Lululemon spins further out of the yoga circuit

Lululemon‘s

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the roots are grounded in yoga, but it extends far beyond that now.

The athletics firm said in an analyst presentation last Wednesday that it aims to double its sales from $ 6.3 billion in the most recent fiscal year to $ 12.5 billion in 2026. As ambitious as it may seem, it may not be too far off. reach of Lululemon, which has doubled its revenue in three years. Analysts polled by FactSet had already written a similar number.

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Lululemon’s new goals come as the company expands its horizons. It recently launched women’s footwear, which the company says sells well, and which branches into clothing for golf, tennis and hiking. Having made its entry into fitness equipment through the Mirror acquisition in 2020, the company is also aiming for paid memberships. Later this year, Lululemon plans to debut a $ 39-a-month membership program that will give its users access to digital fitness classes in Mirror’s library, as well as online courses from boutique studios such as Pure Barre and Y7. It will also include discounts for personal classes offered by these studios.

However, there are some reasons to be wary of Lululemon’s new plans, which come as the company expects a slowdown in growth in women’s sales. Lululemon’s market share in North American women’s clothing has already doubled between 2015 and 2020, according to data from Euromonitor.

The real challenge will be to pull off the expansion while keeping its luxury brand-like margins intact. Wild success in footwear, for example, would be a double-edged sword because it is a category with a lower margin compared to clothing. And while comfortable work trousers for men are a niche category with few significant competitors, footwear, golf, tennis and hiking all place the company more directly in competition with the Nike NKE -4.72%

and Adidas. Meanwhile, a $ 39 membership fee seems high compared to alternatives. Peloton’s membership for its app only, for example, costs only $ 12.99 a month.

So far, Lululemon believes it can primarily deliver its growth target by selling its core line of products to multiple customers, including international markets, which accounted for only about 15% of total revenue last fiscal year, and men, which account for a third of its sales. Mirrors and footwear are only expected to account for about 5% of sales in the foreseeable future.

One of the reasons why Lululemon has been so successful in maintaining its bottom line – in addition to the steep price tags – is its grassroots marketing strategy. The days when $ 100 plus Lululemon pants practically sell themselves could be numbered; the company said in its presentation on Wednesday that it will move to a more “integrated” approach that will involve more earned and paid media, as well as sports partnerships. In addition, international markets where Lululemon plans to quadruple its business by 2026 may also end up having a mixed impact on profitability. David Swartz, an equities analyst at Morningstar, noted in a recent report that Lululemon’s expansion into Europe “has been slow and a drag on earnings.”

Lululemon is increasingly positioning itself as an all-encompassing fitness and sports brand, directly in Nike’s path. It will be neither easy nor cheap to get there.

Write to Jinjoo Lee at jinjoo.lee@wsj.com

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