Categories Analysis, Retail

Retail: Is athleisure here to stay or is it time to say bye-bye to casual clothes?

Gap believes the Athleta brand is on track to reach $2 billion by 2023

2020 was the year of many changes and one of these was in apparel. Last year, the COVID-19 pandemic led people to stay at home and work from home which made them turn to more comfortable clothing as they spent most of their time indoors. The absence of outdoor entertainment events led to lower demand for fancy dresses and formal apparel.

In 2021, with the vaccines being distributed and things slowly normalizing, retailers expects apparel spending to rebound and demand for formal wear to pick up. On the flip side, there is a likelihood that the ease and comfort of working from home could prompt people to continue with this option thereby retaining the demand for casual clothing. So what’s it going to be?

Strength in casual

Last year, retailers saw demand increase for casual clothing such as tees, sweatshirts, and loungewear. An increased focus on health and fitness alongside comfort led to higher demand in categories like activewear and athleisure.

Retailers like Gap Inc. (NYSE: GPS), Macy’s (NYSE: M), Kohl’s (NYSE: KSS), and American Eagle Outfitters (NYSE: AEO) benefited from strong demand in the activewear category. Gap reported a 29% sales growth in its Athleta brand in the fourth quarter of 2020 and saw continued market share gains during the year in this brand helped by the strong performance in active.

Another category that did well was fleece with Gap, Macy’s and Foot Locker (NYSE: FL) witnessing strong demand in this space. During 2020, Macy’s revamped its assortment to focus on more high-demand categories such as active, fleece and loungewear.

However, Urban Outfitters (NASDAQ: URBN) saw mixed results within the casual category with some classes selling well and others not. The weakness in dressier apparel continued as Urban saw this category underperform through January and much of February this year.

Recovery in formal

Despite the softness seen in dressier apparel through the first two months of this year, Urban Outfitters has more recently seen a pickup in demand for going-out apparel. The company believes that as vaccines are rolled out and restrictions ease, people will start going out more and the demand for apparel will increase. Urban also believes that consumer spending is likely to rebound this year and apparel spending will benefit from this rebound.

Outlook

Most retailers expect the casual category to remain strong and the formal category to see softness at least for the first half of this year. By the second half, formals are anticipated to see a recovery as life goes back to normal.

Gap expects the strong performance in Athleta to continue and believes the brand is on track to reach $2 billion by 2023. In January, the company unveiled sleepwear and inclusive sizing within the brand, both of which are expected to be major growth drivers this year.

Kohl’s expects to see continued strength in activewear and the company plans on extending its assortment in athleisure and outdoor this year. Kohl’s will increase the space in its stores for the active category by at least 20% in 2021 to take advantage of this opportunity and drive sales.

Overall, it can be assumed that the strength seen in casuals could continue for the most part of this year but this momentum could slightly begin to moderate once people start venturing out more and formals make a stronger comeback.

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