Lululemon Avoids the Markdown Bug
Athletica, which last week reported a 60.2 percent hike in third quarter
earnings, appears to be one of the few retailers to navigate this recession
without resorting to pervasive markdowns.
the financial collapse last fall, many Wall Street observers felt Lululemon
would feel the brunt of the recession given its pricy goods. Jackets
range from $99 to $128; pants, $74 to $168.
that the Vancouver-based retailer of yoga wear and other athletic apparel
wasn’t impacted. The 10 percent same-store sales gain in the third quarter
came after three periods of declines. But it now expects earnings to
rise for the year on healthy sales and full-price selling.
its third quarter conference call, Christine Day, CEO, indicated that
Lululemon ultimately benefited from a few key steps designed specifically
to reduce markdown pressures amid the recession:
focus on securing space in high-quality factories to support a quick
turn on goods. While costing more up front, the move reduced inventory
on hand while enabling quicker turnaround. Items are now replenished
in two weeks to 45 days;
emphasis on “more value” products with added technical functionality,
colors and fabrics without increasing prices. Likewise expanded its
organic cotton and natural fabric lines at competitive prices to provide
a greater point of differentiation;
prices of some key accessories to drive traffic and to solidify its
position as the leading yoga retail and lifestyle destination. Its
yoga mat was cut to $28 from $54;
availability of items such as tops for layering to standard offerings
at the lower end of its price range, $50 to $70.
of these moves hurt margins while driving sales in the first half. But
gross margins in the third quarter improved to 49.9 percent from 48.1
percent with the aid of improved sourcing on fall merchandise and reduced
focus on sourcing and supply chain initiatives, as well as adding value
for the guests have paid off with increased sales providing leverage
on depreciation and occupancy, while supply chain initiatives improved
our initial product margin,” said Ms. Day.
helping is a continued strong response to the concept with its focus
on healthy living. Grassroots efforts such as offering complimentary
yoga classes is helping Lululemon further bond with local yoga and fitness
enthusiasts. And strong demand for its core yoga collections as well
as its new running collection is also driving the top line.
focus on new colors and styles delivered weekly creates a scarcity model
that provides an immediate guest purchase,” said Ms. Day. “This focus,
combined with an upbeat staff and store environment have proven over
and over to be a winning formula.”
Questions: What do you think of the many ways Lululemon added value during
the downturn without resorting to promotions? Is there one that particularly
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