\nRam\u00edrez, for example, noted that many barre- and pilates-goers are now venturing out from skin-tight leggings to more wide-leg and loose options. Sports like pickleball, tennis and golf also require different staple products, namely shorts, skirts and dresses, which, according to Ram\u00edrez, Lululemon didn\u2019t capitalize on.<\/p>\n
Davidkhanian, too, believes Lululemon has struggled to follow trends and keep up with demand for viral products.<\/p>\n
\u201cIt’s hard when you see something selling really well to not keep going in that direction,\u201d Davidkhanian said, noting that colors like black, gray and white are consistent best-sellers for brands. \u201cBut if that happens, then you’ll never see Barbie pink popping \u2014 or anything else.\u201d<\/p>\n
The good, the bad and the ugly leggings<\/h3>\n
Where does Lululemon go from here? And how does the brand recapture the attention of activewear shoppers?<\/p>\n
Lululemon has its own answer to those questions. McDonald outlined a plan in early September to rethink the activewear brand\u2019s design and product development processes. He also highlighted that Global Creative Director Jonathan Cheung, who arrived last year, has been building out a team of designers with a fresh perspective on Lululemon.<\/p>\n
\u201cMy view now is that we have relied on the same product playbook across certain categories for too long,\u201d McDonald said, specifically citing its more casual social and lounge offerings.<\/p>\n
As a result, the brand plans to grow new styles to 35% of its overall assortment by next spring, up from 23% now. Lululemon will likely need to iterate further once that new product hits stores, Zackfia said, and how fast they can do so will determine the brand\u2019s turnaround success.\u00a0<\/p>\n\nTaking a hard look at product design, development and innovation should help, especially with chasing trending product. Lululemon also hired a chief AI and technology officer, who started earlier this month, which Davidkhanian said could give the brand a boost when it comes to predicting demand.\u00a0<\/p>\n
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\u201cThe last thing you want to be told is that your assortment is boring and that your competitors are ripping you off.”<\/p>\n
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Liza Amlani<\/p>\n
Principal at Retail Strategy Group<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
Some analysts are skeptical whether Lululemon\u2019s dedication to newness really solves the problem, though.<\/p>\n
Jefferies analysts in several instances this summer noted signs that Lululemon\u2019s \u201ccore is cracking.\u201d The firm flagged \u201calarming\u201d markdowns at Lululemon stores in July and criticized its attempts to spread beyond its yoga-based roots.<\/p>\n
\u201cThe shift to louder styles aimed at younger shoppers has led to rapidly increasing sales activity and echoes [Gap and Under Armour\u2019s] past missteps,\u201d the analysts wrote. \u201c[Management] is zeroing in on \u2018newness\u2019 as a panacea for their product struggles and has emphasized the need for more colors and designs, however the outcome is a disjointed assortment that’s failing to convert.\u201d<\/p>\n
Jefferies lambasted the retailer for selling logo-heavy products aimed at young shoppers, saying they were likely to alienate Lululemon\u2019s customer base, and in early August released a note revealing those products were showing up on sales racks.\u00a0Lululemon did not immediately respond to a request for comment,\u00a0though\u00a0<\/strong>McDonald acknowledged on the brand\u2019s recent call that some of its best customers are pulling back on spending in core categories.<\/p>\nAmlani sees value in the logo, collegiate-type products, as that style is trending among young shoppers right now, but everyone Retail Dive spoke to highlighted the need for better innovation. Specifically, Ram\u00edrez said Lululemon has been slow to react to the slowdown in leggings and what shoppers need from their performancewear right now.\u00a0<\/p>\n
Brand followers on Reddit have also complained about discontinued lines, lower quality products and a bent away from performancewear over the years. That last is a double-edged sword, though, as some \u2014 like Under Armour \u2014 have stymied their own growth by sticking too close to performance products.<\/p>\n
While Lululemon\u2019s material innovation is top class, the brand is getting beat by competitors on design and functionality, Amlani said, and needs to keep innovation lanes open even as it executes on seasonless collections.\u00a0<\/p>\n
\u201cLululemon doesn’t have that point of difference that it used to have,\u201d Amlani said. \u201cThe last thing you want to be told is that your assortment is boring and that your competitors are ripping you off, right? So I think it’s really important for Lululemon to continue to innovate.\u201d<\/p>\n
How long will Lululemon be in downward dog?<\/h3>\n
The question is whether innovation is enough. Lululemon\u2019s core black leggings began showing up in outlets this summer, according to Jefferies, a development that signals a “fundamental breakdown\u201d in the brand\u2019s inventory management and brand positioning.\u00a0<\/p>\n
\u201cI think part of what Wall Street is struggling with right now is trying to understand: Is it competition? Is it newness? Is it shifting consumer tastes? And I think that’s really the big question,\u201d William Blair\u2019s Zackfia said, noting that we may know more when Lululemon drops new styles next year. \u201cIn the interim, there’s just a lot of questions around what’s causing that weakness.\u201d<\/p>\n
Several growth areas for Lululemon are also under pressure. A \u201chigh volume\u201d of men\u2019s basic bottoms and polos were on sale this summer, Jefferies noted, a category that is a key pillar of Lululemon\u2019s growth plan. Lululemon is banking on its men\u2019s business to double and its international segment to quadruple by 2026.\u00a0<\/p>\n
While international numbers remained strong in the latest quarter, HSBC analysts in September flagged \u201crelatively cautious commentary\u201d on key markets like Canada and China, which implies \u201cthe brand is now globally vulnerable. We believe an eventual slowdown in international markets could be another leg down.\u201d<\/p>\n
HSBC also downgraded Lululemon, saying it was \u201cin a downward spiral\u201d and likely to face an uphill battle regaining relevance in the U.S. According to HSBC, that\u2019s due to the \u201cbelated acknowledgment of underlying product issues and increased competitive pressures,\u201d which have already come a year after Lululemon\u2019s initial attempts to right the ship.<\/p>\n
\u201cAs a result, we no longer give [Lululemon] the benefit of the doubt,\u201d HSBC analysts wrote, adding that foot and web traffic are both losing steam as core customers tune out the brand.<\/p>\n
\u201cLululemon has been the go-to in performance-driven apparel but there are better fashion-forward alternatives out there, in our opinion,\u201d the analysts said. \u201cGiven casual is 40% of the product mix, we think it will be challenging to scale from here.\u201d<\/p>\n
On the other hand, the upcoming Gen Alpha generation loves Lululemon and is already sporting the brand, according to Ram\u00edrez. Lululemon also has strong marketing, led by a solid brand ambassador and rewards program \u2014 and it maintains a leading place in customers\u2019 minds.\u00a0<\/p>\n
This may simply be a speedbump, perhaps exacerbated by the loss of Chief Product Officer Sun Choe last year, who left to lead Vans\u2019 turnaround. Choe held a lot of responsibilities around product design, innovation and merchandising, and she was \u201cvery significant\u201d at Lululemon, according to Ram\u00edrez.<\/p>\n
\u201cI feel like what they’ve outlined is the right plan,\u201d Ram\u00edrez said. \u201cWhat I’m now starting to have questions on is if the right team is in place.\u201d<\/p>\n<\/p><\/div>\n
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