The Motley Foolยท2025-09-04 08:41Core Viewpoint - Lululemon Athletica is suing Costco for selling similar products, which could significantly impact Lululemon's growth and stock performance [1][4][10] Company Overview - Lululemon's stock has decreased nearly 50% this year due to concerns over its growth and exposure to the Chinese market [2][9] - The current trading levels are the lowest since 2020, raising questions about whether Lululemon represents a good investment opportunity or a value trap [2][11] Legal Issues - The lawsuit claims Costco is selling "dupes" of Lululemon's products, infringing on its intellectual property and confusing customers [4][10] - Lululemon alleges that Costco is using identical color names, which are crucial to its branding [4] Competitive Threats - If Costco wins the lawsuit, it could severely threaten Lululemon's growth, especially as consumers are already cutting back on discretionary spending [5][10] - Lululemon's pricing power may be compromised if consumers opt for lower-priced alternatives at Costco, potentially leading to reduced prices and lower gross margins [6][10] Growth Rate Concerns - Lululemon's growth rate has sharply declined, with recent sales growth in single digits compared to previous years when it often exceeded 20% [7][10] - The potential for Costco to offer similar products could further erode Lululemon's growth prospects [9] Market Conditions - Macroeconomic conditions are unfavorable, with consumers likely to seek lower-priced options, which could constrain demand for Lululemon products [10][11] - The uncertainty surrounding tariffs and the Chinese market adds additional pressure on Lululemon's business [9]