Lululemon faces unexpected new rival as customers pull back | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Lululemon (LULU) , which became popular for its luxury athletic wear, has been battling weak consumer demand over the past few months, and a new rival threatens to exacerbate the problem.

During the second quarter of this year, Lululemon saw its comparable sales in the region drop by 4% year-over-year, according to its latest earnings report. Recent data from Placer.ai also found that foot traffic in Lululemon’s same-store locations declined by 8.5% year-over-year during the quarter.

During an earnings call on Sept. 5, Lululemon CEO Calvin McDonald said that the company is “not happy” with its performance in the U.S. and warned that consumers are de-prioritizing athletic wear purchases.

“The overall market for premium athletic wear in the U.S. remains challenging, with declines continuing in quarter two,” said McDonald. “Consumers are spending less on apparel overall, spending less in performance activewear, and are being more selective in their purchases, seeking out truly new styles.”

The decline in consumer demand comes after Lululemon implemented “modest” price increases on a small portion of its items earlier this year to help mitigate the impact of President Donald Trump’s tariffs.

Lululemon is struggling to retain customers amid recent economic headwinds and new rivals.

Image source&colon; Costfoto/NurPhoto via Getty Images

Lululemon faces a growing competitor that threatens sales

Amid its challenges with attracting customers, Lululemon may have a harder time boosting sales thanks to Nike’s new partnership with Skims, a shapewear brand founded by billionaire socialite Kim Kardashian.

The new NikeSKIMS partnership, which launched on Sept. 26, consists of seven collections and 58 silhouettes, allowing 1,000 different activewear look combinations.

The collections feature layers that support and move with women’s bodies. Pieces such as leggings, sports bras, etc., contain “flattering lines, sculpting fabrics, innovative materials and neutral colorways,” according to a recent Nike press release.

The first NikeSKIMS launch introduces three core collections. The Matte collection offers pieces that provide mid-level compression, smoothing, sculpting, and contain sweat-wicking technology.

The Shine collection is designed for strength training. Its pieces are stretchy feel with a subtle sheen finish. They also contain quick-drying technology. The Airy collection has seven breathable, mesh-inspired knit pieces that are made for layering and movement.

“Our mission is clear: to redefine women’s activewear without compromise,” said Kardashian in the press release.

The NikeSKIMS ad campaign features athletes like Serena Williams, Jordan Chiles and Sha’Carri Richardson.

Anna Andreeva, an analyst at Piper Sandler, said in a recent research note that NikeSKIMS threatens to take customers away from Lululemon, especially since prices for NikeSKIMS goods are roughly 35% lower than similar items sold by its competitors.

“We view this as a negative for Lululemon, especially with the younger consumer,” said Andreeva.

Lululemon CEO previously flagged why it is falling behind rivals

During Lululemon’s earnings call on Sept. 5, McDonald said that the company’s lounge and social product offerings “have become stale and have not been resonating with guests” as its competition multiplies.

“My view now is that we have relied on the same product playbook across certain categories for too long,” said McDonald. “The competitive landscape is different today than it was even two or three years ago. While no single competitor is having a meaningful impact on our business, there are now many players in the market.”

The athletic wear retailer plans to double down on offering more innovative styles to attract back customers.

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“Some areas of focus for our new design team include maintaining our momentum in performance activities, designing into several new products across lounge and social, and giving a fresh perspective to some of our most iconic items,” said McDonald.

“As a result of their work, we intend to increase new styles as a percentage of our overall assortment from the current 23% to approximately 35% next spring. We will continue to gauge guest behavior and adjust this penetration in future seasons based upon their response.”

While Lululemon bets big on innovation to boost sales, it still plans to implement “modest” price increases over the next few months due to the growing threat of tariffs, which may further discourage customers from making purchases.

Many consumers across the country have been cutting back their spending because they worry that tariffs will make everyday goods more expensive.

According to a recent survey from market research company Numerator, 87% of consumers are concerned about the impact of tariffs on their finances or shopping, while 82% anticipate changing their shopping habits in response to tariffs, such as reducing spending on non-essential goods.