lululemon CEO Says Brand Will Be Inclusive

Jessica Binns
Senior Editor
Following a year of missteps, PR disasters and product quality issues, lululemon athletica is looking to 2014 as an "investment year" that will refocus the lifestyle brand by finetuning its product mix and and expanding its empire internationally in addition to disseminating the brand message more clearly and consistently.

Adding 43 new stores since the last quarter of 2012 helped lulu boost Q4 2013 revenue by 7.3 percent to $521 million, with DTC sales up 24.9 percent to $19.5 million.  Overall in 2013, e-commerce brought in 16.5 percent, or $263.1 million, of total sales.

Lessons learned
Noting that lululemon has been "voiceless" in the midst of controversy after controversy for much of 2013, newly hired CEO Laurent Potdevin said one of the main technology investments this year is focused on CRM, which will help with "understanding our guests at a more micro level" and personalizing the retail experience.

"When you go back a year, lululemon has been in the headlines like every other week and has not participated in pretty much any of those discussions," Potdevin explained, which tempered the effect of all the "meaningful work" the brand's 900 ambassadors do in communities across the U.S. Many of the retailer's employees had to "play defense" throughout much of 2013, he said.

While it's no secret that lululemon was served its share of humble pie in 2013, Potdevin believes the company can change the conversation back in its favor. "We know we don't need to go to traditional marketing strategies," he added, though the company must find a way to "take control of the discussion."

And because competition in active lifestyle apparel has proliferated in recent years, retaining loyal customers is more important than ever, with Potdevin acknowledging, "we're not the only game in town."

After taking a beating in the media over controversial comments about women's bodies and the limited range of sizes it offers, lululemon also needs to make a concerted effort to become more "inclusive," he says, offering no details on how exactly the heretofore exclusive brand aims to achieve this end.

Expanding abroad
lululemon has established a presence in Asia but is just opening its first London store this week. While the goal of the company's U.S. e-commerce is to offer the entire product portfolio online, chief product officer Tara Poseley says each new country-specific website will offer an assortment tailored to that community's needs.

lululemon also is rethinking its international. Instead of relocating existing talent into new territories, now the company is identifying top talent in the regions where it plans to expand, Potdevin says.

Core versus seasonal
Customers are buying a greater share of trendier seasonal products, says Potdevin, with these items selling through four times faster than expected. "While we don't mind our guests being hungry for our product, we don't want them to starve for it," he notes.

The company is pursuing strategies to ensure the right of core and seasonal products. lululemon's inventory holdings at the end of Q4 were 19.9 percent higher than a year prior, which CFO John Currie describes as higher than optimal but not of great concern. "The composition is weighted more toward core items, which will typically sell throughout the year at full price and balance inventory levels by reducing future orders," he says.

The retailer plans up to $115 million in CapEx for the year for IT projects, new stores and renovations, and other investments at headquarters.
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