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Property Special: How sportswear is rising up the retail property agenda

Sports brands are keen to muscle in on fashion, while for fashion sport is a growth area.

It’s a race that is changing the retail scene. The sports and fashion markets - always close running mates - have well and truly locked horns in the past 12 months, with sports brands muscling in on the fashion sector and fashion brands focusing on sports offshoots. And amid it all is Mike Ashley, the indomitable boss of Sports Direct, who has warned that unless European sports retailers welcome expansionist overtures from his business then Sports Direct will “smash them to bits”.

With the gloves well and truly off, Sports Direct is busy putting down stores in European markets - it already operates in 19 countries, and acquired Sport Eybl and Sports Experts’ 52 stores in Austria last year. It opened a net 200,000 sq ft of space in Europe, adding another 1.9 million sq ft through its Austrian acquisition and the purchase of a majority stake in Baltic business Sportland International, the market leader in Estonia, Latvia and Lithuania. Sports Direct also intends to open in Australia.

It’s little wonder the competition is hotting up. The UK sportswear market was worth £5.3bn in 2013 and is expected to reach £6.3bn by 2018, according to Euromonitor, while Sports Direct and JD Sports are forecast to take shares of 21.7% and 13.7% respectively this year, according to Verdict Research. GAP and Uniqlo have their own sportswear ranges, while H&M has previously opened dedicated sportswear pop-up stores in London in time for the 2012 Olympics, and this year grew its sportswear sub-brand in reaction to what it described as a “rapidly growing” activewear market. In July, lifestyle retailer Fat Face announced the addition of gymwear and sports underwear to its offer as it vies to grow its store estate from 325,000 sq ft to 500,000 sq ft in the Next three to five years. It has been trialling activewear in 15 stores since the spring and plans to extend it into more shops next year. Fat Face chief executive Anthony Thompson says it launched the categories in response to customer demand: “We’ve listened and given them more choices of what they want. After Christmas, they wanted gym gear.”

Ashley’s tactics certainly don’t suit everyone: Adidas squared up to him last year when it withdrew Chelsea replica kit from Sports Direct, and also restricted the type of replica boot the chain could stock, saving more distinctive designs for other retailers, including Adidas’s own stores. In July, Sports Direct reported that the two parties were having “progressive discussions”, and in the meantime Adidas has been implementing a new distribution strategy across Europe for key products in football and other sports and has experimented with a range of branded formats, including the Originals and Three Stripes formats.

Best known is Adidas Originals, but the group has been opening Adidas Neo stores in Germany and central and eastern Europe with a view to broader expansion of this more accessibly priced range. In August, the company previewed a collaborative range with Latin American singer Selena Gomez.

Rival Nike is well established in its store strategy, having launched its brand flagship concept a decade and a half back in 1999 with its NikeTown stores in London and opened its first standalone store outside London as far back as July 2008 at Grosvenor’s Liverpool One scheme, which also represented a move towards owning its own stores rather than retailing through a franchise model.

More recently it has targeted the trend-led fashion market, opening one-offs and cult outlets such as NikeLab 1948 in London’s Shoreditch in 2008 - a hard-to-find store with an interior mixing black-painted brick, wood and pentagon-shaped display units made from corrugated cardboard.

Nike and JD Sports also collaborated to open Crosstown Running at Westfield London this year, which sells runners’ shoes and clothes and shares an internal entrance with a JD store next door. Reebok is another to have launched retail last year with the September opening of its Fitness Hub in Covent Garden.

Covent Garden was also the landing point in April for Canadian yogawear business Lululemon Athletica, which is also looking for more stores in the capital, with a view to wider UK openings in the longer term. Chief executive Laurent Potdevin says the Covent Garden store will act as a “springboard” for expansion across Europe and the rest of the world, reflecting: “If you don’t have a presence in London, you don’t really have a presence in Europe.”

UK yogawear retailer Sweaty Betty also continues to grow and to increase its own label offer, with the revamp of its website last year and the opening of its 38th store in Shoreditch, east London, last month.

“Retailers like Lululemon are rightly cautious in entering any new market and are keen to create an in-store experience relevant to each location. They typically take a site and create a showroom concept in an offbeat location on a shorter lease of up to two years,” explains CBRE head of retail tenant representation Graham Barr. “These are more about creating meeting places and community hubs so they are often located close to coffee shops and organic food outlets. Once they have created that brand loyalty, they look to open full-line stores.”

Barr notes that despite the proliferation of sports brand stores, openings will be at moderate levels for most, unlikely to rise above four to five per annum. “We are talking about very considered expansion,” he says. “These brands are very particular about the locations and the types of stores and in many cases they are more about identifying the brand with the sports community they are within than acting simply as stores. The North Face is another example, hosting climbing and running clubs and meetings.”

Baltimore-based Under Armour and Australian yogawear retailer Lorna Jane are other names understood to be looking at the UK. Under Armour already produces the sports kit for the Wales rugby union team and for Tottenham Hotspur, while Brisbane’s Lorna Jane - which already has 33 US stores - is currently up for sale, with potential suitors including private equity companies and, according to local reports, retailer Foot Locker.

Sportswear is also becoming big business for fashion retailers online. In July, Net-A-Porter launched Net-a-Sporter, a sub-section of its site dedicated to luxury activewear, inspired by collaborations such as Adidas by Stella McCartney, which launched in 2005, and between Puma and Alexander McQueen, who also first teamed up in 2005 and have recently expanded their relationship to include sub-brand McQ, as well as upmarket sportswear brands such as Lucas Hugh. Adam Petrick, brand director at Puma, says it and McQ have drawn on their “divergent yet complementary” experiences to “investigate the point at which performance blurs into fashion.”

Not to be left out, multiple retailers are also looking to capitalise on sportswear. Tom Knight, head of Matalan’s sporting fascia Sporting Pro, said at the time of last year’s launch that he believed there was a gap in the market for an expert sports fascia, especially after JJB’s demise. “We want to present sports in a way that will excite the consumer,” he said of Sporting Pro’s launch. “JD is not really a sports store, it’s more about fashion, and Sports Direct is very much about an own brand proposition. So it’s very difficult for [sports] brands to come to market.”

Last year Sporting Pro opened five stores which were all located adjacent to existing Matalan stores, all at around 5,000 sq ft. The exception to this was its first store, a two-floor 6,000 sq ft unit which opened on Kensington High Street last November. The total has now swelled to 16, including six that are joint fascias with Matalan and a seventh due to open in Dartford shortly, and nine standalone stores. The standalone formats include larger stores of above 10,000 sq ft, including Colchester (12,500 sq ft), Leeds Colton (10,000 sq ft), Stockport (17,000 sq ft), Bristol (12,000 sq ft), Leeds Kirkstall (12,000 sq ft) and Kendal in Cumbria(11,000 sq ft).

“We are seeing brands like Nike and Adidas taking their own stores to manage their brand proposition within the sports fashion market,” adds John Maddison, head of retail Warehouse asset management for property firm British Land. “The optimum property requirement appears to be around the 10,000 sq ft mark and the stores are filling the gap between the value offer and small independent sports shops. Across our portfolio, Nike opened its first non-outlet store at a retail park with us at Broughton Shopping Park in Chester, while Sporting Pro took one of its first shops at Westgate Retail Park in Wakefield.”

“There has undoubtedly been a coming together of fashion and activewear, with much of the merchandise almost suitable to be worn out after exercise,” says CBRE’s Graham Barr. “The specialist sportswear brands are trying to maintain ownership of what they stand for and to tell authentic or heritage stories, while the main fashion groups have spotted an opportunity but are more likely to fulfil this within their own stores or as in-store concessions,” he says. “For that reason we will probably see considered rather than rapid expansion, but it’s a strong growth category.”

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