How Big Is Lululemon Athletica's International Opportunity?
We know how big the athletic apparel market is globally -- about $300 billion, according to Morgan Stanley. But with so many competitors vying for position, it doesn't tell us, specifically, what the opportunity is for Lululemon. Lululemon's international sales made up only 11% of total revenue last year, with the balance coming from the U.S. and Canada. But recent trends suggest the international segment is on track to one day make up a much larger portion of the company's revenue. Nike and Adidas have been experiencing double-digit growth in China for a while, which reflects two things: 1) The growing demand for athletic wear in that country, and 2) A growing Chinese middle class, which is already the size of the total U.S. population and is expected to double to 600 million in 10 years. Because of global demand for athletic wear, Lululemon will likely see most of its revenue come from outside of North America in the next few decades, consistent with its peers. The bottom line. What all this means is that buying Lululemon stock today could be like buying Nike stock 20 or 30 years ago. Even as Lululemon's international opportunity is in the early stages of development, North America sales continue to grow steadily, up 18% last quarter.