These athleisure brands are still looking fresh to investors

As major retailers continue to report earnings this week, investors should be thinking more about the brands filling store shelves. EquitySet CEO Tony Zipparro makes the case for including the top athleisure and apparel brands in your portfolio.

"A lot of what we're seeing with names like Nike (NKE), Under Armour (UA, UAA), Lululemon (LULU) is it's really already priced in, right? So if they don't do well, you've seen them fall 20, 30%, whereas yes, there is a chance that they're losing market share. But a lot of that market share is growing... There's reports out that right now around $330 billion in athleisure consumer spending. That is supposed to be at a 9.3% compound annual growth rate until 2030, which puts the market nearly double," Zipparro says, believing these brands are "fine" on their valuations.

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This post was written by Luke Carberry Mogan.

Video transcript

Speaking with our retail discussion.

Investors are also watching names like Target, BJs, TJ Maxx and Ralph Lauren ahead of their quarterly results this week.

And our next guest says the athletic retail is the place to invest here to weigh in.

We've got Tony Zaro.

Who is the equity set?

Chief Executive Officer Tony, great to have you here in the studio with Thank you for having me.

Absolutely.

All right, so let's dive into this.

Walk us into your thesis here on the athletic apparel side of retail.

So athleisure definitely had its headache in the last couple of years, obviously, with with covid and staying indoors and remote work, uh, you had huge run ups right in in stock prices and and discretionary spending.

Uh, the thesis now is they've actually, over the last year and year to date, massively underperform not only the market but the consumer discretionary and retail, uh, other names and ETF S. So banking on a bounce back here correct and and banking on a couple names that we feel diversify in in terms of product line price points.

Uh, and really, they're the stalwarts in the industry that even though they're not perfect.

They have been around and they're generating massive profits and cash hoards.

What's your assessment right now of the ability to generate demand through innovation through some of these companies?

Yeah.

Um, and we were talking a little bit earlier about it.

Feels a little stale, right?

Uh, so when you're looking at the the big players, Nike's Lululemon's under armors while under armour might be kind of the newest one with some of its celebrity collaborations, Right?

Obviously, Nike's been doing it for decades and doing it well, uh, it it just seems like the same product with a different face on it.

Right?

Uh, and same thing with Lululemon yoga pants, Right?

Some nice, uh, breathable polos for golf and and going out to the bar after.

But, uh, it really has to improve in order to kind of drive sales and demand.

Uh, but that's where we think if there's a waning of consumer spending, at least those are safer bets than some of the newcomers in the space.

It's not the bar if you just call it the 19th hole.

Um, you know, at the end of the day, we also have a critical year for all of them.

And there's gonna be a lot of competition amid the Olympics.

It's an Olympic year.

Of course.

You've got the, UH, 10 pole events and we were speaking with a couple of analysts about this earlier on today and how critical and actually the CFO of Amer Sports.

We had them on morning brief earlier today, just talking about how critical of the year this is with the Olympics, with a lot of major events that are taking place and companies needing to get this right.

What happens if they do not?

And what's the difference between the winners and losers there?

Honestly, I think they'll be fine.

Um and and that's strictly from a valuation perspective, a lot of what we're seeing with names like Nike under Armour Lululemon is it?

It's really already priced in, right?

So if they don't do well, um, you've seen them fall 20 30% whereas yes, uh, there is a chance that they're losing market share, But a lot of that market share is growing right.

There's reports out that right now around 330 billion in ath leisure consumer spending that supposed to be at a 9.3% compound annual growth rate until 2030 which puts the market nearly double.

Um, And so, while optics news might not provide the best headlines for the shorter term trades, uh, on those names, really, I don't think in the long term it matters that much to the bottom line for them.

We we just had a company in under.

Armour put out their fourth quarter and in full year results here for a fiscal 20 four.

just last week, thinking through the management of this company and the revolving door that has been what should investors be keeping tabs on there and and what this management team needs to do and make no excuses for under Armour's results were terrible, right?

Dismal.

Um, you saw it pushing down heavy, um, and then surprisingly, had a lot of buying, and it kind of pushed it up.

And it's right around those same levels.

Uh, and that's really it's a value stock.

Um, because of all those issues right now, right, you're looking at half times price to sales.

Does mismanagement classify a company, though as a value stock, regardless of the environment.

Good point, Um, and so I think with with former CEO S a lot of it is it's gonna have to be a turnaround story.

So I think that's where if they can get it right with management coming in, uh, shaking things up and pushing the company in the right direction.

That's the play that then it becomes a value stock.

Right now, it's a little bit of a gamble, right in terms of its valuations are low, but they're low for a reason.

Uh, because there's a lot of questions around whether they can sustain it.

There's There's a lot of, of course litigation that is always taking place with these companies.

Um, whether it's Nike and new balance or whether it's Adidas and, um and Lululemon, I mean it.

It seems like there there's always something that gets kind of lobbed at the other enemy territory, time and time again here.

But is there anyone that's clearly running away with the consumer mindset?

At this juncture, I would say Lululemon may be the closest right?

Um, they Nike's had a lot of bad press, Um, and issues come up with supply chains international market shrinking.

They've been around for a while, right?

Kind of that.

That bodes well for where they're in their business cycle under armour.

We know of their issues.

Um, Lululemon is the one that, uh, they haven't really made any major moves.

And and so I think that's where they have the the cash they have.

They're having the growth, Uh, in order to reinvest in something big.

Um and that's where I think they're gonna be focused on the right things the most out of the other two.

All right, Tony Zarro, Who is the equity set?

CEO Joining us here on set all the way from Chicago.

Thanks so much for taking the time.

Thanks for having me.