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Lululemon and Athleta Inc: How Gap Stole What Could Have Been

in Business of Yoga, YD News

Lululemon and Athleta Broken By GapWe learned a few weeks ago that Gap Inc. announced plans to buy Athleta Inc. for $150 million cash, subsequently validating the yoga/fitness apparel niche market. Since then we’ve discovered that perhaps things could have been very different. We surmised that Gap must’ve considered Lulu in its deliberations and perhaps even approached them. As it turns out Lululemon was actually getting pretty chummy with Athleta and was itself in line as a potential buyer/partner in the e-commerce space. That is, before Gap beat them out.

However, the deal has now placed Athleta on par with Lululemon’s positioning (and estimated worth), which in turn actually gives Lulu an edge because now investors can see the valuation in this speciality market.

So, is it only a matter of time before Lululemon gets snatched up by a bigger fish?

RBC Capital Markets analyst Howard Tubin thinks so:

Given the current retail environment, investors should take seriously the fact that capital is flowing to serve this market niche.  Investors also should ponder that LULU itself could be the retail solution for a larger player.

And According to Credit Suisse analyst Paul Lejuez, the acquisition [Gap of Athleta] is “an incremental negative for Lululemon, since the largest specialty retailer in the U.S. now owns one of its direct competitors.”

Will the Lulu lollies need to join forces to compete?

Gap Beats Out Lululemon to Buy Athleta [Seeking Alpha]

Earlier…Gap to Buy Athleta Inc., Make a Play for Yoga Niche Market, Lululemon

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