ASOS PLC is testing the waters with sportswear, but will it take the plunge?

Is ASOS PLC (LSE:ASC) positioning itself to enter the sports and outdoor clothing market?

After it was confirmed that former Nike executive Tim Phipps will be the online retailer’s new sports and outdoor apparel director, a shift towards sports fashion seems more likely.

A statement said Phipps, who spent nine years at Nike, “will lead the vision and strategy for the ASOS Sportswear and Outdoors team.”

Phipps “will play a key role in the commercial leadership team, supporting the delivery of a critical element of ASOS’ growth strategy and ensuring the evolution and growth of its activewear and outdoor offering. air both under its own brand and under third-party brands”.

As it struggles with investigations into allegations of greenwashing, a cost-of-living crisis and a plummeting share price, experts said changing its bid because it appears to remain competitive could be a smart play .

Lean into sports

JD Sports has proven not only the popularity of activewear and outdoor apparel, but also its ability to withstand the current cost of living crisis (sales in the 14 weeks to May 7, 2022 increased 5% to comparable data).

According to John Stevenson, retail analyst at Peel Hunt, ASOS’ apparent shift towards sports comes as it tries to catch up, after spending years in the doldrums.

Six years ago the group was embroiled in a legal battle with Assos, a Swiss maker of cycling clothing and Anson’s, a German menswear retailer, over alleged trademark infringements on their names.

As a result, ASOS have been virtually unable to do anything sports-related for some time, meaning “to some extent they’ve been laggards” on that side of the business.

The £20million settlement in 2016 allowed them to study third-party products and develop their own ranges from the case.

Now he can look to lock himself in and get a slice of the increasingly popular athleisure trend.

However, Stevenson argues that Phipps’ appointment does not signal a big change in strategy, but rather a lean towards the market.

“I wouldn’t say there’s a shift in strategy to move more towards sports products, but if you look at the areas where they can expand, there’s clearly a big opportunity, especially given their customer base,” Stevenson said.

The ASOS approach

ASOS won’t follow the basement, high-pile approach invented by Mike Ashley at Sports Direct.

Nor will it seek to enter the high-end sportswear market which is growing in popularity, according to Julie Palmer, partner at corporate restructuring firm Begbies Traynor (AIM:BEG).

Instead, ASOS, which has positioned itself as an online fast fashion provider, will “see if it can build on its online offering by offering a different range that might be a bit more profitable.”

Essentially, it will continue to rely on its online presence and wide price range, but will “dive lightly” into sports and outdoor apparel to see if any money can be made before diving straight into it.

Is this the right time?

Americans’ growing interest in the English Premier League is often associated with TV rights and the millions of pounds that go with it.

However, another thing that American sports do much better than Premier League clubs, and English sports in general, is merchandising.

“There’s a general feeling, even with the strength of the Premier League brand, we haven’t been able to monetize as the Americans are very skilful,” Palmer said.

With four of the Big Six clubs American-owned and growing influence in the US in British football – even Wrexham is owned by Hollywood stars Rob McElhenney and Ryan Reynolds – ASOS could position itself as a supplier of sportswear and sports goods, thus creating a solid clientele. and entering into third-party agreements with elite sports clubs.

Another “residual problem,” as Palmer puts it, is the hybrid working model.

Employees are spending part or all of their days working from home, which means casual chic has been ditched for more comfortable tracksuits and t-shirts.

“People who met in a professional context went from traditional suit and tie to casual chic. I think what we’re seeing now is almost a move towards the upper end of sport casual versus smart casual,” Palmer added.

But, as consumer habits change and demand for activewear grows, it may be the first dip of the foot in the water before diving straight in.

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