Brian Sozzi Discusses Lululemon Versus Gap's Athleta (LULU, GPS)

Brian Sozzi of Wall Street Strategies is out with a research report on Lululemon

versus Gap's

Athleta, which both market athletic apparel to women. In the note, Sozzi says, "Amidst all the Lululemon hoopla, Gap (

) quietly issued a press release today announcing the opening of its first Athleta store, a 5,000 square foot box in San Francisco. Why should this matter if you are a shareholder in Lululemon? Isn't growth set to go up in a straight line for the next five years unabated? I tell you why you should be on notice. Athleta represents the first credible threat to Lululemon's yoga apparel market dominance (wide moat business this is not). Athleta's product offerings are not the mediocre quality women's athletic garb increasingly sprouting up at Target (

) and Kohl's (

). It's quality product at an attainable price. Moreover, unlike Lululemon, Athleta is coming to market with a complete lifestyle assortment." He goes on to say, "What is equally important to take away here is that Athleta is a brand purchased by CEO Glenn Murphy quickly upon his arrival at the company. That means Athleta's growth path and in turn performance, is owned by him. All of this shows in the time and care taken to develop the brand online first since Athleta joined the Gap family of brands in 2008, at a cool $150 million (looks like a steal in hindsight). Gap is hungry to recharge its overall revenue and earnings growth rates as trends in the established portfolio only being so-so, and certainly has the balance sheet to aggressively pursue Athleta store openings...globally." The entire research report can be read in its entirety

Shares of Lululemon are down 35 cents in pre-market trading to $72.50, while Gap is down 13 cents to $20.25.