Laurent Potdevin is working to mend the scarred Lululemon Athletica Inc. brand as the yoga wear retailer pushes into new categories and overseas markets.
The new chief executive officer needs to lure back customers who have wandered to the burgeoning array of rivals, ranging from Gap Inc.’s Athleta to Under Armour and Loblaw Cos. Ltd.’s cheap-chic Joe Fresh. Shoppers fled after Lululemon had to pull its signature black pants from its shelves last year because they were too sheer, hurting its premium image.
As Sam Poser, retail analyst at Sterne Agee in New York said, “the wandering customer is often hard to bring back.”
Lululemon is at a critical point in its development, having virtually created the yoga wear segment more than a decade ago and become a stock-market darling, only to stumble because of its own missteps. Now Mr. Potdevin, a former global shoes and snowboard executive, has to convince customers the chain’s stretchy pants are worth $100.
“The brand is now at that moment where what got them there is not going to get them to the next level,” said Joe Jackman of retail consultancy Jackman Reinvention.
On Wednesday, when Lululemon holds its annual meeting in its home city of Vancouver, it may shed more light on its progress in bolstering its systems, introducing new lines and expanding abroad. The following day it will release its first-quarter results.
Despite its setbacks, Lululemon has beaten analyst forecasts for 24 quarters in a row. Nevertheless, analysts have slashed their outlooks for the retailer’s growth prospects. Its crucial same-store sales at outlets open a year or more likely will not exceed mid-single digits until 2016, Mr. Poser predicted. Until a year ago, those sales grew at a double-digit clip.
To return to strong same-store sales, Lululemon has to broaden and update its core offerings, he said. “We did not see such product.”
Analysts expect the retailer’s first-quarter earnings to be flat at 32 cents (U.S.) a share and total revenue to rise 10 per cent to $381.2-million from a year earlier.
Analyst Jennifer Black of Jennifer Black & Associates in Lake Oswego, Ore., has modest expectations for the company’s first-quarter results but said it is showing signs of getting back its groove. She pointed to a new line of sportswear that seems to be setting the stage for a new category such as paddle boarding, with lightweight and waterproof items.
She said women’s products have improved and men’s merchandise “looks amazing,” such as versatile men’s shorts for golfing, biking “or just about town.” Mr. Potdevin said recently the men’s business could generate $1-billion in annual revenue in the next several years from about $216-million in 2013.