasons for concern that value investors would site. These include high P/E ratios and relatively new firms without long histories.
There were likewise potential issues with athleisure from a long-term growth point of view. Market leader Lululemon Athletica already had a market capitalization of over $40 billion by early October 2020. That compared with nearly $200 billion for much better established Nike (NKE). While that actually leaves room for growth, those expecting a repeat of Lululemon's near tenbagger performance between 2017 and 2020 are likely to be disappointed.
A shocking performance in the near past could lead to other problems for athleisure stocks. Some of the better technical indicators, like RSI, flashed admonitions in August 2020 before a September correction. From a longer-term perspective, legendary growth investor William J. O'Neil cautioned that the majority of the money is normally made in the initial two years, followed by mediocre returns or a bear market.
- As athleisure became increasingly popular in the years leading up to 2020, it provided substantial gains for growth investors.
- Athleisure is a term for comfortable athletic apparel.
- Lululemon began the athleisure trend during the 2010s, and the sector has continued to develop.
- Unfortunately, the rapid rise of athleisure stocks between 2017 and 2020 created high downside risk.