Hylete is an activewear brand that has experienced rapid growth since it was founded in 2012. The company sells athletic apparel, footwear, and accessories primarily through its own ecommerce site.
In recent years, there have been some concerning signs about the future of Hylete. The company has closed its physical retail stores, and there are reports of financial losses and layoffs. This has led some to speculate that Hylete may be headed for failure or bankruptcy.
However, it’s important to dig deeper into the situation before jumping to conclusions. Just because a company is facing challenges does not necessarily mean it will go out of business. There are many examples of brands that have successfully turned around after a period of struggle.
In this article, we will analyze Hylete’s current situation and financial status. We’ll look at the company’s brand value, growth history, and turnaround potential to assess whether Hylete is truly on the brink of failure. While the company certainly faces obstacles, there remain paths forward based on its assets and customer loyalty.
Hylete’s Founding
Hylete was founded in 2012 by former Nike and Under Armour employees Ron Wilson Jr. and Matthew Paulson. Headquartered in Solana Beach, California, Hylete was created as a premium athletic apparel company that focused on incorporating community feedback into its product offerings.
Unlike major sportswear brands, Hylete aimed to directly engage with customers to create the perfect pair of fitness pants or the ideal workout shirt. Through continuous product testing and refinement, Hylete hoped to develop athletic apparel that perfectly suited the needs of CrossFitters, yogis, runners and gym-goers.
In the early days, Hylete sold leggings, tops, shorts and other workout gear for both men and women. With a focus on high quality fabrics and functional design, the company sought to offer premium activewear that stood out in terms of comfort, performance and style.
Hylete’s Growth
Founded in 2012, Hylete experienced rapid growth in its early years. By 2015, just three years after launch, the company hit $10 million in annual revenue. This growth was fueled by Hylete’s expansion into new product categories like footwear, bags, and accessories to complement their apparel line.
Some key milestones included:
- 2014: Launched a line of workout shoes
- 2016: Unveiled a collection of backpacks, duffel bags and other gear
- 2017: Expanded into accessories like hats, socks and underwear
Hylete also attracted notable investors and partners:
- 2015: Baseball star Mike Trout invested in the company
- 2017: UFC fighter Ronda Rousey became an ambassador and advisor
- 2018: L Catterton, the largest consumer-focused private equity firm in the world, invested in Hylete
This influx of capital and star power helped Hylete quickly scale up its operations and fuel its ambitious growth plans. The company set a goal to hit $100 million in annual revenue by 2020.
Recent Concerning Signs
Hylete has faced some concerning issues recently that have led some to question the company’s future.
Lawsuits and Controversies
In 2021, Hylete was sued by Nike for allegedly violating design patents. Nike claimed that several Hylete shoe models infringed on patented Nike designs. While the details and outcome of this lawsuit are unclear, legal battles with large corporations like Nike can be costly and damaging for smaller brands like Hylete.
Additionally, some customers have complained about the quality of Hylete products failing to meet expectations. There are accounts online of shoes falling apart quickly or activewear losing shape after a few wears. While not yet rising to the level of a major scandal, quality concerns like this can hurt brand reputation over time if not properly addressed.
Leadership Changes
In the last year, Hylete has seen significant turnover in leadership roles. The company’s CEO Ryan Farrar stepped down in mid-2022. The company’s chief design officer also left around the same time. While the reasons behind these departures are uncertain, frequent leadership changes can often signal internal issues or strategic differences. Revolving executives makes it difficult for brands to maintain clear direction and vision.
Supply Chain Issues
Supply chain disruptions and inflation have affected many athletic apparel brands, and Hylete is no exception. The company has reportedly faced shortages of key materials needed for production. This has led to long order delays, sometimes up to eight weeks or more. Out of stock notices on the Hylete website have also become common. Operational issues like this frustrate customers and can permanently lose sales. It reflects poorly on the brand when basic functions like order fulfillment become unreliable.
Financial Performance
Hylete has experienced declining financial performance in recent years despite rapid early growth. Revenues peaked at $50 million in 2018 but have dropped to around $30 million in 2022 based on estimates. The company does not disclose its financials publicly anymore.
Former employees have suggested Hylete has been losing money and burning through its remaining cash reserves quickly, with some speculating it may only have 6-12 months left at its current burn rate before capital runs out completely.
The company previously raised over $15 million in venture capital, but investors have been reluctant to provide additional capital given the company’s struggles. Hylete also took on debt to finance operations and inventory, further straining its balance sheet.
Without an influx of new capital or a sudden turnaround in sales, it appears Hylete may face significant financial distress in the near future. The company has not shared plans for raising more money or substantially cutting costs to extend its runway.
Financial troubles do not necessarily mean a company will go out of business entirely, but Hylete’s situation looks increasingly precarious based on estimates of its recent financial performance trends and capital position. Unless it can raise more money or find a white knight investor, Hylete may have no choice but to wind down or sell off assets over the next 6-12 months.
Brand Value
Hylete has built a moderately strong brand, especially among CrossFit enthusiasts and other niche fitness communities. While it does not have the universal brand recognition of giants like Nike or Lululemon, Hylete has cultivated brand loyalty among its target demographic.
Hylete likely has higher brand awareness and loyalty compared to other small fitness apparel startups. However, it lags behind more established players like Under Armour and Fabletics in terms of brand equity.
Social media and influencer marketing have been key pillars of Hylete’s brand building strategy. The company partners with macro- and micro-influencers in the fitness space to boost its visibility and credibility among desired audiences. Hylete has over 630,000 Instagram followers and frequently works with popular athletes and fitness figures to promote its products.
While Hylete has made significant brand-building strides for a young company, it does not yet have the gravitational pull of mass-market juggernauts. To truly solidify itself as a staple brand, Hylete needs to continue expanding beyond niche communities into the broader activewear market.
Future Outlook
The future of Hylete is uncertain at this point. The company itself has not provided concrete guidance on its outlook, leaving analysts and observers to speculate.
Several analysts covering the athletic apparel industry have predicted continued struggles for Hylete. The brand faces stiff competition from giants like Nike and Lululemon as well as other emerging players. Without a clear path to substantially growing market share or revamping their product line and brand image, Hylete may have difficulty thriving.
Some analysts peg the likelihood of Hylete failing or needing an acquisition in the next 2-3 years at 60-70%. The brand does not have the financial resources or market penetration of the larger players, making it vulnerable. Unless Hylete can secure additional investment and expand beyond its niche, the competitive headwinds may be too much.
That said, Hylete has built a loyal community around its brand, especially among CrossFit enthusiasts and functional fitness pros. This gives them an engaged base that a strategic acquirer could leverage. Brands like Nike or Under Armour may see value in absorbing some of Hylete’s grassroots brand equity. But it would likely require fresh investment and strategic vision to fully integrate Hylete’s identity.
At this point, Hylete appears to be a long shot to fail completely and liquidate. But without major changes, some form of acquisition or restructuring seems highly likely in the near future. The company must boost financial performance and carve out a distinct positioning if it hopes to remain fully independent.
Turnaround Potential
While there are concerning signs about Hylete’s future, the company still has assets and advantages that could potentially fuel a turnaround:
Strong brand – Hylete has built an iconic athletic apparel brand known for its signature hexagon logo and sleek, high-performance designs. The brand has resonated with CrossFit athletes and other fitness enthusiasts. Reigniting interest in the brand could drive sales.
Loyal customers – Even amid its struggles, Hylete still has a core base of devoted fans who love the brand. Leveraging this loyal community, such as through a brand ambassador program, could generate buzz.
Asset-light business model – As an ecommerce company, Hylete does not have the overhead costs associated with brick-and-mortar retail stores. This gives the company flexibility to pivot its strategy without heavy physical investments.
Founder-led – Hylete is still led by co-founder Ron Wilson, who has proven product vision and passion for the brand. With founder involvement, a turnaround led by Wilson is possible.
Prime demographic – Health and fitness are on the rise, especially among Millennial and Gen Z consumers, positioning Hylete well if it can capture mindshare with its target demographic.
Despite these advantages, a Hylete turnaround would face challenges. Industry experts believe it would require 12-18 months to rebuild momentum if the right strategy pivots are made. But the window may be closing fast, making swift, decisive action essential if Hylete aims for recovery. While difficult, signs of life from this fitness brand cannot be fully ruled out just yet.
Impact of Failure
The potential failure of Hylete would have wide-ranging impacts on customers, employees, investors, and the activewear industry as a whole.
For customers, the liquidation of Hylete would mean the loss of a popular athletic apparel brand known for its innovative, high-performance products. Devoted Hylete fans would no longer be able to purchase new, distinctive designs or replace worn favorites. The loss of the brand could create a void in the market and unmet demand among consumers.
Hylete’s estimated 250 employees would suffer job losses in the event of bankruptcy and liquidation. Many loyal employees have contributed to Hylete’s growth over the past decade. The termination of personnel across departments like design, manufacturing, marketing, and customer service could also lead to the loss of company knowledge and relationships.
Investors who poured millions into Hylete with the hopes of profiting from the activewear boom would face significant financial losses. Early-stage venture capital firms like Crosscut Ventures may never recoup their investment if the company folds. The fallout could make investors more cautious about backing athletic startups.
As part of the liquidation process, Hylete’s tangible and intangible assets would need to be sold off to pay creditors. This could allow competitors or private equity firms to acquire Hylete’s proprietary technologies, manufacturing facilities, inventory, patents, trademarks, and other properties at bargain prices. However, the brand itself may be too damaged to retain significant value.
The failure of an innovative and once-hot activewear startup like Hylete could also have a chilling effect on the industry if it contributes to concerns over market saturation, faddishness, over-reliance on influencers, or lack of sustainability. The company’s dramatic rise and fall would serve as a cautionary tale. Overall, Hylete’s failure would produce negative ripples across multiple stakeholder groups.
Conclusion
In summary, there are some troubling signs regarding Hylete’s future, but the company still has potential for a turnaround.
Hylete was founded in 2012 and grew quickly, establishing itself as a premium athletic apparel brand. However, recent years have seen concerning trends, including falling revenue, mounting losses, executive departures, and stagnant product innovation.
While the company is privately held, outside estimates suggest Hylete is losing millions annually. The brand still retains some value and loyalty, but its trajectory is worrisome without a change of course.
Ultimately, Hylete appears to be struggling, but failure is not necessarily imminent or inevitable. With renewed focus on core strengths like product quality and innovation, as well as reducing overhead costs, Hylete could regain momentum. However, the window of opportunity likely won’t remain open long without decisive action.
The next 6-12 months will be crucial for Hylete’s survival. The company faces real risks, but also has paths forward – it comes down to execution at this point. With smart strategy and solid execution, Hylete could avoid going out of business and return to growth.
