Athletic apparel will be on many a wish-list this holiday shopping season, and these 6 stocks should see a boost from the trend. Here’s why.
As the holiday shopping season heats up, athleisure is front and center with consumers clamoring for loungewear as the coronavirus pandemic continues to keep people at home.
“From cozy loungewear, to active glam, and pajama-inspired fashion, consumers will not only be dressing differently, but this frame of mind will also lead them to be more selective with their apparel holiday gifting choices,” said NPD apparel analyst Maria Rugolo.
Leggings, hoodies, pajama sets, and other cozy items are central to Gap-owned Old Navy (NYSE: GPS) holiday marketing and merchandising this year, and the store shuffled its store layout to advertise the trend.
“We gave it much more dominant, forward space,” said Old Navy President and Chief Executive Nancy Green. “Active has moved far up in position. We believe that the modern way of dressing is mixing things up, so you can pair a power legging for women with a denim jacket… whether you’re working out or hanging at home. You’ll also see this dominantly in our marketing.”
While Gap shares dropped more than 19% on Wednesday following disappointing earnings, the company’s Old Navy and Athleta brands continue to outperform. Old Navy’s net sales increased 15%, and same-store sales were up 17% as the store offered 55% more active wear in the third quarter.
And it’s Athleta brand for women’s workout clothes saw net sales surge 35% in the quarter, while same-store sales rose 37% marking the highest gain ever reported by the brand.
Names like Lululemon (NASDAQ: LULU) and Nike (NYSE: NKE) are also seeing a big boost from the athleisure trend, and both reported stronger sales growth than retailers who haven’t leaned in to the trend.
Bank of America analyst Lorraine Hutchinson recently issued a Buy rating for Lululemon shares, calling the company “one of the best growth stories in retail and expect the brand to be a winner in a COVID and post-COVID environment.” And RBC Capital Market’s Kate Fitzsimons has an Outperform rating on Nike shares, with a $145 price target, writing that the company is a “best-in-class global athletic play.”
Both stocks’ shares have delivered big gains this year as sales have surged, with Lululemon shares gaining 54% so far this year, and Nike shares adding 34% year-to-date.
Companies ranging from Levi’s (NYSE: LEVI) to Target (NYSE: TGT) to Louis Vuitton (OTC: LVMUY) are investing in the space, offering new products and active apparel brands with stretchy fabrics that can be worn around the house or out-and-about.
“Athleisure has changed consumer expectations regarding comfort and fit of their apparel,” said Deborah Weinswig, Founder and CEO of Coresight Research. “We expect the boundaries between athleisure and sportswear and casual wear will continue to blur.”
“More and more companies are entering the athleisure category,” Weinswig added, “attracted by [its] strong growth opportunities.”
As for those strong growth opportunities, the U.S. athleisure market is expected to see sales decrease 9.2% year-over-year to around $105.1 billion in 2020 due to the coronavirus pandemic and consumers shopping less, but are expected to rebound next year with nearly 8% growth. And by 2023, the athleisure space is expected to grow around 6.5% annually, taking market share from traditional apparel retailers.