DOWNWARD DOGFIGHT
Yoga-wear giant Lululemon is facing plenty of competition, including from Toronto’s Michi,
Toronto entrepreneur Michelle Watson grew up wearing Lululemon Athletica Inc. products.
Now Watson is competing against them, with her own line of sportswear apparel — Michi — inspired by superheroines, boudoir lingerie, art and high fashion. Watson is not alone. Vancouver-based Lululemon, scheduled to report earnings on Wednesday, is competing in a growing field of athletics-wear companies operating at all price points, from British retailer Lucas Hugh selling leggings for $330 to Kate Hudson’s subscriptionbased Fabletics brand, which has come under fire for the quality of its clothes, customer service and billing practices.
The competition is growing as Lululemon expands globally to ensure its long-term success following a series of embarrassing and expensive gaffes that included a recall of sheer yoga pants that left little to the imagination when wearers attempted the most common of yoga moves, the Downward Dog.
Lululemon has also been working to grow its men’s market.
“The huge problem with men’s is that men don’t want to spend the money that women do,” says Lululemon Addict blogger Carolyn Beauchesne.
Lululemon pants for men sell for about $100 in Canada, with yoga pants for women ringing up at roughly the same price point.
Beauchesne says fans she knows like the wholesome look associated with Lululemon and aren’t likely to abandon it for a high-fashion alternative, especially if the look is provocative.
“They like to look nice, but they don’t want weirdos hitting on them,” she said of the diehards who populate her blog and Facebook pages devoted to Lululemon products.
Watson, 38, is betting that there are more women out there who, like her, want more fashion innovation in their workout wear.
“I grew up playing competitive sports, so I’ve always been in workout or sports clothes and I was always unhappy with the wardrobe and I noticed at the gym that everybody looked like a clone,” said Watson, who golfs, skis, dances and practices martial arts. She launched her line in 2010. “There weren’t any brands in the marketplace that I had ever seen that had interesting statement sports bras that could also be worn as layering pieces in the fashion world,” said Watson.
“We had statement bras with quite a lot of straps and a little bondage-inspired, as well as a lot of mesh inserts for ventilation.”
Watson claims she was first to market with mesh, an idea that has since been widely put to use in athletic wear.
Since launching in Vancouver in 1998, Lululemon has grown to 354 stores in North America, Australia, New Zealand, the U.K., Singapore, Hong Kong and Germany.
For a while, it seemed that there was no stopping Lululemon, which, in 2012, reported sales of more than $2,000 per square foot.
To compare, a struggling department store would be delighted to hit $300.
In its last annual report, Lululemon reported sales per square foot of $1,678.
In December, Lululemon lowered its revenue and profit expectations for the year after reporting that third-quarter net income fell by 12 per cent to $53.2 million (U.S.).
One month later, CEO Laurent Potdevin reported a strong holiday selling season and projected an increase in fourthquarter revenue of 15 per cent over 2014, to between $690 million and $695 million.
Potdevin said diluted earnings per share for the quarter would be in the range of 78 cents to 80 cents.
In a note to investors on Jan. 12, analyst Brian Tunick of RBC Capital Markets noted that 90 per cent of Lululemon products sold between Cyber Monday and Christmas were sold at full-price, and accessories remain an opportunity for the brand over time.