The lines between workout clothing and everyday wear have disappeared, and that has driven share prices of Nike (NKE 0.45%) and Lululemon Athletica (LULU -0.98%) well ahead of the broader market over the past decade.

Even after the market decline in 2022, an equal investment in Nike and Lululemon would have delivered almost identical returns over the last 10 years. A $5,000 investment in each stock in 2012 would be worth about $46,000 today. That's a fantastic compound annual return of 16.5% on a $10,000 investment.

However, if I were deciding on one athletic apparel stock, I would focus on investing in Lululemon for a few reasons.

Why Lululemon is the better growth stock

The global activewear market was valued at $366 billion in 2021 and is expected to reach $455 billion by 2027, according to Statista. Nike is still a good choice, since its total revenue amounted for only 12% of global activewear spending in 2021. That means despite its long operating history and large market cap of $153 billion, Nike can still gain share of total spending in the industry and deliver returns to shareholders.

But one reason Lululemon can outperform Nike over the next 10 years is the former's faster rate of revenue growth. Since 2012, Lululemon has grown revenue by 467% cumulatively compared to Nike's revenue increase of 95%. 

NKE Revenue (TTM) Chart

NKE revenue (TTM). Data by YCharts. TTM = trailing 12 months.

In the most recent quarter, Nike posted revenue growth of 3% year over year excluding the impact of foreign currency fluctuations. It is a global powerhouse and has the advantage of a large customer base that is spread all over the world, but that also limits its growth potential. Revenue from outside of North America totals 58% of Nike's business, which doesn't leave as much room for expansion. 

Geographic Breakdown % of Revenue From North America % of Revenue From Outside North America 
Nike 42% 58%
Lululemon 83% 17%

Data source: Nike and Lululemon. 

While global reach gives Nike an advantage in scale and brand recognition compared to smaller competitors, Lululemon is an emerging global brand in the early innings of growth.

Lululemon is winning over customers with a more fashion-forward angle to its merchandise assortment. While Nike is dominant in footwear, with $28 billion in annual footwear sales, Lululemon seems to be taking the lead in apparel.

In Lululemon's most recent quarter, revenue grew 32% year over year. The company generates a small amount of revenue from its Mirror interactive fitness devices and accessories, but most of its revenue is from apparel. Compared to Nike's 6% decline in apparel sales last quarter, Lululemon's performance looks very strong. 

Lululemon's faster growth is more impressive given the two companies' radically different approaches to marketing their brands. While Nike relies heavily on sports stars, Lululemon leans more on word-of-mouth and grassroots efforts, such as yoga classes and marathons that help spread brand awareness in local communities. 

Lululemon is taking market share from Nike in the apparel market, and it will continue to grow faster, given that Nike is more globally saturated, while Lululemon is still in the early stages of opening new stores in Europe and China. Revenue outside of North America was only 17% of Lululemon's business in the last quarter.

Investors get more growth per dollar with Lululemon

What seals the deal for Lululemon is that both stocks sell for almost the same valuation. But because of Lululemon's higher rate of revenue growth, it is a steal compared to Nike. 

Investors are getting more than twice the growth for almost the same price. The odds are good that Lululemon is going to outperform Nike by 2032.