Lululemon Q3 2012 Earnings Call Impressions

I just finished listening to the Lululemon Q3 Earnings call and before I write a post out later today with the transcript I’m just going to offer my impressions in note form. Here is the Vancouver Sun article on Lululemon Q3 2012.

* Slower start to 4th quarter (December shopping season). ‘We are not immune to consumer distractions that negatively impact other retailers’. Jeeze! Pay attention to your customers and what they are asking for!

* Lululemon is feeling the pinch on their bottom line, once again due to them deviating from the core products in order to innovate in the more technical. They are doing away with ‘street wear’ (other than the occasional fun piece) and focusing more on ‘Technical Street’ with a heavy focus on Technical. What this means is that the piece is really purely technical but with the ability to be worn casually, such as the What The Fluff Line. Boo!! I really miss the items such as the knits, the wraps made out of knits and cottons, the cotton lines like hoodies and fleece. The too and from fleece items and jackets. I really dislike this direction and am buying only specifically Cool Racerbacks lately and the Devotion Tee LS, That pattern of shopping for me has been for the past three months at least. I think there was a big place in my closet for the none technical, stylized items that Lululemon used to offer. I still always purchased the technical that I needed but also purchased a lot of my street wear. Now I’m having to look at other brands for the none technical. Especially since Lululemon prices are now so inflatted.

*I learned that their margins are huge. We knew that….but now we KNOW that. Their gross margins are around 55% and occasionally rise above that (WTF line). they claim that the excess margins are reinvested into technical innovations. What we see is that they are thinning out designs and increasing margins while sacrificing the quality. Scuba Hoodies!! They changed a superior premium item made out of cotton and complex stitching, and created the Scuba Stretch with polyester blend, inferior design and shorter smaller proportions. Cheaper to produce, cheaper looking and all for the same price as the original scubas. Christine acknowledged in a question that if she was to do it over she would not have walked away from cotton and none technical fabrics such as the  scuba, especially since during the holiday shopping season as it is such a big gift for girls.

*The mens line has shifted to a slimmer more modern fit. Dumb! Lululemon was already known as having much smaller fits for the mens line. I had heard last year that they were improving fit to be more accommodating to the athletic builds, however it sounds like know they are seeing an increase in shoppers from the younger crowd and so to please them they have made the designs ‘more modern and slimmer fitting’. I guess that discounts the wife shopping for her husband. I’m sad that I got my husband a hoodie for Christmas (the sequence hoodie) and yesterday I compared the Sequence Hoodie which is an XL to another jacket he has that is an L and the Sequence Hoodie is a full 2″ shorter in arm length than a smaller sized jacket. SO, that hoodie which I though was designed perfect for him will have to be returned in favor of a more athletically proportioned Under Armor hoodie.

*They just hired a head of innovation, Dr. Tom Walker (sounded like?) and his focus is technical fabric innovation. I’d heard from a source that they are working on a new formula for luon that will closer replicate their old luon, and that they know very well that the luon they’ve been putting out recently is CRAP. Hopefully we will see this new luon in early 2013.

*No mention of the Crossfit capsule but Christine did mention that January will show more the back to gym/studio items which ‘is the best we’ve ever seen’.   We missed these items this year since November/December was really heavy on the outdoors mid layer pieces such as ALL THOSE RUNNING JACKETS and the What The Fluff Line. Seriously! What percentage of your shoppers work out exclusively outdoors year round?? How many of these very expensive mid layer pieces will each runner buy???

*They made a huge mistake on the pricing of the What The Fluff line. SO much so that they’ve had to reprice those items to make them more accessible. yet, Christine day made this comment that they found their really tech user runner really loves the line and that they want to ‘get it into the hands of people we want to be in it’. (yuck! how elitist). No wonder the What The Fluff Line was not for me. They were really excited about the premiumness of the WTF line and so they priced it that way. With the repricing of the WTF line it is still a heavy margin product. No kidding. I look forward to seeing them again on Boxing day.

*They had huge issues with their email notifications during the weeks before and after thanksgiving and this really affected their bottom line as this is a major way they promote their new product.

*There will be a couple of warehouse sales this year. Yes, we will be seeing a lot of markdowns. Make a list of items to look out for on Boxing day. Stores are not at all selling out of items with the exception of all Deviotion Tee LS’s except for Love Red, Herringbone Runder Unders and certain colors of CRB’s.

* We will see about 6 capsules for the new year rather than the 8 we saw this year, but those capsules will go a bit deeper. The What The Fluff line is expected to be a long term line (how does that work since it’s specific to winter running?)

*There will be two Swim capsules in 2013, one in March for the early shopper and one in June. Perhaps one of those will be more focused on technical swimming such as triathalon athletes rather than last years younger, surf lifestyle swim line that really didn’t work for any sort of athletic performance or fit anyone larger than a size 4.

*No word on eliminating the hugely popular Define Jacket but I do hope it will return since the Scoop Neck Tank has made a comeback. The Forme Jacket just isn’t selling so I doubt they will keep it around instead of the Define.

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