For Beijing resident Alex He, the cost of a trip to the mall can easily top $3,000. He, 29, works in the finance industry and while he doesn't regularly go shopping for clothes, “when I do shop,” he said in an interview, “I buy a lot.”  Recent purchases include several pairs of Adidas shoes that he found at an outlet mall. He also fancies Under Armour shorts and shirts. “I used to buy a lot of luxury brands but in the last year or so I've been purchasing more of the sports brands because they are more comfortable and more fashionable,” said He.

Chinese consumers like He, who want to make statements when they go shopping, are turning more to Western sports brands. President Xi Jinping's multi-year campaign to reduce conspicuous consumption of luxury goods by public officials has hurt sales of Pernod Ricard, Hugo Boss and BMW. Even as sales of luxury fashion, cars and other prestige products suffer, sportswear brands are robust. Nike's Greater China sales are strong, with orders from September to April up between 27 and 35 percent. On June 6, the company announced it will work with the Chinese Ministry of Education to train up to 7,000 physical education teachers. “Today's generation is the least physically active in history and we can help change that,” Nike President and CEO Mark Parker said in a statement.

Eoin Treacy's view

With one of the highest rates of diabetes in the world China is finally warming up to physical fitness. The service oriented nature of providing gyms and personal trainers also gels well with the government’s aim of fostering the domestic economy. The comparatively high cost of Adidas, Nike and Under Armour clothing relative to domestic brands acts as a diversifier between the well-heeled upper middle class and those for whom such outlays are too expensive. 

The biggest question is whether this is already in the price for these companies. 

Adidas is among the best performing large cap shares in Europe this year. It continues to hold a progression higher reaction lows but is now quite overextended relative to the 200-day MA. Reversion to the mean is a possibility and would offer a more attractive entry point.   

Nike lost uptrend consistency from early this year and moved to a new reaction low three weeks ago. A sustained move above the trend mean would now be required to question medium-term top formation completion. 

Under Armour has a similar pattern. 

Lululemon’s Asia Pacific business is still comparatively small particularly relative to its USA revenues. The question is whether China will develop as a market for yoga and yoga pants in the same way North America has. The share moved to a new two-year high last week and has held the majority of that move as it consolidates in the region of the upper side of the medium-term range. A clear downward dynamic is now required to question potential for some additional upside.