Lululemon's Apparel Advantage

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Lululemon's Apparel Advantage

By Jamie Grill-Goodman - 09/08/2017

While athletic apparel companies have been faltering, lululemon athletica inc. posted a 7% increase in comparable sales for its second quarter and direct to consumer revenue increased 29%.

"As an originator brand, we remain at the forefront of the market we created, powerfully owning our position as the brand that defines an active mindful lifestyle," said CEO Laurent Potdevin. "And in a world of increasingly commoditized guest transactions, our relentless focus on innovation, human connection, and our vertical business model allows our guests to enjoy holistic experiences that transcend the four walls of our retail store unlocking tremendous growth opportunity as we reach new guests around the world."

Online, lululemon made improvements to its visual merchandising and said it has seen increases in both traffic and conversion as guests respond to enhancements to the website. Potdevin attributed a 30% increase in site conversion to improved photography and video that "overtly highlight improved merchandise assortments and technical site enhancements."

"We are focused on building capabilities that will leverage our business across critical areas and unlock new ways to engage our guests," said COO, CFO Stuart Haselden. "In the near term, Julie Averill, our recently named CTO, continues to strengthen our technology team and set the IT agenda in support of our business goals."

The retailer said it has another update to its website coming in the third quarter, which will deliver site enhancements "in time to impact the holiday selling period." Lululemon said the update will create greater flexibility for its e-commerce team to make updates quickly.

"The earlier version of the site is very brittle," said Haselden. "We are not able to make changes quickly. The new update will enable us to have a read and react capability we haven't had previously."

The retailer is also working to enhance its inventory allocation systems to better anticipate guest demand. There will also be some checkout improvements to the site coming, but more substantive checkout improvements will occur later in the year.

Improving its mobile capabilities is on lululemon's horizon as well.

"[Mobile] is something that I think is still in front of us in terms of tackling that as a major element of the broader digital strategy," said Haselden.

In the second quarter, lululemon launched its first fully integrated product campaign online and in-store featuring the Enlite Bra and began its seasonal storytelling showcasing lightweight jackets and outerwear. Collectively, these campaign strategies contributed to a 23% increase in traffic year-over-year, according to the retailer.

Capital expenditures were $30 million for the quarter compared to approximately $45 million in the second quarter last year. The reduction relates primarily to lower corporate head office and IT capital.