Speaker 1: For over a decade, Canadian-based activewear company Lululemon has dominated the athleisure industry that it helped pioneer. But now, the sector is flooded by challengers and the competition is majorly heating up.

Speaker 2: Viore just raised $825 million in funding last week, taking its valuation up to $5.5 billion.

Speaker 1: Newcomer Viore is rising to the challenge and making big moves as Lululemon missteps.

Speaker 3: We don't believe that Aloe or Lululemon necessarily needs to lose in order for us to win. We think that this is a growing market.

Speaker 4: They're challenging the legacy players of Hepleta and Lululemon, and they're bringing a lot of excitement to the market.

Speaker 5: It's taking Cher, it's taking Lululemon's customers, and it's taking Nike's customers.

Speaker 1: The private, direct-to-consumer company became profitable in under three years. And as of December 2024, it counts 79 stores in six countries, including the U.S. It continues to impress investors, raising more than $1.2 billion in total. So how is this challenger brand shaking up the athleisure industry? And is that enough to take on Lululemon? Viore, a Southern California-based company, is only a decade old. Its CEO, Joe Kudla, a former model and accountant, came up with the idea after getting into yoga and being disappointed by what workout gear options were available for men.

Speaker 3: Baggier fits, big logos, kind of shiny, synthetic materials. It just wasn't product that I wanted to wear, and it wasn't product that a lot of my friends wanted to wear. Viore was really our answer. It was to build product we couldn't find.

Speaker 1: The brand took off during the pandemic as comfort became king, joining an influx of other startups hoping to capitalize on the moment. But Viore quickly differentiated itself, and between December 2019 and December 2020, grew both sales and customers by nearly 300 percent.

Speaker 5: It focused on profitability from the very beginning. It didn't care about growing to these exponential heights at any cost. It wanted to take the slow and steady approach.

Speaker 1: In 2021, venture capital fund SoftBank invested $400 million, placing Viore's value at 10 times its revenue. And the investment was a hefty $300 million more than in 2019.

Speaker 4: There's only been a couple of companies that have achieved a similar kind of valuation. So it was notable for what was a, at the time, somewhat unknown but high growth brand to achieve that kind of valuation from a prominent investor like that.

Speaker 1: 2021 was a big IPO year and a record peak for the equity markets in general. Valuations were at an all-time high. But those figures have pulled back in 2024, including for legacy companies. Today, investors are much more cautious as consumer discretionary spending has gone down and there's the potential terrorist by an incoming president. Meanwhile, Viore scored $825 million in private equity funding in November 2024, taking its value to $5.5 billion. It's one of the largest valuations ever for a private apparel company.

Speaker 4: It is a notable investment, both from a valuation perspective, from the investors who are investing behind it and the growth that's going to support the company going forward.

Speaker 5: For Viore to be able to go from $4 billion in 2021 and to be able to grow to $5.5 billion in 2024, at a time when money has all but dried up for things like discretionary consumer companies, it's remarkable. And it really stands out in this space.

Speaker 1: While remarkable, Viore's full year 2023 revenue was an estimated $320.8 million. Competitor Lululemons was $9.6 billion. Though Lulu has faced a slowdown, it's still delivering massive sales. Its stock rose 9 percent after close on December 5th after reporting better than expected earnings for Q3 2024, mainly due to healthy international sales. Sportswear is the fastest growing category in fashion, and the fight for market share between competitors will intensify in 2025, according to McKinsey. Challenger brands, which include Viore, have grown their revenue faster than established companies while increasing profitability and are set to generate more than half of the segment's profit in 2024, up from 19 percent in 2020.

Speaker 6: You see Lululemon at the top and then everybody else trying to get a piece of that. What I would say is that leaves plenty of room, right, to encroach either on Lululemon's position or it's a very, very fragmented

Speaker 1: industry. Now Viore is on the cusp of an IPO and has slowly filled its team with veterans who have experience running public companies. But unlike many private companies, it's not desperate for funding and can take its time. Plus, the latest investment was structured at what's called a secondary tender offer, where the original investors sell their shares to new shareholders, resulting in a big payday, which is what an IPO would achieve. Still, that would make it the only one of Lululemon's direct rivals to go public.

Speaker 5: It would kind of be like a stamp of approval. And then it's like, I'm here to stay and I'm here to take over and I could really be a disruptor in this category.

Speaker 1: Viore started with men's products in an industry largely focused on women. Its first bestseller was a pair of men's shorts that are still sold today. And that success led the company to launch pilot programs with wholesalers REI and Nordstrom.

Speaker 5: If you're a brand that's good enough to be sold in REI and Nordstrom, that customer is going to remember that brand. And then when you have your own website and your own store, might be willing to go there and shop there, too.

Speaker 6: When you build that kind of, you know, awareness in the men's business and then you have these hero products, you can actually get scale and economies of scale versus trying to be kind of everything to everyone.

Speaker 1: High quality and comfort are cornerstones of Viore, and the products have stood out to consumers, turning them into brand evangelists, even though the company rarely offers discounts or sales.

Speaker 3: I think I may have found the best pair of shorts for guys.

Speaker 1: Your daily leggings are so comfy. You guys are all sleeping on Viore. The company has been strategic in its marketing. Being an early adopter of social advertising and getting early sponsorships with college and professional athletes. Products are now sold at several high-end retailers.

Speaker 5: Viore is absolutely trying to steal the Lululemon customer. They're going after the same kind of customer base, the people who are going to the gym, people who have active lifestyles and the people who blend performance with lifestyle, right?

Speaker 3: We want to be where our customer is shopping for this category and we like to compete on the quality of our product, the differentiation of our product and the differentiation of our store experience as well.

Speaker 1: Kudlow's leadership has majorly influenced how the company has grown, too.

Speaker 7: Because he was seeing things differently and thinking in a noncompetent way, he had trouble raising money. He then had to find ways to do more with less. He forced focus. I'm going to not spend as much time and resources on X, Y or Z and really overcommit to the things they think are going to matter at first, which are kind of product and marketing.

Speaker 1: Expansion has been thoughtful. The company has often opened stores near Lululemon. It added 20 U.S. locations in 2024 and is growing internationally with new stores in London, Shanghai and Seoul opening this year. The goal is 100 stores by 2026. Going public would help it get there. Globally, Lululemon has more than 700 locations and Aloe north of 100.

Speaker 4: Viore has been on a faster pace of growth than most of the others. Aloe's doing very well as well. But longer term, when you look out 10 years, 20 years, will Viore be, you know, the number two player? It's hard to say now. They will be significantly bigger than they are today, for sure.

Speaker 1: As Viore scales, there are some risks, one being quality.

Speaker 7: The thing that consumers of Viore are most concerned about is, is the quality of the fabric going to fall? Are they going to water down the brand that I love in exchange for growth?

Speaker 1: Though Viore has been successful so far, there's still a big question as to whether the brand can keep up with this growth, something that's been an issue for rivals. Another challenge is innovation. In a category where each company's products are highly similar and encroach on each other's territory, Lululemon plans to double its men's business by 2026.

Speaker 5: That's what so often good retailing comes down to, is really, really great product. If you can innovate and differentiate yourself based on the fabrics that you're using and the fit and the quality, then that is going to make you stand out in a crowded leisure space.

Speaker 1: And beyond good product, Viore is still fighting for brand recognition, which sits in the low double digits.

Speaker 4: Viore is still, on a relative basis, unknown. It probably has lower awareness than Aloe. Part of the success they're having is their consumers are coming back and buying more from the business, which for any business is kind of the mark of success.

Speaker 5: There's no way Viore is coming for Lulu's lunch. It's going to take a lot more time for it to come anywhere close to Lululemon, even if Lululemon is seeding just a little bit of

Speaker 1: share. Still, Viore has already come a long way. From an e-commerce men's company to a Lululemon competitor with real stores in six countries. And its early and calculated success may be an indicator of where it's headed.

Speaker 7: To go from someone who was struggling to get funding kind of 10 years ago to someone who is probably actively turning away funding at some points now is definitely a validation of their vision and kind of the business that they've built. And so now they just have to continue doing that.