They add style, they are becoming increasingly fashionable and new fitness trends have made this a “must” for many athletes over the last few years. Compression wear has gone from a simple aid for recovery to now almost a necessity for those of us who subscribe to a more active lifestyle than the simple jog on the weekends.
Compression garments have become one of the more recent trends to hit performance gear makers, and what started roughly five years ago has evolved into a new science. Not so much for recuperation efforts but now for more of an ergonomic aid, compression gear has carved out its own niche in the multibillion-dollar athletic wear industry, with Under Armour Inc. (UA, Financial), EXOlifestyle Inc. (EXOL, Financial), Gildan Activewear Inc. (GIL, Financial), Target Corp. (TGT, Financial), adidas AG (ADDYY, Financial), Walmart Stores Inc. (WMT, Financial), JCPenney Company Inc. (JCP, Financial).
Under Armour may have had the first crack into this market. The company went public in 2005 and what initially started out as a company focused on uniquely different apparel that helped keep players cool in the summer and warm in the winter has continued to change the athletic landscape. It took former University of Maryland football player Kevin Plank five years to turn Under Armour into a $5 million company.
Ten years later, Plank built Under Armour into a billion-dollar sports apparel and equipment corporation. Year over year, the sports apparel company continues to grow, having posted year-over-year increases since 2006 when it recorded annual revenue of $430.69 million. Today, Under Armour boasts annual revenues of nearly $4 billion and is anticipating full-year net revenue to be nearly $5 billion for 2016.
Under Armour hasn't been the only one to benefit from the growth in the compression-wear industry either. A study by Persistence Market Research shows significant growth to be realized in the near term. This market and its products continue to become more popular with professional and amateur athletes who are more interested in getting a performance edge than simple recovery, a more dated use for compression gear.
The industry currently generates about $2.38 billion, but projections show that it will grow to $3.23 billion by 2020. The largest share of the market is found in North America, and Europe is in a close second place. But a big focus, according to the study, is that the global market will offer the next big leg for growth. It is believed that future growth will be greatly influenced by the Asian market, mainly India, Japan and China. Much of the growth has been spurred by new competitive athletics like CrossFit and various action sports.
EXOlifestyle, for example, is more of a newcomer to the space but has recently entered the global marketplace for compression wear. In October, the company, which recently underwent a name and symbol change, announced that it would be ramping up its global presence and increasing inventories due to high demand for its products. EXOlifestyle has begun to build a stronger foothold as the brand of choice for numerous functional fitness athletes including Christmas Abbott, a CrossFit Games Competitor, Olympic Weightlifter and first female NASCAR Pit Crew member, as well as Noah Ohlsen and Brooke Ence, elite CrossFit Games athletes.
Prior to the name and symbol change, more than 60% of the company’s revenues came from the EXO brand, which had helped propel the company’s growth to the tune of 84.7% on a year-over-year basis. Though still a smaller player in the space, EXO has established distribution partnerships in Germany, Sweden, the U.K., New Zealand and even Dubai.
In comparison, Gildan Activewear has begun to better establish itself in the market as this new industry niche expands. At the end of 2015, the athletic apparel company posted over $2.5 billion in sales with retail exposure in over 50 countries. This was also the fourth consecutive year of compounded growth the company had seen since 2011. Unlike EXO or Under Armour, Gildan is more focused on a lower-priced model with a heavy presence in markets where screen printing on “blanks” (or nonbranded apparel) is popular. In fact, more than two-thirds of the company’s revenue for the first half of the year came from printwear as opposed to branded apparel.
The company is set to report its third-quarter results Thursday. Also having a global presence, Gildan has built an organization that now has more than 48,000 employees with large manufacturing facilities in Central America, North America and Bangladesh. The brand’s compression gear can be found at retailers like Target, Walmart Stores and even JCPenney, targeting a shopper looking for a more affordable brand of compression wear.
But one brand that has been put directly in the limelight due to strategic moves toward the “alternative sports” market such as CrossFit has been adidas. Through its Reebok subsidiary, the company has become the exclusive sponsor of the CrossFit brand. It should also be noted that a few years back the company inked another landmark deal with action fight sport organization UFC to become the exclusive outfitter and apparel provider for the world’s leading mixed martial arts organization. This not only has brought more notoriety to the clothing brand but has also popularized compression wear as a whole.
Even with the athletic apparel giant seeing strong growth overall, the exact brand bringing attention to the “CrossFit apparel” space, Reebok, may be holding adidas back. In fact, Greg Glassman (CrossFit’s creator) made it begrudgingly evident that he wants to see Reebok sold off.
“I’d like to see Reebok sold to someone young, fresh, excited and willing to enter into the modern era of things,” Glassman said in a clip posted on the "60 Minutes" website. This could ultimately open up an opportunity to set the stage for a new entrant into the branded apparel space when it comes to action sports like CrossFit and MMA after both contracts with Reebok run their course.
Over the better part of the past two decades, compression-based activewear has been more firmly established in sportswear. Claims that compression garments can aid and even improve athletic performance, reduce the risk of injury and even enhance recovery times during and after exercise have been key factors to support industry growth.
The fact remains that this is a market segment still in its infancy but set to see a surge in growth over the near term especially. With companies like those mentioned in this article continuing to realize high double- and triple-digit growth on a quarterly and annual basis, this fact strengthens the emphasis on targeting companies actively pursuing a foothold within the space.
Disclosure:Â The author owns 158,200 shares in EXOlifestyle and no shares in any other stock mentioned.
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