4 Reasons Athletic Apparel Stocks May Have More Room to Run

4 Reasons Athletic Apparel Stocks May Have More Room to Run - Yahoo Finance

4 Reasons Athletic Apparel Stocks May Have More Room to Run - Yahoo Finance
Lipscomb signs deals with apparel giants Under Armour and PUMA - Lumination Network
Costco sells $7B in clothing a year, surpassing some apparel retailers: report - Fox Business

4 Reasons Athletic Apparel Stocks May Have More Room to Run - Yahoo Finance

Posted: 06 Jul 2019 09:10 AM PDT

The retail industry has had its ups and downs in recent years, but the standout of the industry has been athletic apparel. Shares of Nike (NYSE: NKE), Adidas (NASDAQOTH: ADDYY) (NASDAQOTH: ADDDF), and lululemon athletica (NASDAQ: LULU) have significantly outperformed the SPDR S&P Retail index over the last 10 years. The one exception has been Under Armour (NYSE: UA) (NYSE: UAA), which has had its share of issues lately.

While top athletic wear stocks are not cheap and could have limited upside potential in the short term, there is tremendous long-term growth potential for the leading brands.

Here are four reasons why athletic apparel stocks have further room to run over the next 10 years.

A woman lacing up a sneaker on her right foot while wearing a high heel on her left foot.

IMAGE SOURCE: GETTY IMAGES.

1. Innovation driving growth

The top athletic brands have seen steadily rising revenue over the last decade, thanks to increasing interest in healthy lifestyles and the athleisure trend.

NKE revenue (TTM). Data by YCharts.

Athletic brands are using their increased scale to get faster at releasing new styles to the marketplace, which allows them to sell more merchandise at full price while avoiding markdowns. Additionally, the increased focus on e-commerce channels is starting to push margins higher for Nike, while Lululemon and Adidas have already been reaping the benefits, as you can see here:

NKE gross profit margin (TTM). Data by YCharts.

The rising demand for lifestyle athletic wear (or athleisure), and the effort by the top brands to release new styles at a faster pace throughout the year seems to be reinforcing their brand power in a crowded apparel industry. Because of social media, fashion styles are changing faster than ever, so the apparel brands that can respond to those shifts in the timeliest manner stand to win in the long run.

One survey found that Nike, Adidas, and Under Armour rank as the top three apparel brands among millennials -- ahead of Ralph Lauren, Levi Strauss, and L Brands' Victoria's Secret -- which may signal that the athletic brands are already winning the battle.

2. Athleisure is likely here to stay

One of the defining fashion trends of this decade has been athleisure, and it seems only to be gaining momentum. Sneakers have been featured during Paris Fashion Week of all places, which is not surprising, given that women's sneaker sales soared last year while sales of high heels fell. Nike, in particular, sees a significant long-term opportunity to grow sales of women's apparel, as sales in the women's category have started to pick up recently.

Fashion trends come and go, but the growth in footwear and athletic apparel in recent years is consistent with the secular shift in everyday dress. Over the last century, clothing styles have been getting more and more casual, and that is playing into the hands of the apparel brands that are in business to make the most comfortable and functional clothing available. This partly explains why Lululemon, and its "science of feel" approach to design, has seen exploding sales over the last 10 years.

Two young women wearing sneakers and long skirts.

IMAGE SOURCE: GETTY IMAGES.

3. The sneaker market is gaining steam

The most important indicator that athletic apparel stocks still have room to run is the forecast for footwear sales. The sneaker market is expected to reach $95 billion by 2025, representing an annual growth rate of 5%, according to Grand View Research. This would provide a tailwind for Nike and Adidas, since both companies derive most of their revenue from footwear.

There are a few reasons why sneaker sales should keep growing. For one, there is the growing interest in fitness around the world, particularly in China, which is the fastest-growing market for Nike and Lululemon.

A second reason is customization. Nike and Adidas are investing in a variety of colors and materials options for best-selling styles. Nike credited the expanding variety of choices for its growth last quarter.

Also, Adidas and Nike are continuing to effectively use celebrities and well-known apparel designers to craft unique sneaker styles in limited quantities that drive brand heat. One of the more noteworthy collaborations in recent years was Adidas' partnership with music artist Kanye West, which was very effective in creating the Yeezy Boost 350 v2, one of the best-selling sneakers of 2018.

Adidas just recently announced a collaboration with pop star Beyonce to create an exclusive line of sneakers and apparel that could be huge for the brand.

4. Exploding sneaker resale market

The growth of the sneaker market has created a healthy resale market, which suggests that there is much more demand for lifestyle sneakers that Nike and Adidas are not fully capturing. Three resale sites have emerged during the sneaker boom: StockX, Stadium Goods, and GOAT. It's common to see unique pairs of Air Jordans or Yeezys sell above the original retail price on these marketplaces.

StockX alone is estimated to be worth $1 billion, but the whole sneaker resale market is projected to reach $6 billion by 2025, according to research firm Cowen. The growth of the resale market is a positive sign that there is a long tailwind of demand to drive sneaker sales at Nike and Adidas, as well as potential new entrants like Lululemon, for a long time.

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John Ballard owns shares of Lululemon Athletica. The Motley Fool owns shares of and recommends Lululemon Athletica, Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.

Lipscomb signs deals with apparel giants Under Armour and PUMA - Lumination Network

Posted: 06 Jul 2019 10:02 AM PDT

It is time to invest in some new Bison gear. This week Lipscomb signed a 5-year deal for Under Armour to become their official outfitter. This agreement covers all of Lipscomb's varsity teams, except Men's Soccer, who signed a deal with another international apparel giant, PUMA, earlier this summer.

Both of these partnerships give the Bisons a number of unique advantages over fellow ASUN teams.

Lipscomb's agreement with Under Armour makes it the only ASUN member to have an exclusive, direct partnership with an apparel powerhouse. By joining the Under Armour family, Lipscomb Athletics will have newly available funds that can be used throughout the department.

"Coming off of one of the greatest competitive years in the history of Lipscomb Athletics, I am excited to see what's next for us, and I'm glad to have Under Armour as a part of the plan to elevate our programs," Lipscomb Athletic Director Philip Hutcheson said in a statement released by Lipscomb Athletics. "Recruits, serious athletes and casual fans alike all are familiar with the Under Armour brand, and we are proud they will be outfitting our Bison fans and teams in the coming years."

Not only does this deal offer Lipscomb monetary savings, but additionally Under Armour offers an annual allotment of promotional dollars to be spent on apparel, equipment and uniforms; a significantly reduced rate on all additional apparel and equipment purchases; marketing and branding dollars to enhance the athletic facilities and direct access to UA's inventory and customer service.

The incentives and financial support are almost secondary to the brand recognition that Lipscomb will enjoy as a partner of Under Armour, as the Bisons will join NCAA powerhouses Auburn, Boston College, California, Cincinnati, Maryland, Northwestern, Notre Dame, South Carolina, Texas Tech, UCLA, USC and Wisconsin in the Under Armour family.

In addition to the growth and recognition that the Under Armour deal creates for Lipscomb, the Men's Soccer team's three-year agreement with PUMA puts them in an unparalleled position in NCAA soccer. This partnership is the first of its kind in collegiate soccer.

"In today's age, landing a fully-supported deal with an industry-leading brand like PUMA is unique, and it will keep our men's soccer program on the forefront of the NCAA landscape as the game continues to grow in America," Lipscomb Associate AD for External Affairs Brent McMillian said in a statement released by Lipscomb Athletics.

All Lipscomb Men's Soccer apparel will be provided by PUMA, whose internationally recognized name will continue to grow Lipscomb's reputation, which reached new heights after the team reached the Sweet Sixteen last fall.

"We are very excited to enter into an agreement with PUMA, a company that has long been at the forefront in the game of soccer," 2018 ASUN Men's Soccer Head Coach of the Year Charles Morrow said in the statement. "Not only will this help with building the brand of our program, it will also have a big impact in recruiting by being known as the leader of our game."

PUMA, who signed the back-to-back Premier League Champions Manchester City earlier this year, will also benefit from this deal as they continue to grow their markets in North America and in the international soccer community.

All new PUMA and Under Armour gear is available for purchase now. Be sure you are a part of this historical new step in Bison athletics.

Photo courtesy of Mckenzi Harris. Graphics courtesy of Under Armour and Lipscomb.

Costco sells $7B in clothing a year, surpassing some apparel retailers: report - Fox Business

Posted: 01 Jul 2019 11:19 AM PDT

Costco isn't just the place to get groceries in bulk -- it's also become a popular spot to buy clothes.

Despite the absence of fitting rooms and window displays, the membership-based chain sells more than $7 billion a year in clothing and footwear sales, which is more than apparel retailers such as Old Navy or Ralph Lauren, The Washington Post reported.

Even though people are turning more to online shopping, most of Costco's business continues to happen in-store, with apparel sales increasing about 9 percent every year since 2015, according to the outlet.

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What helps is that the chain sells brands such as Calvin Klein, Birkenstock and Tommy Hilfiger -- as well as Costco's Kirkland Signature brand -- at lower prices than other stores, The Post reported.

"Costco has quietly become an apparel destination," a retail analyst for Instinet told The Post. "It is clearly resonating with shoppers and winning over brands at the expense of department stores."

Ticker	Security	Last	Change	%Chg
COST	COSTCO WHOLESALE CORPORATION	268.25	-0.89	-0.33%
GPS	GAP	18.30	+0.18	+0.99%
RL	RALPH LAUREN CORP	110.99	+0.50	+0.45%

But apparel isn't the only area where Costco is making impressive sales. Jewelry is another category where the retailer has been successful.

In May, Costco revealed it sold a $400,000 diamond ring at one of its stores.

The sale was significant for the chain, which is known for its discount prices. Currently, Costco lists nearly 470 diamond rings on its website. The highest priced is a round platinum solitaire ring listed for $419,999. The second highest diamond ring is $280,000 cheaper.

During an earnings call with investors in May, Galanti said the purchase helped boost sales for the quarter.

"Sales highlights for the quarter included some significant diamond repurchases one in the $400,000 range and big-ticket items like golf simulators that sold for $14,000 each which we sold during the fine pay period," Galanti explained on the call.

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In March, Gap Inc. announced it will separate Old Navy into its own publicly-traded company and create a new, currently unnamed firm to house the remaining brands in its portfolio, including Gap and Banana Republic.

The move – announced as part of its fourth-quarter earnings – will better position the San Francisco-based company to "leverage the power of our brands," CEO Art Peck said at the time.

Peck will serve as CEO of the new Gap entity, while current Old Navy CEO Sonia Syngal will lead the spun-off firm.

Gap will also close 230 stores across the country over the next two years, a decision expected to cost roughly $625 million, as well as some Banana Republic stores. Among the brick-and-mortar locations that will be shuttered are some of its flagship properties, company executives said.

FOX Business' Jennifer Earl and Joe Williams contributed to this report.