LULULEMON LOOKS TO POP-UP STORES FOR BOOST.
TORONTO — Lululemon is opening 14 pop-up shops across Canada and the U.S. to showcase the brand to customers in “unexpected ways” as it fights to restore its weakened image, its CEO told analysts Thursday.
A day after company founder Chip Wilson accused the retailer’s board of straying from the positive culture and “core values” of innovation he built in crafting the brand, executives faced analyst questions about what prompted the company to cut annual revenue and profit guidance.
“We still are seeing a deceleration in (same-store sales) coming in to the second quarter,” chief financial officer John Currie said during a first-quarter conference call, with promising increases in store customer traffic but lower sales at its 263 stores worldwide. “It still is prudent to be conservative, and expect that the underlying trend continues for the time being.”
After the retailer’s most difficult year since its inception in 1998 — including a costly recall of overly-sheer athletic pants, the departure of Christine Day as CEO and tone-deaf comments from Wilson suggesting some women’s bodies weren’t suited to wear the brand — new CEO Laurent Potdevin is steering the company through a transitional year as it takes steps to speed up its supply chain, improve quality control measures, increase assortment in men’s and kids’ apparel, and better gauge customer sentiment and awareness through new customer analytics tools.
“We have never used a lot of data in the history of Lululemon and we are shifting that as quickly as possible,” Potdevin said. “We have got a very loyal guest, and we should know a lot more about him or her.”
Asked to comment on morale after Wilson’s unsuccessful bid to vote out board chair Michael Casey and director RoAnn Costin on Wednesday, Potdevin steered around board activity, but added executives had talked with staff about the feud.
“We sort of mentioned that our parents are fighting and it’s awkward,” he told analysts. Staff “are the face of our brand (and) they deal with our guests every day, so personally we have made their lives more difficult in the last year.”
Since the January arrival of Potdevin, former head of Burton Snowboards, management has been working on a four-year road map to increase the retailer’s store footprint in Europe, Asia and other international locations. By then, North America will have an estimated 350 Lululemon stores.
In addition to trying to boost revenue through the pop-up stores, all of which have leases of less than six months and will wind up in September, the retailer is assessing job functions at its Vancouver headquarters, hoping to free up designers to spend more time on product designing as it strives to create more sport-specific technical athletic apparel.
Nevertheless, with a nine-month period between when goods are ordered and when they show up on store shelves, the company is still working its way through merchandise ordered in the frenzied wake of last year’s recall and before the arrival of chief product officer Tara Poseley last October. She was brought in to spice up and improve product design as Lululemon battles Under Armour and Nike for market share.
“We have a (second-quarter) core product assortment that has not evolved as quickly as it should have, and we are diligently working away at that,” Poseley told analysts. Lululemon wants to move its ‘go-to-market’ calendar more quickly in response to trends as it looks toward 2015 and 2016 “landing in stores on time, in the right place at the right time,” she said.
In its updated outlook, Lululemon said 2014 revenue could hit $1.8 billion US, below its prior projection of up to $1.82 billion. Adjusted earnings are expected to hit $1.71 to $1.76 per share, below executives’ earlier forecast of up to $1.90.
The outlook also calls for second-quarter sales of $375-million to $380-million, short of the $387-million estimated by analysts.
First- quarter adjusted profit was 34 cents a share, ahead of analysts’ 32 cents. The adjusted profit excluded a one-time adjustment of $30.9-million for the repatriation of foreign earnings to fund a share buyback of up to $450-million, Lululemon said, which will be completed over a two-year period.
In the first quarter ended May 4, Lululemon’s samestore sales, a key measure of retail performance, fell four per cent and online revenue rose 25 per cent. Revenue rose 11 per cent to $385 million, above analysts’ prediction of $381 million.