Public Markets Rewarded Cozy, Comfy Clothes This Year. Allbirds’ IPO Surge Shows Momentum Continues

Fashion is an enormous industry, with annual global spending on footwear and apparel estimated at around $1.8 trillion. But increasingly, customers have only limited interest in being fashionable.

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Given the choice, many of us would opt to spend the day in stretch fabrics reminiscent of pajamas (if not actual pajamas). Favored footwear is the sneaker, flip-flop or slipper. And the preferred waistband is of the elastic variety.

In short, comfort is in. And for upstarts with an innovative approach to comfy, casual, socially acceptable apparel, times are good.

We write this as one of the more heavily funded startups riding this trend—eco-friendly footwear maker Allbirds—just began trading on the Nasdaq, with shares closing up 91 percent in first-day trading Wednesday. Earlier, the San Francisco-based company raised just over $300 million for its IPO, after pricing shares at $15 each, just above the projected range of $12 to $14.

Allbirds got its start in shoes, but has since branched out into other categories including sweatshirts, workout clothes and socks. Apparently its marketing around sustainability and comfort has struck a chord among consumers with the company ringing up $118 million in sales for the first half of 2021, up 25 percent year over year. Although Allbirds posted a net loss of $21 million in the first half of 2021, the hope is that public investors will value long-term brand proposition over current profits.

Markets reward the comfy

Certainly, there’s market precedent for comfy apparel IPOs doing well.

The last big offering for an upstart company in the comfort clothing arena—health care apparel maker FIGS—bodes well for the space. The Santa Monica-based company, which makes high-end scrubs touting durable, flattering designs, snagged a valuation of around $5.4 billion in its May debut, and has held up over the following months.

Established names are also flourishing. The biggest player in the comfort and performance footwear space—Nike—is trading close to its all-time highs, with a valuation around $267 billion; that puts it roughly on par with ExxonMobil. Crocs, the maker of flexible, clog-like shoes you’ll never see on fashion week runways, is a $10 billion company. And shares of Lululemon, the maker of high-end yoga and casual gear, have more than doubled since the onset of the pandemic, with the company now valued at more than $60 billion.

Overall, the circumstances surrounding the pandemic accelerated the comfort movement that was already underway within the U.S. fashion and footwear markets, according to research from NPD Group. The consultancy found that while total apparel sales declined by 19 percent in 2020, comfy cozy categories such as sweatpants showed double-digit growth, as did slippers and clogs.

Fashion pivots

Consumers’ changing tastes aren’t lost on brands built for fashionably minded types.

Rent the Runway, which started with rentals of evening wear and accessories for special occasions, has grown to include products for subscription across categories including casual and even loungewear. The onset of the pandemic heavily impacted demand, with casual wear, loungewear, knits and activewear going from 25 percent of items at homes in May 2019 to 46 percent a year later, according to the company’s S-1 filing.

Still, Rent the Runway remains best known as a company catering to the most style-conscious consumers, which may have contributed to its lackluster IPO performance last week. Shares of the New York company were recently trading under $17 each, well below the $21 price they fetched in the IPO last week.

Meanwhile, heavily funded private fashion brands are also pivoting with the dressed-down times. One case in point is Skims, the shapewear brand launched by reality TV star Kim Kardashian West in 2019. The company raised $154 million at a reported $1.6 billion valuation earlier this year, after adding pajamas and loungewear to its collection.

Another is Savage X Fenty, the intimate apparel startup co-founded by singer and fashion trendsetter Rihanna, which raised a $115 million Series B this year. The company is best known for lingerie, but its top-selling items include robes made of sweatshirt fleece and a hooded “onesy” that essentially functions as a one-piece sweatsuit.

Startups didn’t invent dressing down, but are scaling it

Obviously, the startup ecosystem didn’t singlehandedly make us less willing to sacrifice comfort for fashion. Americans pioneered sweatpants and baggy T-shirts long before there were laptops and cellphones, and venture-backed direct-to-consumer commerce startups.

But, it should be noted that the tech world has made major contributions to the dressed-down lifestyle, including its embrace of billionaire CEOs in hoodies and jeans, T-shirts as proper office wear, and a philosophy that people can get the most work done in the same clothes they wear to get the least work done.

The rise of working from home has also contributed, as few feel inspired to dress up for online meetings. Of course most of us still aspire to look good. But most days, it seems, we’re willing to settle for looking good enough.

Illustration: Dom Guzman