Denim Price Drop Affected by Athleisure Sports Apparel Popularity

A new generation of urban fashion disruptors is continuing to steal market share from major brands, riding the athleisure trend to define new market segments. Major players such as Adidas (OTC: ADDYY) and Foot Locker, Inc.(NYSE: FL), who once dominated the sportswear industry, are now giving way to new brands such as RYU Apparel Inc. (TSX.V: RYU)(OTC: RYPPF) who continue to innovate with their functional line of urban athletic apparel. Major fashion brands such as Deckers Outdoor Corporation (NYSE: DECK) and PVH Corp. (NYSE: PVH) have also begun to embrace the trend, designing athleisure lines to cater to consumers seeking comfort and quality in the same item.

RYU Apparel Inc.'s (TSX.V: RYU)(OTCQB: RYPPF) rise to prominence is particularly impressive in a retail industry that has entered into a profound crisis. The loss of interest in "fast fashion" brands sold by Macy's and H&M has hit those major retailers hard, forcing them to close stores and cut prices. Investors are questioning the strength of a comeback strategy by Macy's after it was forced to downsize in several prominent locations. According to the New York Times, H&M reported earlier this year it was holding a $4 billion stockpile of unsold clothes.

Athleisure Sales Growth Has Outpaced Traditional Apparel Sales Growth, and the Market Continues to Expand 

While the financial community debates the depth of the so-called "death of retail", US sportswear and athleisure sales will total almost $116 billion this year. This figure represents a year-over-year increase of almost 7%.

RYU Apparel Inc.'s (TSX.V: RYU)(OTCQB: RYPPF) is taking it to another level with revenues doubling each year since 2016 . In fact, RYU outsold both Lululemon and Under Armour combined over its first two years of operation.

Retail Stores Rapidly Expanding 

RYU Apparel Inc. (TSX.V: RYU)(OTCQB: RYPPF) has four stores in Vancouver, BC with two more Toronto area locations to be opening before the end of this year. RYU also recently went cross-border opening their first retail store in Venice, CA. RYU is also close to opening their Brooklyn, NY retail store in the near future. RYU is set to have 9 stores in North America by the end of this year. Marcele Leone, CEO claims to grow that number to 29 by the end of 2022 and is looking to expand overseas.

With North American expansion well under way, RYU has begun to look beyond its iconic outerwear and bags to footwear, swimwear, underwear and accessories. Margins on sales products have been stable at 46% over the last two years and these are expected to increase as economies of scale are reached and high-margin items are added to the company's product line.  

Athleisure's Influence Killing The Price of Denim 

According to The NDP Group, yoga pants and leggings has seriously influenced the pricing of premium denim jeans.  Individuals were willing to spend between $200 and $300 for a pair of jeans, but in 2018 the average price for a pair of jeans has dropped to $32, according to Euromonitor, and the firm forecasts that the US premium jeans segment will decline by 1.8% in 2018 versus a low-single-digit increase for the overall jeans market. Instead of opting into wearing denim, women today are more inclined to wear the more comfortable athleisure apparel, even at the office.

Competing in a Stale Industry  

PVH Corp. (NYSE: PVH), who owns a collection of fashion brands including Calvin Klein and Tommy Hilfiger, have begun to cater to the athleisure trend through their new CK Performance line. Calvin Klein's latest offering includes a line of activewear specifically designed for those living an athletic and multi-dimensional lifestyle.

The athleisure trend has begun to influence footwear as well. The "sports leisure" style has become the largest category in the U.S. sneaker space according to the research firm NPD Group. Demand for sport leisure styles increased 17% last year to $9.6 billion in sales, a trend that companies such as Deckers (NYSE:DECK) have already begun to target. Deckers' performance lifestyle brands such as Hoka One One, Teva, and Sanuk all directly target consumers with an active and diverse lifestyle.

Adidas (OTCQX: ADDYY) are already major players in the athleisure space, working together with celebrity designers including Kanye West to create a unique line of shoes and apparel. Recently Adidas launched a new version of Kanye West's signature shoe called the Yeezy Boost 700, which comes in a variety of color variations and models. A new "V2" version of the Yeezy Boost 350 is expected to be released on Black Friday.

As a national sportswear retailer, Foot Locker, Inc. (NYSE: FL) have been exposed by the athleisure trend as sports performance brands gave way to challengers from the athleisure segment. Following market trends, Foot Locker has shifted its strategy to embrace clothing and footwear in the athleisure market including Adidas' Yeezy line of footwear.

RYU Apparel Inc. (TSX.V: RYU)(OTC: RYPPF) has a bright future ahead by creating a strong brand with a strong supportive community of members and trainers. With profits doubling year over year and retail store expansion into the United States, RYU should not be overlooked.

For a FREE research report on RYU Apparel Inc. (TSX.V: RYU) (OTC: RYPPF), visit Microsmallcap.com.

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