Lululemon faces stiff competition in its core business from a growing array of rivals, and the spectre of a past stumble in piloting a fresh retail idea.Moe Doiron/The Globe and Mail
A poster child for her brand, Christine Day was deep into a sunrise yoga session on Miami Beach just two hours before stepping up to the podium at a recent U.S. investor conference to expound on her vision for Lululemon Athletica Inc.
The yoga wear chain's chief executive had reason to breathe easy: Vancouver-based Lululemon had just raised its fourth-quarter outlook after a strong holiday selling season, sending its stock soaring once again. Still, the phenomenal growth at Lululemon raises the question: what next?
Ms. Day still has expansion on her plate at the company's core North American business, while testing new international waters this year. She's also intent on rolling out new retail concepts, even though the company ditched one – separate organic-wear stores – a couple of years ago. Analysts think new store ideas now may include athletic specialty concepts such as a biking, spinning and hiking apparel chain.
"One of the things that you see us doing to drive both same-store sales and eventually see new concepts is we drop pods [sections]in the stores and we are testing things like spin and bike and hike," Ms. Day said at the Miami conference in January. "We are getting good at the product while we do that."
On Thursday, when Lululemon releases its year-end results, Ms. Day may provide more hints about the new concepts. As she contemplates them, she faces stiffer competition in her core business from a growing array of rivals, and the spectre of a past stumble in piloting a fresh retail idea.
Several years ago, Lululemon rolled out separate Oqoqo stores, which stocked eco-casual clothing made of bamboo and other organic materials, but they were dropped in favour of yet another concept – Ivivva – which stocks dance wear for girls. With about five Ivivva outlets today, the company is drawing up a blueprint for other concepts, betting that it has learned from past missteps.
"They need to look at different concepts," said James Smerdon, retail director at Colliers International Consulting in Vancouver. "But their previous foray into other brands has not fared as well as they'd hoped – nowhere near as well as the Lululemon brand itself."
Even so, Lululemon has made headway in moving beyond women's yoga wear in its namesake stores. Its running apparel sales now make up about 20 per cent of its business, while men's wear sales represent between 12 and 15 per cent of revenue, Ms. Day said.
Her push for new retail concepts comes as she grapples with a tougher market, with competitors including Gap Inc., which has its own U.S. athletic wear stores, and even Vancouver-based Mountain Equipment Co-op, which is moving further on to her turf.
"The battlefield is going to be between Mountain Equipment Co-op and Lululemon because they're both starting to nibble away at each others' territory," Mr. Smerdon said.
John Currie, Lululemon's chief financial officer, acknowledges the "copycats."
"You go up and down [Vancouver's]Robson Street, you go two blocks either way, there's three stores that are just trying to knock us off," he told a recent conference in Whistler. "They rarely seem to have a customer in there. Not to say we are untouchable but competition is all around and it's only growing as we are more successful."