Lululemon’s CEO has cut waste and rebuilt customer trust after yoga pants were recalled for becoming sheer when the wearer bent over. Now he’s staking the company’s future on innovation, including pants that make women feel naked when they wear them.
Lululemon Athletica is at a turning point.
It’s been two years since the Vancouver, B.C., activewear company brought in Laurent Potdevin as chief executive. His task: Cut the waste and expense of designing, making and distributing its garments, and rebuild customer trust after the 2013 recall of $98 yoga pants for becoming sheer when the wearer bent over.
Now Potdevin is staking the company’s future on innovation, including pants that make women feel naked when they wear them.
He is looking to improve profit margins while beating back growing competition in a niche market where clothing trends may be turning against Lululemon.
Potdevin’s goal is to cement the retailer’s reputation as the top-quality athletic-apparel maker, justifying its higher prices, and change its perception to a brand worn by top athletes as well as wealthy women saluting the sun in urban yoga studios.
“Everyone’s got a magic number for what they’re willing to pay for quality,” said Bridget Weishaar, a Chicago analyst with Morningstar. “It’s not like your option is Lululemon or Old Navy. You can trade down just a very little bit and still get a really good product.”
The growth of athleisure — workout clothes worn on the street — expanded the market for companies such as Lululemon, Weishaar said. When shoppers return to denim and blazers, Lululemon could be left with fewer customers willing to fill their closets with expensive workout gear.
Potdevin, who meditates twice a day, doesn’t seem worried. Sales at stores open at least a year and online have grown in the past five quarters.
On Monday, the company boosted its fourth-quarter earnings forecast, citing a “very successful holiday season.” Lululemon now sees profit per share in the current quarter of 78 to 80 cents, compared with an earlier estimate of up to 78 cents. Analysts had forecast earnings of 77 cents a share.
Gross margins in the three months ended Nov. 1 fell 6.9 percent from a year earlier, according to data compiled by Bloomberg. Margins for the current quarter are in line with previous estimates, and revenue is likely to be higher than expected, the company said. Revenue will be as much as $695 million, more than the $685 million the company previously estimated. Continue reading >>