Lululemon Competitors Seize Opportunity
Apr 2nd 2013 5:30PM
Updated Apr 2nd 2013 5:36PM
Conventional wisdom says you shouldn't kick a guy when he's down -- forget that. lululemon athletica is still reeling from the yoga pants recall that it issued two weeks ago. The pants had the unfortunate feature of looking transparent when stretched. As a result of the shortage of product the recall has caused, the company has said that it's going to see a drop in comparable sales growth, revenue, and earnings per share for the first quarter. That's giving competitors a chance to pounce on the lucrative segment, and two have finally taken the initiative by featuring their versions of yogawear on their websites.
Under Armour makes its case
Sport-tech-driven Under Armour has been trying to increase its sales to women over the past few years. The goal is to generate 50% of apparel revenue from sales of women's clothing, which is a big move from its current state at about 20% of revenue . Tapping into Lululemon's market could be a great expansion for Under Armour.
To help it capture some of the disgruntled customers, Under Armour has added a slide to its main website that features the company's studio pants line. The pants look like the standard Lululemon range, but run about 10% cheaper. The company even featured the line on its Facebook page late last month, driving customers to its site with the tag line "We've Got You Covered." Well played, Under Armour.
Nike does it too
Not to be outdone, Nike has also brought its line of women's pants to the front of its site. The company's Legend Pants have prime real estate on the front page of Nike.com. The product page also highlights the pants' non-see-throughness, indicating that they provide coverage even when bending or stretching. While the additional income would be a smaller addition for Nike -- it made $6.2 billion last quarter -- the company couldn't help but make at least a gesture toward the customers that might come over from Lululemon. Nike's pants run even cheaper than Under Armour's, at around 25% less than Lululemon pants.
Gap misses an opportunity
For all its talk about increasing its Athleta business, Gap missed the boat on this one. The company doesn't even mention its yoga line on the brand's homepage, focusing on swim instead. Unlike Nike, Athleta could use a revenue boost in almost any denomination. The segment containing Athleta earned $117 million last quarter, which was a 31% increase from the year before. Still, Lululemon has said that around $15 million in lost sales are on the line, and any of that that Gap can pull in would be helpful. It's too bad the company missed out on the chance.
Where does Lululemon stand?
Lululemon has the potential to grow its sales by 10 times if it can penetrate its other markets like it has in Canada, but without question, the competitive landscape is starting to increase. Can Lululemon fight off larger retailers like Gap and Nordstrom, and ultimately deliver huge profits for savvy investors like yourself? The Motley Fool answers these questions and more in our most in-depth Lululemon research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.
The article Lululemon Competitors Seize Opportunity originally appeared on Fool.com.Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica, Nike, and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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