Lululemon is facing mounting pressure from competitors and changing customer preferences, forcing the premium athleisure retailer to discount merchandise at unprecedented levels while losing market share to emerging rivals.

The Vancouver-based company, known for its $150 leggings, has been marking down products at “alarming rates,” according to new research from investment bank Jefferies.

Recent store visits revealed significant price reductions across Lululemon’s product range, with a slim-fit skirt marked down to $74 from $118 and jogger pants reduced to $135 from $194.

A windproof golf vest was discounted to $120 from $194, representing substantial markdowns for a retailer that historically sold 95% of merchandise at full price.

“Historically 95% of their stuff was sold at full price; now they are lucky to get 75% at full price,” said Craig Johnson, president of Customer Growth Partners.

The discounting strategy marks a significant departure from Lululemon’s traditional premium positioning and full-price sales model.

Competitors Alo Yoga and Vuori are aggressively pursuing Lululemon’s customer base through strategic store locations and social media marketing campaigns.

Alo, founded in 2007 in Beverly Hills, operates 99 US stores, while San Diego-based Vuori has expanded to 93 locations.

Both brands have accelerated retail expansion in recent years, often opening stores directly adjacent to Lululemon locations.

“Alo and Vuori are coming after Lululemon,” Jefferies analyst Randal Konik told reporters.

On Manhattan’s Fifth Avenue, Lululemon’s flagship store faces direct competition from an Alo location at the corner of West 48th Street, illustrating the aggressive positioning strategies employed by emerging competitors.

Alo has invested heavily in influencer marketing, partnering with celebrities including Kendall Jenner, Hailey Bieber, and Bella Hadid to build brand awareness among younger demographics.

This social media-focused approach contrasts with Lululemon’s traditionally more subtle marketing strategies and community-based brand building.

In response to competitive pressure, Lululemon has introduced product lines that deviate from its core athleisure identity, including bright colours and non-athletic apparel that customers don’t typically associate with the brand.

Recent store visits revealed markdown racks filled with bright green, pink, orange, and neon yellow merchandise that contrasts sharply with the muted pastels traditionally associated with the brand.

“They are trying to extend the brand to non-athletic people, but these non-core products are on sale,” Konik explained.

Green leggings were priced at $105 down from $148, while orange shorts were marked to $74 from $103, demonstrating the discounting pressure on non-traditional products.

Lululemon’s financial performance reflects these challenges, with stock prices declining 38% this year to close at $361 on July 10, down 54% from the December 2023 all-time high of $782.

The company reported 7% revenue growth to $3.6 billion in the first quarter, but most growth occurred overseas while North American comparable store sales decreased 2%.

The company has expanded its outlet store presence to at least 24 locations from just a handful in 2019, with these discount locations now representing some of the highest-grossing stores in the network.

Lululemon has also increased logo visibility across products, moving away from its subtle “Omega” symbol toward more prominent branding on sweatshirts, jackets, and baseball caps.

Despite competitive pressures, Lululemon maintains market leadership among premium athleisure brands with 770 stores compared to Gap’s Athleta chain with 250 locations and Free People Movement with 68 stores.

However, the company announced 150 corporate layoffs in June and reduced profit forecasts, citing economic uncertainty and changing consumer spending patterns affecting discretionary purchases.