Lululemon: The Year In Review

The year started off rather confused for Lululemon Athletica (NASDAQ:LULU), as the company’s stock price fell by almost 25% on the back of disappointing store comp sales and slowing e-commerce momentum. That said, it completely turned things around in Q2. The company recorded good top and bottom line growth thereafter, while focusing on best implementing the “strategic pillars” that are expected to drive growth at the company over the next few years, ultimately surpassing the $4 billion mark in revenues by 2020.

In this respect, the company worked hard to improve business over four key areas that include digital, international, men’s, and the North American business. The turnaround in the company’s results over the remainder of the year can be attributed to continued work in these four spaces.

Key Highlights From The Year:

• In Q1, Lululemon saw declines in its e-commerce revenues as a lack of color choices in its spring line and the failure of the website’s interface in correctly displaying its “design vision” steered customers away. However, since then, the company has worked hard on making the online experience as engaging and seamless as possible, while increasing its overall digital presence. Now, the company’s focus is to bring to life its design vision, pulling through a combination of engaging storytelling, personalization, and assortment, while making the e-commerce experience scalable, easy, and frictionless. In today’s day and age, it is essential for the company to have a digital footprint that gives the consumer easy access to what the company is and what it has to offer.
• The company decided to use a good amount of resources on executing its international expansion plans in the year. While companies like Nike and Adidas have always had a mixed revenue proportion, Lululemon was lacking in this respect. Hence, over the year, the company heavily targeted growing its business in China, leading to heavy growth figures in the region. While market growth in Asia was recorded at a commendable 100%, growth in China came in at a whopping 450% in the latest quarter. Furthermore, the company believes that current customer behavior is indicative that its e-commerce penetration in China could approach a significant 40% to 50% of its business in the region very soon.
• In the year, Lululemon announced the closure of a number of its Ivivva stores (catering to the “tween” segment) to increase focus on another potential billion dollar market — the men’s market. The company has long ignored this demographic in order to maintain its “specialist” tag. However, things under the new CEO took a different turn. Judging by the results in Q3, it seems as though all the hard work in respect to expanding the men’s business is working out well for Lululemon. In the last three months, the company witnessed a 21% increase in new male customer transactions. This was primarily made possible thanks to additional focus on their co-located stores, and their very first men’s marketing campaign.

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