Lululemon Envy Has Retailers From Gap to Nordstrom Chasing Yoga Devotees

Gap, Nike and Nordstrom may have something in common: Lululemon envy. Seeking to lure shoppers willing to spend $98 on stretchy yoga pants, these retailers are mimicking the strategy of Lululemon Athletica Inc. (LULU), the sports apparel company known for its pricey yoga gear.

Nike Inc. (NKE)’s Salvation chain of athletic-wear stores is selling $64 training capris and features a yoga-studio format similar to that of Lululemon. Gap Inc. (GPS)’s Athleta stores sell $60 women’s yoga tops and offer free yoga classes -- another Lululemon innovation. Nordstrom Inc. (JWN)’s Zella line, dedicated to yoga attire, hired a Lululemon alum to introduce the effort.

By adding yoga gear to their mix, the three big retailers are angling to grab a larger share of women’s athletic apparel sales, Bloomberg Businessweek reports in its Sept. 12 issue. While consumers continued to restrain their spending, U.S. sales of women’s athletic clothing rose 2.6 percent last year, to $30.5 billion, says market researcher NPD Group.

“This trend is 100 percent driven by Lululemon,” said Andrew Burns, an analyst at equity research firm D.A. Davidson in Portland, Oregon.

While yoga has been around for millennia, Lululemon “helped turn it into a social thing for women by making them feel like they looked good while doing it,” says Jill Miller, a Los Angeles yoga instructor.

The Vancouver-based company was founded by entrepreneur Chip Wilson in 1998 after he took a yoga class and found clothing then available wasn’t ideal for yoga.

Cult-Like Following

With a canny blend of fashion and lifestyle marketing -- besides the free yoga classes, it spotlights local “ambassadors” who “embody the Lululemon lifestyle” -- the retailer has built a cult-like following. Lululemon’s revenue grew 57 percent last year, to about $712 million. Revenue for fiscal 2011 may increase as much as 33 percent to $950 million, the company said today in a statement. The shares fell $2.63 to $55.06 at 4:21 p.m. on the Nasdaq Stock Market.

Rivals appear to be undercutting Lululemon on price. A jacket in Nordstrom’s Zella line goes for $98, $20 less than a Lululemon version. While Lululemon sells yoga pants for $98, San Francisco-based Gap’s Athleta brand sells a comparable pair for $59.

“I think we differentiate ourselves from other brands because of our wider selection,” said Scott Key, a senior vice- president at Gap’s Athleta unit. “It’s more accessible, more affordable.” He denies borrowing from Lululemon.

‘Zen Webinars’

Nike, which is based in Beaverton, Oregon, and Gap also are following Lululemon’s practice of tapping into yoga’s spiritual ethos, an effort to make customers feel that they’re part of a community. Athleta’s website features a blog on how to stay “Chi” as well as a series of “Zen webinars.”

Nordstrom, which is based in Seattle, poached Lululemon product manager Libby Vance to design the Zella line. Before her departure in 2009, she introduced Lululemon-esque looks for Nordstrom shoppers, including reversible jackets with two-looks- in-one and spandex pants that won’t ride up while doing the Downward-Facing Dog. Nordstrom and Nike declined to comment for this story.

The big question for Lululemon and its rivals is whether yoga still has room to grow. Lululemon’s revenue logged a compound annual growth rate of 52.3 percent from 2005 to 2009. Sales growth at Lululemon stores open more than 12 months have slowed this year and the company is boosting online sales, hoping they will hit 8 percent of total revenue by next year. That’s a tougher goal as new rivals emerge.

Moreover, women are starting to spend more on dressy clothing for work and special occasions, says Adrienne Tennant, a Janney Capital Markets analyst in New York, leaving less cash to spend on yoga togs.

Photographer: Benjamin Norman/Bloomberg

Athletic apparel sits on display at the Union Square Lululemon retail store in New York. Close

Athletic apparel sits on display at the Union Square Lululemon retail store in New York.

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Photographer: Benjamin Norman/Bloomberg

Athletic apparel sits on display at the Union Square Lululemon retail store in New York.

“There is a high level of fashion risk tied to this trend,” said Burns, the D.A. Davidson analyst. “As consumers have less discretionary funds, or preferences change, the whole trend could fall apart.”

To contact the reporter on this story: Ashley Lutz in New York at alutz8@bloomberg.net

To contact the editors responsible for this story: Robin Ajello at rajello@bloomberg.net; James Ellis at jellis27@bloomberg.net

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