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Is Lululemon's new approach different than the old approach?

March 25, 2014

See-through yoga pants, supply chain issues and a lightning rod of a chairman have brought Lululemon a lot of unwanted attention in recent years, but the retail chain is looking to regain its momentum with new leadership, overseas expansion and lines of products that broaden its appeal.

The yoga-inspired chain faces numerous challenges besides overcoming those of its own making. Competition in the activewear market has intensified and Lululemon has sometimes found itself facing rivals that either sell similar goods for less or offer items viewed by consumers to be of higher quality.

Even when the chain apparently gets it right, it has taken hits. Consumers have taken to social media to complain that inventory of Lululemon's new "&go" casual wear was bought up by opportunists who are reselling the items on eBay at a substantial markup. A number of customers took to Lululemon's Facebook page to complain about the lack of availability of items online. A customer named Kristin Montero wrote, "How is it that I get up super early and I still can't buy a product from an email sent out hours earlier? Beyond frustrating Lulu."

The person hired to fix all of Lululemon's past problems is CEO Laurent Potdeven, who came to the chain after serving as president at TOMS Shoes. It appears based on the reactions to "&go" that Mr. Potdeven has some current issues to iron out, as well.

FINANCIALS:     [NASDAQ:LULU] [ ]

Discussion Questions:

Is Lululemon continuing to shoot itself in the foot or do you think the issues with the "&go" line have an upside? If you were Laurent Potdeven, what would you be doing?

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Instant Poll:

Are you more or less optimistic about Lululemon's prospects today than you were a year ago?

Comments:

Job one for Lululemon is to shore up loyalty among its current fans while they are still saying "please don't make us leave". The good news is that most of the company's problems have stemmed from unforced errors so a big part of the strategy should be zero tolerance for cutting corners. Given his past experience building feel-good, community-oriented brand TOMS, Mr. Potdeven should have a few tricks up his sleeve when it comes to rebuilding Lululemon's tribe. For the short term, open and frequent dialog with Lululemon's customers through social media will serve the brand well. Currently, the majority of the company's postings are closed-ended. Switching the strategy to feedback solicitation and giving Lululemon customers a positive place to use their voices would make a lot of sense.

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Carol Spieckerman, President, newmarketbuilders

It can happen to any retailer/manufacturer - launch a new exciting product, only to find out you don't have the inventory to fill the demand you created. But for Lululemon, it is compounded by prior bad decision-making. They must tread very carefully, and let their customers know that they realize they have made mistakes in past, value their business and interest, and commit to only offering new and exciting products they can fulfill. Their customers are not interested in Lululemons' problems, and in fact, any more of these "blips" and they will have a tremendously difficult time holding on to the customers they have. I don't feel strongly that they are up to it, nor that they realize it's about their customers, not them.

Donna Brockway, President, FutureRetail

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