Lululemon’s Plan to Grow Sales by 50% in Two Years
Shoppers continue to flock to lululemon’s stores and website thanks to strategic investments in technology designed to enhance the customer experience.
Following a disappointing start to 2017, the retailer rebounded with three quarters of solid sales, spurred by continued investment in both the physical and digital shopping experience.
“What was really gratifying for, I know the management team, but also for the board is how we actually recovered after a tough Q1,” Glenn Murphy, executive chairman, lululemon said on a recent earnings call with analysts. “When you look at it sequentially the business improved from Q2 to Q3 and Q4 across pretty much every KPI. I was kind joking with the management team that this is the kind of quarter that you take, you laminate, you frame, and ultimately you replicate it.”
Murphy’s pride over the retailer’s Q4 results is warranted. The retailer’s $928 million quarter, bested last year by 17.6% and helped raise 2017 total revenue to $2.6 billion, an increase of 13% year-over-year. While the 2017 sales growth is certainly impressive, the retailer has bigger sales goal on its mind ― it plans to increase revenue by more than 53% over the next two years.
The retailer is on the record as saying it plans to grow revenue to $4 billion per year by 2020, with $1 billion in men’s sales, 25% e-com penetration, and $1 billion in international business. “We are on track-to achieve our goals and we're excited by the momentum we are currently seeing across the business,” said Stuart Haselden, CFO and COO, lululemon.
To make this lofty goal a reality the retailer is investing heavily in its next-gen technological capabilities to build stronger relationships with shoppers and drive traffic both to its stores and digital properties.
“[We are investing] not only in new stores but in our co-located projects, our international expansion, investments in technology to fuel our e-commerce and digital strategies, and supply chain,” said Haselden. “All those things are connecting to increased levels of investment that we believe will help us achieve our growth plans.”
Below is a quick look at some of the initiatives and investments that lululemon is laser-focused on to build engagement and sales.
While data is the fuel of the modern retail enterprise, some retailers are obviously further down their analytic journey. Lululemon has yet to fully leverage the power of its large data set, but is taking steps to rectify the situation and positon itself as a leader in the space.
“We acknowledge we’re little behind on data analytics and embracing the power of data,” said Murphy. “That’s going to be really something that’s going to ignite the performance of the business.”
Haselden said the retailer’s approach is to bring data-driven insights into core decision making across three key areas: customer engagement, merchandising, channel operations.
“We are not as far along as we would like to be in these areas,” Haselden said. “We're building a talented team, we've committed to some significant resources this year to pursue the strategy and we're seeing some nice early wins in our e-mail and digital marketing efforts.”
The retailer’s early analytic wins include leveraging customer insights to engage and market to shoppers via e-mail and social media. In addition, lululemon believes its investment in analytics will greatly increase its customer acquisition capabilities, a key metric if the brand is going to increase revenue by 50% over the next two years.
Lululemon relaunched its website at the end of Q3, helping contribute to the healthy sales numbers the brand enjoyed in Q4. The newly enhanced website offers increased functionality, compelling content and storytelling, and enhanced product images. In addition to the improvements released last year, the retailer will be deploying upgrades to its online check out, search and site personalization.
“We’re creating a more flexible format where we can make changes to the website, in hours or days were it used to take weeks or months even,” said Haselden. “There were some big issues that we were able to address with that update to the website.”
Since relaunching the site, the retailer has enjoyed a 20% increase in site traffic, a 19% increase in conversion, 19% increase in direct visits, 32% increase in e-mail business, and a 42% rise in comp sales.
While its e-commerce capabilities are a key component of lululemon’s growth plans, the retailer continues to invest in its stores.
In 2017, the retailer focused much of its in-store investment on growing its men’s apparel segment. The brand was founded as a women’s apparel retailer, but has been steadily increasing its male-focused offerings. Last year the retailer completed 12 unisex stores, and plans to accelerate the program to approximately 25 in 2018.
Overall, the retailer plans to open 40 to 50 company-operated stores, including 20 to 30 stores in international markets. A key international market for the retailer continues to be Asia ― it ended 2017 with 23 stores on the continent.