Abundant innovation is the key to lululemon's growth against the trendThe dark horse lululemon continues to grow against the trend. According to Fashion Business News, in the three months ended October 29, sales of sports lifestyle brand lululemon surged 19% year-on-year to $2.2 billion, the overall gross profit margin increased to 57%, and the net profit was **2.27% to 2$4.8 billion, same-store sales increased 9% year-over-year, direct-to-consumer sales increased 18%, accounting for 41% of total net revenue. In the first three quarters, the group's sales surged 20% to 64$1.4 billion. By region, sales surged 12% in North America and 49% in international business, with China up 53% to 2$6.6 billion. By category, revenue from women's products increased by 19% year-on-year to 14$3.3 billion, men's product revenue increased 15% year-over-year to $500 million, and other category revenue increased 29% to 2$600 million. Lululemon expects sales to be lower than expected during the holiday season due to tighter consumer spending. At the same time as the earnings release, the group's board of directors approved an additional** buyback program of up to $1 billion. However, in the current volatile macro environment, lululemon is undoubtedly one of the few brands that can grow significantly. lululemon expects sales to grow 13% to 14% in the fourth quarter of this yearFor the full year, it is expected to grow by 18%., reaching 95$4.9 billion to $95$8.4 billion. It is worth noting that Lululemon CEO Calvin McDonald announced at the results meeting that it will launch men's shoes in the first quarter of 2024. He said it would be a big moment for lululemon. Industry insiders believe that this will mark a higher level of competition between lululemon and Nike, with the footwear business, especially men's shoes, being the latter's dominant category, with the footwear business contributing 60% of sales revenue. Lululemon, a dark horse, has been approaching the top of the sportswear industry pyramid step by step in the past two years, surpassing adidas in July 2022 in terms of market capitalization, and has become the world's second largest sportswear group after Nike. In terms of sales revenue, lululemon has also left PUMA and Under Armour to become the world's third largest sporting goods group. In 2022, lululemon, which has built a reputation for yoga pants, launched the brand's first women's footwear collection in its 24-year history, including five shoes, named Blissfeel women's running shoes, chargefeel women's sneakers, strongfeel women's training shoes, and RESTFEEL unisex slippers. Innovatively, lululemon has positioned its footwear collection as a footwear collection for women from a woman's perspective.
lululemon launches women's footwear collection in 2022According to lululemon, women's foot shapes are completely different from men's, but most sneakers are currently designed based on men's foot shapes, and then changed to women's sneakers. Lululemon's new footwear collection is based on data on the shape of millions of women's feet, working with biomechanics and morphology experts to create a women's last from scratch and inviting women to undergo multiple rounds of wear testing. lululemon started with women's footwear and entered men's footwear, reversing the traditional path of sports giants such as Nike. With its unique insight into women's needs, the brand has eaten the women's business coveted by traditional sports giants but is not easy to conquer, and achieved corner overtaking. Lululemon doesn't stop at women's business, though. Since 2018, lululemon has decided to break through the brand stereotype and expand into a comprehensive sports brand. Since then, the brand has been changedWhile doing "deep" female business through category expansion, while seeking incremental growth in male business。Men's business is nothing new to lululemon, and in recent years, the keyword has frequently appeared in the brand's earnings conferences. According to lululemon's first Power of Three five-year plan, lululemon has made the expansion of the male market one of its core goals, and has achieved a doubling of the revenue of men's products in 2023 compared to 2018. The Power of Three 2 new five-year growth plan, released in April 2022, also specifically sets a very specific quantitative target of doubling the revenue of the men's business by 2026. However, judging from the latest earnings conference, lululemon is trying to accelerate the men's business again. Calvin McDonald says building awareness and attention remains a top priority for brandsBrands have ample opportunities to increase investment in business and brand building. lululemon conducted a round of televised testing in the U.S. market in the third quarter, with the goal of bringing new male customers to the brand around the star ABC men's pants collection. According to Circana, brands currently have less than 25% unaided awareness, compared to 13% in the North American market. Therefore, he stressed that the brand is still in the early stages of development of the business in all categories and two genders. In the Chinese market, the men's business is also the most visible marketing focus of lululemon this winter, except for the Wunder Puff down jacket. On December 4, lululemon's first pop-up space in China officially opened on the first floor of Hongqiao Tiandi in Shanghai for a period of one month. The pop-up space features a full range of running, training and daily commuting products for men, as well as a special display of ABC's men's trousers collection and new winter products. In September, lululemon also launched a new and upgraded ABC men's pants collection, featuring China's first F1 driver and brand ambassador Zhou Guanyu. According to the brand's promotional tone, the newly upgraded ABC men's pants collection is designed for male consumers, with an ergonomic design, a looser and cleaner overall cut, and a fabric with four-way stretch for effortless stretch.
lululemon brand ambassador Guanyu ZhouWear the ABC men's trouser collectionContinuing lululemon's successful formula of relying on comfort and style validation in the women's business, the men's business also emphasizes comfort, functionality, and collocation. It is worth noting that lululemon highlighted the Wunder Puff down jacket collection in the pop-up space, and at the same time drove the current key products of the two brands. lululemon, which relies on the rise of female labels, continues to infiltrate men's businesses. But gender classification aside, from the perspective of commodities, lululemon still has a lot of cards in its hand. This year, the brand has invested heavily in marketing for the new Wunder Puff puffer jacket collection. It is reported that this new Wunder Puff down series is made of softmatte fabric, which can block the wind and is not easy to get wet by water, and is filled with 600 fill power goose down, which has a light texture. From lululemon's communication caliber of the series, it can be seen that this year, the brand has placed more emphasis on the fashion and collocation of the down series.
Lululemon's new Wunder Puff collection highlights the collocation of stylish stylingIn the accessories category, lululemon's bags have also unexpectedly become popular. The keyword entry "lululemon bag" on Xiaohongshu has more than 30,000 notes. With everything from Fast Track and On My Level to Quilted Grid becoming popular bags, the brand has taken on many trends from luxury, including underarm bags and versatile bags. Calvin McDonald said there are many categories that have lower market share than the brand's core strengths, and accessories is a good example, which is a $110 billion global category, but lululemon's share is currently less than 1%.
The keyword entry "lululemon bag" on Xiaohongshu has more than 30,000 notes.In the third quarter, the brand's handbag category achieved strong double-digit growth, with one of the Everywhere Belt Bags continuing to deliver solid growth from a high base last year. lululemon is building a very solid handbag business, and there are many opportunities for growth in the future, as other companies typically have a market share of 2% to 3% in this category. He emphasized that through lululemon's novelty and innovation, people can see not only the popularity of the Everywhere Belt Bag, but also a core product that has resonated with the market and will continue to make an outstanding contribution to the brand. In October, lululemon also launched its tights Wundermost line, competing with brands like SKIMS for market share in the segment. The collection is made with the new fabric, Ultra Soft Nulu, which features four-way stretch, double layer, sweat wicking and quick-drying, making it the softest fabric innovation to date. Lululemon said Wundermost drove the brand's sales performance faster in October. However, the series is not currently available in China, and it is expected to be officially released in 2024.
lululemon launches the tights Wundermost line to compete with popular brands such as SKIMS in the segmentSome analysts believe that just as Wundr Puffer has entered the current hot down jacket market, the tights market that Wundermost has entered is also the most sought-after market segment at present, which has given birth to the world-famous SKIMS and carried out a round of pre-market education. As an emerging brand, lululemon has not yet entered the stage of product lifecycle management, and needs to build a model like Nike to drive business growth by star products in turn. Calvin McDonald repeatedly emphasizes the novelty and innovation of the brand, and the brand is indeed continuing to bring fresh products to the market in addition to the traditional advantageous categories, expanding the market's imagination for brand growth. If you rewind the clock to the second quarter, the capital market at that time was still worried about lululemon's inventory problems. lululemon's inventory increased further to $1.7 billion in the second quarter from $1.5 billion a year earlier, when the company expected inventory growth to remain in the high single digits to low double-digit digits in the fiscal third quarter. Unexpectedly, however, the company's inventory fell by 4% in the third quarter, better than previously expected. The company attributed the results to higher sales, inventory write-offs, collection timing and foreign exchange factors, and emphasized that the company was satisfied with inventory levels in the third and fourth quarters, but continued to focus on optimizing inventory levels as a long-term goal, and there are still opportunities to continue to improve inventory management levels. The brand has admitted that due to the use of many special fabrics in the product, if the chain is interrupted, it is impossible to ensure that additional fabric suppliers or raw material suppliers and manufacturers can be found in the short term. After the latest 2021 ** chain crisis, lululemon began to deliberately increase orders, which increased inventory pressure to a certain extent. The improvement of the inventory problem has undoubtedly given the market another shot in the arm. In the best-case scenario, brands will continue to export innovative products and gain market popularity, brand desire and sell-out rates will increase, sales channels will continue to expand, and inventory issues will be improved, which will be more sustainable and efficient than any form of inventory handling. Of course, being vigilant to macro market changes has become a necessity in the post-pandemic era. Despite lululemon's bet on men's business, the brand has also observed a decrease in spending by male consumers in North America on apparel and a greater focus on discounted products. Calvin McDonald said the company is actively planning its business to respond to any changes in consumer behaviour that may arise in relation to the dynamic macro environment. After the somewhat blind acquisition of Mirror proved to be a failure during the pandemic, lululemon has clearly turned pragmatic and focused on product innovation and category expansion. The reason why it was able to achieve sales growth against the trend is that lululemon's product strength is still strong. At the same time, retail expansion has helped lululemon quickly translate product innovation into sales performance. lululemon has been bold in its retail strategy, especially in China. In the third quarter, the brand closed a number of stores globally for relocation, with a net increase of 14 stores to a total of 686 stores. At present, the number of lululemon stores in the Chinese market has exceeded 100 to 114 stores, covering first- to third-tier cities. Throughout the year, the brand opened about 35 new stores in the international market, most of which were in China. The performance of its stores in China continued to exceed expectations, with the brand highlighting the outperformance of the newly opened Kerry Centre store in Shanghai, and the sales performance of some other stores that have already reached the stage where the brand needs to continue to invest more and increase assortment**. There is no need to go into details, China is also a trump card in lululemon's hands. The company sees its strengths in the Chinese market as that:Brands are still small in China, with room for growth, and brands can leverage KOLs and community events to increase local connections。Since the beginning of the year, lululemon's stock price has accumulated **55% to $502, with a market capitalization of about $63.6 billion. Nike's stock price has barely grown since the beginning of the year, with a market capitalization of about $180.5 billion.