Like an overworked balance ball, the athleisure bubble is bound to pop. But that doesn't have Lululemon's CEO sweating through his moisture-wicking workout garb.
Instead, as specialty shops, emerging brands and activewear powerhouses flood the market with new products, Laurent Potdevin is confident his company can sustain its industry-leading comparable-sales growth. It just has to keep innovating.
"Athleisure, that bubble will pop and the people that are not in it for the right reasons will go away," Potdevin told CNBC in an exclusive interview.
"We are still in a very unique position. ... You've got athletic brands that are mostly a wholesale business, that don't have the margin structure that we have, and that don't have access to the same quality of construction that we have. And then you've got the fashion brands that don't have the technical mindset," he said.
This combination of technical yet fashionable products helped lift Lululemon's comparable sales 6 percent in the most recent quarter. Its redesigned women's pants assortment, which categorizes its styles by feel, and its growth in its menswear business were two key drivers behind that increase. The company plans to roll out even more changes to its products, including a reinvented women's tops assortment that includes less form-fitting styles.
Investors have taken notice. Momentum in its same-store sales — paired with improvement in its gross margin, inventory levels and assortment — helped Wall Street looked right past the company's modest earnings shortfall in the first quarter, when it missed the consensus forecast by a penny. Yet with the battleground stock up nearly 45 percent this year, some analysts have branded it overvalued.
"It's an emotionally charged brand," Potdevin said, explaining that the company is only about 80 percent of the way through its efforts to boost profitability. "We've started seeing margins extend and profitability grow."