Sour Lululemon results may signal squeeze for athletic leisure lines

Thu Mar 30, 2017 6:20pm EDT
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By Gayathree Ganesan and Sruthi Ramakrishnan

(Reuters) - The steep drop in Lululemon Athletica's (LULU.O: Quote) stock price, following a sales warning that resulted from poor color choices in the company's spring collection, turns the spotlight on slowing growth in the athleisure category pioneered by the Canadian yogawear retailer.

Shares of rivals Nike Inc (NKE.N: Quote) and Under Armour (UAA.N: Quote) also were down on Thursday, raising questions of whether athletic leisure wear can maintain its torrid growth amid competition from denim and possible shopper fatigue with the now decade-old fashion category.

In the age of fast fashion, when trends change overnight, athletic leisure wear is showing signs of age. Industry-wide sales in North America have grown 39.2 percent to $26.05 billion in the last five years, according to Euromonitor.

However, sales in the category are expected to grow at 5.2 percent in 2017, slower than the average 6.9 percent rate at which the category had grown in the last five years.

The latest quarterly results have also indicated a slowdown from the marquee manufacturers.

The last few years have seen a surge in the number of retailers offering athleisure clothes, ranging from mass-market products sold by retailers such as Gap Inc (GPS.N: Quote) to $1,000 leggings from designers such as Alexander McQueen.

"There is no more the growth that was there before and there are way more competitors for the brand (Lululemon) compared to when they'd started 10 years ago," Jan Rogers Kniffen, chief executive of consulting firm J. Rogers Kniffen WWE, said.

A hash of celebrity brand launches, including Beyonce's Ivy Park line in April last year, has also competed for sales at the traditional retailers.   Continued...

People walk past a store by yogawear retailer Lululemon Athletica in New York City, U.S., March 30, 2017. REUTERS/Brendan McDermid