Is ASOS PLC (LSE:ASC) positioning itself to move into the sports and outdoor wear market?
After confirming that former Nike executive Tim Phipps will be the online retailer’s new sportswear and outdoor director, a shift towards sports fashion looks more likely.
A statement said Phipps, who spent nine years at Nike, “will lead vision and strategy for ASOS Sportswear and Outdoors team.”
Phipps “will play a key role in the commercial leadership team, supporting the delivery of a critical part of ASOS’ growth strategy and delivering the evolution & growth for its sportswear and outdoor offer across both own-brand and third-party brands.”
As it battles with investigations into greenwashing claims, a cost-of-living crisis, and a tumbling share price, experts said altering its offering as it looks to remain competitive might be a smart play.
Leaning into sports
JD Sports has proven not only the popularity of sports and outdoor wear but that it can also withstand the current cost-of-living crisis (sales in the 14 weeks to May 7, 2022, were up 5% like-for-like).
According to John Stevenson, a retail analyst at Peel Hunt, ASOS’ apparent shift towards sport comes as it attempts to play catch-up, having spent years in the doldrums.
Six years ago, the group was entangled in a legal battle with Assos, a Swiss cyclist clothing manufacturer and Anson’s, a German menswear retailer, over alleged infringements of the trademarks on their names.
As a result, ASOS was virtually unable to do anything sports related for a while, meaning that “to a certain extent, they have been late starters” on that side of the business.
The £20mln settlement in 2016 allowed them to study third-party products and develop their own ranges in the time since the case.
Now, it may be looking to lock itself in and get a slice of the increasingly popular athleisure trend.
However, Stevenson argues that the appointment of Phipps doesn't signal a big change in strategy, but rather a lean into the market.
“I wouldn’t say there is a change in strategy to pivot more towards sports products, but if you look at areas in which they can grow, clearly there’s a big opportunity, especially given their customer base,” Stevenson said.
The ASOS approach
ASOS will not follow the bargain basement, high piling approach coined by Mike Ashley at Sports Direct.
Nor will it look to enter the high-end sports fashion clothing market that is growing in popularity, according to Julie Palmer, a 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 providing a different range which might be a little bit more profitable."
Essentially, it will continue to rely on its online presence and wide range in terms of pricing, but "dip its toe" ever so slightly towards sports and outdoor wear to see if money can be made before potentially diving straight in.
Is now the right time?
Growing American interest in the English Premier League is often associated with TV rights and the millions of pounds that come with it.
However, another thing that American sports do far better than the Premier League Clubs, and English sports in general, is merchandising.
“There's a feeling generally, even with the strength of the brand of the Premier League, we have not been able to monetise to the extent that the Americans are very adept at," Palmer said.
With four of the big six clubs owned by Americans, and growing stateside influence in UK football - even Wrexham are owned by Hollywood stars Rob McElhenney and Ryan Reynolds - ASOS could be positioning itself as a sports clothing and merchandise provider, building a strong customer base and bagging third-party deals with elite sports clubs.
Another “residual issue” as Palmer puts it is the hybrid working model.
Employees spend some or all days working from home, which means the smart casual has been ditched for the more comfortable tracksuits and t-shirts.
“People meeting in a business context moved away from the traditional suit and tie to smart casual. I think what we are seeing now is almost a move towards the upper end of sports casual as opposed to smart casual,” Palmer added.
But, as consumer habits change and demand for sportswear grow, this may be the first dip of the toe in the water before diving straight in.