How Vuori Is Taking On Lululemon And Alo Yoga — Transcript

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1. 0:00For over a decade, Canadian based activewear company
2. 0:03Lululemon has dominated the athleisure industry that it
3. 0:06helped pioneer.
4. 0:09But now the sector is flooded by challengers and
5. 0:12the competition is majorly heating up.
6. 0:14Vuori just raised $825 million in funding last
7. 0:17week, taking its valuation up to 5.5 billion.
8. 0:21Newcomer Vuori is rising to the challenge and making big
9. 0:25moves as Lululemon missteps.
10. 0:27We don't believe that Alo or Lulu necessarily needs to
11. 0:31lose in order for us to win.
12. 0:32We think that this is a growing market.
13. 0:34They're challenging the legacy players of Athleta
14. 0:37and Lululemon, and they're bringing a lot of excitement
15. 0:39to the market.
16. 0:40It's taking share, it's taking Lululemon's
17. 0:42customers, and it's taking Nike's customers.
18. 0:44The private direct-to-consumer company
19. 0:46became profitable in under three years, and as of
20. 0:49December 2024, counts 79 stores in six countries,
21. 0:53including the U.S.
22. 0:54It continues to impress investors, raising more than
23. 0:57$1.2 billion in total.
24. 0:59So how is this challenger brand shaking up the
25. 1:02athleisure industry, and is that enough to take on
26. 1:04Lululemon?
27. 1:16Vuori, a Southern California-based company, is
28. 1:19only a decade old.
29. 1:21Its CEO, Joe Kudla, a former model and accountant,
30. 1:25came up with the idea after getting into yoga and being
31. 1:28disappointed by what workout gear options were
32. 1:30available for men.
33. 1:31Baggier fits big logos, kind of shiny synthetic
34. 1:35materials. It just wasn't product that I wanted to
35. 1:38wear, and it wasn't product that a lot of my friends
36. 1:40wanted to wear. Vuori was really our answer.
37. 1:42It was. it was to build product we couldn't find.
38. 1:44The brand took off during the pandemic as comfort
39. 1:47became king, joining an influx of other startups
40. 1:49hoping to capitalize on the moment.
41. 1:51But Vuori quickly differentiated itself and
42. 1:54between December 2019 and December 2020, grew both
43. 1:57sales and customers by nearly 300%.
44. 2:01It focused on profitability from the very beginning.
45. 2:03It didn't care about growing to these exponential
46. 2:06heights at any cost.
47. 2:08It wanted to take the slow and steady approach.
48. 2:11In 2021, venture capital fund SoftBank invested $400
49. 2:15million, placing Vuori's value at ten times its
50. 2:18revenue, and the investment was a hefty $300 million
51. 2:21more than in 2019.
52. 2:22There has only been a couple of companies that have
53. 2:24achieved a similar kind of valuation, so it was notable
54. 2:27for what was at the time somewhat unknown, but high
55. 2:31growth brand to achieve that kind of valuation from
56. 2:33a prominent investor like that.
57. 2:352021 was a big IPO year and a record peak for the equity
58. 2:39markets in general.
59. 2:40Valuations were at an all time high, but those figures
60. 2:43have pulled back in 2024, including for legacy
61. 2:46companies. Today, investors are much more cautious as
62. 2:50consumer discretionary spending has gone down and
63. 2:53there's the potential tariffs by an incoming
64. 2:55president. Meanwhile, Vuori scored $825 million in
65. 2:59private equity funding in November 2024, taking its
66. 3:02value to $5.5 billion.
67. 3:05It's one of the largest valuations ever for a
68. 3:07private apparel company.
69. 3:08It is a notable investment both from a valuation
70. 3:11perspective from the investors who are investing
71. 3:13behind it and the growth.
72. 3:14It's going to support the company going forward.
73. 3:16For Vuori to be able to go from $4 billion in 2021 and
74. 3:20to be able to grow to $5.5 billion in 2024, at a time
75. 3:26when money has all but dried up for things like
76. 3:28discretionary consumer companies, it's remarkable
77. 3:31and it really stands out in this space.
78. 3:33While remarkable, Vuori's full year 2023 revenue was
79. 3:37an estimated $320.8 million, competitor
80. 3:41Lululemon's was $9.6 billion.
81. 3:44Though Lulu has faced a slowdown, it's still
82. 3:47delivering massive sales.
83. 3:48Its stock rose 9% after close on December 5th, after
84. 3:52reporting better-than-expected
85. 3:53earnings for Q3 2024, mainly due to healthy
86. 3:57international sales.
87. 3:58Sportswear is the fastest-growing category in
88. 4:00fashion, and the fight for market share between
89. 4:02competitors will intensify in 2025, according to
90. 4:06McKinsey. Challenger brands, which include Vuori,
91. 4:09have grown their revenue faster than established
92. 4:11companies while increasing profitability and are set to
93. 4:14generate more than half of the segment's profit in
94. 4:162024, up from 19% in 2020.
95. 4:20You see Lululemon at the top and then everybody else
96. 4:23trying to get a piece of that. What I would say is
97. 4:25that leaves plenty of room, right, to encroach either on
98. 4:29Lululemon's position or it's a very, very fragmented
99. 4:33industry.
100. 4:34Now, Vuori is on the cusp of an IPO and has slowly filled
101. 4:37its team with veterans who have experience running
102. 4:40public companies.
103. 4:41But unlike many private companies, it's not
104. 4:44desperate for funding and can take its time.
105. 4:47Plus, the latest investment was structured at what's
106. 4:49called a secondary tender offer, where the original
107. 4:52investors sell their shares to new shareholders,
108. 4:54resulting in a big payday, which is what an IPO would
109. 4:57achieve. Still, that would make it the only one of
110. 5:00Lululemon's direct rivals to go public.
111. 5:02It would kind of be like a stamp of approval, and then
112. 5:04it's like, I'm here to stay and I'm here to take over.
113. 5:06And I could really be a disruptor in this category.
114. 5:14Vuori started with men's products in an industry
115. 5:16largely focused on women.
116. 5:18Its first best seller was a pair of men's shorts that
117. 5:20are still sold today, and that success led the company
118. 5:23to launch pilot programs with wholesalers Rei and
119. 5:26Nordstrom.
120. 5:27If you're a brand that's good enough to be sold in
121. 5:29REI and Nordstrom, that customer is going to
122. 5:32remember that brand.
123. 5:33And then when you have your own website and your own
124. 5:34store, might be willing to go there and shop there too.
125. 5:37When you build that kind of, you know, awareness in the
126. 5:39men's business and then you have these hero products,
127. 5:41you can actually get scale and economies of scale
128. 5:44versus trying to be kind of everything to everyone.
129. 5:47High quality and comfort are cornerstones of Vuori, and
130. 5:50the products have stood out to consumers, turning them
131. 5:52into brand evangelists.
132. 5:54Even though the company rarely offers discounts or s
133. 5:56ales.
134. 5:57I think I may have found the best pair of shorts for guys
135. 6:00Vuori daily.
136. 6:00Leggings are so comfy.
137. 6:02You guys are all sleeping on Vuori.
138. 6:04The company has been strategic in its marketing,
139. 6:06being an early adopter of social advertising and
140. 6:09getting early sponsorships with college and
141. 6:11professional athletes.
142. 6:13Products are now sold at several high-end retailers.
143. 6:16Vuori is absolutely trying to steal the Lululemon
144. 6:18customer. They're going after the same kind of
145. 6:21customer base, the people who are going to the gym,
146. 6:23people who have active lifestyles and the people
147. 6:25who blend performance with lifestyle, right?
148. 6:29We want to be where our customer is shopping for
149. 6:31this category, and we like to compete on the quality of
150. 6:35our product, the differentiation of our
151. 6:37product, and the differentiation of our store
152. 6:40experience as well.
153. 6:42Kudla's leadership has majorly influenced how the
154. 6:44company has grown too.
155. 6:45Because he was seeing things differently and thinking in
156. 6:47a non-incumbent way. He had trouble raising money.
157. 6:50He then had to find ways to do more with less.
158. 6:52He forced focus. I'm going to not spend as much time or
159. 6:55resources on X, Y or Z and really overcommit to the
160. 6:58things that I think are going to matter at first,
161. 6:59which are kind of product and marketing.
162. 7:01Expansion has been thoughtful. The company has
163. 7:03often opened stores near Lululemon.
164. 7:05It added 20 US locations in 2024 and is growing
165. 7:09internationally, with new stores in London, Shanghai
166. 7:12and Seoul opening this year.
167. 7:14The goal is 100 stores by 2026.
168. 7:17Going public would help it get there.
169. 7:19Globally, Lululemon has more than 700 locations and
170. 7:23Alo, north of 100.
171. 7:25Jewelry has been on a faster pace of growth in most of
172. 7:27the others. Alo is doing very well as well.
173. 7:29But longer term, when you look out ten years, 20 years
174. 7:32will Vuori be already be, you know, the number two
175. 7:34player. It's hard to say now, but they will be
176. 7:36significantly bigger than they are today for sure.
177. 7:45As Vuori scales, there are some risks.
178. 7:48One being quality.
179. 7:49The thing that consumers of Vuori are most concerned
180. 7:52about is, is the quality of the fabric going to fall?
181. 7:54Are they going to water down the brand that I love
182. 7:57in exchange for growth?
183. 7:58Though Vuori has been successful so far, there's
184. 8:01still a big question as to whether the brand can keep
185. 8:03up with this growth, something that's been an
186. 8:05issue for rivals.
187. 8:06Another challenge is innovation in a category
188. 8:08where each company's products are highly similar
189. 8:11and encroach on each other's territory.
190. 8:13Lululemon plans to double its men's business by 2026.
191. 8:17That's what's so often good retailing comes down to is
192. 8:20really, really great product. If you can innovate
193. 8:23and differentiate yourself based on the fabrics that
194. 8:25you're using and the fit and the quality, then that
195. 8:28is going to make you stand out in a crowded athleisure
196. 8:30space.
197. 8:31And beyond good product, vuroi is still fighting for
198. 8:34brand recognition, which sits in the low double
199. 8:36digits.
200. 8:37Vuori is still, on a relative basis, unknown.
201. 8:39It probably has lower awareness than Alo.
202. 8:42Part of the success they're having is their consumers
203. 8:44are coming back and buying more from the business,
204. 8:47which for any business is kind of the mark of success.
205. 8:50There's no way Vuori's coming for Lulu's lunch.
206. 8:52It's going to take a lot more time for it to come
207. 8:54anywhere close to Lululemon, even if Lululemon
208. 8:56is ceding just a little bit of share.
209. 8:58Still, Vuori has already come a long way from an
210. 9:01e-commerce men's company to Lululemon competitor with
211. 9:04real stores in six countries, and its early and
212. 9:07calculated success may be an indicator of where it's
213. 9:10headed.
214. 9:11To go from someone who was struggling to get funding
215. 9:14kind of ten years ago, to someone who is probably
216. 9:17actively turning away funding at some points now,
217. 9:19is definitely a validation of their vision and kind of
218. 9:21the business that they built. And so now they just
219. 9:24have to continue doing that.