Shoppers aren’t feeling great about Lululemon lately, and it seems that the yoga-inspired retailer is facing some stiff competition.
Recent research from Jefferies highlights that Lululemon, known for its pricey $100 leggings, is now offering discounts that are “amazing,” even as it loses buyers to other brands.
For instance, over the July 4th weekend, a slim-fit skirt was reduced from $78 to $49, and jogger pants went from $128 down to $89.
According to the same Jefferies report from July 2, a windproof golf vest saw a price drop from $128 to $79.
Craig Johnson, president of Customer Growth Partners, noted that these discounts are quite remarkable for a retailer that typically sold nearly all items at full price.
“Historically, 95% of their products were sold at full price, but now it’s more like 75%,” Johnson explained.
Meanwhile, competitors like Vuori and Alo Yoga are encroaching on Lululemon’s territory, gaining ground since February based on recent surveys by Jefferies.
Jeffries analyst Randall Connick remarked, “Aro and Voli are coming for Lululemon.”
These companies have established physical locations near Lululemon stores, particularly in urban areas. For example, Lululemon’s flagship shop on Manhattan’s Fifth Avenue is directly across from an Aro outlet.
ALO, founded in Beverly Hills in 2007, now operates 99 stores in the U.S., while Vuori, based in San Diego, has 93 locations according to their website.
Both brands have heavily invested in retail expansion and social media marketing. ALO has notably collaborated with influencers like Kendall Jenner and Hailey Bieber.
In response, Lululemon seems to be struggling with strategy, introducing bright-colored items—colors like red, yellow, and purple—that don’t typically resonate with the athletic brand image, according to Connick.
“They’re trying to diversify their appeal, but these non-core products are now on sale,” he said, maintaining a poor outlook for Lululemon shares for the last two years.
Lululemon’s stock has dropped 38% this year, standing at $238 on July 10, down significantly from a peak of $516 in December 2023.
During a recent visit to Lululemon, multiple markdown racks displayed items like neon leggings and shorts, with prices visibly slashed. For instance, green leggings were down to $69 from $98.
Conversely, the ALO store across the street appeared to have no discounts available.
In recent years, Lululemon has expanded its outlet store count from a handful to at least 20, as noted by Johnson.
“Most of their higher-grossing stores are outlets now,” he added.
Moreover, Lululemon has adopted a “Logomania” approach, putting its name on various apparel beyond the usual—a tactic that some find excessive.
“They’re fixated on ‘newness’ but this has led to a rather chaotic product assortment that isn’t resonating well,” Connick pointed out.
The company has not responded to requests for further comments.
While revenues grew by 7% to $2.4 billion in the first quarter ending May 4, this growth was mainly international, with comparable store sales in North America dipping by 2%.
In June, Lululemon laid off 150 corporate employees, adjusting their profit outlook and citing various challenges.
“We experienced a decline in store traffic in the Americas, influenced by economic uncertainty, inflation, and shifting consumer spending,” the company stated.
Additionally, Costco has initiated a lawsuit against the brand over allegations of copying designs, selling similar products at much lower prices.
Lululemon, with 770 locations, remains a leader among premium athletic brands, outpacing competitors like Gap’s Athleta and Free People.
“The brand is still strong, and loyalty persists. However, they’ve definitely got some chinks in their armor,” Johnson concluded.
