Performance apparel has been the darling of the sporting goods apparel business over the last few years, netting strong double-digit gains that have masked weakness in many other areas of the apparel market. The categories that make up the performance sector, which have helped increase average selling prices – and functionality – on everything from t-shirts to compression shorts, have now become so mainstream that growth has started to moderate – or even slip in some cases. Under Armour is certainly credited with fueling the surge in growth and relevance of these categories, but Nike has recently turned up the volume on their own efforts in the business.
In interviews with several execs at sporting goods chains, Sports Executive Weekly found that most of the merchants polled feel that serious athletes remain devoted to the performance fabrics and compression remains the workout uniform for today's youth. Some mentioned how the expansion of looser-fitting styles is providing an opportunity to reach a wider audience. While some price resistance was cited amid the recession, all the execs noted that the pressures were certainly not as bad as in many other categories. Indeed, some stores were continuing to show revenue increases.
But after years of strong double-digit growth, the slowing is also causing some to again reevaluate the growth prospects in performance apparel and its star brand, Under Armour. At least from the buyers reached by SEW, the overall sentiment was that the category is holding its own given the climate.
One head apparel buyer at a regional sporting goods chain, who wished to remain anonymous when discussing vendor relations, was encouraged that the category was still showing growth for his chain. “The category is still performing,” said the buyer. “It's not the way it used to be. But in today's market, if you're flat, its like you're up 10%. At these price points, you'd think the category would be down double-digits.”
The most bullish comments came from a top executive at a specialty west retailer who described his performance apparel business as “strong and getting stronger” with little price resistance.
“We've got a serious athlete shopping our stores who really believe in their core training programs,” the exec said. “And if you're running, you don't want to get wet. In our case, our customers get it and understand the technology behind it and are willing to buy it. If anything, we're chasing product.”
Compression and looser-fitting styles are showing similar solid gains for the chain. The exec asserts that while performance apparel's percentage gains are bound to level off as the category gets bigger, the category's momentum has not slowed. “It's not a case where it has matured completely not even close,” he said.
Michael McGuinn, SVP and GMM of footwear and active apparel at The Sports Authority, said his chain's performance apparel business is down. But he asserts it's hard to benchmark how the category is performing because the entire business is down.
“Business in general is soft and it's not like performance apparel is a small piece of our floor where I can compare how it's performing in relation to the rest of the floor,” said McGuinn. “The reality is that it is our floor. So it's really hard to give a clear answer on how performance apparel is doing because business today is not what it was.”
Regarding brands, however, McGuinn said Under Armour “continues to be a strong brand in performance apparel because it's their backbone.” Under Armour “continues to dominate” in men's while Nike leads in women's performance apparel. Regarding Under Armour, he was encouraged that the brand is updating their basics, “which they need to do because their basics have now run their course for awhile.”
While compression remains “a big piece” of its performance apparel assortments, TSA has had success with the introduction of slightly-looser fitting performance apparel over the last 12 to 18 months. He believes this reaches a different, typically-heavier customer that is looking for help managing muscle fatigue, but don't have a physique that's appropriate for tight-fitting apparel. He doesn't see loose taking away from compression, which is still especially preferred by younger athletes.
“Loose for us is doing well as it appeals to be broader consumer base but it doesnt mean it's trading off from the compression customer,” said McGuinn.
McGuinn doesn't see a pullback from cotton, even pointing out that long-time cotton brands such as Russell and Champion are finding success in the category.
“It's a very large market and actually we're having great success with both Russell and Champion in performance fabrics. In addition, while the industry may be concerned about price resistance when it comes to brands like Under Armour and Nike there are other brands who do offer lower price points for performance apparel.”
He also believes Nike and Under Armour are “priced right” with the addition of Russell and Champion complementing TSA's good-better-best merchandising strategy. “We don't want to drive prices down,” said McGuinn.
Overall, McGuinn still sees numerous growth opportunities across the category.
“I dont think it's going anywhere,” said McGuinn. “Like I said, it's difficult to judge that today knowing that the overall business is soft and it a big, big piece of our business. So obviously it's going to be soft but overall it's doing okay.”
The head buyer at another regional sporting goods chain said performance apparel is generating single-digit gains for his chain and continues to outperform other active apparel. He described the performance as “pretty good, especially considering that business overall is quiet Whether it's single-digit or double-digit, it's growing so it's still pretty good.”
Under Armour, which the buyer described as the “Rolls Royce” of the category, continues to be in demand and Nike product “is doing pretty good.” Other more opening-price-point brands such as Russell and Champion complement those brands, he said. The buyer also noted that compression “as a category is still good” and tighter-fitting product remains the preferred style by athletes. He described the performance of more fashion-oriented and looser-fitting offerings coming out from Under Armour as “so-so” at his chain.
The buyer also suspected that warmer weather was holding back some of category's gains. “We need a couple days of 80 degree weather to get people to come out,” he said.
Mark Lundvick, divisional merchandise manager at MC Sports, based in Grand Rapids, MI, said the performance apparel category has been running slightly down for the chain. He largely attributes the softening to the economy with consumers turning increasingly price sensitive.
“The consumer is responding to discounts on everything for the most part,” said Lundvick.
On the bright side, he notes that youth sizes in performance apparel are performing well given the climate and MC Sports plans to aggressively pursue the youth opportunity. But he said the adult models are seeing pressure.
“Mom and dad take care of the kids so the youth product is selling. But a lot of the adult models that are at higher price points are seeing some softness. Parents are hesitant and not buying for themselves. And that's true in apparel as well as footwear.”
Lundvick also noted that mild weather during March likely impacted sales. This particularly limits growth in performance apparel since cold-weather compression apparel carries ticket prices around $50 versus around $30 for warmer-weather compression apparel.
Lundvick is also is not seeing any pull away from tighter-fitting garments for athletes. “If you're playing a sport, you really want compression, whether grade school or junior high, high school or higher.”
Another head buyer at a regional chain, who also requested anonymity, said performance apparel at his chain has been softening with sales of Under Armour down so far this year although he likewise described the category as “okay” given the climate. Most of the weakness was blamed on the economy and a warmer March compared to the prior year. But he also felt Under Armour's introduction of looser-fitting might be taking some sales of the compression side, which has been “suffering a little.”
He also feels that Under Armour's expansion of the brand to Foot Locker, Champs and Finish Line could be having an impact. The other execs reached by SEW felt the assortments at the mall-based chains were too limited at this point to have much of an impact.
But the regional buyer believes the recession is clearly having an impact across all categories. Consumers are no longer paying up to buy a brand as a statement as price concerns loom larger. This heightens the challenge of selling a full-priced product such as Under Armour.
On the bright side, the buyer said the overall performance apparel category is certainly not seeing as much price resistance as categories such as exercise equipment and high-end backboards.
“There's still value in the performance feature. If it's comfortable and it performs, I'm still going to get value,” he said. Still, he believes the performance apparel category is “definitely maturing” and expects or fashion elements will continue to be developed to drive growth.
“The double-digit growth we've had for the last four or five years is coming to an end,” he said. “Now we're hoping for mid-single-digit growth.”
