Lululemon Faces Slowest Growth in Years Amid Rising Competition
The athleisure giant Lululemon is bracing for a grueling Q3 earnings report, with revenue expected to rise a modest 7% to $2.36 billion. This marks a significant slowdown from the nearly 19% jump seen in the same period last year. Shares have plummeted 33% so far this year, raising concerns about the company’s ability to keep pace with trendy upstarts.
New Challengers Emerge
California-based brands Alo Yoga and Vuori have been gaining traction, refreshing their shelves with fresh styles more frequently. This approach has resonated with younger shoppers, including celebrities like Kendall Jenner, Taylor Swift, and Kaia Gerber, who have been spotted wearing gear from these brands. According to Elizabeth Lafontaine, director of research at Placer.ai, “newer brands like Alo Yoga and Vuori are outpacing Lululemon in visitation growth year-over-year” in established athleisure markets like California.
Gap-Owned Athleta Sees Resurgence
Meanwhile, Gap-owned Athleta has returned to growth, thanks to a trendier collection of joggers and tees, as well as social media buzz. The brand’s $109 leggings have been a hit, and its resurgence has added pressure on Lululemon to revamp its product line.
Lululemon’s Struggles
Lululemon’s North America business has shown signs of fatigue, with product missteps in its women’s business prompting the company to slash its 2024 sales and profit forecasts in August. The company has blamed its choppy sales on lower availability of smaller sizes and colors in its key women’s apparel business, as well as less newness across core and seasonal styles. The debacle surrounding its $98 “Breezethrough” leggings, which were pulled from shelves due to criticism over their design, has only added to the company’s woes.
Competition Heats Up
Vuori and Alo are aggressively expanding their store count, strategically targeting openings around existing Lululemon locations. Roughly 90% of Vuori stores and 84% of Alo stores now operate within 0.5 miles of a Lululemon location across the United States. This increased competition has raised concerns about Lululemon’s ability to maintain its market share.
Lululemon’s Search for Growth
The company has attempted to broaden its product category, including flannel shirts and ankle-length skirts, and launched a Disney-themed limited-edition collection. However, analysts say these efforts have not translated into a sales boost. Lululemon’s customer base consists of middle- to upper-income individuals who engage in fitness activities, and the company risks alienating its core customers by venturing into new areas.
A Challenging Road Ahead
As Lululemon prepares to report its Q3 earnings, investors will be watching closely to see how the company plans to address its slowing growth and rising competition. With its shares already down 33% this year, the pressure is on for Lululemon to prove it can still dominate the athleisure market.
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