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Is Lululemon falling behind?

The activewear market continues to grow, the space is increasingly seeing more brands and most are aggressive in keeping their share of the market. A few of the big names such as Nike (NYSE: NKE) and Under Armour (NYSE:UA) are also keeping a close eye on the evolution of the athleisure trend and preparing their brands for the future. The future, in our view, will be premium sportswear with increased fabric technology.

We are positive on Lululemon (NASDAQ: LULU) for now, the women’s line is fashion forward with great details. Men’s has been a major focus for the business, in our recent store visits to Lulu we noted an increase in the square footage devoted to men’s. The growth in menswear helped contribute to same-store sales increases of 6% in its latest quarter.

However, as we continue to shop stores in the sports market, Lulu seems to be falling behind in updating their product. Lulu does sell premium sportswear through its &Goassortment, yet it seems to be a smaller assortment than the competition and its not highlighted to their customers. They do have two lab stores that carry limited product of premium sportswear. This is where the sportswear area is headed yet it is not available on their site and has limited distribution.

Our view

Under Armour Sport, (UAS) is a premium sportswear line which will launch in September. UAS will have its own website, fashion show during fashion week and sell at many upscale stores.

NKE spends marketing dollars highlighting its Lab collaborations with major designers and sells the line through their e-commerce site as well as in their Lab stores. As these two major players give special attention to this evolution of sportswear we see the luxury customer spending in this premium market. Therefore, UA & NKE will benefit in the long-term.

We feel LULU should be part of this premium active world. They definitely sell to the affordable luxury customer. If they don’t keep up with the competition in terms of Premium Sportswear we are afraid that they could lose share. We feel that their Lulu Lab collection should be available on their website. We also feel that they should be increasing the assortment of their &Go collection on-line and in store.

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