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Lululemon love affair

Lately, investors are as dedicated to the retailer as its yoga crowd customers. Can the good times last?


 
Lululemon love affair

Benjamin Norman/Bloomberg/Getty Images

In the world of yoga, nothing seems to levitate like Lululemon Athletica, the Canadian sports clothing retailer. The company saw its shares shoot up by eight per cent early last week after projecting higher than expected fourth quarter returns. It was “the second coming of Coach,” said Credit Suisse in a note to clients, referring to the popular accessories retailer, adding that Lululemon had found “the elusive formula to unlock the mystery of what women want to wear and how they want to buy it.”

A little over a decade after first setting up shop in Vancouver in 1998, the retailer now counts 130 stores across North America, Europe and Asia, and a market capitalization of $5 billion. The company sailed unscathed through the recession, and shows no sign of slowing down its expansion. But is the karma going to last?

Some naysayers are predicting trouble ahead. The Gap’s Athleta brand of women’s activewear could be “the first credible threat to Lululemon’s yoga apparel market dominance,” Wall Street Strategies, a stock market research company, warned last week. Athleta just opened a 5,000-sq.-foot store in San Francisco and, some say, could soon threaten Lululemon with its cheaper versions of tank tops and, of course, yoga pants.

Athleta, though, wouldn’t be the first one to try to tap into yoga gear. Nike, Victoria’s Secret and American Eagle have all moved into that market without much sign of cutting into Lululemon’s sales. And competitors jumping into that space are more a proof of success than a worrying sign, says David Ian Gray, a retail analyst and principal of Vancouver-based DIG360 Consulting. Besides, he adds, the company enjoys remarkable consumer loyalty thanks to women’s unwavering devotion to clothes that “fit great, look good and feel comfortable.” Of course, Gray notes, almost nothing in this universe can grow forever. “Concepts”—even Lululemon’s—“have their life,” he adds, but for now, “there’s no immediate danger of them faltering.”


 

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