Canadian apparel giant Lululemon Athletica (NASDAQ:LULU) has been struggling mightily of the past year, as its stock has lost half of its value. Business has been slow, with the company's growth rate falling . The company has also sued Costco for selling "dupes" of its popular items, effectively giving customers cheaper options to choose from. On top of all this, there's no shortage of cheap clothing products to buy from online retailers.
Competition has intensified, and the company is in the midst of a search for a new CEO with Calvin McDonald stepping down at the end of the month. McDonald has come under pressure from Lululemon founder Chip Wilson about navigating the business down the wrong path.
But whether it's as simple as innovating new product lines is debatable, given how competitive the clothing industry has become. Nike, for example, is also in the midst of a significant turnaround effort as it's also facing significant challenges and slowing demand.
While it's tempting to want to believe these companies can turn things around through their own efforts, the reality is that many factors outside of their control, including macroeconomic issues, could make it incredibly difficult to drive improved sales growth. At a time when consumers have a growing number of options to choose from and prices have been rising significantly in recent years, there may not be much of an incentive to buy high-priced apparel.
This is why I wouldn't gamble on Lululemon's stock, despite how strong the brand may appear to be.
