Fashion is the common thread running through the efforts of the big three athletic shoe makers –Reebok International, Ltd., Adidas USA, Inc., and Nike, Inc.–as they put an increasing emphasis on activewear.
With the fitness movement accelerating and health club settings suitable for flaunting fashion flair, these companies are recognizing the significance of this ingredient to boost an industry in transition.
Participation in activities such as running and tennis is flat at best. However, the utility look of the clothes for these and other sports is getting a fashion updating, so that the wearer can comfortably shop or stop for a snack after a jog or a set or two of tennis.
Taken a step further, apparel designed specifically with multiple-purpose capabilities in mind, or cross training, is an area that is showing strong growth potential. With the help of Lycra spandex tights, for example, one can go from being fashionable on the street to the gym or hop on a bike.
Add to this sportswear and coverups, and you have a picture of the three big active shoe companies that once sold no-frills, utilitarian apparel solely in sporting goods shops trading up to department stores with an array of merchandise that smacks of sportswear trends.
Women, especially in their desire for flattering workout wear and swimsuits, already have a long jump on men in total spending for these categories. A Sporting Goods Manufacturers Association sales trend report indicated that female consumers outspent their male counterparts on overall sports apparel last year. Then, a staggering $3,030,000,000 was doled out, with 51.4 percent of the purchases made by females and 48.6 percent by men.
Each quarter, the North Palm Beach, Fla., organization conducts a survey of 10,000 households. Last year, $545,600,000 was spent on swimsuits, with 81 percent of those purchases made by females. Of the $154,200,000 spent on leotard and fitness apparel, excluding sweats, 94 percentcame from women’s wallets. Sweatsuits also fared well among women: Of the $271,400,000 spent on this item, 57.3 percent came from females.
Sebastian DiCasoli, director of marketing services for SGMA, said that for the first quarter ended March 31, females once again outspent men for active apparel. Of a combined total of $581 million spent for the quarter, $318 million, or 54.7 percent, came from women and $263 million, or 45.3 percent, was spent by men.
Adidas, a privately held company, projects 1987 women’s apparel volume at $35 million of its U.S. volume of $300 million. Although its men’s apparel business continues to lead women’s in volume, sales in the women’s area have increased 10 percent in the past 18 months, with combined sales of women’s and men’s apparel expected to jump 40 percent this year.
Worldwide last year, the company had $2,200,000,000 in activewear and footwear sales. Adidas expects a 5 percent drop in worldwide consolidated sales this year due to the decline in the value of the dollar and the weak French export market. However, total sales gains, including footwear, of about 25 percent each are expected in the United States and Japan for 1987.
Reebok has been on a roll, with a momentum that should help its drive in apparel. Overall sales in 1986 more than tripled to $919,401,000 and earnings did likewise, rising to $132,134,000. Its sales of women’s and men’s apparel were $39 million. This year, overall volume is expected to hit $1,300,000,000, with all apparel volume under the Reebok label at about $50 million. Women’s apparel alone is expected to account for $18 million.
Reebok’s commitment to apparel was further illustrated when it acquired Ellesse International SpA last month for $60 million in cash and notes. Ellesse, a privately held Italian company, manufactures and markets fashion skiwear, tennis apparel, sportswear, footwear and other apparel products. Its sales in 1986 were reported to be about $120 million, with sales of licensees estimated at more than $40 million.
Nike has hit some rough going but now appears to be perking up. In its fiscal year ended May 31, Nike’s overall volume fell 17.9 percent to $877,357,000, while earnings dropped 39.9 percent to $35,879,000. Apparel volume for Nike came to $130,700,000.
In the first quarter ended Aug. 31, however, revenues were up 10 percent to $282,828,000 and earnings climbed 67.9 percent to $25,081,000. First-quarter revenues from Nike’s apparel operation increased 5 percent to $36,783,000. Men’s continues to outpace women’s activewear, according toNike executives, but women’s, as at the other two shoe giants, is an area of increasing importance.
Of the three, Reebok is the latest entrant into the women’s apparel field–its first year anniversary will be marked with this year’s holiday shipping. Adidas, the most mature producer of women’s apparel, launched its first collection in 1975. Nike broke ground in the women’s apparel area in 1979.
Stanley Lanzet, a first vice president of research for Drexel Burnham Lambert, Inc., New York, said Reebok dominates about one-third of the domestic market, primarily in footwear sales. However, he is “pessimistic’ about this or any other active firm–Nike and Adidas included –dominating apparel the way Reebok has in footwear.
At the retail level, George Walker, vice president of sales promotion for Herman’s World of Sporting Goods, Carteret, N.J., said the 210-store chain does well with all three of the major active brands in functional apparel. Items in the collections run the gamut from sweats, fleece pieces and warmup suits to tennis and running attire.
“We sell quite a bit of each one,’ Walker insisted. “While Reebok continues to maintain a leadership role in footwear, Adidas and Nike are formidable opponents in apparel.’
He added that there’s been no decline in business for apparel made for active sports participation; it’s just not “accelerating as quickly as it did a couple of years ago.’
Douglas Arbetman, president of apparel at Reebok, said that, without a doubt, fashion is the most important feature for a women’s active line to sell: “If fashion isn’t there, nothing else is going to matter. The most important feature is how the total line hangs when it is shown to buyers.’
Under the Reebok banner, the company produces two distinct lines, Reebok Sport, a sportswear weekend line with an emphasis on fashion, and Reebok, which is a true performance line sold exclusively in sporting goods shops such as Herman’s. Reebok Sport is sold in department stores (60 percent) and specialty shops (40 percent).
New for fall 1988 will be a line of apparel designed for walking that will complement Reebok’s walking shoes, which made their debut in stores this fall. “This group will be a more sophisticated, casual lifestyle approach moving into the contemporary vein,’ Arbetman said from Reebok’s headquarters in Canton, Mass.
Colors, too, will be more sophisticated than the ones used in the Reebok Sport collection, which are primarily pastels, he said. Wholesale prices range from $30 for walking shorts to $40 for a top.
Separate sales forces, designers and merchandisers are used for the Reebok and Sport divisions. This arrangement has its advantages, since the “designers are not influenced by each others’ markets but by what their specific market dictates,’ Arbetman explained.
The turning point in functional to fashion activewear, Arbetman continued, came with the growth of interest in health, fitness and aerobics –activities where fashion and fit are paramount. Now, some of the apparel–such as tights–even has a unisex appeal. “There is a fine line between true performance and weekend wear,’ he noted.
“Today’s customer is looking for a good fit and the best fabrics and quality workmanship,’ he continued. For instance, in the firm’s competitive line, he said its french terry cloth pieces are very durable and can look great after many washings.
But unlike the variety of fabrics that are acceptable in today’s active lines, Arbetman recalls a time– “five years ago’–when he was a buyer for the J.W. Robinson department store chain, when “everything in active apparel was made of velour.’ No matter who was making them “there was nothing else in department stores but velour warmups.’ Now he believes any fabric is appropriate as long as it meets the performance or sportswear requirements of the wearer.
Adidas is scrambling these days. The American division of the giant West German-based activewear firm, left behind in the fashion explosion, is pulling out all stops in an effort to switch its utilitarian and functional image to one that also reflects an updated posture.
Despite the prominence Adidas claims in functional wear, Joe Kiener, chief executive officer and president of Adidas USA, admitted that the company “had been missing out on a number of major trends that created major new businesses,’ such as aerobics and workout wear.
Fashion, too, and the growing importance of the female market were not being recognized. However, the company is making a belated rally to capture lost ground by addressing these areas without severing the core part of its business– “our roots,’ Kiener said–which is function.
Joseph S. Kirchner, general manager and executive vice president of marketing and sales, said, “Three or four years ago, all of the women’s apparel lines made for Adidas USA were simply a recolored version of the men’s line. The same fabrics, styling and designs were used. The only difference besides the color was that the apparel was made in a women’s pattern.’
Around the same time the design team was continuing in this direction, it became apparent that “we were going nowhere with this approach,’ Kirchner said. “We then rebuilt a completely separate and distinct department of merchandisers, product managers and fabric researchers’ to handle only the women’s area.
A lifestyle active sportswear element was added shortly after. It covered the running, tennis and fitness spectrum but also translated into more leisurely attire for not-so-active pursuits.
Although Adidas, like other activewear firms, has embraced the concept of branching into sportswear, it is looked at as a niche business, an addendum to its active lifestyle line.
“We want to cover participant sports like tennis and running and also go into active offerings worn by the consumer for weekend activities as well,’ Kirchner said from the firm’s new U.S. division headquarters in Warren, N.J. The company produces separate collections for fitness, warmups, tennis, fleecewear and all-purpose activities.
He added that Adidas doesn’t compare itself with sportswear companies like Esprit, a trendy junior resource, or firms of a similar ilk that produce more than the four lines Adidas does each year. Because of this, Adidas merchandise has a longer life cycle and reaction time than sportswear companies that produce six, seven or even eight collections each year.
Sixty percent of the firm’s line is produced in the Orient and South America; the rest in made in the United States. Kirchner said its women’s, men’s and children’s product lines are distributed to almost 7,000 department store and specialty accounts. The latter group includes a broad base in better-price sporting goods stores like Herman’s.
While fashion may be driving today’s active business, Kirchner believes the element of authenticity, which is Adidas’s hallmark, lends the label its credibility. “There are many new companies that appear on the scene each season and then disappear,’ he said. “Because of our authenticity and our experience in participant and active sports, we know what our female customer wants when she plays sports, and we added this experience to our lifestyle approach.’
Kirchner and Kiener plan to hone merchandising strategy further with the separation of various divisions. “We have different sales forces to work on apparel and footwear,’ Kirchner said. “They even call on different people.’ This segregation –the groups have separate office spaces–will be complete within the next 12 months, with the ultimate goal being a vertically aligned marketing concept from product conception to distribution. “We have people thinking, eating and living the ladies’ business,’ Kirchner insisted. “They no longer make it just a part of their duties.’
Women’s apparel sales may be creeping up the volume ladder, but it is the men’s area that continues to set the pace. The emphasis now in the women’s business is one of fashion dominance. “If you turn out fleece today, it has to have a fashion feature,’ Kirchner maintained. “Just to turn out a crewneck and sweat pants doesn’t do it anymore.’
It is this product innovation that Kirchner, the former vice president and general manager of the Adidas USA textile division, called the key to maintaining market share in the competitive and often volatile active environment.
“We cannot sit back and be content with what we have achieved,’ he said. “Our product people go to Europe and Japan, as well as shopping boutiques for ideas and trends. These may hit our industry one or two seasons later but we still have to keep on top of what’s going on.’
Because there’s been a leveling off in the number of women playing tennis and running, Kirchner said, more attention is being placed on the fitness movement with apparel made for aerobics and gym workouts, as well as lifestyle thematic clothing. He added, “We are always looking at marginal trends such as biking, which to us is the most interesting.’
Adidas was founded by Adi Dassler in 1948. Before then–since 1929 –the company made athletic shoes that were used for a variety of sporting events, including Olympic competitions. It wasn’t until the late Sixties that the company entered the men’s apparel business and several years later started making a women’s line.
With 12,000 employees world-wide –1,000 of them working for the U.S. division alone–Adidas is governed by a management board where half the members are family.
The revival of strength in the footwear business at Nike–primarily with the Nike Air running shoes –is rubbing off on its active sportswear area as well, observed Drexel Burnham Lambert’s Lanzet.
Marilyn Tam, vice president of Nike Sport, concurs with this assessment: “There is a coordinated effort between the Air products and apparel, a sort of synergy involved. Also, we respond to customer needs in apparel just like we do in footwear.’
“I think for both Reebok and Nike, apparel has been a strong area,’ Lanzet continued. “Nike has redesigned its apparel lines in terms of esthetics, and they look extremely good. The Nike brand once again offers excitement at retail.’
He explained that over the past few years Nike “wasn’t doing much in footwear and its apparel lines weren’t exactly blockbusters either.’ But with this year’s redesign effort, helped by the Nike Air shoe line, business has become more upbeat overall, Lanzet said.
Several years ago, Nike experienced two consecutive quarters of loss, said Kevin Brown, a spokesman for the company, after Reebok made the move from active to street with its soft white leather shoe.
This innovation proceeded to capture market share and left the Beaverton, Ore.-based firm with an inventory of 22 million primarily low-end jogging shoes aimed at mass merchandisers. These shoes went nowhere, and Nike has since discontinued selling its shoes to the hardcore volume industry.
But with the launch of last year’s slick promotional campaign reviving its 10-year-old Air line and emphasizing fashion as well as function in its women’s apparel, the company is again back in step with market needs.
The women’s division comprises lines for running; basic before and after-workout sportswear looks; fitness; tennis, and unisex golf attire. But it wasn’t until about four years ago that the company gegan to “understand the importance of fashion on athletic wear, and we didn’t have anyone merchandising that side of the business until Marilyn (Tam) joined us six months ago,’ Brown said.
Women’s active apparel had been the “ultimate of utility,’ with scant offerings that in the late Seventies consisted of little more than a T-shirt, running shorts and socks, according to Brown. But as women wore their Nike running outfits for activities other than running, it became apparent that this look had a purpose beyond tracks and macadam roadways, he indicated. Along the way, “we became more cognizant of color and started to use things that would be received better in the market, such as textured fabrics for a complete fashion and function look,’ Tam noted.
The fashion evolution at Nike, which went public in December 1980, was slow to take hold, though, with the company steadfastly holding onto its nuts-and-bolts image as a true function house. Now, however, with the “whole fashion aspect there is more of an awareness and need’ for this type of apparel in the company’s target markets, Tam said. But she was quick to reassure the sporting purists that “whatever we put out, the customer can be assured that function will always be there as well as the fashion element.’
Fitness-related attire is the biggest segment in women’s apparel, and walking wear is also doing well, Tam and Brown acknowledged. Another area, cross training, is a major direction and gives the firm an opportunity to implement further its fashion strategies, as well as tieing in with its cross-training shoes, part of the Air line, which made its debut last year.