In a note, analysts at Cowen Group highlighted six up-and-coming or rebounding brands – Fila, Puma, Rhone, Allbirds, Fanatics and StockX – that are causing some disruption in the active lifestyle space with the potential to do more.
The analysts, led by John Kernan, assessed the progress of the six companies on the competitive landscape and the companies under Cowen’s coverage in the space: Lululemon and Adidas, both rated “Outperform,” and Nike and Under Armour, both rated “Market Perform.”
The following is a summary of Cowen’s analysis of the upstarts:
Fila: Having recently hosted meetings with Fila’s North America management team, Cowen said Fila is “accelerating on many levels and could be a major share winner in holiday 2018 across men’s and women’s footwear and apparel.” The investment boutique said Fila is a top selling women’s brand within Foot Locker and had a large presence at Milan Fashion Week as well as at the U.S. Open. Cowen’s contacts further suggest that Fila is gaining significant space at Urban Outfitters, Foot Locker and Kohl’s.
Cowen said Fila is benefiting from its “careful segmentation” across channels, including recently hosting a launch event at Bergdorf Goodman. Several high-profile collaborations with Fendi and others as well as capsules have also improved Fila’s appeal. Fila was generating about $350 million in revenue in 2015 and Cowen believes the brand’s revenues are now “materially above that level” and on a path to surpass $1 billion.
Kernan wrote, “Fila’s upstart status starts with marketing and product but is also accentuated by its supply chain. Interestingly, management is working outside of normal seasonal timelines of shipments and working closer to the market by creating their own samples and then partnering with the retailers to get the product in-store on a shorter lead time through air freight – with retailers footing part of the expense. Fila can source styles and collaborations with as few as 50 pairs. The strategy enables Fila to be in the market at the right time with trend-right product.”
Fanatics: Cowen noted that the fan apparel powerhouse achieved an estimated $2 billion in revenues in 2017 and was valued at $4.5 billion in a funding round led by SoftBank in late 2017. Cowen believes Fanatics’ competitive advantage are its vast collection of vendor partnerships, relationships with collegiate and pro teams and its vertically integrated manufacturing model.
Partnerships include its recently-reached 10-year deal to become the exclusive manufacturer and distributor of all Nike branded NFL fan merchandise. Fanatics’ vertical model was enhanced by the 2017 acquisition of Majestic Athletic from VF Corp. and the recent promotion of Joe Bozich to lead its in-house manufacturing and wholesale apparel division. Wrote Kernan, “The goal behind the Fanatics NFL partnership is speed, the ability to get the fan a breakout stars jersey or a Cinderella storied franchise gear, as soon as possible, the ‘on-demand’ response.”
StockX: The sneaker re-seller marketplace in mid-September secured $44 million in Series B Funding and media reports suggest StockX generates $2 million in daily volume. The funding should help grow StockX’s user base, improve the experience and increase the authenticity and liquidity of the marketplace. Wrote Kernan, “StockX should continue to gain significant share in the high-end sneaker marketplace, and the innovation pipeline at Nike, Adidas, Jordan, Kith, Supreme and others, along with each brand’s expanding cultural influence and content generation ability, should solidify a bright future.”
Puma: Puma has seen double-digit growth for nine out of the past 10 quarters as part of a multi-year brand resurgence, but Cowen believes “Puma’s push is in the early innings.” Signs of continued momentum were seen when Puma raised its top-line outlook for this year while reporting second-quarter results. The updated outlook translates to a three-year CAGR of 11 to 12 percent. Significant improvement has also been seen in EBIT margins since 2o15 and Puma’s market cap has tripled over that same time frame. A newer growth initiative called out Puma’s return to performance basketball, marked by the signing of a number of NBA draft prospects and the hiring Jay-Z as president of basketball operations.
Rhone: Cowen said Rhone’s price points and product quality are similar to Lululemon while its marketing and digitally-driven strategy are reaching fans. Wrote Kernan, “We expect this brand to continue to gain share at the premium level across athletic apparel as its marketing is resonating across a wide range of men and the product is fashionable and also performs at a high level. This is a brand to watch.”
Allbirds: The maker of casual sneakers made out of merino wool recently received $50 million in Series C funding that gave it a valuation of over $1 billion, according to the Wall Street Journal. The Journal said Allbirds has reached $200 million in sales and the funding will support store and category expansion. Eco-friendly sourcing, comfort and unique styling is helping Allbirds stand out. Wrote Kernan, “In terms of aesthetic and price, the $95 wool runner sneaker can be characterized as understated vs logo heavy peers in both casual and performance running.”
Photo courtesy Fila
