Did you catch this article Lululemon’s Secret Sauce on The Wall Street Journal today? I thought it was a really interesting read but a little bit  A LOT misleading to investors. What struck me the most out of the article were Christine Day’s comments and how out of touch she is with the actual inventory and customer feedback. Paris Pink according to her sold out in one week when it was first released in December. Bravo Lululemon! But she failed to mention it was mostly returned back to the stores due to quality control issues and then eventually pulled off of store shelves. Plenty of Paris Pink has been on markdown as well. Plenty of returns and plenty of payment for damage to personal property due to ridiculously cheap dyes. I just received my Dazzling Dance Strap Tanks yesterday and sadly, due to color bleeding all over itself in the factory or at the warehouse it will be going back to the store. This has been an ongoing issue with them since NOVEMBER! The 4th Quarter earnings call is this afternoon and I’m really looking forward to hearing the truth amidst all the fluff talk that happens during these phone calls. 

My favorite part of the article:

While a large part of Lulu’s strategy is getting the product right, an equally important part is keeping it scarce (maybe they should focus more on getting it right for now) The goal is to sell gear at full price and to condition customers to buy when they see an item rather than wait. “Our guest knows that there’s a limited supply, and it creates these fanatical shoppers,” says Ms. Day.

New colors and seasonal items get three, six or 12-week life cycles so stores feel fresher. Sheree Waterson, Lulu’s chief product officer, says a hot-pink color named “Paris Pink” that launched in December was supposed to have a two-month life cycle but sold out its first week. (?)

The strategy has sparked some concern on Wall Street. Conference calls with analysts often center on Lulu’s inability to stock enough items.

In the most recent quarter, the company made logistical changes so it loses fewer sales from products being out of stock. For instance, it has focused on getting core products that don’t change from season to season, such as black yoga pants, into its stores, while keeping limited-time items scarce.

Lulu also sells 95% of its gear at full price, says Chief Financial Officer John Currie. Its pants range from $78 to $128, while lower-priced competitors like VF Corp.’sVFC -0.04% Lucy brand and Gap Inc.’s GPS +0.31% Athleta each have yoga pants on sale on their websites in the $25 to $50 range.

The company never puts its core items on sale (except now it does because of all those returns of defective items. Tons and tons of remaining paris pink items were on markdown and at the warehouse sale and outlets) , and it has a very strict return policy: no products accepted after 14 days, and all must be unwashed and unworn, with original tags.

“We aren’t Nordstrom,” (damn straight. They’ve been around 100 years!) Ms. Day says. “We aren’t your personal shopper.”

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