Lululemon (LULU) stock slipped by more than 20% on Thursday after posting Q4 earnings for 2016 that missed expectations and gave a bleak outlook for the first fiscal quarter of 2017[1]. The brand that helped pioneer the “Athleisure” trend has seen less traffic in both their stores and on their website, partially due to the new-found stiff competition– and a dismal outlook provides an opportunity for their competitors to grow even more. So is the Athleisure trend dying, or is the market just oversaturated with leggings in the apparel industry?

Athleisure is a term that refers to active wear that is suitable for both exercise and everyday life, as described by Merriam-Webster dictionary.[2] The words Athletic and Leisure are antonyms that have been combined to create the newest phenomenon in fashion.  Hoodies and leggings are not only trendy, but appropriate for places outside of the gym, and their popularity has all but cemented the style’s place in the retail sector. Much of this is due to the cultural shift of increased health awareness, and driven by millennials who made it cool to wear joggers and sneakers to the office. Nike’s CEO Mark Parker confirmed this shift at the 2014 Women’s Innovation Summit, proclaiming that “Leggings are the new denim.”[3] Starting with companies like Lululemon, the trend of wearing leggings and yoga pants anywhere created its own niche in the market place by filling in a gap: clothes that are functional were now also stylish. The trend caught so much buzz that luxury fashion brands even showcased their expensive version of street clothes on the runway. Suddenly, price points ranged from basic Nike tees for $30 to Alexander Wang’s cashmere sweatpants for $295.

In an otherwise lagging apparel industry, which has seen low sales growth at 2% in 2015, active wear stands out, with a 16% increase in sales that same year.  Without the boom in athleisure trend, it was estimated that the industry would have declined by 2%[4]. But in the short span of about a year, athletic-based retailers such as Sports Authority and Quicksilver have filed for bankruptcy, and now Lululemon and Under Armour have seen sales-growth decline along with their stock prices. Yet despite these setbacks, athleisure doesn’t seem to be losing its popularity anytime soon; the trend is representative of a lifestyle shift with health and comfort as its main priorities. The decline in sales for these companies is likely do to an over-stretched market— from Wal-Mart to Lululemon to Alexander Wang, now enters the era of celebrity-based collaborations with athletic aesthetic top of mind (Stella McCartney with Adidas, Beyoncé with Topshop, etc.). The focus on fashion-forward active wear will leave many brands in the dust if they don’t continue to adapt to changing trends that appeal to their customers. Gym clothes are the uniform on the street now, whether they are worn for athletics or leisure.

An investor cannot invest directly in an index. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.

[1] http://finance.yahoo.com/news/lululemon-lulu-plunges-q4-earnings-110711100.html

[2] https://www.merriam-webster.com/words-at-play/athleisure-words-were-watching

[3] https://www.nytimes.com/2016/03/17/fashion/nike-fashion-olympics.html

[4] https://www.forbes.com/sites/greatspeculations/2016/10/06/the-athleisure-trend-is-here-to-stay/#b244f7428bd4

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