Home Adidas shop Lululemon spins further out of yoga’s orbit

Lululemon spins further out of yoga’s orbit

3
0

lululemonit is

LULU -3.60%

the roots are in yoga, but it extends way beyond that now.

The activewear company said in a presentation to analysts last Wednesday that it aims to double sales from $6.3 billion in its last fiscal year to $12.5 billion by 2026. As ambitious as it sounds, it may not be too far out of reach for Lululemon, which has doubled its revenue in three years. Analysts polled by FactSet were already pointing to a similar number.

SHARE YOUR THOUGHTS

Do you think Lululemon can maintain its premium quality while diversifying its product line? Why or why not? Join the conversation below.

Lululemon’s new goals come as the company expands its horizons. It recently launched women’s shoes, which the company says are selling well, and are branching out into golf, tennis and hiking wear. After making its foray into fitness equipment through the acquisition of Mirror in 2020, the company is also targeting paid subscriptions. Later this year, Lululemon plans to launch a $39-a-month subscription program that will give its users access to digital fitness classes in Mirror’s library, as well as online classes from studios. boutique such as Pure Barre and Y7. It will also include discounts on in-person classes offered by these studios.

There are a few reasons to be cautious about Lululemon’s new plans, however, which come as the company anticipates slower growth in womenswear sales. Lululemon’s market share in women’s clothing in North America has already doubled between 2015 and 2020, according to data from Euromonitor.

The real challenge will be to pull off the expansion while keeping its luxury brand margins intact. A wild success in shoes, for example, would be a double-edged sword as it is a lower margin category than clothing. And while comfortable men’s work pants are a niche category with few sizable competitors, footwear, golf, tennis and hiking all put the company in more direct competition with Nike NKE. -4.72%

and Adidas. Meanwhile, a $39 membership fee seems high compared to alternatives. Peloton membership for its app costs just $12.99 per month, for example.

For now, Lululemon believes it can achieve its growth target primarily by selling its core product line to more customers, including international markets, which only accounted for approximately 15% of total Lululemon revenue. the previous year, and men, who represent a third of its sales. Mirrors and shoes are only expected to represent about 5% of sales for the foreseeable future.

One of the reasons Lululemon has been so successful in preserving its bottom line, in addition to high prices, is its core marketing strategy. The days of Lululemon pants over $100 practically selling out could be numbered; the company said in its presentation on Wednesday that it would move to a more “integrated” approach that would involve more earned and paid media, as well as sports partnerships. Additionally, international markets, where Lululemon plans to quadruple its business by 2026, could also have a mixed impact on profitability. Morningstar equity analyst David Swartz noted in a recent report that Lululemon’s expansion in Europe “has been slow and has held back earnings.”

Lululemon is increasingly positioning itself as a global fitness and sports brand, directly in the way of Nike. Getting there will not be easy or cheap.

Write to Jinjoo Lee at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8