Morgan Stanley
  • Research
  • Oct 30, 2015

Athletic Lifestyles Keep Apparel Sales Healthy

The high-flying sportswear sector seems due for a fall, but prospects for growth are getting stronger, not weaker, as the health and fitness trend goes global.

What do yoga moms, high school athletes and Chinese school kids have in common? They’re all helping to power global sales of athletic wear.

Sports apparel and footwear sales have jumped 42% to $270 billion over the past seven years. It’s the kind of winning streak that raises eyebrows—and investor skepticism. Is the sportswear sector due for a fall? In fact, prospects for growth are getting stronger, not weaker, as health and fitness trend for adults and sports participation for youths goes global, according to a recent report from Morgan Stanley Research, “Global Athletic Wear: Very Bullish Five-Year Outlook.”

“We think the market will be surprised to learn how broad-based the cultural factors driving athletic apparel and footwear sales are,” says Jay Sole, who covers branded footwear and apparel for Morgan Stanley. “US investors may not grasp how big the China and emerging market opportunities are, and Asian investors may be similarly surprised at US strength,” he adds. Just how strong? The report estimates that the industry could add $83 billion in sales by 2020, or more than 30% growth.

Asia Could Be Biggest Contributor to Athletic-Wear Sales Growth

Source: Euromonitor, Morgan Stanley Research Estimates

State of Play

The sports we play (or watch) can shape what we wear—and buy. A focus on fitness and healthy living has translated in more active lifestyles, especially among youth. In North America, for example, sports participation among high-schoolers overall has jumped from 25% to more than 35% over the past 35 years, led by a near doubling among girls, from 17% to 32% over that period. Studies by US professional sports leagues show that consumers’ interest in sports is highly influenced by whether they played when younger.

“As these consumers mature and move into prime apparel and footwear buying years, we imagine they will stay active,” says Sole.

More and more boys and girls are playing sports in high school

Source: Euromonitor, National Federation of State High School Associations, Morgan Stanley Research

It isn’t just the US, which is the world’s biggest market for active wear, currently accounting for $97 billion, or 36%, of all sportswear sales. Morgan Stanley forecasts 5% average annual sales growth in Europe over the next five years, driven by growth in Eastern Europe, the Middle East and Africa. Meanwhile, markets in Asia and Latin America—where athletic-wear penetration is low, relative to the US—have the most room to grow and could deliver the best gains, Sole says.

China, in particular, will be a key market to watch. The government has emphasized the need to support youth athletic participation, develop sports infrastructure and business overall, with plans to build 60% more sports facilities by 2025 and get 500 million of its citizens to exercise and play sports regularly, says Edward Lui, who covers China’s consumer industry for Morgan Stanley. Key to growth: The government aims to integrate soccer into primary and high school curriculums to develop future talent.

The message is already resonating with China’s urban residents—more than a million of whom are expected to run marathons in 2015, up 88% from 2014. Sports pastimes, such as skiing and hiking, which a generation ago were unheard of leisure pursuits, have become more common and accessible. People who enjoy such activities also tend to have the means to buy the clothes and gear that go with them.

Rise of the Ath-Leisure Consumer

Other larger consumer market trends also are at play. Today’s “ath-leisure” wear is a long ways from the notorious track suits of the 1970s. The sportswear industry designs clothes, shoes and gear that are high performance, comfortable and fashionable. You don’t have to be a track star to prefer the comfort of running shoes; if you’re into yoga, chances are you already appreciate the look and feel of form-fitting stretch-wear. The upgrade cycle of new designs and improved materials—a page torn from tech—also keeps consumers engaged and coming back for more.

The generational and societal shift toward less formal fashion styles over the past few decades hasn’t hurt. Wearing sneakers and jeans to work was once frowned upon, but many professionals now arrive at the office in flashy, multihued trainers and exercise gear—perhaps along with a wearable device that counts everything from steps and stairs to heartrates and calories, all of which reaffirm their dedication to an active lifestyle.

Healthy living can create a positive feedback loop. “We think this is one of the most under-discussed aspects of the trend, likely because it is hard to prove with scientific data,” Sole says, though he cites Gallup survey data that indicates individuals who exercise more frequently enjoy appreciably more emotional health and well-being. People buying clothes, shoes and gear that helps them stay healthy, fitter and feeling good? Why would that ever go out of style?

More Active Lifestyle Helps Improve Emotional Well-Being

Source: Euromonitor, National Federation of State High School Associations, Morgan Stanley Research

For more Morgan Stanley Research on prospects for the global sportswear market, ask your Morgan Stanley representative or a Financial Advisor for the full report, “Global Athletic Wear: Very Bullish Five-Year Outlook” (Oct 12, 2015). Plus, see more of our Ideas.