In This Article:
The U.S. market continues to lag for Lululemon Athletica Inc., which contributed to mixed second quarter results. The athleisure juggernaut missed Wall Street’s revenue expectations for the first time in over two years—and a cut full-year expectations.
Company CEO Calvin McDonald gave the alert in March when the company reported fourth-quarter results that there was a “slower start to the year” in the U.S. By the first-quarter report in June, revenue for the Americas rose by 3 percent, but comparable sales were flat. Those numbers deteriorated further in the second quarter ended July 28, with the Americas revenue up just 1 percent and comparable sales now down 3 percent.
More from Sourcing Journal
-
Ross CEO Sees Availability of Product as Favorable and Broad-Based
-
Non-Profit Wants France to Investigate Lululemon for Greenwashing
In comparison to the much stronger international market, there appeared to be a slight slowdown there as well. International revenue jumped 29 percent in the quarter, with comparable sales up 19 percent. In contrast, international sales in the first quarter rose 35 percent, with comparable sales up 25 percent.
Not helping has been the yoga firm’s struggling efforts to get its assortment mix fixed. The second quarter also saw the fumbled launch of its Breezethrough leggings, which was pulled shortly after introduction after customers complained about how they fit.
McDonald told analysts in a conference call on Thursday that Breezethrough, which was aimed at those who do hot yoga, “was a small buy.” He explained that the product launch is “viewed as a test-and-learn,” noting that “we took the right step of pausing on sales and look forward to reintroducing the fabric in the future.” He also said the decision to pull the product “had a negligible impact on our performance in this quarter.”
The CEO also said on the call that the brand “remains strong in the U.S..” But he also said that while the men’s business continues to see growth, “we have experienced a slowdown in women’s. We have improved our in-stocks in smaller sizes through Q2 and are entering Q3 better positioned.”
The CEO said the company believes the problem with the women’s line was a product plan that introduced less newness across core and seasonal styles, translating to fewer color, print, pattern and silhouette options. The reduced newness impacted conversion rates, and was more pronounced in bottoms. “We simply did not have enough to inspire her to purchase,” he said.
McDonald emphasized that Lululemon’s pipeline of innovations “remains full.” He also said changes within its product organization, including a new reporting structure, puts design and merchandising on “equal footing.”