Lululemon Has an Ace up Its Sleeve

Lululemon Athletica (NASDAQ: LULU  ) is taking its company one step further to become THE place to shop for women's yoga apparel and accessories. Recently, Lululemon introduced its newest apparel collection "&go" to incorporate exercise into consumers' daily activities. The collection has already become a hit among consumers, with some items selling out online. If this wasn't enough, Lululemon has now created a new brand -- Ivivva -- to target girls between the ages of six and 12 who are actively participating in athletic sports, yoga, or dance. Clearly the fast-growing retailer has more than one trick up its sleeve.

The idea becomes reality
Lululemon first launched Ivivva in 2009 with its first store in Vancouver, Canada. Lululemon's idea for Ivivva came after it realized that young girls were shopping for active-wear apparel at Lululemon stores, which also happened to be where their moms and other adults in their lives shopped. In addition, young girls were purchasing apparel that was not exactly in their sizes simply because they liked the look, texture, and comfort of Lululemon's yoga apparel.

Ivivva fills that niche for young girls who need active-wear apparel for sports, yoga, dance, and other exercise activities. Girls can buy anything from tank tops to shorts, crops, and sports bras at Ivivva, and the best part is that pre-teens will have their own place to shop while the stores also incorporate some of Lululemon Athletica's most popular styles. Just like Lululemon Athletica stores, Ivivva stores also offer yoga classes. Ivivva currently has 11 stores in Canada and 22 stores in the U.S.

Hooking consumers at young ages
Customers are key to any retailer's success. However, as we all know, as people get older their styles also change. For this reason, retailers are always gaining and losing customers. Lululemon's goal, ingeniously, with Ivivva is to get girls hooked as children and pre-teens on its yoga apparel. We are all creatures of habit and as these young customers become adults, they will transition to shopping at Lululemon. This way, Lululemon will keep its sales strong and its customers loyal for longer.

Lululemon's biggest competition for yoga apparel sales with its Lululemon brand is none other than The Gap  (NYSE: GPS  )  with its athletic-apparel and accessories brand Athleta. However, the Aerie brand of American Eagle Outfitters (NYSE: AEO  )  will compete more directly with Ivivva for sales in the future as they serve the same target market.

Company Name

FY 2011 Comp sales

FY 2012 Comp sales

FY 2013 Comp sales

Lululemon Athletica

22%

16%

7%

The Gap

(4)%

5%

2%

American Eagle Outfitters

(6)%

9%

4%



Based on comparable sales for these retailers, Lululemon has remained the strongest among them with positive store sales growth for the past three fiscal years. While The Gap generates the most revenue because it has many brands, its annual comparable sales have fallen over the past year. American Eagle Outfitters, on the other hand, will be Ivivva's biggest threat based on the fact that Aerie is for young girls and it offers yoga pants, yoga shorts, and tank tops in addition to a large assortment of sleepwear and lingerie. Most likely, girls will associate Ivivva with yoga since it's under the Lululemon umbrella, whereas Aerie will be more associated with lingerie and sleepwear. Fiscal 2014 will be the true test of if Ivivva can thrive against Aerie.

Foolish takeaway
Ivivva is a step in the right direction for Lululemon, which is still trying to repair its brand's reputation after remarks made by former CEO Chip Wilson and a yoga-pant manufacturing malfunction. Not only does Ivivva fill that niche for young girls' active lifestyle, it also provides more depth to Lululemon. Just like The Gap fought back against Lululemon with its Athleta brand, American Eagle will end up doing the same to compete with Ivivva. Foolish investors would be wise to do more research on Ivivva and Lululemon's future plans to take its business to the next level. There's no question that Lululemon is always up for a fight, and it will likely see sales increase as young girls are introduced to Ivivva.

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