Nike (NKE 0.19%) is the undisputed heavyweight champion in the apparel and footwear industry, as its global reach and brand recognition have made it a household name. The stock has rewarded shareholders throughout history, and it's up 1,300% in the past 20 years. What's more, the company's market cap sits at close to $150 billion today.
But looking out between now and 2050, a long time for sure, I think it's completely in the realm of possibilities that Nike's market cap will be overtaken by that of Lululemon (LULU 1.31%). That might seem like a wild statement to some, so let's take a closer look at both businesses to gain a better perspective.
Nike's dominance is hard to ignore
Nike has a commanding lead in the global market for sports apparel and footwear, a position it has held for decades. The Oregon-based business produced revenue of $51.2 billion in fiscal 2023 (ended May 31), indicative of its huge scale, with a sizable presence not only in North America but also in various regions across the world. Developing and selling some of the most in-demand merchandise has cemented Nike's status atop the industry.
Nike has also undoubtedly become a consumer favorite thanks to its incredible marketing prowess. The brand's strength is Nike's greatest asset, bolstered by high-profile athlete endorsements and impactful ad campaigns. Moreover, this company has made a push in recent years to further develop its digital capabilities. Management says there were more than 500 million visitors to Nike's various apps during the latest quarter. That helps the business develop deeper connections with its customers, something that's hard for competitors to match.
Lululemon is a fast-growing rival
In the past 12 months, Lululemon generated revenue of $8.8 billion, which equates to about 17% of Nike's fiscal 2023 figure. Clearly, it has a long way to go to catch up to the leader in the industry. But one thing is becoming more apparent with each passing quarter: Lululemon is registering tremendous growth that is far outpacing that of its bigger rival.
Between fiscal 2019 and fiscal 2022 (ended Jan. 29), Lululemon increased sales at a compound annual rate of 27%. The business was almost unfazed by the powerful headwinds, including the coronavirus pandemic, supply chain issues, inflation, and an uncertain macro environment today. This company just keeps posting strong results, while Nike has dealt with its own struggles.
For Lululemon to exceed Nike's market cap by 2050, the growth machine needs to keep running. According to the management team, it will be at least for the next few years. They expect revenue to hit $12.5 billion in fiscal 2026, double 2021's total. Important strategic initiatives will include pushing further into the men's category and boosting digital and international sales.
While Lululemon was founded with women's athletic apparel in mind, it is now becoming a popular brand for all genders. And the company is now dipping its toe in the footwear market with the launch of its first-ever shoe line last year. Perhaps over time, this will contribute more to the revenue picture.
As Lululemon expands and focuses more on men's apparel, footwear, and China, where it plans to open dozens of new stores this fiscal year and where sales surged 61% in the latest quarter, the company will inevitably start to compete more directly with Nike. After all, Nike is second to none when it comes to catering to the men's segment, and the business has been in China since the 1980s.
To be fair, it's impossible to predict what the world will look like in 2050. But the way this industry has been trending in the past several years, it's hard not to get excited about the long-term prospects of Lululemon to take on the juggernaut in sports apparel and footwear. Many things have to work in its favor, but the Canadian company could eventually be worth more than Nike.
