by Cristina

Guest Post: Lululemon First Quarter Fiscal 2016 Results

June 9, 2016

Huge thank you to Gretchen Connelie for her Lululemon First Quarter 2016 Earnings Results cliff notes. The earnings calls are about an hour long with a question and answer period at the end and so I’m very grateful that Gretchen took the time to listen to the call and provide these great cliff notes for us.

In case anyone is a super-nerd like me, you can listen to the Lulu investor call in the link below (this page). If you have a life and don’t want to waste an hour, here are the highlights for the first quarter of their FY (March, April, May)

* Comp store sales increased by 5% Website sales increased by 18%
* Gross Margin increased and exceeded expectations primarily due to improvements in supply chain logistics and reduced manufacturing costs.
* Product innovation, storytelling, and strong merchandising is a continued focus. A successful example of this was the updated “Pant Wall” and launch of “Aligns”
* Inventory was reduced due to aggressive mark-downs. (Don’t get used to the great MDs we’ve been seeing, it’s a strategic move to reduce inventory and they’ve changed their supply chain to prevent the same issues from repeating in the future)
* Lulu is making the official uniforms for all Canadian Olympic Beach Volleyball players. Expect to see similar design features in retail products.
* Swiftlys were a top performing item, bolstered primarily by the introduction of True Black.
* The Making Moves collection was a test in getting products from design to stores much quicker and was considered a huge success.
* The RFID (computer chips in the hang tags) technology is syncing with the new web platform infrastructure. Inventory accuracy at the store level is at 98% (I find this one hard to believe but am optimistic).
* The CRM program (Guest Profile) will be fully rolled out in in the fall. (No good hints on what to expect).
* There will be a Wanderlust pop-up at the 12 “Summer of Yoga” stops. (We heard rumors of this).
* The new website has been a huge success (despite our feelings about it). They have seen better conversion (people actually completing the transaction), especially on mobile.
* There will be a Shop in Shop in a “Well-known London retailer” (Harrods? Selfridges?)
* Traffic to stores has been stronger than industry average and AUR (average number of units purchased per person) has increased
* Comp store sales in Canada were higher % than comp store US sales (you Canadian ladies are making us look weak J)
* The 900 sq foot Tokyo Showroom is one of the strongest performing showrooms and validates their plans to expand in Japan.
* Hong Kong IFC produces a whopping $5,700 per square foot (By comparison, Apple holds the record with $6,050 followed by Tiffany & Co with $3,017 and US Lulu stores at $1,936)
* In the UK, King’s Road, Covent Garden and Marylebone are doing really well while Richmond and Denver(?) are underperforming.

* Physio and Cardio styles will be combined into one group
* There is an increased focus on Run – men & women
* Styles in different categories will be designed to go with each other
* More attention to detail, trim, construction, & raw material
* Almost 100% attention on “Sweat Category” (less “work wear”)
* Expect to see more “looser silhouette, the one that you can layer, and that combined with the success of bras.”
* “You will see more holistic product launches in the months to come as we deliver new styles and innovative fabrics across categories and genders”

* They purchased a parcel of land in Vancouver for “general corporate purposes”
* Zurich, Switzerland Store (currently only a Showroom) set to open in July
* 40 company operated stores are planned for 2016
o 11 will be international
o 12 will be iviva

PRICING: (I have to just copy/paste the whole quote. Interpret as you wish)
“We are daily bringing a lot of innovation. And so, we have priced to a value that we deliver to the guests. I mean, we are very confident that we got with the pricing architecture, both across categories, from a global standpoint as well, and we thought, I mean, we are like where we need to be. I mean, we see a lot of success and we see the opportunity to actually bring innovation and completely sort of really owning the high end of the market that we really have.”

41 comments so far.

41 responses to “Guest Post: Lululemon First Quarter Fiscal 2016 Results”

  1. Anonymous says:

    Thanks LLM for posting! I laughed out loud at the copy and paste statement regarding pricing. To what degree is this person educated? My 15 year old could make a better topic statement than that. ( and that's not saying much!!)

    • Anonymous says:

      I was thinking the same thing. It just does not sound professional at all. …"completely sort of"… wow! that makes a lot of sense. It all seemed vague to me.

    • Anonymous says:

      I am pretty sure English is not this person's first language. this has nothing to do with their level of education…

  2. Anonymous says:

    Hahaha, Anon 1:12, I was just about to say that I laughed out loud at the bit about the black Swiftlies (talk about a "no sh!t?!" moment) and then I got to the quote…woof.

  3. Anonymous says:

    Gross margin increased due to lowered manufacturing costs…shocker

  4. Anonymous says:

    Thanks for posting this, Lulumum. To be honest I've been becoming more and more turned off of Lululemon and this is not helping at all, now I'm even more turned off.

  5. Anonymous says:

    "A successful example of this was the updated "Pant Wall" and launch of "Aligns""… oh great if that ridiculous publicity stunt was considered a success then I guess we can be expecting more of the same in future… this is the kind of stuff I really hate about this company.

  6. janine57 says:

    I personally think they are pricing themselves out of the market.

    • Anonymous says:

      this is why i buy on Ebay. There are several very nice and reasonable (most of the times below retail) priced sellers.

  7. LOL @ THE PRICING QUOTE?! like, lol. excited about the run & sweat focus!

    • Anonymous says:

      That is one of the only things I'm excited for, that there will be more of a focus on 'sweat' and less on 'work' (usually a lot of this stuff was stuff such as the &GO line and was crap).

      Not at all excited for what seems to be more 'looser' fitting tanks, seems like that's what they mean since they're mentioning the success of their bras in the same sentence. Not everyone likes loose tanks that show off bras. Loose tops make those of us with large boobs look pregnant and we usually don't have any choice when it comes to pretty bras to show off.

    • Anonymous says:

      Oh, and all these "looser" fitting tanks require that you also purchase a nice showy bra to wear with them, so, what this means is more money for Lulu! tank at anywhere from $58 to $68 or something like that and bra for something like $58 or whatever it is – that adds up! whereas a built in bra tank costs around $58 or so.

    • Anonymous says:

      agree! as a larger busted runner most of my tanks are lulu but the good olden day lulu that had shelf bras! I've been hardcore creeping for the scoop neck tank to make a revisit for the past 2 years!!! not a fan of the loose tanks either

    • Anonymous says:

      I don't care about the loose tanks/bra exposure (though one only needs so many of those styles), but I do not wear and will not buy tops with a built in bra, particularly those that are basically just a bra with a crappy cheap tank top attached to it. I think the Ebb to Street tank is the only one I currently own with a built in bra of any kind, and only because it's otherwise slim-fitting.

    • Anonymous says:

      Yes, agree about the looser fitting tanks. One or two is ok, but dedicating a chunk of your inventory/production to it isn't smart. As a smaller-busted lady, those tops always make me look like a boy. I like the tight tanks to help me feel more feminine. Plus, loose stuff gets in the way sometimes when you're trying to exercise!

  8. Anonymous says:

    WHO is buying?? Us die Hard lulu fans aren't like we used to

    • Anonymous says:

      That's the part that's bugging me. The sales are up with the new website? I just went it to before here looking for more in the palm pattern, and I breezed through because all the clicking to see colors I got bored. By the time I got to the pants they all looked the same and I just closed the window. I haven't been buying as much, and I've been buying steadily for 4 years… who is buying??

    • Anonymous says:

      I'm wondering the same thing. I'm pretty sure most of Lululemon's loyal fans have become more and more fed up with the company and haven't been purchasing as much.

  9. Anonymous says:

    Nice to know we shouldn't be expecting to see many more markdowns like the ones we've been seeing lately… Since after Christmas that's pretty much the only purchases I've been making. The thing is, the markdowns are more like what the regular prices should be, so they really aren't that special anyway except for the fact that there have been some nice items being marked down. I've just been happy to see things that I've had my eyes on make it to WMTM at a more reasonable price… never used to find anything I liked from the WMTM section! Anyway, shows how greedy they really are that they made sure to sort it out that we won't be seeing much more like this in future.

  10. Anonymous says:

    About the new Lululemon website being a huge success: I think not. There is no way to know that so soon! I would not be surprised if that is a fib. Someone wants to take credit, I feel. I get all the LLL news, reviews and info here and go here before I go to the LLL website. I wrote LLL about their new cheezy website being a long-time customer, it is very unfriendly, stalls, and it actually locked me out of my account — I sent them the photo I took. Again, it is too soon to know and someone is demanding to take credit. It seems like some kind of Pac Man game and very frustrating when I want to see the sizes, colors, the reviews — click here, click there — nothing makes sense.

  11. Anonymous says:

    I placed a mobile order on the app because the website was such a pain to navigate. While lulu still makes some worthwhile pieces occasionally, I'm really picky as to what I buy or keep. I agree with Anon 6:44 that a lot of the markdowns are what the prices should be. Too bad then they are not returnable and so I usually don't purchase.

  12. Anonymous says:

    "* There is an increased focus on Run – men & women"

    HELL YEAH. This makes me so happy! Can't wait to see what's coming. The educators here are probably super tired of me asking for more run gear.

    Excited to see sales up. I know some people were concerned about Chip Wilson's comments. I'm glad those fears were unfounded.

  13. Anonymous says:

    Lulumum, wanderlust pop up – does it mean same item as the ones in store & online or the exclusive Wanderlust event items?

  14. Anonymous says:

    1st quarter results-website increase in sales would not have nothing to do with new website yet, I will be looking at their 2nd quarter for that. They state better conversion of people who visit new site make a purchase but that could happen with less traffic and fewer purchases. There is no way that new website is inspiring more sales and if LLL remains so out of touch and doesn't make it better I won't be on it.

    I am happy to hear there will be more focus on running gear. I refuse to buy their tanks with armholes to my waist so if this is what they mean by looser I won't be buying. I don't see these tanks moving in stores, they all seem to have plenty of inventory so are they hugely popular? They also mention more focus on details etc., time will tell.

  15. Anonymous says:

    New website a success haha. No way. This is what upper level management tell each other based on someone telling them some stats. They he's what they want to hear and convey a message up above wants to hear. I also see this at the company I work for.
    It is laughable.

    I still like select items from LLL but ai won't continue to pay ever increasing prices. Also very turned off by the sexuality marketing angle (description of feel of pant and man's crotch shot). Any more of that and bye bye.

    • Lulumum says:

      They just put a video up on youtube about their ABC pants (haven't watched it yet) with a similar but much worse thumbnail photo. There is no subtlety there.

  16. Anonymous says:

    1) Re uptick in sales & website: agree w/ above: this is based on 1st quarter fiscal earnings.
    However, the LLL app DOES work (even tho you can't SEE anything on a tiny screen)

    2) Re uptick in store sales: suspect that there is a flood of newbies to LLL. NOT those of us that are fed up. (Tho lets face it, we may be fed up, but we continue to buy from this company, even if it's just "less than in the past". And now a comment that may stir antagonism: we bitch & moan about the increasing prices but that we buy LLL because of their "high quality". I started buying LLL products in 2010-ish so maybe I just don't know their "high quality" products but I've never had to baby so much athletic wear like LLL! Pants that fall apart after a only few wears, fabrics that snag easily, clothing that has to washed on delicate, bright colors bleeding & the list could go on. How long did it take LLL to be accountable for their product?!????)

    Have to admit that those ubiqitous red bags – that are everywhere! – has been an excellent marketing ploy. I suspect that as more young women embrace this era of "exercise empowerment", they *may* be buying at LLL because a) they see everyone wearing LLL and b) LLL is part of the "fast fashion" trend in churning out new stuff every week, feeding the culture of consumerism.

    3) Re loose tops: it's the current trend

    4) Lastly, the market is now inundated with new athletic wear (and now athleisure) companies. Think LLL tried to be a one stop shop for all types of exercise – which is unrealistic. The "original" company (30+ yrs ago) that had innovative designs was Patagonia which started out making clothing for mountaineering. (Then skiing; rock climbing etc)

    I suggest we all start checking out the upstarts and to stop complaining about the company "we love to hate".

    Sorry y'all but just being honest.

    • Anonymous says:

      I was thinking the same regarding the newbies to Lulu being the reason for more sales. Which is also why the stores in the Asian countries and Europe seem to be doing so great as well. The people in these countries are excited about being able to purchase Lulu now.

      As for the rest of us, I don't use the so called "high quality" excuse, I know the quality is not anywhere near as good as they claim it is. Honestly, I continue to purchase because of the fit and I still like a few of the basics like CRBs, Swiftly tops in all styles, Define Jackets, Wunder Unders, Grooves (not loving the updates on these though),etc. Although a lot of my favourites have been "updated" for the worst or discontinued otherwise I would have continued to purchase these too (Scuba 2, Dance Studio Pants 2, Skinny Grooves, among others). I tend to prefer Lulu's classic staple pieces and not the new stuff they come out with. I also agree with what you say about churning out new stuff every week as I am a victim of wanting my favourite pieces in all the new colours that catch my eyes, and honestly, I'm pretty sure this is what keeps me coming back all the time.

    • Anonymous says:

      Totally agree: we all have our favorites or things that work for each of our various needs/body types at LLL!
      And instead of thinking of yourself as a "victim" of the fast fashion (that has escalated in the last 10-20 yrs), make choices. (which many have commented on: picking and choosing and buying less)
      NO judgement here: I look at what LLL puts out every week. But I am finding less and less things that appeal. I pick up something every now and then – or "stock up" on a bra that works on WMTM (the fact that they even call it "we made too much" puts the onus on the customer BUT, it's a great marketing ploy, making the consumer *think* they are getting a deal. yet as other's have commented, the WMTM prices are more "normal(-ish)" so it feels "easier" to purchase, EVEN THO it's final sale. how many of us haven't at some point, taken a risk in buying something off the website in WMTM, having not tried it on, thinking, "oh well, it's ok, it's ON SALE"? only to find we've wasted our money)
      But I digress: if you (or anyone else here) are interested in taking charge of one's spending habits on clothing, and want to really understand how fast fashion is effecting ALL of us, check out the book: Overdressed: The Shockingly High Cost of Cheap Fashion by Elizabeth L. Cline.
      And please, before anyone says: well LLL isn't CHEAP so this book doesn't apply.
      READ THE BOOK. Any company that churns out new stuff constantly IS in the FAST FASHION world.
      It is unhealthy, for ALL of us. (rant over. and thank you to our host to be able to even have a discussion!)

    • Anonymous says:

      Interesting comments and I will check out the book (am already a very discerning consumer), thanks.

      I do have to say though that your use of CAPS is unnecessary. I know you mean to harmlessly emphasize, unfortunately it just comes off as yelling.

    • Anonymous says:

      POINT TAKEN! (guess am dealing with one too many nearly deaf people these days, both literally & figuratively – and now I'm yelling at strangers 😉

    • Anonymous says:

      Thanks, yes, it is silly to look at it as being a 'victim', now that you say that it makes sense, like you say it is as simple as changing one's mindset to one of taking charge of the situation rather than being a victim to it. The thing I have a hard time with is giving up those favourite pieces even though I know the quality has gone so far downhill… I'll check out the book, thanks for sharing.

  17. Lulumum says:

    That's a great book. There is also a documentary on Netflix along the same lines. I'll try to find the title of it tonight.

  18. Anonymous says:

    Stating "higher conversion" rate on new website is not a success. If people want something they are still going to buy no matter what the website looks like especially if these customers do not have easy access to stores. So I would tend to think that their conversion rate is made up of the same people who were buying on the old website. The new website layout is not the reason people are buying from their website. Higher conversion rate does not translate success if for example: Old Website – 100,000 visits per day – 20,000 purchases for a 20% conversion rate — New Website 80,000 visits per day – 20,000 purchases for a 40% conversion rate. You can have a higher conversion rate simply by less traffic on your site with the same number of sales as before.

    I love certain product from this company and will continue to buy it as long as the design remains to be a good fit and the quality of fabric and construction is there. I want this company to succeed so that I can continue to buy what I like but I won't support this company by buying their cheap product that doesn't stand up to normal wear and tear. I read posts by people who cry that their product is pilling and complain about the poor quality of seams, etc. and then they say how upset they are that when they return the product and there is no more left in their size??? Why would you want more of the same when you know how poor the quality is? Do you think that the next one you get will magically be different from the first one? It's this mentality of I have to have it because it's LLL that drives the sales and allows it to continue producing cheap product. Why do you think the fashion retailers are pushing today's styles? Less fabric, thinner fabric, more white in fabrics equal less cost to produce it. They describe tanks with armholes down to your waist and cut so wide that there is now side boob exposure as being great for ventilation but in reality it's designed that way because it is cheaper to produce and then they sell more sports bras as a result of less coverage. I see this company under it's new management being more focused on a youthful and sexier clientele which is apparent in their designs and marketing strategy and I expect in the not too distant future I will be designed right out of most of the clothing due to that.

    • Anonymous says:

      Agree with a lot of what you wrote here! I too have been getting the feeling that I'm going to end up being 'designed right out of most of the clothing' as I'm getting older now (early 40's) and besides that I prefer more classic look and have no interest in what's trendy.

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