Lululemon Athletica Inc.‘s chief executive is confident his company is well on its way to addressing some of the concerns customers and analysts had earlier in the year about a lack of newness in the brand’s product assortment.
After reorganizing the retailer’s product team and introducing a new reporting structure, Calvin McDonald said Lululemon is on track to reach historical levels of newness by the first quarter of its fiscal 2025.
“I feel good about the quality and quantity of newness the teams have planned and I believe we are well positioned for spring,” he said on a Thursday call with analysts.
Newness — how fresh a brand’s products and styles appear to consumers — is one of the key ways retailers draw in customers.
To give the impression of newness, apparel companies often experiment with colours, prints, patterns and silhouettes. Some also partner with celebrities or other brands to launch product lines that attract shoppers.
Lululemon’s efforts to boost newness have so far focused on new detailing applied to some of its Define jackets and the release of its velvet Scuba hoodies, satin running tights and shorts and waffle knit apparel.
“The guest is responding very well to that,” McDonald said.
In August, he conceded that Lululemon’s womenswear division had struggled with “reduced newness,” which impacted conversion rates — typically the percentage of people who visit a store and make a purchase before leaving.
Lululemon’s product assortment this year has focused largely on its staples — yoga pants, scuba hoodies and sports bras — while the company also saw continued success with its belt bags.
However, there were some missteps. When Lululemon outfitted Team Canada at the Olympic Games in Paris, the uniform was criticized for resembling uncooked bacon or looking like it had been blood-spattered.
Lululemon also paused sales of its Breezethrough product line of tights and other activewear in June. Many of the line’s pieces featured a long V-shaped waistband in the front and Y-shaped seam in the back that some consumers complained was unattractive and produced a “whale tail” look.
Neil Saunders, managing director of GlobalData, said in a note to investors that he feels many of the newness issues “have largely been corrected.”
“Across the third quarter the women’s range felt fresh and interesting and there was more than enough to grab the attention of shoppers,” he said, adding it had improved the company’s conversation rate and average basket size, a measure of how much consumers spend.
“In our view, Lululemon deserves praise for the quick course correction.”
Some of that correction was reflected in Lululemon’s third-quarter results, which were released Thursday and showed the brand earned US$351.9 million in its latest quarter as its revenue rose nine per cent.
The Vancouver-based retailer, which keeps its books in U.S. dollars, said its third-quarter net income compared with US$248.7 million a year prior.
Its diluted earnings per share for the period ended Oct. 27 amounted to US$2.87 compared with US$1.96.
Lululemon’s third-quarter revenue totalled US$2.4 billion, compared with US$2.2 billion a year ago.
McDonald said the results “exceeded our expectations” and reflected strength the company has seen in its shorts, skirts and leggings in seasonal colours.
Saunders felt it was a “solid quarter,” in part because Lululemon’s comparable sales increased by four per cent overall and its international revenue increased by “a stellar” 33 per cent in overall terms.
McDonald said that the company will enter Italy next year using a company-owned model, but will also expand to Denmark, Belgium, Turkey and the Czech Republic under a franchise model.
In the latest quarter, however, there was weakness in the Americas, where Lululemon’s comparable sales fell by two per cent.
“There is much more competition in the US market and our data clearly show that even relatively loyal Lululemon consumers are shopping around more widely,” Saunders said.
“This problem isn’t going to disappear over time, if anything it is going to intensify.”
Shoppers, he said, had become “more constrained and pickier” because of inflation and high interest rates.
“While most Lululemon shoppers are far from being hard-pressed, they are still impacted by inflation and have modestly reduced the volume of things they buy,” Saunders said.
He felt Lululemon should respond by leaning into categories like menswear, which Lululemon has increasingly been expanding through new styles and even partnerships with NHL teams.
In more recent months, the company also introduced a range of Disney apparel.
This report by The Canadian Press was first published Dec. 5, 2024.
