Lululemon Treads Into Sneaker Space

Lululemon has entered sneaker space, in an effort to capture some of the industry’s hottest trends. The retailer launched its first branded sneakers on Wednesday and is offering a 25% discount across all lines through Friday—a move that may be one step towards Lululemon trying to become a lifestyle brand.

Lululemon is a company that has been known for their yoga apparel. Recently, they have started to make and sell sneakers. This is not the first time that this company has entered into the sneaker space.

The debut of Lululemon’s women’s shoes was revealed earlier this month.

Business Wire/Associated Press photo

6:33 a.m., March 30, 2022 ET

Lululemon LULU 9.58 percent, the world’s largest leggings company, is expanding into the women’s footwear market. Is it for the proper reasons that you’re going into it?

Lululemon shares have fallen this year, as have those of other sports gear companies such as Nike and Adidas, as investors worry about supply-chain difficulties and likely consumer demand dampening as inflation drives up the cost of everything. Nonetheless, Lululemon’s announcement of a women’s shoe launch in March appears to have piqued the interest of investors. Its stock has gained 7.5 percent in the last month, surpassing Nike and Adidas, which have both gained roughly 2%.

Because footwear has lower margins than garments, a move into that sector might be a mixed bag for Lululemon, which is more lucrative than its athletic contemporaries. Last fiscal year, its 57.7% gross margin was higher than Nike’s 46 percent, putting it closer to luxury behemoth Kering, which owns Balenciaga and Gucci.

Some investors may perceive Lululemon’s move into a new area as a warning sign if it indicates that the company’s main business is experiencing limited growth opportunities. Its debut into the fitness-equipment market in 2020, through the purchase of Mirror, has been unimpressive thus far. However, according to the company’s findings, which were released late Tuesday, Lululemon’s entrance into footwear is more of an offensive than a defensive move.

Following a 42 percent revenue increase in the fiscal year that ended Jan. 30, Lululemon said it anticipates sales to increase by 20% to 22% this fiscal year, a far faster rate than the 15.6 percent that Wall Street analysts were forecasting. Lululemon anticipates its core garment business to account for a large portion of that increase. Following the results call, the stock rose 7.7% in after-hours trading. Megan Frank, Lululemon’s Chief Financial Officer, said that footwear would be a “test-and-learn” category that will account for a modest amount of the company’s revenue in 2022.

If it can get its loyal network of consumers enthusiastic, Lululemon could be in a good position to achieve headway in the market. According to NPD Group statistics, women who purchased from Lululemon spent 30% of their total sportswear purchases there in the fiscal year that concluded in January. According to NPD, Fabletics, Under Armour, and Adidas each account for less than 10% of those consumers’ sportswear purchases.

Subscribe to our newsletter

Alert received

The first word on what’s going on on Wall Street.

One concern that will arise in the future is if Lululemon is attempting to achieve too much at once. It will debut its first tennis line this week and a golf collection the next week, in addition to footwear. In 2022, it will also be handling the launch of 70 net new shops, which is a faster pace than usual.

For its new footwear company, baby steps may be the best approach.

Jinjoo Lee can be reached at [email protected].

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

The print issue of the March 31, 2022, was published.

Related Tags

  • hottest sneakers 2021
  • sneaker heads