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Sourcing Summit 2014 Takeaway: Athleisure Still Has Legs

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There’s still plenty of room for growth in athleisure, or active apparel worn as streetwear–a key takeaway from a panel discussion at Sourcing Journal’s “Insight and Outlook” Summit held Tuesday at the Harmonie Club in New York.

In a session called, “Retail Today: Overdiscounting, Underemployment + the Rise of the Yoga Pant” presented to a packed ballroom of more than 250 industry professionals, John Kernan, CFA and director at financial services firm Cowen & Company, led a panel including Faye Landes, managing director at Cowen, and David Bassuk, managing director for consulting firm Alix Partners.

According to Bassuk, the athleisure trend isn’t so much a fashion phenomenon as a shift in the way consumers are spending their time. “This trend is a byproduct of lifestyle, putting more comfort and function in product. And it’s impacting many more categories than just yoga pants. It’s across the board. The way consumers are acting and socializing, posting pictures of what they’re wearing and doing, everything’s more visible.”

The panelists observed that brands like Soul Cycle, Lululemon, Under Armour, and even Nike are beginning to generate a cult following. The viral nature of some of these phenomena is what has the potential to move markets in a big way.

When asked how long the current athleisure cycle will last, Cowen’s Faye Landes said, “It’s really hard to predict the duration of cycles. In recent years we’ve had fads like Heelys [sneakers with retractable rollers] and bright colored jeans that lasted only a season or two. However, when you layer on comfort to the trend, it can last a long time. Take UGG boots. They started their ascent when Carrie [Bradshaw, the main character played by Sarah Jessica Parker in the TV show Sex and the City] started wearing them, and they’re still going strong.”

Although the athleisure segment is growing, it’s also getting crowded. Lululemon, the company credit with inventing the category, created “lightning in a bottle” according to Landes. “They were in the right place at the right time. They took grass roots marketing as far as anyone has,” she said, referring to the company-sponsored yoga events that built awareness of both yoga and the brand – creating and filling the need at the same time.

But Lulu, after having worked out some quality and supply chain problems, finds itself in the position of having to defend its turf against some stiff competition. “Nike is selling an estimated $1 billion in apparel in the U.S. each quarter, and its quarterly earnings report last week indicated that women’s is doing great,” Bassuk said, “And Under Armour is gaining a tremendous amount of awareness with its renewed focus on women’s.”

The panelists pointed out that department stores are getting into this business with more athletic looks in their private label brands, as are specialty retailers like Urban Outfitters with its “Without Walls” concept. Then there are the myriad boutique brands like U.K.-based Sweaty Betty and Montreal-based Lole.

Landes said, “We’re also very bullish on Athleta. Gap Inc. doesn’t break out Athleta sales in their numbers, but we feel the brand is growing rapidly. Gap Fitness is also doing well – you see it everywhere. And Under Armour’s Misty Copeland spots, which are unbelievable, have gotten six million YouTube views.”

There’s less going on in the discount sector, however, according to Bassuk. Target’s C9 brand by Champion has not enjoyed the explosive growth many had expected due to problems at the retailer stemming from last year’s security breach and resulting sluggish sales. But Bassuk feels that another age group holds the key to future growth.

“Demographics and price points have begun to shift toward younger consumers. Millennials and Generation Z aren’t going to pay Lululemon prices,” he said. “For them, $58 for a running top is too steep. So H&M and Forever 21 are coming after that customer with a $13 version.”

Landes said Lululemon needs to move away from basics and deliver more fashion. “Everyone has enough black yoga pants. Lulu needs to stop being so conservative in their forecasts, because they sell out of things quickly.”

This contrived scarcity might be part of the brand’s allure, however. According to Landes, “The consumer’s bond with Lulu is not broken. At Soul Cycle in Tribeca – the trendiest unit of the cycling studio’s fleet – the women are wearing Lululemon.”

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