NIKE vs. lululemon: Which Stock Offers Better Upside Potential?

In the global athleticwear arena, NIKE, Inc. NKE and lululemon athletica inc. LULU embody two distinct models of market leadership. NIKE stands as the industry’s dominant force, commanding the largest share of the global sportswear market through its expansive footwear, apparel and equipment portfolio. Its scale, athlete endorsements, innovation pipeline and vast direct-to-consumer network reinforce a powerful competitive moat across performance and lifestyle categories.

lululemon, while smaller in overall market share, has carved out a premium niche in athleisure. Built on technical fabrics, community engagement and brand exclusivity, it commands strong pricing power and loyalty, particularly in women’s apparel, while expanding into men’s wear, footwear and international markets.

The contrast is strategic: NIKE competes on breadth and global reach, leveraging volume and brand heritage, whereas lululemon emphasizes focus, margin discipline and premium positioning. As athleticwear demand shifts toward wellness-driven lifestyles, the question is whether scale or specialization ultimately defines long-term market leadership.

The Case for NKE

NIKE’s case rests on its reaffirmed industry leadership and accelerating sport-driven momentum. The company is benefiting from its dominant market position in a structurally growing global athleticwear industry. NIKE remains the category leader, operating across more than 190 countries and commanding the largest share of the global sports footwear and apparel market. Management reiterated that Running has been gaining share for multiple consecutive seasons, underscoring the brand’s ability to win in core performance categories. With North America and EMEA representing nearly three-fourths of the business and operating in a healthier marketplace environment, NIKE’s scale advantages in sourcing, marketing and distribution reinforce a competitive moat that few peers can replicate.

NIKE’s “sport offense” centers on athlete-led innovation and deeper category segmentation. The portfolio spans Nike, Jordan and Converse, enabling reach across performance and lifestyle, multiple price tiers and broad demographics. The company is expanding beyond legacy franchises, building depth across men’s, women’s and kids’, while investing in differentiated platforms such as Nike Mind and Aero-FIT. A more disciplined digital strategy, focused on premium positioning and fewer promotions, aims to reinforce pricing power and long-term brand heat.

However, risks remain. The gross margin pressure has been notable, with margins declining 300 basis points due to tariff impacts and inventory actions in China. The strategic pullback in Classics created a significant revenue headwind, exposing near-term portfolio gaps. Greater China continues to face structural and macro challenges, requiring a path back to double-digit EBIT margins. While inventory levels are improving, execution risk remains as NIKE balances brand elevation with competitive intensity in a price-sensitive global consumer environment.

The Case for LULU

The investment case for lululemon is anchored in its leadership within the premium athleisure segment and its growing relevance across the broader athleticwear industry. While its total market share remains smaller than that of global sportswear giants, the company continues to gain share in women’s leggings and technical apparel, reinforcing category authority. Its core women’s business remains a powerful growth engine, supported by innovation and strong full-price sell-through. International markets, particularly China, are contributing meaningful growth, expanding lululemon’s global footprint beyond its North American base. However, its concentration in premium price tiers exposes it to discretionary spending cycles.

lululemon is executing its Power of Three ×2 roadmap, expanding across product, men’s, footwear and international markets. The men’s category continues to scale and represents a key diversification lever. Digital remains a structural advantage, accounting for a significant share of revenues and driving higher-margin direct-to-consumer engagement. However, expansion into newer categories like footwear introduces execution risks and competitive intensity in premium activewear is rising.

lululemon delivers strong profitability and disciplined inventory management. Yet management flagged margin headwinds tied to investments and product mix shifts. While brand heat and pricing power remain intact, sustaining high growth in an increasingly crowded and macro-sensitive environment will be critical to preserving its market position.

How Does Zacks Consensus Estimate Compare for NKE & LULU?

The Zacks Consensus Estimate for NIKE’s fiscal 2026 earnings implies a year-over-year decline of 27.3%, while the estimate for revenues suggests growth of 1.1%. The EPS estimate has been unchanged in the past 30 days.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 sales suggests year-over-year growth of 4.6%, while that for EPS indicates a decline of 10.8%. The EPS estimate has been unchanged in the past 30 days.

This clearly illustrates that both NIKE and lululemon have witnessed downward estimate revision trends in the past 30 days. Moreover, estimates for both NKE and LULU indicate year-over-year declines in earnings for the current year.

Price Performance & Valuation of NKE & LULU

Shares of both NIKE and lululemon have witnessed growth in the past three months. NIKE shares have risen 5.6%, while the lululemon stock has gained 10.4%.

NIKE is trading at a forward price-to-earnings (P/E) multiple of 29.88X, below its median of 30.02X in the last five years. lululemon’s forward P/E multiple sits at 14.57X, below its median of 28.7X in the last five years.

lululemon’s stock looks cheap from a valuation perspective. Moreover, investments in product innovation, guest experience and market expansion, as part of the Power of Three X2 growth plan, highlight its growth prospects.

NIKE does seem pricey. However, its valuations reflect its focus on repositioning itself to be more competitive and drive sustainable, profitable long-term growth. If the company sustains its execution, the premium can be warranted.

Conclusion

In the battle between scale and specialization, both NIKE and lululemon present compelling yet contrasting investment narratives. NIKE’s global dominance, broad portfolio and deep-rooted brand equity provide unmatched reach across performance and lifestyle categories. Recent share momentum reflects investor confidence in its repositioning strategy and sport-led innovation push. However, earnings estimate cuts, margin pressures and China-related challenges highlight that the turnaround is still in progress. At nearly 30X forward earnings, the stock trades at a premium, leaving limited room for execution missteps.

Meanwhile, lululemon offers a more valuation-driven growth story. Trading well below its historical multiple, the stock appears inexpensive relative to its long-term potential. Its strong positioning in premium athleisure, disciplined inventory management and expansion into men’s and international markets support structural growth. However, earnings declines, rising competition and execution risks in newer categories remain watchpoints.

Ultimately, NIKE represents stability and scale at a premium, while lululemon offers growth optionality at a discount, provided execution holds. NIKE and lululemon currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research