Growth in the athletic apparel market is plateauing, and it could be further impacted by a trend toward looser denim fits.
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Athletic apparel retailers such as Lululemon and Nike could be in the crosshairs, while brands like Levi Strauss & Co. could see the upsides, according to Jefferies analyst Randal J. Konik, who labeled the looser fit trend as an “under-appreciated risk” to athletic apparel retailers.
Interest in wide-leg pants has grown over the past several years—so much so that Levi’s management on the company’s second-quarter earnings call named the winning trend outright. “We continue to lead the global trend around straight, loose, and wide-leg bottoms,” Levi’s president and CEO Michelle Gass told investors during the call last Wednesday.
Gass said the loose fits, which are now more than 50 percent of Levi’s overall bottoms assortment, grew 21 percent across its distribution channels in the second quarter ended May 26. “We are continuing to lean into the trend this summer with the launch of a new baggy fit for women, the XL, which will be available globally and across channels, along with a new relaxed fit for men, the 555,” she added.
The core of Levi’s business “remains very healthy,” with the original icon, the 501 jean, continuing to “deliver impressive growth,” Gass noted. In addition, Levi’s focus on “denim dressing” continues to gain traction and is becoming a “more meaningful part of our portfolio.” That has helped the company expand its total addressable market opportunity, with denim dresses, skirts, jackets and jumpsuits up by triple digits in the quarter.
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Gass said the company is also seeing success in tops and non-denim categories. She noted strong sales in Western shirts in Levi’s women’s business, up 40 percent, while the Tech Pant in the 511 fit for men also posted strong results. And following the quick-drying, cooling and lightweight Performance Cool denim, Gass said the fall will see the expansion of the platform with the launch of Performance Warm, featuring a soft interior designed for warmth in cooler weather.
Konik said that according to Google Trends, interest in “wide leg pants” has grown 9 percent year to date, while interest in “flare leg pants” and “ skinny pants ” has fallen 13 percent and 16 percent, respectively, year-to-date. It is the shift in fashion interest toward the wide-leg pant that has the analyst believing that Nike could face some headwinds related to this trend, while Lululemon could be impacted further as it skews toward women—particularly as the fashion shift is “outside of Lululemon’s core and overall expertise.”
“We visited a Lulu location in early April, and its wide-leg offering appeared to be garnering minimal interest,” Konik said.
In a research note in April, Konik said Lululemon store visits across Long Island in Garden City, Huntington and Manhasset showed heavy inventory in wide-leg bottoms on the sales rack, a possible indication that the athletic retailer could be losing share to other players. He emphasized that the reason could be that Lululemon is better known for its tight leggings, and not jogging pants.
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