Wednesday, August 22, 2007

Suiting Up: Women's Sports Apparel Showing Muscle

A person can wear only so many clothes in one lifetime -- that's what makes the U.S. apparel industry a mature and slow-growing business. However, this market, worth $344.5 billion at retail in 2005, isn't likely to disappear.

To capitalize on what growth there is, manufacturers and retailers must stay on top of consumer trends, such as the strengthening demand for sports apparel -- especially in the women's segment. Clothing and accessories sales overall rose by about 3.9% in 2004, according to government data. But sports apparel sales grew by 4.9%, according to The NPD Group/NPD Fashionworld. (The sports category includes multi-use or "lifestyle" clothing, such as gym clothes that can be worn casually around town, as well as technical or "active" gear meant for a specific sport, such as golf or cycling.)

The sales gain for sports apparel overall was due largely to increased spending for women's items, up 10.8% in 2004, notes the Sporting Goods Manufacturers Association (SGMA), a trade group. Women's share of active sports apparel (41.1% of dollars spent) is also close to achieving parity with men's 42.5% share. While active apparel (men's, women's, and children's) declined in units in 2004, average price was up 6.4%, versus a 4.1% price rise on all sports apparel.
In 2005, sales trends favored the lifestyle segment rather than active wear, according to Standard & Poor's Equity Research. While total sports apparel sales saw a 7.4% increase to $44 billion, active wear grew 2.7% in dollar terms, according to NPD. S&P&P; thinks 2005 sales were driven by clothing intended for use, rather than by technical gear or T-shirts from the Gap. Purchasers, according to S&P&P;, were people attracted to an active lifestyle and who may engage in sports recreationally, though perhaps not competitively.

S&P's fundamental outlook for the apparel, accessories, and luxury sub-industry is positive, due mostly to strength it sees in accessories, as apparel manufacturers are under pressure from retail consolidation. S&P's view on apparel retailers is neutral, because of inventory build-ups and long-term demographic weakness due to shoppers' changing priorities. However, some retailers are benefiting from consolidation, S&P believes. Apparel retailers with strong brands, differentiated products at attractive prices, and superior customer service stand the best chance of outperforming their peers.

Demand for sport apparel is supported by technological as well as demographic factors. Currently, 41.3 million Americans hold gym memberships of some sort, according to the New York Times. Women's increased participation in sports has been supported by federal law as well as by the leisure time and cash wielded by the baby boom generation. Performance fabrics, such as polyesters, which improve the feel and function of sporting goods, are likely to increase consumer demand and to fuel dissatisfaction with lower-tech gear.

Within women's apparel overall, females ages 35 and older may present a significant opportunity, according to S&P. This 80-million strong cohort is projected to increase by 1.2% annually through 2010, compared with a 0.8% rise for women ages 20 to 34. Additionally, women 35-plus tend to have the disposable income to spend on clothing.

S&P sees Chico`s FAS (CHS) and Liz Claiborne (LIZ) as poised to profit from this generation, thanks to the customer knowledge, service, and merchandise -- all of which S&P calls "superior." S&P also approves of their entry into women's sports clothes, along with similar strides by bebe Stores (BEBE) and Nike (NKE).

To broaden their revenue base, manufacturers must diversify, in S&P's opinion, as Liz Claiborne did by buying Prana, maker of yoga and climbing apparel. S&P views the company's breadth in brands, sales channels, and demographics, along with its consistently strong financial results, as worthy of boosting its earnings multiples. Another company striking a posture in the yoga market is privately held L.L. Bean. The $1.4-billion mail-order retailer is introducing a cataolgue called Everyday Adventures, with women's clothing suitable for yoga and fitness activities.

Nike, the $13.7-billion sporting goods giant, emphasizes both fashion and function in its products. Women's sports apparel is "a big part of our business, and will continue to grow," said spokeswoman Morgan Shaw. "That includes women's fitness, running, court sports, dance, cardio, and yoga."