In a new report, Bank Of America (BofA) identified five “megatrends” expected to drive sports apparel and footwear categories in the years ahead: Health & Wellness, Female Sports Participation, Hybrid Working Models, Affordable Luxury, and Sustainability.
In a study conducted by Euromonitor analysts led by David Roux noted that global sportswear was a €310 billion market in 2019, and BofA estimated sportswear would increase at a 6 percent CAGR (compound annual growth rate from 2021 to 2024), almost double the rate of the overall apparel and footwear space.
Earnings for BofA’s EMEA sportswear coverage are estimated to rise at a 19 percent CAGR from 2021 to 2024, representing the fastest-growing subsector within the consumer discretionary sector, excluding online retail.
BofA also noted that sportswear’s two overarching drivers are athleisure and China.
Athleisure, described as “wearing sportswear as a fashion staple in an everyday setting,” is estimated to grow to 41 percent of the sportswear market and is projected to expand at a 6 percent CAGR from 2021 through 2025, according to Euromonitor’s findings and BofA estimates.
Performance, making up 59 percent, is projected to expand at a 5 percent annual rate over the same period.
China made up 14 percent of the market in 2019, behind the U.S. and Western Europe, but is expected to contribute 34 percent of sportswear’s growth from 2021 through 2025.
BofA said that while the benefit of athleisure and China is generally understood by investors in the space, its report highlighted “five structural megatrends we see as tailwinds to growth.”
- Health & Wellness – BofA believes a greater consumer emphasis on health & wellness could drive sportswear penetration higher. Analysts pointed to GSK’s recent survey of 4,400 individuals that showed 65 percent of respondents across Germany, Italy, Spain, and the U.K. were more likely to consider their health in day-to-day decision-making after the pandemic. A BofA recent proprietary survey, conducted by the BofA Thematic Strategy, likewise found Health & Wellness the most passionate issue across all age groups. Also cited was the 2021 Physical Activity Council study that showed sports participation increased moderately in the U.S. in recent years before gaining a boost due to the pandemic experience. Other drivers are expected to be legislative initiatives to drive fitness, including China’s five-year fitness program launched in August 2021, the E.U. Work Plan for Sport plan and the PHIT (Personal Health Investment Today) Act in the U.S.
- Female Sports Participation: Women’s participation in sports remains low. For example, the 2021 Erasmus Sport Project ICoachKids report found that just 20 percent of young females played sports in Europe versus 80 percent for boys. Underlying trends expected to increase female participation include gender equality, government programs and a heightened awareness of the health benefits of sports on health and self-image. According to Euromonitor, BofA noted that women’s sportswear has outgrown men’s in recent years and projected the athleisure trend would gain momentum from increased female sports participation.
- Hybrid Working Models: Post-pandemic, WFH (work-from-home) is expected to be more common on at least some or all of the workdays per week. BofA also found that the WFH experience has changed attitudes towards office wear. A survey by the Office Group found that 26 percent of respondents expected to dress less formally when back in the office working. BofA wrote, “We believe sustained levels of hybrid WFH and changing attitudes towards work attire could present tailwinds.”
- Affordable Luxury: BofA noted that luxury brands had embraced streetwear through collaborations with sportswear brands, particularly footwear. The collections present entry points into the luxury market for consumers. BofA estimated that traditional sportswear prices run about one-third of luxury price points. BofA wrote, “Collaborative releases are often limited, driving brand heat in our view, especially among younger generations.”
- Sustainability: According to a McKinsey study, the number of sustainable SKUs offered by sports brands increased by an average of 58 percent from 2017 to 2020. BofA wrote, “More brands are engaging in sustainability initiatives, both within their product offering and supply chains. We believe sustainability is an emerging driver of differentiation and brand heat, which resonates with younger generations who are most conscious of the environmental impact.”
BofA’s top pick for a sportswear brand is Puma with a “Buy” rating, while its preferred retailer is J.D. Sports, also with a “Buy” rating. For Adidas and Frasers, BofA gave both an “Underperform” rating.
Photo courtesy Puma