Monday, January 13, 2014

4th Quarter Guidance Updated Down - Production/Distribution Issues at Fault?

Lululemon updated their 4th Quarter guidance today, to below their third quarter estimates. Predictably, analysts and reporters are blaming declining sales on lululemon losing customers to the March sheer pants and November Wilson fat thighs issues but I honestly don't think the public's memory is that long lasting. The CFO, John Currie's, statement backs me up on this: "We were on track to deliver on our sales and earning guidance though the month of December; however, since the beginning of January, we have seen traffic and sales trends decelerate meaningfully. Based on this recent performance and assuming these trends continue through the remainder of Janyar, we are reducing our outlook for the fourth quarter." 

Close observers of the company, which includes all of you who read this blog, have noted how odd the January product release has been. Though, to be honest there were issues in December, too. There has been a mishmash of colors - Fresh Teal, Lavender Dusk, Pink Zing, Baroque Blue, Power Purple, Guava Lave - that don't seem to make a cohesive "collection". There have also been missing products - such as the size ten Parallel Stripe Wunder Under crops that never made it to North America though we did get size ten in the Wunder Under pants. I've been following lululemon for quite some time and can't recall a Wunder Under crop color not being offered in a size ten before. I know size twelves are routinely excluded, though less these days than in the past, but never a size ten so that was extremely odd. Parallel Stripe Runday crops never made it to Canadian stores and were only available in the on-line store. Guava Lava Swiftly products have not shown up yet even though the headband is in the stores. Pink Zing items are being rolled out very slowly. There is no solid Baroque Blue Cool Racerback, etc., etc. I know it was mentioned in an earlier conference call that lululemon is now inspecting product before it makes it to the store floors so I am wondering if the "missing" items didn't pass muster and they were deleted out of the collections. The product releases have been pretty small, too, and not consistent across all outlets - website, Canadian, and American stores - considering people have Christmas gift cards to spend. I think all these things add up to production issues. The third quarter conference call mentioned that seasonal special items, such as pique Skinny Will pants or parallel Wunder Unders, have sold extremely well, so people are buying the more "special" items but I think the lackluster January sales are due in large part to lack of compelling product.

27 comments:

Anonymous said...

I 100% agree with your analysis. It seems the company is completely missing the obvious.

Amy Poulson said...

I have an idea for them, bring back the quiet stripes. I am quite sure that reintroduction will boost sales.

Anonymous said...

Lulu needs to get with the program and improve its ecommerce practices. I hate seeing pics of new items in stores and then have it appear many weeks later online - or never at all (by then ive usually lost interest/set my sights on something else, or it will sell out immediately). The online stock is not great and people often report difficulty with check out. For those that aren't near a store, or prefer to shop online, these are drawbacks and lost $$ for lulu. Free returns (within time window) would also make me buy more on upload mornings since I'd have a hassle free return if something didn't fit.

Agree that product has been uncompelling since the fall.

Anonymous said...

Personally I think you are right but keep in mind also that Lulu holiday upload came minutes before the christmas deadline, not giving people more time to shop. Super slow shipping also adds to slow buying. It took me almost 2 weeks to get my last order and I would have ordered more if I got it earlier had a chance to try it on (show it off). Popular items sell out way to fast for people to be able to buy them (parallel stripe, coco pique etc). If lulu is in business to make money they should make enough items to keep in stock, if they sell out within minutes re-cut. How silly is it that in this day an age you have to stalk a website/store to get the item you want, which you most likely seen on the companies Canadian, Australian or Hong Kong website. Get it together Lulu.

Anonymous said...

100% agree. Throw in too high price points on many items and you have people thinking twice before they bust out their credit cards. Lulu needs to get it together and face reality - they need to get competitive because they are not the only option in workout wear anymore

Anonymous said...

Interesting.
I bought 2 iconic wraps at the store in L.A. but I don't think I saw them online. I also heard people on east coast never seeing them in their stores. I usually wear an 8 in tops but the size 12 I got still has extremely tight arms and shoulders....so maybe they didn't pass inspection?
OT, thank you for those of you who gave me advice on how to wash and dry the extremely heavy cozy yogi infinity scarf !

LuluAddict said...

They totally need to fix website issues, particularly the loading for the uploads and check out via paypal.

Lululemon has stated they buy separately for the website - treat it like a store- so the website stock not matching the store stocks is definitely a symptom of the production issues, I think.

@ anon 11:08 am -I agree on the price point issue, too.

Anonymous said...

I agree as well, and I also agree with some of the other comments here. Over the summer and into the fall, I was spending an uncomfortable amount on lulu gear online. I haven't bought more than a couple things here or there over the few weeks. One was a scuba when they had that pop up sale, and then I bought a FTB Wild bra. The products just aren't appealing. Add that to lack of product appearing online, faulty website issues, quality problems, and high prices, and it doesn't take an expert to see why their sales are down.

LuluAddict said...

@ anon 10:36 am - I think the company knows full well production/distribution/quality is an issue but they don't want to admit it. However, analysts and reporters are too lazy to dig beneath the surface of the bad press - which THEY have made an issue BTW, not the hardcore fan. I mean, we knew about failing quality TWO YEARS before Pantsgate happened but Wall Street was taken completely by surprise. And we knew the company had a blame the customer attitude long before Wilson outed himself by blaming fat thighs for pilling. Like I said, lazy analysts and reporters.

Anonymous said...

I've been so well-trained to obsessively check the blogs and website, but after nearly a year of disappointing quality, availability, and design, I actually have to remind myself about uploads.

I would have bought the PS Runday crops, but I missed the upload Canada-side. Oh well.

Anonymous said...

Website issues are ridiculous. Every time I try to login it takes at least 5 minutes and then I end up with a timeout error and I have to start over. Doesn't matter what computer or iPad I'm on...

Agree that the price points have been too high for less than spectacular designs. There used to be a lot more extras in the designs, embellishments, details, etc. now you get just a sloppy looking t-shirt or a boxy pullover for $70-120. Less for more :(

Eric Lewis said...

It's like they gave up on the mens side lately...

December was a bust, barely anything was released...

Lulumum said...

You are definitely correct with the production issues being the cause of slowdown in my opinion. Things I've noticed are items being distributed only online (Mint Moment, Angel Blue CRB's) which later get to stores 6 weeks later. Odd ball items from the summer coming back all of a sudden. The commuter cycling line was online first, and then about 6 weeks later made it to stores. Parallel Runday crops never made it to Canada and the Brisk Bloom wunder unders were extremely limited. Green Bean Nice Asana Jacket never made it to the majority of stores. I'm also noticing they are running out of these items much faster than usual which to me shows they have smaller runs available which they are only allotting to certain stores/online. Also, they are very heavily repeating colors from last year.

And another interesting thing I noticed is they have excess inventory for scuba hoodies which they have resorted to marking down 50% off on a one day sale, and then also giving some away to random customers.

Anonymous said...

I totally agree about the slow shipping! On the east coast it always takes at least a week to receive my order. I appreciate that the shipping is free, but really, that is really slow.

Anonymous said...

I agree with your analysis LLA. The product offerings have been inconsistent the past couple of months. The declining sales are not due to the sheer pants issue or Chip's comments. The media likes to focus on these issues because it makes for better reading.

For example, I was ready to buy the Ebb to Street tanks in Raspberry and Lavender Dusk but as I far I know, I don't think we received them here in North America but Australia got them a long time ago. Also, the website in Canada was the last one to receive the PS WUC and they did not appear until well after Christmas. Those crops were a hot seller and should have been available before Christmas. By the time they were uploaded, the hype was over for me and I no longer desired them. Also, I noticed that they did not sell out right away online in Canada.

On the other hand, I thought the end of summer and early fall were stellar with their product offerings and colour schemes and I purchased a large number of items during that time (various plum items, tech mesh tights, bliss wrap, etc).

Anonymous said...

the analysis is spot on lla! Yeah it seems so obvious to all of us so i am of the thought that since they expanded all over the damn world they sacrificed lulu quality/specialness for quantity why they can't have both???? is beyond me. but before they expanded like they did is when lulu was top notch no athletic wear company like it- they set the bar so high no one could compare! its like everything mediocre is the name of the game- anyhow i'm not holding my breath for lulu to go back to its roots i doubt they ever will; yeah big boxy crappy tops w/ strang hemlines that are really fug and they want top dollar for it- uh no i'll pass!!!!

Anonymous said...

Bottom line of course is that if there is fab stuff to buy we'll buy it no matter what hoops we have to jump through! However, website issues are ridiculous...have used some fantastic websites from companies which I'm sure are much smaller and have much smaller budgets for this. I've ordered using Paypal, been given and order number and it turns out the order wasn't made...I've ordered, received the items and turns out I wasn't charged! That really is only a couple of examples, I have many more.
I'm in the UK and I've decided that, although we get the odd item before the US, generally I think we're often used as the 'outlet store' i.e. I've seen items in the WMTM on the US side and they turn up in 'New' for the UK the same week...mmmm
whilst I suppose that shouldn't really matter it just doesn't do much for the 'feel good' factor and LLL doesn't have the cult following here that it does in the US and I can't see that building because the company isn't treating customers in the same way it used to (when I lived in US).

Get matching items out together...then we'll buy a whole outfit rather than thinking..'I like that but I have nothing to match it'...make all the leg lengths in all the colours, cut down on the black (others do that cheaper).


I could go on!

Anonymous said...

Spot on analyses, LLA and LLM. I am super disappointed with the latest colour runs, and noticed so many things that should have made it to stores, never did. What happened to a solid DZ or raspberry CRB? Coco pique WU never made it to my stores, and brisk bloom WU i was only able to spot in a size 2. The PS WUP/WUC took forever to appear in stores/online Canada side and when it did, again only size 2 in stores. Barely anything in Guava Lava showed up, and I was so excited for that colour! Everything seemed so slow moving and I thought it was me being whiny, but I'm glad to know it's a production issue. I heard on the men's side, the pigment blue items (shown in the November sneak peek I think) were recalled and never made it to the floors. IMO there was not nearly enough of the DZ/rasp/WO/GL/surge palette! :(

I'm not too optimistic about the coming months because it seems it will take several months to overcome whatever issues they are currently having.

Anonymous said...

Winter 2012 I bought every color in the Run Ice Queen pant and denim Barre Pulse pant. Bought several denim WU and denim Defines last year. This year all they are doing is swapping out band color on pants. Very disappointed in product offering.

Lana said...

Anon 1:27 they also released an Inkwell Ebb to Street tank in addition to Raspberry and Lavender Dusk that only seems to have made it to Australia. I thought about using a connection to get them but I figured they would pop up but have not as of yet. At this point I no longer care. All of the varying release times would lead to diminished enthusiasm for items if they show up weeks or months after you were looking for them.

I went to the Santa Barbara store last night and was unable to muster enthusiasm for anything, even stuff marked down to $19. I know my spending on Lulu has always lagged for the first 3-5 months of each year and this is par for the course. But the crap they have out now is all over the map color-wise and design-wise. They also had heaps of scubas and thick pullovers and its sunny and warm here, no need for those.

PS: Peplums are never a good idea on athletic clothing, and most other clothing, too.

Anonymous said...

Their reason for the declining sales is not limited to just the recent months. For me this is cumulative. A bunch of things lead to why I care less for the brand. (also see the clothing specific points below). Their lack of a price adjustment policy and lingering bad customer service are still a problem. I receive good service where I shop (Canada) but still hear about the problems. Wilson's foot in mouth doesn't help the brand at all, nor does their lack of class move on the Partner's Card in Texas.

In the past year and a half I have bought far less LLL than in previous years. In 2013 I bought several CRB's (and even turned friends on to this particular article), a base runner half zip in herringbone, and the run full tilt l/s (in rulu). Recently I bought a free to be bra. I bought the dog runner pant only because they were on sale for Boxing Day. The only pant or crop I've bought in a year and a half. The reasons I don't buy that much LLL anymore:

- deteriorated quality for pants and crops whether luon or luxtreme
- sometimes raising prices for worse quality (Dance Studio Pant, anyone)
- juvenile designs
- ugly designs (just overall ugly, colour blocking, boxy, too short, too loose, peplum obsession etc.)
- colours that don't appeal (enough with all this light stuff)
- jackets - what happened here? They used to be so good, now they are not worth a second look by me (but it's OK, I really have enough jackets)
- not getting items into stores quickly enough (I'm in a major city); I prefer to try on and shop in person.

Anonymous said...

As a side note to the pigment blue recall- I went to my local store today to return a pair of pigment blue post gravity pant that when washed once according to washing instructions were blotchy with white patches all over them. When I brought them to the store I was basically told it's my own fault and that they would do nothing for me. The manager said that I must of used bleach. I pleaded with her telling her I don't even own bleach products. She said how do know that I didn't see you wash them. Not only was I humiliated but I am now stuck with $100 unwearable pants. Soo disappointed and upset with the way I was treated. I am definitely done with this store and their over priced low quality clothing. Shame on them

Anonymous said...

I agree with everything mentioned, but also want to put in that there are much more appealing items out there in the market. I find myself giving Prana or Athleta the dollars I previously marked for Lulu. Add to that, I'm, for the first time, conscience of wearing the Lulu logo to a studio or to school because I feel like a clone. LLL is getting a bit saturated and the only thing I can think of to counter that is to add more product.

That said, I always check this site on the off chance LLL comes out with something unique again!

Liz Phelps said...

The quality has gotten noticable worse since 2009 & I've finaly all but given up. I got 2 GCs for Xmas, and I'm saving them--hoping the Play All Day shorts come back.

What would it take to bring me back? Diamond gusset. Pique pants (wide release). Good cotton leggings (crops & pants) a la 2009--they lasted for 4 years. New ones from 2012 & 2013--I've mended several holes because they are too thin, snag on anything (nothing), and yes, certain points around the triangle gusset are strained more than with a diamond gusset so the seams have separated a touch. I really feel like I should be able to like on my back and stretch my legs in all directions without worrying that I'm straining my leggings too much. The gusset issue really peeves me--it used to be the pride of Lulu to have the diamond...have a feeling we must thank Day for this & I hope it leaves with her. I've never seen such specific feedback so continually ignored. They haven't really fixed the quality/feel of the luon issue, but they at least say "we hear you".

And while I'm ranting, the last thing I was really buying over the last year was Flow bras. Then I got some that are completely different sizes from each other, in completely different ways. Band, staps, all around...? WTF?

I really hope a new CEO turns things around.

Anonymous said...

I have noticed that companies like Under Armor, Nike, New Balance etc. are also coming up with items that look or resemble old school lulu.
Just last night when at the Nike run club I saw a whole rack of shorts that looked exactly like lulu run speeds in the 4 way fabric; The material felt just like swift. Nike also has a shirt that looks like lulu swiftlies, a reflective jacket that if you did not see the logo you'd think it was lulu.
Because other companies are offering similar products like lulu, this could also be the reason that lulu is seeing loses.

M

Anonymous said...

What about the online product reviews over the last few months?? I love lulu and am a regular customer, but I refuse to replace my stretched out wunder under crops until I feel assured that new ones won't pill after just a few wears. I have been so disappointed by the decreasing quality that I bought Zella leggings to get me through this interim ... And I actually LOVE these Zella pants, not to mention the price is right!

Anonymous said...

I feel their problems can be summed up with:

- lack in quality compared to three years + ago
- less selection in sizes (the size 10/12 controversy and rare production of tall sizes)
- short, boxy, poorly designed for style and wear and tear
- poor customer service attitude of blame the customer
- price point vs quality is way off

Lulu used to be stylish, felt as comfortable as a second skin, durable, well designed, quality fabric that was flattering on any shape and we were willing to pay for it. Not now. I am off the lulu juice. Someone stirred the pot, namely Chip and Christine.