Full Note: Lululemon vs. Athleta Real Estate

8/12/2019 Full Note: Lululemon vs. Athleta Real Estate

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Quantifying Athleta impact on Lululemon1/27/2014

Companies mentioned:

Lululemon Athletica (LULU) - $47.47Gap Inc. (GPS) - $37.21

Why Read?

Over the last year, there has been a growing concern surrounding the effects of increased competition in

the Yoga/Active Wear market. Lululemon (LULU), once alone in the space, has experienced newcompetition from Athleta, a yoga/active wear company purchased by Gap Inc. (GPS) in 2008 for$150mn in cash.

Instead of purely speculating on the impact of increased competition from Athleta, we havequantitatively studied the impact by mapping the distances between Lululemon and Athleta storeswhile also analyzing the market penetration rates of each concept.

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! Store counts increasing: From 4Q12 to Jan. 20th, 2014, Lululemon added an additional 41stores in the United States. Over the same time period, Athleta added 31 new stores. Although,

Lululemon added more new stores, new Athleta stores tended to be at the same locations asexisting Lululemon stores while Lululemon new stores tended to be in untouched markets.

! Market overlaps increasing:At the end of 4Q12, 21% of Lululemon stores had an Athletawithin 1 mile of their location. By Jan. 20th, 2014, 26% of Lululemons had an Athleta within 1mile. At the same time, 36% of Lululemon stores had an Athleta within 5 miles at the end of4Q12, increasing to 45% of Lululemons by Jan. 20th, 2014.

! Average distances between stores relatively flat: We calculated the average distancebetween Lululemon stores and Athleta stores within 10 miles of each other and found that thedistance has remained relatively flat over the last year, increasing from 2.41 miles at the end of

2012 to 2.66 miles by Jan. 20

th

, 2014.

(Continued on next page)


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January 20th, 2014

February 2nd, 2013


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Major Market Analysis

CALululemon

StoresAthletaStores

% ofLululemonstores with

Athletawithin 1

mile


Athletawithin 5

miles

Averagedistance ifwithin 10

miles2012 24 8 17% 42% 3.2

2013 29 9 21% 41% 3.0+5 +1 +4% -1% -0.2

California, Lululemons largest U.S. Market saw an increase in penetration from Athleta with the% of Lululemon stores with an Athleta within 1 mile increasing from 17% to 21%. Conversely,the % of Lululemon stores with Athleta within 5 miles slightly decreased from 42% to 41%.Lululemon opened 5 net new stores in the state while Athleta chose to focus new store openingsin new markets and only opened 1 new store in Santa Monica.

NYLululemon

StoresAthletaStores


Athletawithin 1mile


Athletawithin 5miles

Average

distance ifwithin 10miles

2012 9 4 44% 67% 1.92013 16 6 50% 69% 2.1

+7 +2 +6% +2% +0.2

Lululemon grew its New York store base by 7 stores to 16 stores during 2013. The newopenings were mainly focused in Long Island and Manhattan. The 2 new Athleta stores wereopened in Union Square and Rochester, increasing the % of Lululemons with an Athleta within 1mile from 44% to 50%.

TXLululemon

StoresAthletaStores


Athletawithin 1

mile


Athletawithin 5

miles


miles2012 10 1 10% 20% 3.62013 15 3 13% 27% 3.0

+5 +2 +3% +7% -0.6

Lululemon increased the number of stores in Texas 50% to 15 stores during 2013. Many of thesestores were opened in markets such as San Antonio and Southlake where Athleta has nopresence. Despite this, the 2 new Athleta stores were placed close to existing Lululemons,

causing the % of Lululemon stores with an Athleta within 1 mile to increase to 13% from 10%.

(Continued on next page)


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ILLululemon

StoresAthletaStores


Athletawithin 1

mile


Athletawithin 5

miles


miles2012 9 1 22% 67% 2.72013 10 2 20% 60% 2.7

+1 +1 -2% -7% 0

Lululemon made few changes in its Illinois store base, adding one new store and shifting fromthe Evanston market to Skokie. Athleta opened an additional location in the state in theNorthbrook mall. Lululemon actually gained ground on Athleta due to relocation, causing the %of Lululemon stores with an Athleta within 1 mile to drop from 22% to 20%.

FL

Lululemon

Stores

Athleta

Stores


Athletawithin 1

mile


Athletawithin 5

miles


miles2012 8 0 0% 0% N/A2013 9 2 11% 22% 1.3

+1 +2 +11% +22%

Florida at the end of FY12 had 0 Athleta locations and Lululemon dominated the market. During2013, Athleta opened 2 locations in the state, both near Lululemons, compared to Lululemons 1new store opening. Lululemon now has 11% of its locations in Florida within 1 mile of anAthleta and 55% within 5 miles of an Athleta.

MALululemon

StoresAthletaStores

% ofLululemon

stores withAthletawithin 1

mile

% ofLululemon

stores withAthletawithin 5

miles


miles2012 6 3 67% 67% 2.22013 8 6 88% 88% 0.3

+2 +3 +21% +21% -1.9

Massachustets has long been a battle ground between Lululemon and Athleta with the state beingthe #1 state in the U.S. at the end of FY12 by Athleta penetration. During FY13, Athleta doubledthe number of locations and increased the percentage of Lululemons with an Athleta within 1mile and 5 miles from 67% to 88%. At the sametime, the average distance between Lululemonand Athleta stores decreased from 2.2 to 0.3 miles, show casing Athletas head to head strategy.

(Tables on next page)


5/7 &

Jan. 20, 2014

StateLululemon

StoresAthletaStores

% of Lululemonstores with Athleta

within 1 mile


within 5 milesAverage distance if

within 10 miles1 IN 1 1 100% 100% 0.12 MA 8 6 88% 88% 0.33 MO 3 2 67% 67% 2.74 NY 16 6 50% 69% 2.15 PA 6 5 50% 67% 3.1

6 CO 4 3 50% 75% 0.67 DC 2 1 50% 100% 0.98 OR 2 1 50% 50% 4.89 WA 6 2 33% 50% 2.4

10 GA 3 1 33% 67% 4.911 TN 3 1 33% 33% 0.312 VA 4 3 25% 75% 1.713 MN 4 2 25% 50% 4.514 CA 29 9 21% 41% 3.015 IL 10 2 20% 60% 2.716 NC 5 2 20% 40% 1.217 OH 5 2 20% 40% 2.818 NJ 7 3 14% 29% 3.719 TX 15 3 13% 27% 3.0

20 FL 9 2 11% 22% 1.321 AZ 5 1 0% 0% 8.322 MD 4 1 0% 0% 6.923 CT 3 1 0% 33% 6.324 MI 2 2 0% 100% 2.325 UT 2 1 0% 100% 1.326 WI 2 2 0% 50% 4.627 KY 2 0 0% 0% N/A28 OK 2 0 0% 0% N/A29 RI 1 1 0% 100% 5.030 AL 1 0 0% 0% N/A31 AR 1 0 0% 0% N/A32 HI 1 0 0% 0% N/A33 KS 1 0 0% 0% 9.334 LA 1 0 0% 0% N/A35 NE 1 0 0% 0% N/A36 NV 1 0 0% 0% N/A37 NH 1 0 0% 0% N/A38 NM 1 0 0% 0% N/A39 SC 1 0 0% 0% N/A40 VT 1 0 0% 0% N/A41 AK 0 0 N/A N/A N/A42 DE 0 0 N/A N/A N/A43 ID 0 0 N/A N/A N/A44 IA 0 0 N/A N/A N/A45 ME 0 0 N/A N/A N/A46 MS 0 0 N/A N/A N/A47 MT 0 0 N/A N/A N/A48 ND 0 0 N/A N/A N/A49 SD 0 0 N/A N/A N/A50 WY 0 0 N/A N/A N/A

176 66 26% 45% 2.66

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Feb. 2, 2013

StateLululemon

StoresAthletaStores


within 1 mile


within 5 milesAverage distance if

within 10 miles1 MA 6 3 67% 67% 2.22 CO 3 3 67% 100% 0.63 DC 2 1 50% 100% 0.94 OR 2 1 50% 50% 4.85 NY 9 4 44% 67% 1.9

6 PA 6 2 33% 33% 2.77 MN 3 2 33% 67% 4.58 VA 3 2 33% 67% 1.09 WA 3 1 33% 33% 2.9

10 GA 3 1 33% 67% 4.911 IL 9 1 22% 67% 2.712 OH 5 1 20% 20% 2.813 CA 24 8 17% 42% 3.214 TX 10 1 10% 20% 3.615 FL 8 0 0% 0% N/A16 NJ 6 1 0% 0% 8.617 NC 4 1 0% 0% N/A18 MD 3 1 0% 50% 6.919 AZ 3 0 0% 0% N/A

20 CT 3 0 0% 0% N/A21 TN 3 0 0% 0% N/A22 MI 2 0 0% 0% N/A23 MO 2 0 0% 0% N/A24 WI 2 0 0% 0% N/A25 UT 1 1 0% 100% 1.226 AL 1 0 0% 0% N/A27 HI 1 0 0% 0% N/A28 IN 1 0 0% 0% N/A29 KS 1 0 0% 0% N/A30 LA 1 0 0% 0% N/A31 NE 1 0 0% 0% N/A32 NV 1 0 0% 0% N/A33 NM 1 0 0% 0% N/A

34 SC 1 0 0% 0% N/A35 VT 1 0 0% 0% N/A36 AR 0 0 0% 0% N/A37 KY 0 0 0% 0% N/A38 AK 0 0 N/A N/A N/A39 DE 0 0 N/A N/A N/A40 ID 0 0 N/A N/A N/A41 IA 0 0 N/A N/A N/A42 ME 0 0 N/A N/A N/A43 MS 0 0 N/A N/A N/A44 MT 0 0 N/A N/A N/A45 NH 0 0 N/A N/A N/A46 ND 0 0 N/A N/A N/A47 OK 0 0 N/A N/A N/A

48 RI 0 0 N/A N/A N/A49 SD 0 0 N/A N/A N/A50 WY 0 0 N/A N/A N/A

135 35 21% 36% 2.41

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Disclaimer:The information contained herein reflects the views of Consumer Fox as of the date of publication. These views

are subject to change without notice at any time subsequent to the date of issue. All information provided in this presentationis for informational purposes only and should not be deemed as investment advice or a recommendation to purchase or sellthe securities mentioned or to invest in any specific security or investment product. While the information presented herein isbelieved to be reliable, no representation or warranty is made concerning the accuracy of any data presented. In addition,there can be no guarantee that any projection, forecast or opinion in this presentation will be realized. All trade names, trade-marks, service marks, and logos herein are the property of their respective owners who retain all proprietary rights over theiruse. This presentation is confidential and may not be reproduced without prior written permission from Consumer Fox. Itshould be noted that Consumer Fox has no position in any security of the company mentioned in the report/presentation.

Full Note: Lululemon vs. Athleta Real Estate

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