investment theme | 1q19 · cio insights 1q19 | 100 collaborations: the new hype. collaborations...

Investment Theme | 1Q19

Millennial Wave:Athleisure

Source: AFP Photo

Source: AFP Photo

CIO INSIGHTS 1Q19 | 98

Investment Theme III: Millennial wave: Athleisure Dylan CheangStrategist

Yeang Cheng LingStrategist

The rise of Athleisure

Millennials – loosely defined as those born between 1980 and 2000 – are re-shaping the world. Born in the Internet age, Millennials are vastly different from Baby Boomers and Generation X. First, Millennials are highly technologically-savvy and tend to embrace social media. Second, Millennials often prioritise healthy-living and wellness. Third, Millennials value experience more than ownership.

As Millennials enter adulthood and possess higher spending power, this generation will profoundly impact consumption habits – from retail, to education, food, and leisure. Companies catering to their needs and lifestyles will therefore be beneficiaries of this trend.

Athleisure, the “new casual” – It is no longer just about function; It is about style. We will be launching a series of investment themes that covers the “Millennial Wave” – which essentially refers to new consumption habits that are unique to this generation. In this inaugural theme, we touch on the rapid rise of global “Athleisure”, a trend that is synonymous with Millennials.

Now, what is Athleisure? A combination of the words “athletics” and “leisure”, the term Athleisure was popularised by female yoga wear which was widely used in gyms during the early days of the trend. It has since spread to men’s fashion and today, the term Athleisure loosely refers to fashionable and aesthetically-appealing athletic clothing that is used for everyday wear – the new causal wear.

Think Lululemon. Think Adidas x Kanye West. Think Puma x Rihanna. The list goes on.

Today, Athleisure is no longer about function. It is about fashion, and a lifestyle. The growth potential is huge and according to Morgan Stanley, sales are expected to increase to USD350b by 2020 as Athleisure gains market share from the non-athletic apparels segment.

Style x Wellness: Why Millennials like Athleisure. The Athleisure craze has taken the Millennial world by storm. Rapid evolution of Athleisure from sports use to leisure wear can be attributed to two key factors. Firstly, fashion. Celebrities and social influencers strutting around in these apparels makes Athleisure a fashionable lifestyle which consumers are eager to identify with. The rise of social media and online shopping has accentuated this trend, as evidenced from the enormous growth in followers for Nike on Instagram (Figure 1).


It is more than that. Millennials want to live healthier and live better. According to a survey conducted by CreditCards.com, Americans spent more than USD100b in 2017 on sports events, equipment, as well as gym memberships (Figure 2). On gym memberships, 36% of the respondents aged 18-36 said they have paid for one in the last 12 months, a rate twice that of the older age groups.

Given the rising emphasis on health and wellness, the cool and effortless style of Athleisure resonates with Millennials.

Millennials embrace a healthy lifestyle and Athleisure encapsulates that

Source: Bloomberg, DBS

Figure 1: Social media is accentuating consumer interest in Athleisure

Figure 2: Sports-related spending among Americans

Source: CreditCards.com

Rising obesity: A reason to embrace an active lifestyle. According to Nielsen’s Global Health and Wellness Survey (2015), 49% of the global respondents felt that they are overweight, while 50% replied that they are trying to lose weight on an active basis. When queried on what the respondents are doing to reduce weight, 75% said dietary change while 72% said doing more exercises (Figure 3). Taken together, rising interest in embracing a more active lifestyle is positive for the outlook on Athleisure demand.

Rising obesity and interest in exercising underpin Athleisure demand

Figure 3: Athleisure is boosted by rising awareness of health and wellness

Source: Nielsen

0

1

2

3

4

5

6

7

0

10

20

30

40

50

60

70

80

90

Jan-15 Jan-16 Jan-17 Jan-18

NIKE instagram followers (m, LHS) NIKE Sportswear instagram followers (m, RHS)

34%

29%

23%

12%

8%

0% 10% 20% 30% 40%

Sporting events

Athletic equipment

Gym membership

Sports-themed video games

Sports races

75%

72%

11%

7%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Changing diet

Doing exercise

Taking diet pills and the likes

Taking medication


Collaborations: The new hype. Collaborations between sports companies and other high-street fashion brands or celebrities have generated lots of hype in recent years. Today, Millennials are no longer content with buying regular items off the shelf. Exclusivity is key. And that is where collaborations come in.

The “limited edition” nature of collaborations help drive a sense of exclusivity around the item. Revenue is rarely the consideration. Such campaigns are limited in scale and the eventual sales revenue will not move the needle for companies involved. Instead, it is all about generating publicity. Figure 4 lists some of the collaborations that have taken place in recent years.

Collaborations are generating a lot of hype these days given that exclusivity is key

Figure 4: Collaborations between sports brands, leisure brands, and celebrities on the rise

Adidas x Pharrell Williams Puma x Hello Kitty Adidas x Kanye West

Pharrell Williams is an American singer, songwriter,

producer, and fashion designer. A highly-influential style icon, he entered into a long-term partnership with

adidas Originals.

Puma is a German sportswear brand, best known for its athletic apparel and various

sportswear goods. Recently, the brand collaborated with

Hello Kitty.

Adidas Yeezy Boost is the official collaboration sneaker by Kanye West and Adidas. The Adidas Yeezy 750 Boost “Light Brown” was the first

sneaker release from this collaboration in 2015.

Sneakers war: Fashion trumps performance. Sneakers were originally intended to enhance sports performance and was thus emphasised as a key selling point. But it is no longer the case. Research from NPD Group shows that the sales of performance shoes have fallen by 10% to USD7.4b in 2017. Sport leisure sneakers, on the other hand, grew 17% to USD9.6b.

The rise of Athleisure over athletics in the sneakers world is best seen in the divergent share price performances of companies focusing on athletics and those doing a mixture of both (Figure 6). Clearly, the market recognised that Athleisure is the way to go and companies that failed to spot this trend will need to play catch-up.

Sales of sports leisure sneakers have overtaken that of performance sneakers

Source: AFP Photo


Source: NPD Group

Figure 5: Sales of sports leisure sneakers have superseded those of performance shoes

Figure 6: Athleisure-oriented sports brands have vastly outperformed those focusing predominantly on performance


Sales of performance shoes in 2017 (USDb)

Sales of sports leisure sneakers in 2017 (USDb)

7.4

9.6

0

2

4

6

8

10

12

50

100

150

200

250

300

350

400

Dec-10 Dec-12 Dec-14 Dec-16

Proxy for Performance-oriented sports brands (Indexed)Proxy for Athleisure + Performance-oriented sports brands


Footwear products: Strong growth ahead. We expect sneaker sales to trend higher in the years ahead, driven by the following factors:

• Rising popularity of outdoor sports• The gym and fitness club trend• Availability of e-Commerce channels• Urbanisation and shift in lifestyle• Expansion of the middle-class/rise in living standards• Millennials entering the work force• Rising health awareness• Sports attire becoming a fashion

From a macro perspective, we expect the demand for footwear products to register strong increase amid rising consumer confidence in the major markets, especially in the US and China (Figures 7 and 8).


Figure 7: Consumer confidence in US and China

95

100

105

110

115

120

125

130

30

50

70

90

110

130

150


US: Conference Board (CB) consumer confidence (LHS)China: Consumer confidence index (RHS)


Figure 8: Rising consumer confidence is translating into stronger clothing and footwear sales


Indeed, the global demand for athletic footwear is on a tear and this is evident from the combined sales of major brands like Nike, Under Armour, Puma, and Anta, which registered CAGR of 9% between 2004 and 2017 (Figure 9).

* Footwear revenue of Nike, Under Armour, Puma, and Anta Source: Bloomberg, DBS

Figure 9: Global footwear sales have been seeing consistent growth

-

5,000

10,000

15,000

20,000

25,000

30,000

2004 2006 2008 2010 2012 2014 2016

Combined sales of selected footwear brands* (USDm)

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

330

340

350

360

370

380

390

400

410


US consumption of clothing and footwear (USDb, LHS)Dow Jones US Footwear Index (RHS)



Figure 10: Rising earnings of sportswear companies lend justification to the valuation premium

Figure 11: Sportswear companies offer compelling shareholder returns


0.2

0.3

0.4

0.5

0.6

0.7

15

17

19

21

23

25

27

29

31

33


Forward P/E (LHS) Estimated EPS (RHS)

12

14

16

18

20

22

17

22

27

32

37


Forward ROE (%, LHS)Forward ROA (%, RHS)

Athleisure – More of a staple, less of a luxury. From an investment standpoint, Athleisure is classified under “Consumer Discretionary”, which in theory, could see softer demand in times of an economic slowdown. We do not think this is the case. Unlike higher-priced and bigger-ticket luxury goods, the price points for Athleisure is within the affordable range for consumers. As this segment gradually evolves and dominates the everyday lives of consumers, we believe that sales and demand in Athleisure will stay highly resilient in the coming years.

Athleisure’s resilience is underpinned by attractive product price points

Equally, the robust top-line expansion for sportswear companies is translating into strong bottom-line growth. The combined earnings for leading sporting footwear and apparels companies (Nike, Adidas, Under Armour, Skechers, Columbia, Lululemon, and Anta) are consistently rising and have more than doubled since 2011. This, in turn, justifies the premium valuations of the sector (Figure 10) as returns on equity and on assets are compelling, at forward readings of 35% and 18%, respectively (Figure 11).

CIO INSIGHTS 1Q19

Disclaimers & Important NotesThis information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. This publication is intended for DBS Bank and its subsidiaries or affiliates (collectively “DBS”) and clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank.

This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to you to subscribe to or to enter into any transaction as described, nor is it calculated to invite or permit the making of offers to the public to subscribe to or enter into any transaction for cash or other consideration and should not be viewed as such.

The information herein may be incomplete or condensed and it may not include a number of terms and provisions nor does it identify or define all or any of the risks associated to any actual transaction. Any terms, conditions and opinions contained herein may have been obtained from various sources and neither DBS nor any of their respective directors or employees (collectively the “DBS Group”) make any warranty, expressed or implied, as to its accuracy or completeness and thus assume no responsibility of it. The information herein may be subject to further revision, verification and updating and DBS Group undertakes no responsibility thereof.

All figures and amounts stated are for illustration purposes only and shall not bind DBS Group. This publication does not have regard to the specific investment objectives, financial situation or particular needs of any specific person. Before entering into any transaction to purchase any product mentioned in this publication, you should take steps to ensure that you understand the transaction and has made an independent assessment of the appropriateness of the transaction in light of your own objectives and circumstances. In particular, you should read all the relevant documentation pertaining to the product and may wish to seek advice from a financial or other professional adviser or make such independent investigations as you consider necessary or appropriate for such purposes. If you choose not to do so, you should consider carefully whether any product mentioned in this publication is suitable for you. DBS Group does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences, financial or otherwise, arising from any arrangement or entrance into any transaction in reliance on the information contained herein. In order to build your own independent analysis of any transaction and its consequences, you should consult your own independent financial, accounting, tax, legal or other competent professional advisors as you deem appropriate to ensure that any assessment you make is suitable for you in light of your own financial, accounting, tax, and legal constraints and objectives without relying in any way on DBS Group or any position which DBS Group might have expressed in this document or orally to you in the discussion.

If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of the Information, which may arise as a result of electronic transmission. If verification is required, please request for a hard-copy version.

This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

CIO INSIGHTS 1Q19

Dubai International Financial Centre

This publication is distributed by the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the “DIFC”) under the trading name “DBS Vickers Securities (DIFC Branch)” (“DBS DIFC”), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the “DFSA”) with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page.

If you have received this communication by email, please do not distribute or copy this email. If you believe that you have received this e-mail in error, please inform the sender or contact us immediately. DBS DIFC reserves the right to monitor and record electronic and telephone communications made by or to its personnel for regulatory or operational purposes. The security, accuracy and timeliness of electronic communications cannot be assured. While DBS DIFC implements precautions against viruses, DBS DIFC does not accept any liability for any virus, malware or similar in this email or any attachment.

This publication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the “COB Module”), and should not be relied upon by any client which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules.

Hong Kong This publication is distributed by DBS Bank (Hong Kong) Limited (CE Number: AAL664) (“DBSHK”) which is regulated by the Hong Kong Monetary Authority (the “HKMA”) and the Securities and Futures Commission. In Hong Kong, DBS Private Bank is the private banking division of DBS Bank (Hong Kong) Limited.

DBSHK is not the issuer of the research report unless otherwise stated therein. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBSHK.

Singapore This publication is distributed by DBS Bank Ltd (Company Regn. No. 196800306E) (“DBS”) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore (the “MAS”).

United Kingdom This publication is distributed by DBS Vickers Securities (UK) Ltd of Paternoster House, 4th Floor, 65 St Paul’s Churchyard, London EC4M 8AB. (“DBS Vickers UK”) which is authorised and regulated by the Financial Conduct Authority (the “FCA”).

CIO INSIGHTS 1Q19

Glossary of Terms: Acronym Definition Acronym Definition

ADAS advance driver assistance system GDP gross domestic product

AI artificial intelligence GFC global financial crisis

ASEAN Association of Southeast Asian Nations GMV gross merchandise volume

ASP average selling price GRE government-related entity

AxJ Asia ex-Japan HDB Housing and Development Board

bbl per barrel HY high yield

BI Bank Indonesia IG investment-grade

BOJ Bank of Japan IMF International Monetary Fund

bpd barrels ber day IOT Internet of Things

CAGR compound annual growth rate IPO initial public offering

capex capital expenditure ISM Institute for Supply Management

CAR capital adequacy ratio IT information technology

CASA current account saving account JGB Japanese Government Bond

CDS credit default swap LNG liquefied natural gas

CEO chief executive officer LTV loan-to-value

CET1 common equity tier 1 M&A merger & acquisition

CAA CIO Asset Allocation MAS Monetary Authority of Singapore

COC change of control mmbbl million barrels

CPI conusmer price index mmbpd million barrels per day

DM Developed Markets MRO maintenance, repair, and operations

DPS dividend per share NAV net asset value

DPU distribution per unit NIM net interest margins

DXY US Dollar Index NPL non-performing loan

EBITDA earnings before interest, tax, depreciation and amortisation

OECD Organisation for Economic Co-oporation and Development

EC European Commission OEM original equipment manufacturer

ECB European Central Bank OPEC Organization of the Petroleum Exporting Countries

EM Emerging Markets OPM operating profit margin

EMEA Europe, the Middle East, and Africa P/B price-to-book

EPFR Emerging Portfolio Fund Research P/E price-to-earnings

EPS earnings per share P/TB price-to-tangible book

ETF exchange-traded fund P2F passenger-to-freighter

EU European Union PBOC People's Bank of China

EV electric vehicles PCE personal consumption expenditure

FCF free cash flow PET polyehtylene terephthalate

FDI foreign direct investment PLM product lifecycle management

FFO funds from operations PM portfolio manager

FX foreign exchange PMI purchasing managers' index

FYP first-year premium POE privately-owned enterprise

CIO INSIGHTS 1Q19

Acronym Definition Acronym Definition

PONV point of non-viability SD standard deviation

QE quantitative easing SEC Securities and Exchange Commission

QSR quick-service restaurants SKU stock keeping unit

R&D reseach & development SOE state-owned enterprise

RBI Reserve Bank of India SST Swiss Solvency Test

REIT real estate investment trust TAA Tactical Asset Allocation

RevPAR revenue per available room TEU twenty-foot equivalent unit

RM relationship manager TLAC total loss-absorbing capacity

ROA return on asset TP target price

ROE return on equity TSR total shareholder return

ROI return on investment UCITS Undertakings for Collective Investment in Transferable Securities

ROTE return on tangible equity UST US Treasury

RRR reserve requirement ratio VNB value of new business

SAA Strategic Asset Allocation WTI West Texas Intermediate

SASAC State-owned Assets Supervision and Administration Commission of the State Council

YTD year-to-date

investment theme | 1q19 · cio insights 1q19 | 100 collaborations: the new hype. collaborations...

Documents