New Gap Offering Could Spell Trouble For LULU, Wall Street Strategies Reports

Amidst all the Lululemon Athletica inc. LULU hoopla, Gap, Inc. GPS issued a press release today announcing the opening of its first Athleta store, a 5,000 square foot box in San Francisco, Wall Street Strategies reports. “Why should this matter if you are a shareholder in Lululemon?,” Wall Street Strategies questions. “Isn't growth set to go up in a straight line for the next five years unabated?” “I tell you why you should be on notice,” Wall Street Strategies continues. “Athleta represents the first credible threat to Lululemon's yoga apparel market dominance (wide moat business this is not). Athleta's product offerings are not the mediocre quality women's athletic garb increasingly sprouting up at Target TGT and Kohl's KSS. It's quality product at an attainable price. Moreover, unlike Lululemon, Athleta is coming to market with a complete lifestyle assortment.” What is equally important to take away here, Wall Street Strategies said, is that Athleta is a brand purchased by CEO Glenn Murphy quickly upon his arrival at the company. “That means Athleta's growth path and in turn performance, is owned by him,” Wall Street Strategies writes. “All of this shows in the time and care taken to develop the brand online first since Athleta joined the Gap family of brands in 2008, at a cool $150 million (looks like a steal in hindsight). Gap is hungry to recharge its overall revenue and earnings growth rates as trends in the established portfolio only being so‐so, and certainly has the balance sheet to aggressively pursue Athleta store openings…globally.” Wall Street Strategies concluded by saying, “Yoga is known for relaxing mind, body, and soul. However, if I were a Lululemon shareholder, the footsteps of a hungry, more established competitor would indeed interrupt my positive Chi.” Lululemon Athletica currently trades at $51.32.