Lululemon might be wasting its time taking on Nike

In a world where fashion and comfort are increasingly intertwined, ath-leisure companies like Nike  (NKE) - Get Free Report and Lululemon  (LULU) - Get Free Report are set to thrive. 

Take one walk down the trendy streets of New York's SoHo or London's Oxford Street and you'll see plenty of high-fashion types wearing what just a couple of years ago might have been considered gauche. 

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Now, however, it's perfectly acceptable — even encouraged — to wear grey sweatpants with a grey hoodie and dad sneakers. Even better if you pair it with an oversized trench coat and a beanie. What may have been seen in 2017 as unkempt and out of step with high fashion is now considered the highest pinnacle of post-pandemic fashion. It's easy, effortless, and comfortable. 

And perhaps no company has benefited more from this trend than Lululemon. Its women's yoga pants have been popular for over a decade, signaling to everyone from college students to stay-at-home moms that its wearers are active and can afford not just the boutique workout classes but also the accompanying boutique outfit prices.  And the company leans into this reputation. 

"We do not drive our top line growth through discounts or promotions, and we have no intentions to do so," CEO Calvin McDonald told investors in 2023. 

Lululemon continues expansion

Instead of moving its merchandise at any cost, Lululemon has focused instead on expansion into new avenues. In 2022 it announced it would be further developing its menswear line, a relatively unpenetrated market for the female-centric brand. 

That same year, it announced the launch of its brand new shoe collection, which included only a small selection of women's running, walking, and cross training sneakers.

Though it doesn't break out shoe sales individually, the company is getting something right. It's not rare for the company to impress investors — the stock is up 44% year-to-date and in January it announced it would update its net revenue expectations from $3.17 billion to $3.19 billion — a 15% increase compared to the year-ago period. 

But what about its wearers? The shoe rollout can't be measured quantitatively, but online fora are filled with nothing but positive reviews. Again, something must be going right here, because in February Lululemon announced its intentions to once again expand the line into the men's department. 

“At Lululemon, every product we make is designed to embody our feel-first philosophy, which is rooted in the belief that when you feel your best, you perform your best — and our new styles and men’s footwear offerings are no exception,” said Lululemon Chief Product Officer Sun Choe. “With new performance running shoes and our first-ever casual sneaker added to our lineup, we can now outfit both men and women in versatile gear from head to toe.”

But menswear still hovers around 30% of Lululemon's revenue. That's not nothing. Yet CEO Calvin McDonald admits that brand awareness is just 13% among U.S. men. And there are plenty of other companies vying for men's sales, Nike and Adidas  (ADDDF) - Get Free Report being two central ones. 

It's not that men are pickier, in many ways, they're just already saturated. When you consider that Nike makes footwear for at least 10 competitive sports and activities — and that's not counting some of their trendier streetwear — entering this space sounds like a daunting task.

Lululemon gained its reputation thanks to word of mouth and collaborations with pricey workout companies like SoulCycle and Peloton  (PTON) - Get Free Report — two brands with a loyal following, to be sure, but they do lean quite female.

So with a fraction of its revenue, lower brand-awareness, and an already-saturated sneaker market, it may instead be wise of Lululemon to concentrate on what it does best and instead slow-walk a men's shoe line.