By Sabrina Escobar
Lululemon Athletica and Nike have long reigned as the hottest brands for American teenagers. But a new survey suggests they may be losing their grip on one of their most loyal fan bases.
Piper Sandler published its biannual "Taking Stock With Teens" survey on Wednesday. The firm surveyed a little over 13,500 teenagers across 47 states to get a pulse of what is driving spending among younger generations. While teenagers don't have the same purchasing power as their older counterparts, they play a key role in setting trends -- and as many parents can attest, teens often have more money stashed away than you might think.
Retailers should feel cautiously optimistic about this fall's broad findings: teen spending increased 6% from last fall, and even gained 4% from earlier this spring, when teens said they were planning on pulling back. The report gave brands like Sephora and Deckers Outdoor's Uggs brand a lot to cheer for -- Piper Sandler found those companies are gaining market share and remain increasingly popular among teens.
But the survey should set off alarm bells for other brands, particularly Nike and Lululemon, which are already struggling through a sales slump that has hurt both retailers' stocks. Nike shares are down 24% this year, while Lululemon are off 46%.
Both companies are still at the top of most teens' lists: Nike was the favorite brand across the board for all teens, while Lululemon was the number one fashion trend for women for the 14th survey in a row.
Yet both seem to be losing their cool -- especially among teen girls.
Only 27% of female teens surveyed said that Lululemon was their top fashion trend, compared with 36% in the spring and 41% last fall. In a ranking of favorite websites for shopping among women, Lululemon dropped to number eight from number three in the spring. Perhaps more worrisomely, 10% of survey respondents said they wore less Lululemon than they did last year, with some saying they were spending more at competitor Alo Yoga.
That could be a big problem for Lululemon; in the past few quarters, the company has identified teenagers as an important new growth driver, and has adapted its assortment to better address the surge in demand. A drastic pullback could leave the company overburdened with smaller sizes and teen-focused inventory.
The finding could, however, also be a blessing in disguise. Jefferies analyst Randal Konik, for instance, has long argued that relying on a teen audience is a risky move because younger shoppers tend to be less loyal to a particular brand. Plus, tailoring merchandise to younger shoppers could alienate the company's older, core demographic, Konik has said.
A Lululemon spokeswoman didn't immediately respond to Barron's request for comment.
Nike has also lost its sheen among young fashionistas. Mindshare -- a metric Piper Sandler uses to measure a brand's awareness or popularity -- for the brand's footwear fell to 48% this fall, compared with 56% a year ago among teen girls. Higher-income cohorts saw a particularly big decline in mindshare, the survey found, with wealthier teens opting instead to shop at New Balance, Adidas, On Holding, and Birkenstock.
Teen boys, a traditionally sticky demographic for Nike, have also turned to other brands. Nike footwear commanded a mindshare of 63% this fall, down from 67% last fall.
Perhaps that isn't too surprising, given that Nike has been losing market share to competitors across all age demographics, partially due to a sluggish innovation cycle and the decision to cut ties with wholesale partners, opening the door for competitors to poach Nike's shoppers.
Those issues are at the heart of why the company recently decided to switch out CEOs. Current CEO John Donahoe plans to retire later this month, to be replaced by company veteran Elliott Hill. While Wall Street is optimistic that Hill has the chops to turn the business around, most analysts warn it will take time for those initiatives to pay off.
Nike didn't immediately respond to Barron's request for comment.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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(END) Dow Jones Newswires
October 09, 2024 14:17 ET (18:17 GMT)
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