Despite challenges, sportswear appears to be a resilient category in the midst of COVID-19. While the epidemic seems to intensify consumers’ desire in their health and well-being, sportswear is in a good position to benefit from it as consumers express this desire through active lifestyles.
As a discretionary item, sportswear may seem like an unlikely winner after COVID-19. Indeed, for big companies, COVID-19 can be an accelerator because companies gain their connection with customers and conduct business through more profitable channels.
As per research published in William Blair Blog, the total addressable market (TAM) in the sportswear space is estimated at $472 billion globally. Sportswear increased from about 18% of the apparel category in 2007 to almost 26% in 2019. In fact, sportswear has shown a 6.5% compound annual growth rate (CAGR) over the past five years, one-and-a-half times that of the apparel market.
Sportswear companies, over the past few years, have woven digital engagement into their DNA. The ability to talk directly to viewers without any physical footprint, broaden their messages, and drive engagement allows online sales to accelerate faster during lockdown.
Brands are shifting sales from wholesale channels to direct-to-consumer (DTC) channels, which have their own retail footprint and e-commerce management. Big brands have the potential to reach about 50% DTC penetration in the next 10 years, and perhaps even higher over the long term. Some estimates placed DTC at 70% of the sales mix, the research mentioned further.
The growth of sportswear peaked in 1995 and descended by 1999, leading the stocks to underperform the broader market. After 1999 it began accelerating a five-year growth, resulting to strong stock performance.
However, sportswear fundamentals were fairly resilient. In 2009, incomes declined by 3 percent and earnings before interest and taxes (EBIT) declined by 35%, but in 2010 it made a strong comeback. Then, from 2015 to 2018, retro sportswear came into fashion.
Experts believe that this trend will continue as the category has a long track record of value creation over the past 30 years.