New Denim Cycle Triggers a Retail Rebound
The pandemic is leaving a lasting impact on our society…
And on our spending habits.
We’ve covered this in-depth over the past year, including the rise of the stay-at-home economy, the return of precious metals and rare earth minerals, electric vehicles, cannabis, the recreational vehicle revolution as vacations were grounded, and a whole lot more.
We’ve been preparing investors for the post-pandemic world as well.
Today, we’re going to delve into one trend that both consumers and retailers are applauding. It’s not going to solve all of our society’s problems… but it has the potential to make everyone a little bit more comfortable.
Post-Pandemic Pants Dilemma
I’m always amazed at how much can change in a year. Particularly in a year like 2020.
One of the trends that couldn’t survive the pandemic was the fashion frenemy skinny jeans.
You either love ’em or hate ’em.
The style choice has even been a point of contention between millennials and Gen Z on TikTok, a video-sharing social media platform.
Even though skinny jeans have been the driving force behind denim – particularly for women – for more than a decade, they were no match for the pandemic.
During the past year, with people trapped at home and donning more relaxed clothes (if any clothes at all), the consensus emerged that this fashion fad had run its course.
The post-pandemic world is all about comfort.
And a new denim cycle has begun.
This is great news for consumers and retailers.
The most noticeable change in the cycle is the return of loose-fitting, baggier jeans. Now, I’ve been calling for ’90s fashion to make a comeback… though, hopefully, we never have to live through the soggy cuffs of JNCOs again!
But teenagers are draping themselves in Nirvana T-shirts. And they’re listening to classic rock, like Snoop Dogg’s “Gin and Juice” and Oasis’ “Wonderwall.”
So it’s only fitting that baggy jeans are making a slow comeback.
But for investors, this denim trend has real profit potential.
So Long, Skinny Jeans… Hello, Profits!
We have to understand that this isn’t merely a societal shift triggering sighs of relief.
This new denim cycle is also a welcome change for retailers. Over the past year – again, with consumers working from home and quarantined – spending on clothing and footwear plummeted.
We saw some recovery later in the year. But many apparel retailers saw 2020 revenue drop by double digits.
A new denim cycle, which is a new reason for consumers to stop neglecting their closets and start spending, is earning sighs of relief from apparel companies.
The style change is one Abercrombie & Fitch (NYSE: ANF), American Eagle Outfitters (NYSE: AEO), Levi Strauss & Co. (NYSE: LEVI), Gap Inc. (NYSE: GPS), Urban Outfitters (Nasdaq: URBN) and others have been preparing for… and are already profiting from!
Looser-fitting “mom jeans” have been gaining popularity. Levi introduced other relaxed styles, like the “wedgie jean” in 2016 and “balloon jeans” in 2020.
This is a trend gaining momentum.
Levi even toyed with discontinuing its men’s relaxed fit styles in recent years due to their underperformance. But today, they’re enjoying this great resurgence.
Now, skinny jeans aren’t completely dead… at least, not yet.
The NPD Group reports that the segment still accounts for 34% of the $7.1 billion women’s jeans market in the U.S. That’s the largest piece of the pie. But skinny jeans saw a 7% decline in market share in the 12-month period ending in February 2021. So that’s a significant pullback.
Whether they’re balloon jeans, mom jeans, relaxed fit or “wedgies,” the looser-fitting denim from this cycle is hoping to provide an added boost to the 2021 apparel retail recovery.
Abercrombie is forecast to enjoy a 12% increase in sales in 2021.
Gap is expected to see 17% growth.
Urban Outfitters is projected to experience a 23.2% tick higher in sales.
Levi is expecting to see a 24% increase in revenue this year. And American Eagle is projected to enjoy a revenue jump of 27.5%.
Part of this will be driven by a new denim cycle. One that says “sayonara” to skinny jeans and embraces the baggier, more relaxed fit of my youth. And investors are poised to profit as this helps foster a retail rebound.
Here’s to high returns,
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