Lululemon (LULU 3.10%) is an innovative retailer with a long runway ahead of it, but Nike (NKE 0.28%) is an established leader in the space. In this video clip from "Beat & Raise," recorded on Sept. 24, Fool.com contributors Neil Patel, Demitri Kalogeropoulos, and Brian Withers offer their takes on the two companies.
Neil Patel: Demitri, I just want to ask, since you're familiar with the space, if you don't own Lululemon already, what makes you like Nike more or what makes you not like Lululemon as much? Because I've done some digging deep on both of these, and Lululemon, to me, stands out for a number of reasons, but I just want to get your take on it really quickly.
Demitri Kalogeropoulos: Totally. It's probably only because I already own Nike and I probably just don't want to be too invested in that space, you might say. But I've been singing Lululemon's praises for a while now, I just recently wrote a pretty bullish article about it. I mean, I'm very impressed with them, their ability. They just got a really long runway. I love how they can push the new demographics, new geographies. Their innovation is allowing them to get into outerwear and accessories and stuff like that. I think they can do that without diluting the brand at all. I see a really good future there.
Patel: One thing that stood out really quick is just because they don't rely on Dick's Sporting Goods or Foot Locker or something like that to push their products. They're able to keep merchandise at full-price more. That's why historically, Lululemon had a significantly higher gross margin than Nike. I think, obviously, Brian, that goes to your point where they have less of a store presence and they're more focused on direct-to-consumer, and you see that in the numbers.
Brian Withers: Yeah. I wouldn't count Nike out though. These guys have been at it a long time. I remember the last time I was in a Nike outlet store. I looked around and I was just amazed at the number of skews, stock keeping units, the number of different types of sneakers that they're producing is just absolutely amazing. Some of these supply chain issues when you make multiple different models of things get really gummed up. I had a friend I was talking to the other week who is in supply chain for a completely different business. But he said the coronavirus and that the challenges he's had were the most difficult he's ever managed in his career. It made it difficult job, absolutely horrendous. I feel for these guys trying to juggle all of these different things and still come out with a 12 percent year-over-year gain. To me, that's pretty stellar.
