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What’s Driving Growth At Lululemon

What’s Driving Growth At Lululemon

Romana Hai
What’s Driving Momentum At Lululemon

All through lockdowns, as consumers have found themselves spending more time at home, indulging in self-care and at-home fitness routines, more consumers have opted for overall comfort while confined to their quarters. Different retail brands have taken varying approaches to appeal to this shift in consumer behavior. Lululemon, for one, focussed on athleisure. While the pivot to athleisure was important to survive one of the toughest years in the history of the retail industry, what it did to make the pivot a success is a whole different story.

The Vancouver-based retailer previously estimated its revenue growth for the period ending January 31 to be in the mid-to-high teens, while adjusted earnings per share were predicted to improve by mid-single digits.

The company now expects both earnings per share and revenue to be on the higher end of those ranges.

“We’re pleased with the momentum over the holiday period as our investments in Lululemon and Mirror allowed us to connect with guests both physically and digitally,” said CEO Calvin McDonald.

“We remain confident about our opportunities in 2021 and committed to our Power of Three growth plan.”

Dialing into experiences, something consumers craved during the height of the pandemic; the brand looked to round out the Lululemon experience with the acquisition of Mirror, an at-home fitness company.

Through the acquisition, the company expects to double its digital revenue by 2023 through omnichannel guest experiences. Analysts, too, have responded well to those expectations.

Many saw Lululemon’s MIRROR acquisition as one that broke the M&A mold, as retailers all too often tend to focus on scale and expanding market share with their acquisitions. Lululemon also made several other efforts in 2020 to stay relevant. In an effort to ease pandemic-related shopping challenges during the holiday season, Lululemon looked to increase its number of pop-up locations from 50 to 70.

Shortly after, McDonald announced the company’s plans to open new brick-and-mortar locations across the country. The news came at a time when retailers across the board were reducing their footprint and many were filing for bankruptcy or going out of business.

 “We are a growth retailer that works well for landlords,” McDonald said. “When opportunity in great locations come up I think that goodwill will pay dividends for us.”

Today, Lululemon owns roughly 500 stores worldwide, with 370 stores in North America. The bulk of the company’s new locations are set to open overseas, with a large number of them in China.

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The company also made several strategic changes to its leadership.

In early 2020, Lululemon announced plans to extend its global diversity and inclusion efforts, going beyond appointing Stacia Jones as vice president, global head of inclusion, diversity, equity and action (IDEA). The retailer continued to follow through on its promise, with its latest effort being the appointment of Kourtney Gibson, who serves as the president of U.S.-based investment bank Loop Capital Markets, to the company’s board of directors.

Lululemon then went onto name Meghan Frank, a company veteran, as its new chief financial officer. Frank served as interim co-CFO alongside Vice President and Controller Alex Grieve for a brief period. Frank is responsible for finance, tax, treasury, investor relations, asset protection, facilities, operations excellence and strategy.

Looking ahead, Lululemon is getting ready for the launch of its first shoe collection. During the company’s third-quarter conference call in mid-December, McDonald announced plans to enter the footwear category toward the end of 2021 with intentions to sell in early 2022.

The market is bullish too. Analysts believe Lululemon is well-positioned to continue to exceed expectations. In fact, Wall Street is betting on company earnings to reach $2.51 per share and sales of $1.66 billion for the fourth quarter. Lululemon’s stock, in response, has witnessed a major uptick increasing by roughly 52 percent since the beginning of last year.

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