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The athleisure trend is becoming a problem for Lululemon


While athleisure apparel is still quite trendy these days, the creator of the trend, Lululemon Athletica, is struggling to grow profits as competitors threaten its value proposition.

For the third quarter ended Nov. 1, the company posted a profit of $53.2 million, or 38 cents a share, down from $60.5 million, or 42 cents a share, a year earlier. Revenue rose 14% to $479.8 million. Same store sales rose 6% for the second quarter in a row on a constant-currency basis.

Laurent Potdevin, Lululemon's CEO, said: "We had a solid quarter in line with our expectations underscored by the combination of our product, guest and community initiatives along with tremendous guest reception to major store openings around the world. I would like to personally thank all of our educators who create amazing experiences for our guests every day."

As competitors such as Kohl's, Foot Locker, Under Armour, Nike, Victoria’s Secret and many others swamp the athleisure sector with their own versions of yogawear, Lululemon’s market share is being put under immense pressure. Many of these competitors are introducing lower priced versions of the same product Lululemon offers. Meanwhile, the company has been doing quite the opposite: increasing its prices.

"Hiking some prices had the effect of upsetting loyal customers who saw little justification for the increases and therefore viewed them as being unreasonable," said Neil Saunders, CEO of Conlumino. "Given the current struggle for growth, alienating core consumers is arguably the last thing that Lululemon should be doing. ... The company now needs to work much harder if it is to keep in good shape in what is now a much more competitive market."

For the full year, Lululemon expects earnings of $1.81 to $1.84 a share, down from a previous forecast of $1.87 to $1.92 a share. The company estimated revenue in the range of $2.03 billion to $2.04 billion, with same-store sales up in the high-single digits on a constant-dollar basis. The company had previously forecast sales of $2.03 billion to $2.06 billion.

Lululemon ended the third quarter with 354 stores.

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