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Lululemon Athletica’s interim leaders say change is taking shape at the brand, which has been battered with criticism from its estranged founder since the holidays.
Interim co-chief executive and chief financial officer Meghan Frank said Tuesday that the apparel retailer plans to shake up its product assortment with fewer logos, a “more focused and co-ordinated” colour palette and a “more edited” assortment of small accessories.
The goal is to leave the brand with collections that feel fresher and inspire more customers to pay full price, addressing past consumer gripes about a lack of newness and moving Lululemon away from some of the discounting that’s become habit lately.
“We recognize there is more work to be done … but we are encouraged by the guest response to our recent new product drops and activations,” she told analysts minutes after the company released fourth-quarter earnings.
Documents obtained by CBC reveal the inner workings of a theft ring targeting Lululemon stores across the Lower Mainland. A search warrant details how Surrey RCMP linked a street-level shoplifter to a home, where police seized large amounts of stolen goods this spring worth hundreds and thousands of dollars.
The Vancouver-based retailer, which keeps its books in U.S. dollars, reported net income of about $586.9 million US for the quarter, compared with $748.4 million US a year earlier.
The result for the period ended Feb. 1 amounted to earnings per diluted share of $5.01 US, down from $6.14 US a year before.
Lululemon’s revenue was $3.6 billion US, up by about one per cent from its prior fourth quarter.
The quarter marked the last under CEO Calvin McDonald, who departed Lululemon at the end of January for beauty conglomerate Wella Company.
Under McDonald, Lululemon’s sales tripled, its menswear division was expanded and the company landed buzzy deals with Canada’s Olympic team as well as the NHL and NFL.
But its share price also dramatically eroded, and competitors like Alo and Vuori started stealing away customers.
These struggles didn’t escape founder Chip Wilson, who has not worked for Lululemon for years but still holds some of its stock.
He has been pushing since December for Lululemon to revamp its brand and creative strategy and has recommended three board nominees — Marc Maurer, a former co-chief executive of On Holding AG, Laura Gentile, a former chief marketing officer of ESPN and Eric Hirshberg, a former chief executive officer of Activision — to speed up the overhaul he’s pitching.
Lululemon has not named any of Wilson’s nominees to its board. It has said it repeatedly asked to interview the trio but alleges Wilson would not allow that to happen unless the board agreed to a full set of settlement terms, which the retailer did not outline.
Lululemon CEO Calvin McDonald is stepping down in January. This comes after the company witnessed a near 50 per cent share fall in the last year. The Canadian-born executive’s announcement sent Lululemon’s shares surging roughly 10 per cent in extended trading on Thursday.
Uneven performance
Frank was joined on the call by André Maestrini, Lululemon’s interim co-CEO and its president and chief commercial officer, who dug into the company’s uneven performance across several markets.
In the last quarter alone, Lululemon’s net revenue in the Americas dropped five per cent on a constant dollar basis but was up 14 per cent across the company’s international division.
Maestrini said customers in China have been responding well to the company’s product assortment, especially its outer and loungewear, but indicated, back home, there is work to do because the company has resorted to more markdowns.
He said Lululemon’s primary goal in North America this year “is returning the business to healthier levels of full-price sales.”
The company also plans to improve the customer experience online and in-store “with less density of product to better showcase our new styles and innovations, and to make the stores easier for guests to navigate and shop.”
