Lululemon Athletica Inc. LULU

The business

Lululemon sells premium athletic apparel, the $98 pair of Align leggings and the $128 ABC pant, direct to shoppers through its own stores and website, at gross margins near 57% that mall brands never touch. The moat is the brand: two decades of a fit-and-fabric reputation that lets it hold full price where Nike and Under Armour discount. That premium is under two attacks at once. At home, newer labels like Alo and Vuori have taken the novelty, and Americas comparable sales fell 12% last quarter on fewer people through the door, lower conversion, and smaller orders. Abroad, especially China, the story inverts: the brand is still fresh and growing double digits, which is why total revenue slipped only 4% while its biggest region dropped 8%. The whole case is that gap, whether the world's growth outlasts the home market's decline.