Even if you’re not familiar with the term athleisure, you’re sure to be aware of the garments it refers to: fashion-forward sportswear donned as often by women running errands or shuttling children to various activities as those headed to the gym.
As its popularity explodes, the industry is expanding to embrace menswear, demonstrating its potential for growth and diversification. That’s good news for investors interested in buying shares of companies that sell the stylish sports garbs.
If you’re not familiar with your athleisure investment options, these stocks will provide a firm foundation for your portfolio. Coming off recent second-quarter earnings reports, this niche is currently thriving.
Nike: From athletics to athleisure
Though Nike Inc.'s (NKE, Financial) roots are firmly in the athletic sector, producing top-quality sneakers and performance wear, a growing proportion of their products put fashion first. In fact, the company has even backed crossovers with prominent fashion designers, producing a capsule collection with Matthew M. Williams and a women’s sneaker collection created by the all-female designers of International Girl Crew. What’s more, even their performance gear, like the Metcon 3 crosstrainers, are as fashionable as they are functional.
Nike’s stock hit an all-time high in August, and the brand is boosting its appeal with the athleisure set through the new SNKRS app, an e-commerce platform, and the NikePlus membership program. Unlike Under Armour (UA), which has also attempted an athleisure rollout, Nike’s earlier investments in style have made it more popular with fashion-conscience buyers than many comparable athletic brands. After all, even before the days of athleisure, people collected Jordans and other Nike styles because they were stylish, not necessarily because they were planning to play hard.
Lululemon: The athleisure leader
While Nike built its image on athletics, Lululemon Athletica (LULU, Financial) was always a fashion-focused brand. Though the clothes can hold up to a tough workout, their cost makes them status items and their sizing is limited; bottoms stop at a U.S. Women’s 14, or a 35-inch waist, helping to frame the popular perception of the brand. But none of that is holding their stock back. In the last six months, Lululemon’s share price has exploded – the stock is up 52.2% over that period and 21% in just the last three months.
One reason Lululemon is looking so good as it pushes past the second quarter is its recent leadership switch: the company hired former Sephora executive Calvin McDonald as their new CEO. McDonald didn’t come on board officially until Aug. 20, but that will give the company a valuable push during the third quarter, ideally keeping earnings high after a strong year.
Lululemon is known for courting controversy, yet seems to thrive despite mixed public perception. Shareholders, however, are hoping McDonald can help steer the company away from public conflict.
Think broadly about athleisure stocks
Nike and Lululemon both have obvious status in the athleisure market, but for those investing in the space, it’s worth thinking broadly about just what constitutes an athleisure brand. Because of the style’s popularity, a broad variety of brands are producing products that could be considered athleisure: The Finish Line (FINL, Financial), Zumiez (ZMZ, Financial) and teen brands like Aeropostale (ARO, Financial). Simply put, both traditional sportswear companies and major fashion chains want in on the trend. Even major sporting goods retailers like Dick's Sporting Goods (DKS, Financial) have a foot in the athleisure sector.
Investors should be mindful of this type of brand diversification when investing in athleisure, as the market forces impacting big fashion are different from those targeting performance and outdoors brands. Outdoor retailers, for example, are positioned at the juncture between the growing camping sector and fashion, providing multiple fronts for growth.
Disclosure: I do not own any of the stocks mentioned in this article.
