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Lululemon gets to work on remaking its tarnished image

On Monday, Lululemon, which is planning a major expansion beyond North America, lowered its fourth-quarter forecast.

CHRIS HELGREN/REUTERS

Learning from its 2013 missteps, Lululemon Athletica Inc. is racing to improve its public image, its chief financial officer says.

It's taking seriously the negative public relations it endured last year and putting in place measures, including investments in "small acts of kindness" by local store employees, to draw back customers, John Currie told a retail and consumer-product investment conference in Orlando, Fla. on Tuesday.

"What doesn't kill you makes you stronger" is how he summed up 2013 for the Vancouver-based retailer. "I'm joking, but not really."

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Speaking to the ICR XChange conference, Mr. Currie said 2013 was a year that "we're quite happy to see going behind us."

He said it was a wakeup call for the retailer to deal with a string of problems, including serious quality issues, a costly recall of its signature black stretchy pants for being too sheer, leadership changes and bad publicity from statements made by founder Chip Wilson, which created an uproar and ultimately saw him step down as chairman.

On Monday, the company, which is planning a major expansion beyond North America, lowered its fourth-quarter forecast. It projected fourth-quarter sales of between $513-million (U.S.) and $518-million, down from its earlier estimate of $535-million to $540-million. It now expects same-store sales to slip in the "low to mid-single digits" compared with a previous no-growth estimate.

It estimated profit per share will be 71 cents to 73 cents, a drop from the earlier 78 cents to 80 cents. Analysts had anticipated profit per share of 79 cents on revenue of $541.3-million, according to Thomson Reuters I/B/E/S.

On Tuesday, Mr. Currie did not give other examples of how Lululemon will go about trying to polish its image. The acts of kindness by store employees, internally called "No Humbug," entails, for example, sending customers home to visit their parents for Christmas. Lululemon is providing each store with "a few thousand dollars" for the efforts, he said.

But the company's research has found, on the positive side, that the chain still has "off-the-chart brand loyalty" among customers, he added.

"Our brand team is huddled right now, working pretty hard on coming up with ideas for everything we can do to get the conversation back to the fact that Lululemon has the best quality," he said.

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He said Lululemon is coming out of 2013 "a much stronger company than we were a year ago." He said his comments are "the last I'll talk of 2013, ever."

He said Lululemon is testing all fabrics at the raw material stage, and hiring people in markets such as Sri Lanka and Taipei where its factories are located to be in the shops full-time and "not just flying in once a week to do a check," he said. It is also imposing more discipline on its design team, without stifling it, he said. The company is already seeing the benefits of the changes and will see improvements throughout 2013, he said.

And despite the setbacks, Lululemon has some strong areas, including men's wear, which enjoyed fourth-quarter same-store sales growth in the mid-teens, and girls' wear at its newer chain, Ivivva, which also enjoyed same-store sales increases in the teens and will expand further, he said.

Lululemon chief executive officer Christine Day, who is being replaced on Jan. 20 by Laurent Potdevin – former president of footwear specialist TOMS Shoes – did not speak at Tuesday's conference.

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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