NEW YORK, October 16, 2018 /PRNewswire/ --
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Makers of urban athletic wear or 'athleisure' are winning market
share and growing profits as consumers dump major fast fashion
brands. Companies such as Respect Your Universe, or RYU Apparel
Inc. (TSX-V: RYU) (OTC: RYPPF) are serving a growing desire
among Gen X and Millennials to wear athletic-inspired clothing that
crosses over into the casual wear category. Under Armour
(NYSE:UA) has been adapting its product lines to the growing
athleisure trend by featuring star athletes such as Steph Curry to promote the company's new
Threadborne line, although the move was not appreciated by the
market and the stock price reflected it pretty clearly. The death
of fast fashion is a major challenge to the survival of established
retail players such as Foot Locker Inc. (NYSE: FL) and
Skechers (NYSE: SKX) who have previously thrived on fast
fashion models. Conglomerate PVH Corp. (NYSE: PVH) is
trying to keep up with these sweeping changes through its designer
labels such as Calvin Klein and
Tommy Hilfiger.
Major retail brands such as Hennes & Mauritz AB (H&M)
and Macy's Inc. have been forced to shut down stores and cut prices
this year to shift unsold inventory reaching into the billions of
dollars. The industry has labelled the trend the "death of retail",
spelling the end of a profitable spell for companies that embraced
fashion trends with high-volume, low-cost products and high
inventory turns.
The Death Of Fast Fashion
Major fashion retailers are losing customers to nimble
athleisure brands such as RYU Apparel Inc. (TSX.V:RYU)
(OTCQB:RYPPF) who are winning over consumers with
high-quality sports apparel that can also be worn as casual wear
even at the office. RYU, short for Respect Your Universe, charges
fair prices for its models and achieves higher margins, resulting
in fewer inventory issues than fast fashion brands like H&M or
Zara. RYU prices are highly competitive when compared to
established brands like Lululemon or the top lines of Nike, such as
NikeLab, Nike Tech Pack, and Adidas Originals.
The company's entire product line is under 100 items, compared
to the many thousands offered at any one time by fast fashion
retailers. This high volume approach has backfired on retailers
like H&M, who is reportedly sitting on more than $4 billion of unsold inventory according to
Bloomberg.
The athleisure boom has not been lost on the major brands in the
industry. Nike has captured part of this market through its Off
White x Nike label endorsed by tennis star Serena Williams. The label gained notoriety
earlier this year when the French Open banned Williams from wearing
a black catsuit that helped the athlete prevent blood clots. Under
Armour Inc. has captured market share from both Adidas and Nike by
straddling the space between conventional athletics apparel and
urban athletics trends.
An athleisure-led strategy has helped RYU Apparel Inc.
(TSXV:RYU.V) (OTCQB:RYPPF) achieve sustainable growth at an early
stage in its development. The company reported a gross profit
margin of 46%, or $3.01 million in
2017, versus C$1.4 million in 2016.
That trend continued into 2018, with a Q1 gross profit of
C$907,815, or an annualized rate of
C$3.6 million. These numbers are
generally unheard of in the sportswear space, where retailers often
require years to establish a brand and build a customer base.
RYU Apparel's (TSX.V:RYU) (OTCQB:RYPPF)
business model leverages experiential retail hubs to promote its
products and increase brand awareness. The company plans to open
between 4-6 stores per year moving forward, expanding beyond its
eight retail hubs currently in operation across North America. RYU's stores enhance its
experiential connection with customers through in-store classes,
seminars, and workshops, all of which demonstrate the store's
quality products.
A New Challenger In Athleisure
RYU CEO Marcello Leone is
leveraging a life in fashion to capitalize on this new trend. He
hired several former executives of Lululemon, a highly successful
yoga wear brand, to help transform the company into something
special. RYU has since evolved to create products that define
athleisure, including the company's iconic backpacks and signature
apparel. Leone personally involves himself in each design RYU
makes. The company won a 'best workout and training gear of fall
2017' award from Men's Fitness.
RYU boasts an impressive line of core products, including the
company's patent-protected TriLayr waistband training pants that
never need to be adjusted during a workout. RYU's proprietary
OutLayr fabrics ensure its outerwear performs well in the rainy
climate of Vancouver, a standard
that will perform excellently in urban environment, such as
Toronto or New York. RYU is also known for its iconic
backpacks, including the Locker Pack, which is patented and
designed to keep its shape while at the gym or in a locker. The
company's innovations earned RYU a nomination for the Retail
Startup of The Year by the World Retail Awards.
Some of RYU's main competitors in the athleisure space are
beginning to take notice of the company's encroachment on its main
market. Lululemon, one of the most established brands in the
category, recently fought RYU's attempt to trademark their own
products. Lululemon eventually rescinded all objections after RYU
was able to prove first use of the trademark.
As a leader in the athleisure space, RYU has the potential to
grab a significant market share of a rapidly growing fashion
sector. After posting revenue of $3-million in 2017, the company plans to
accelerate growth by expanding product lines within the athleisure
sector. As more and more competitors cater to the athleisure trend,
first-movers such as RYU Apparel Inc. (TSX.V:RYU)
(OTC:RYPPF) have the potential to benefit from the significant
market expansion.
Major Brands Catching Up To Athleisure
Under Armour (NYSE:UA): Under Armour has reacted to the
sweeping athleisure trend by creating their own athleisure line,
Threadborne, to cater to the new segment. The company signed NBA
Star Steph Curry, tennis star Andy
Roddick, and ballet dancer Misty
Copeland to promote the line. While Under Armour CEO
Kevin Plank has kept the company's
athleisure sales numbers private, he has addressed the trend by
stating Under Armour is hitting their internal benchmarks for the
segment.
Foot Locker Inc. (NYSE:FL): Foot Locker is a
New York-based sports footwear
retailer that has expanded to 28 countries. The company, the
successor corporation to retailer F. W. Woolworth, sells a
collection of footwear from major brands including Adidas and Nike.
The company recently announced a strategic investment of
$15-million USD into women's
activewear maker Carbon38 in order to serve the growing athleisure
space. Foot Locker's second quarter revenue rose 3.9% to
$1.78 billion, much of which was
driven by online sales.
Skechers U.S.A. Inc
(NYSE:SKX): Skechers is a global lifestyle and performance brand
specializing in footwear. The company has begun targeting the
athleisure market through their signature 'YOU by Skechers'
collection which offers functional performance wear for women on
the go. Skechers has responded well to the athleisure trend,
posting $1.25 billion in sales in Q1
of 2018.
PVH Corp. (NYSE:PVH): PVH is one of the world's largest
apparel companies with almost $9
billion in revenue last year. PVH holds Calvin Klein, Tommy
Hilfiger, Van Heusen, Izod,
Arrow, Speedo, Warner's, Olga, Geoffrey
Beene and True&Co. in its portfolio. PVH boosted its
second quarter by 13%, driven by strong demand for the company's
designer lifestyle brands including Calvin
Klein, which has targeted the trend through its
athleisure-inspired 'Calvin Klein Jeans Established 1987' line.
For a FREE research report on RYU Apparel Inc.
(TSX.V:RYU) (OTCQB:RYPPF), visit
Microsmallcap.com.
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