Sportswear retailers are hoping the double whammy of back-to-school and the knock-on effect of the Olympics will revive sales after a sluggish summer. After a sluggish June and an equally lackluster July, demand should pick up as the summer draws to a close, giving it enough momentum to continue growing. For the second half of the year, data compiled by Bernstein Societe Generale suggests that the turning point the sportswear industry was looking for has yet to materialize.
The sportswear category consists of footwear, apparel, and wearables, with apparel being the largest segment, translating into total revenue of $215 billion in 2023 and expected to grow to nearly $300 billion by 2030, according to data from Statistica. North America dominated the segment with a 45.6% market share, while APAC is the fastest-growing market with a CAGR of 10.5% (vs. CAGR of 9.6% in the US and CAGR of 9.9% in Europe).
While the competition is rapidly gaining ground, Nike (New York Stock Exchange: NO) remains the largest in the industry with global revenue reaching $48 billion in fiscal 2023, followed by Germany's adidas with $21.4 billion.
Bernstein's study took a closer look at how the industry fared this summer in light of heightened price sensitivity among consumers, exacerbated by persistent inflationary pressures in the U.S.
The study analyzed foot traffic, card data, web traffic, inventory levels, markdown breadth and depth, and app engagement to get a comprehensive view of whether trends developed over the summer for top names in the category, including Nike (NKE), Lululemon (LULU), On Holdings (ONON) and Under Armour (UA, UAA).
Bernstein analyst Aneesha Sherman found that traffic and spending trends continued to be sluggish in July across all brands and retailers, with traffic and spending either flat or declining in July. Web traffic increased for Deckers Outdoor (DECK) and On Holdings (ONON), but slowed for Under Armour (UA, UAA) and Skechers (SKX), which recently reported upbeat results for the quarter ending in June.
Sherman found that inventory is returning to “healthier” levels as destocking via promotions runs its course, while SKUs have increased at certain brands — namely Nike (NKE), adidas, Lululemon (LULU), Puma, On (ONON), Hoka (DECK) and Skechers (SKX) — due to new launches and seasonal assortments. With streamlined inventories come fewer promotions, as most major retailers showed a drop in promotions this summer with the notable exception of Nike (NKE) due to franchise management efforts, according to Bernstein.
“The inflection we were hoping to see in July has not yet arrived,” Sherman said, adding that “traffic and spending trends have remained stable and in many cases even deteriorated marginally in July, with the continued exception of On and Hoka.”
