The athleisure market, which is clothing items worn casually and for exercise, of which Athleta, a part of Gap Inc. (NYSE: GPS), and Lululemon Athletica (NASDAQ: LULU) reside, was a $300 billion market in 2018 and is projected to reach $517.5 billion by 2025. This is a category commercial real estate investors should find worth watching.
Both Athleta and Lululemon appeal to the same consumer market, and both retailers broke into the ginormous and growing athleisure category at the exact same time: 1998. So which will be the preferred brand between these two leading athleisure companies? It appears Athleta may be positioned to become bigger than Lululemon someday, and here's why.
Athleta is experiencing store openings at a time when retailers, including Gap and Banana Republic -- two other Gap Inc. stores -- are closing. The goal is to double the Athleta business by 2023 in two ways: By opening 20 to 30 Athleta stores each year and by starting an international franchise model so that Athleta can grow globally. Athleta is already on that road as it makes a debut in Canada. (Gap Inc. is slated to open Old Navy stores as well.)
Lululemon is also opening retail locations at a time retailers are closing. It plans to open 30 to 35 stores globally in 2021, with a goal of appealing more to men. It recently acquired Mirror, a home exercise brand, to help achieve this goal.
The current stats
Athleta currently has 200 stores in the United States with over $1 billion in net sales, representing a 16% annual sales growth and a 26% sales growth in the most recent quarter. The goal for 2023 is to reach $2 billion in sales.
Lululemon, a Vancouver-based company, currently has 515 stores around the world with $4.4 billion in net revenue sales for the year ending Jan. 31, 2021, representing a 10.6% annual sales increase and a 24% increase in the most recent quarter. Lululemon has a goal called the "Power of Three" plan: quadrupling international revenue, doubling menswear sales, and doubling digital sales by 2023.
Athleta sells clothing and accessories for woman and girls. Its branding and marketing message is about women's empowerment with the hashtag, "powerofshe." Athleta is a Certified B Corporation, which is a new kind of business that is legally required to consider how workers, customers, and the community in general are treated. Companies that are Certified B Corporations are to use business as "a force for good." Athleta appeals to people who want to better the planet.
Lululemon is widely considered a women's-only yoga brand, but it sells men's clothing too, which potentially gives it an edge. But while Athleta is seen as a force for good by consumers, Lululemon has received lots of bad press over the years, mainly regarding how the company treats its workers and whether it's really doing its part to improve the environment. The brand claims to be sustainable, but people question whether Lululemon is mostly talk with little action.
The Millionacres bottom line
Lululemon might be bigger than Athleta now, but which is better positioned for future growth is the question investors want answered. Lululemon has a higher valuation today, but its messaging isn't as strong as Athleta's, and messaging counts for a lot these days. Both brands are in a position to do well over the next few years.