Insight

An iconic jeans brand moves into “athleisure”

Athletic and leisure wear has become the hottest segment of the fashion industry.

Andrew Lindsay

Andrew Lindsay

Principal, Advisory, Transaction Execution, KPMG US

+1 404-593-5917

While the COVID-19 pandemic caused a slew of retail bankruptcies—including such fashion brands as J. Crew, Neiman Marcus, and Brooks Brothers—sales of athletic and leisure wear boomed as lockdowns forced consumers to work remotely, get sweaty in home gyms, and shop online rather than in malls. Levi Strauss, a traditional bricks-and-mortar retailer whose sales of its trademark blue jeans also slipped during the pandemic, capitalized on these shifting trends by acquiring Beyond Yoga.  The apparel brand’s customers—primarily young, digitally-focused women—are a market segment that Levi’s wants to grow.

“One of our key strategies is to diversify the business, and this casualization trend has definitely been accelerated because of the pandemic—and not just here in the U.S., but also on a global basis,” Levi’s CEO Bergh told Women’s Wear Daily.1 “This further positions us as a company, with a new brand in a new space.”

The price Levi’s paid for Beyond Yoga was not disclosed, but CFO Harmit Singh said he expected the acquisition to add $100 million in revenue to Levi’s top-line in the first year.2

Athletic and leisure wear—now dubbed ”athleisure” by the trade—has become the hottest segment of the fashion industry, as workers opt increasingly for comfortable casual clothes and eschew skirts and business suits even when they return to the office. Concerns about health have also prompted many consumers to begin exercising at home.

These trends helped market leader Lululemon report record earnings in September and inspired another traditional retailer, Wolverine Worldwide, a maker of boots and Keds sneakers, to snap up British active wear company Sweaty Betty for $410 million just two days before Levi’s announced its acquisition of Beyond Yoga.

Levi’s hopes to boost sales by cross-selling products with Beyond Yoga in its 2,800 company-owned stores as well as benefiting from Beyond Yoga’s expertise in selling online. Even after improving its digital offerings, Levi’s online sales represented just 8 percent of revenue in 2020, while Beyond Yoga gets 77 percent of sales through e-commerce. Levi’s is also hoping to grow its omnichannel sales from shoppers who buy online and then pick up in stores as they do at Beyond Yoga.

Women currently account for about a third of Levi’s sales, which company officials would like to see grow to more than 50 percent. In addition, Beyond Yoga is following in Lululemon’s footsteps by rolling out more products for men. Even traditional retailers like Brooks Brothers, which was acquired out of bankruptcy by Authentic Brands, is cutting space devoted to business suits and ties in favor of more online sales of casual clothes, at least as indicated by the company’s website.

Levi’s move to break into new markets involves teaming with other brands and using social media. It announced a partnership deal with running shoe company New Balance, another iconic American firm, to produce a matching clothes and shoe collection using legacy materials. It also teamed up with social media site SnapChat to enable SnapChat users to dress a series of avatars in Levi’s 501 jeans. 

We expect to see continued portfolio changes in the apparel and footwear sector as companies continue to expand their product offerings.

Read our KPMG Q3 report from M&A Trends in Consumer and Retail summarizing recent developments in the consumer and retail deal market.

Footnotes

  1. Source: Evan Clark, “Levis Buying Beyond Yoga,” Women’s Wear Daily, Aug. 5, 2021.
  2. “Levi Strauss & Co (LEVI) Q2 2021 Earnings Call Transcript,” MotleyFool.com, August 29, 2021