Time for something a little different in lulu news today. Lululemon had their first quarter financial report this morning, which encompasses sales from February up to May 3rd. This announcement was targeted toward shareholders since lulu is a publicly traded company (unlike most brands I talk about here). For those like me who have a casual interest in the business side of lululemon and like to hear about the bigger picture, the info that comes out of this can be pretty interesting (although it does get pretty deep into the weeds of finance here and there). I heard interesting tidbits on a variety of topics that I’ll sum up in this post.
If you’re interested, you can listen to the full webcast here.
Perhaps the most newsworthy bit of intel: lulu will be doing a warehouse sale soon! Tara Poseley, Chief Product Officer, stated that the online warehouse sale that was in October of 2014 will be moved earlier, up into Q2. Lulu’s Q1 is listed as ending May 3, so by extension, Q2 will end early August. She mentioned this sale should include “holiday inventory”, which I hope will include some cheap rulu! Anyway, in sum: we can expect a warehouse sale sometime in the next 8ish weeks. I’m not sure if this sale will be exclusive to either country as she did not specify. To hear precisely what she said, you can go to 42:10 in the webcast, or back it up to 40:45 to hear the full question Ms. Poseley was addressing.
Starting at about 7 minutes into the webcast, CEO Laurent Potdevin discusses some highlights of upcoming product news. He notes that pants, especially wunder unders, are doing very well thanks to their efforts to revive the category after Pantsgate. He said these trends “bode very well for the relaunch of our pants wall expected in Q3″. This leaves me to wonder what pants styles will be introduced or cut between now and then.
Mr. Potdevin goes on to say “our tank line is evolving as well” with more options for support, coverage, and fit. He said new styles will start coming our way in late Q2 and through Q3 (i.e., July and onward). He said there will be a “full relaunch of the tanks wall in the first half of 2016”. I’m not sure what specifically what this will look like for us, except that things are still continuing to evolve. Overall, their goal is to make their tank line as innovative and compelling as their pants. I have to say, I’m really pleased to hear this. From my perspective, lulu has been lagging behind other brands in the tanks category. Although basics are important, almost all of their offerings are quite plain, with pretty much none of which have that “omg I need” factor many of us love about lululemon. I look forward to seeing what they have up their sleeve–I hope it’s good!
A new website will be rolling out this year, planned to be completed before the holiday season (discussed about 9 min into the webcast). It sounds like the website redesign will go hand-in-hand with a behind-the-scenes revamp to better handle our wants and their needs. It will also include an “enhanced checkout experience”. I remember reading that lulu planned to introduce a system that better integrated store inventory with what’s available online, so I hope that is included in this revamp.
Speaking of which, e-commerce blew up this quarter, growing by about 30%. That’s a crazy number to me. (Online orders make up only about a fifth of their total sales.)
Despite a healthy revenue growth of 10% this quarter, Chief Financial Officer Stuart Haselden noted that profit margins suffered a bit, dropping this quarter from 50.9% to 48.6%. He notes that one big driver for this was the additional costs they incurred of shipping new merch by air (instead of by boat) to bypass the LA port issues and still get us eager fans product. As he broke this down into further detail, he noted that product profit margins actually went up. Well…I could’ve guessed that. Since bottoms have gone up in price, and they said earlier that the bottoms are doing very well, it’s no wonder their profit margins went up in this area.
Speaking of port issues, Mr. Haselden reported that late-arriving product has been inflating lulu’s inventory (31% higher than this time last year) and will remain a little higher than they like in the next quarters. They noted that they have made plans to “reflow approximately 2/3 of this late-arriving inventory” by looping it in with upcoming product drops to “minimize markdown risk”. The remaining 1/3 will go to outlets and warehouse sales. I wonder if this means there will be products in the warehouse sale that weren’t previously released?
Lots of new stores are opening this year, including international markets and lots of ivivva stores. Asian and European markets are doing very well. Lulu is also planning to open a store in Dubai later this year.
Overall, lululemon had a good quarter, exceeding forecasts and managing healthy growth despite port troubles and weak Canadian and Australian dollars. Revenue grew overall by 10% compared to this time last year. Listening to the webcast, I was impressed to hear about the ways lululemon was addressing challenges and continuing to drive forward. Between this and the general trend of prettier product, it looks like lulu is moving in the right direction.