The newly termed ‘Athleisure’ fashion category is booming, and Movarie Capital’s (
TSXV:MOV.P,
Forum) move to acquire Shakti Activewear positions them for success in a business rife with Canadian pioneers.
Never shy to explore new avenues for expansion, the company has agreed to be featured as the first company to appear in Stockhouse’s new
Deal Room private placement portal.
Why is Shakti an interesting play?
Simply stated, it’s about growth. We’ve seen success with the resources we have, and we’re looking to go beyond that. Specifically, we’re seeking financial support which we’ll use in part to add a few key members to our already impressive team.
Tell me about these key members
Two members who we’re really excited to bring aboard are Alex Read and Hamed Shahbazi. Alex is a successful serial entrepreneur with international contacts and a proven track record for guiding promising young companies to the next level. He is a leader and holds expertise in both branding and franchising. We’re thrilled he’s joining the team. Hamed meanwhile, will provide valuable direction as a member of the Board of Directors. Currently on the board of a number of successful companies while serving as CEO for a company he founded, Hamed is a wealth of knowledge and experience not easily accessed. He has helped take companies from the ground floor into the hundreds of millions of dollars in value and is acutely aware of what is required to scale growth in a profitable way.
Your products and brand are currently selling into the yoga space – how big is that market?
Yoga is a tremendous growth industry. Even in 2009, during one of the worst economies in decades, a growing number of North Americans flocked to yoga. Americans spent US$10.3 billion in 2012 on yoga classes and products (equipment, clothing, vacations and media), an increase of 243% from 2004 (“Yoga in America” study by the Yoga Journal).
Beyond this, the U.S. athletic apparel market is estimated to increase by nearly 50% to more than $100 billion at retail by 2020 (source: Analysts at Barclays). In fact, demand for yoga gear is currently outpacing growth of the sport itself. Yoga participation grew 4.5% in 2013, according to the Sports & Fitness Industry Association. Meanwhile, sales of yoga apparel were up 45% (source: Matt Powell, an analyst for SportsOneSource, a sporting-goods industry tracker).
This phenomenon in the apparel industry has been called "athleisure” which describes the demand for yoga apparel among consumers who are not avid yoga practitioners. While there’s much for us to be excited about within the yoga industry, we’re certainly not limiting our possibilities and will look to all avenues that we feel provide tremendous opportunity for growth.
How competitive is the space?
The market for athletic apparel is highly competitive, and Vancouverites need not look far to see shining examples of what’s possible with a well executed plan in this space. Lululemon has really been able to take advantage of the demand for products that can be utilized for multiple endeavours. And it’s not just local brands that come to mind. Big players like Adidas, Reebok, and Nike are now producing products that cater to the athleisure market. From our perspective, this is very much a positive. Consumer demand continues to grow as larger companies commit resources to satisfy that demand, and what remains is a huge opportunity for a company with high quality products and a well executed plan.
Shakti is already an established brand – how does your distribution work? When you speak of new markets, where do you look?
Our distribution at the moment is two-fold. We retail direct to the end user through our online store and we work with over 900 wholesale partners around the world, but primarily in the US. Our online store is where we see the greatest opportunity for growth, though the two avenues do compliment each other. Our online retail sales bring higher margins and statistics show that more and more consumers are turning to online stores, especially mobile ready shops, every year for the products they desire. That said, our wholesale partners have been vital to our success. Aligning ourselves with quality partners has provided brand exposure and legitimacy in addition to giving potential new customers the ability to touch, feel and try on our fabrics before they buy. It has also provided valuable feedback and helped us to design new styes that we know customers will love.
New markets include athletic endeavours of all kinds like dance, pole fitness, running and athleisure as well as geographic locations. Europe, for example, is a few years behind North America in terms of demand for yoga and yoga related products, but it’s catching up. Japan and much of Asia too. It will be important to keep watch of how demand develops in these new markets and be ready to strike when opportunity presents itself.
You mentioned R+D, what does that mean?
It means investing in the development of new fabric technologies, and new methods of applying color and art to those fabrics. We’ve established a reputation for high quality fabrics that look and feel incredible while standing up to the demands of hot yoga, yoga and life in general. As we look to access new markets it will be important to allocate resources to developing fabrics that will best suit the needs of those markets and continue to set us apart. We currently work with wonderful fabric suppliers in Brazil and we’d like to expand on that. Whether that means sourcing from alternate locations, increasing our output in Brazil or both, we’re confident we’re taking the necessary steps to achieve our goals.
With the incredible additions to our team, our proven success and the projected growth for the athleisure market, we feel the sky's the limit for our brand. Any person considering an investment into the ground floor with Shakti stands to take advantage of the incredible upside within our reach.
FULL DISCLOSURE: Movarie Capital has paid for featured placement in the Stockhouse Publishing Deal Room.