Lululemon's status as yogawear's top dog at risk

Wed Apr 16, 2014 7:49pm EDT
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By Phil Wahba

NEW YORK (Reuters) - Still hurting from last year's see-through yoga pants debacle, Lululemon Athletica Inc (LULU.O: Quote) is about to face a new headache: stepped-up competition from rival yoga retailers, department stores and hot new brands.

The company is facing aggressive competition from stores such as Gap Inc's (GPS.N: Quote) Athleta, VF Corp's (VFC.N: Quote) lucy, Macy's Inc (M.N: Quote) and others selling activewear at lower prices at far more locations.

Small but hot yogawear brands such as Sweaty Betty and Lorna Jane also pose a potential threat, but the biggest competition is expected to come from Athleta, which will open 30 stores this year, tripling its locations to about 100 stores in just two years.

"Lulu has had clear sailing up until now. They were the gorilla in this category," said Kelsey Scroggins, a senior vice president at Marvin Traub Associates, a consulting firm in New York.

Long a Wall Street darling for its dizzying revenue growth, the Vancouver, Canada-based company recently reported its first decline in quarterly comparable sales since 2009.

Lululemon's stock is 36 percent below its 52-week high on investor concerns about growing competition. The company is expected to provide an update to Wall Street at its analyst day on Thursday.

Lululemon's U.S. sales hit the $1 billion mark for the first time last year, more than triple what they were two years earlier, making it the top specialty retailer in the $14.5 billion women's activewear market in the United States.

But Lululemon's 2 percent growth in same-store sales - a key measure of performance for retailers - lagged the womenswear market's 9 percent rise, according to NPD Group.   Continued...

A Lululemon Athletica logo is seen outside one of the company's stores in New York, December 16, 2013. REUTERS/Shannon Stapleton