- No more franchise stores
- More inventory so more normal post-holiday markdowns (there were hardly any last year)
- There will be a warehouse sale in January or February
- Some spring product will be launched early
- Bike commuting & marathon training lines coming in spring
- Ivivva.com more popular in US than Canada, partiucarly in NYC, LA, and Chicago.
- New website just for Australia coming in the first quarter of 2012 with Hong Kong and UK to follow
- Looking for a new e-commerce person to help them grow internationally (next big push)
- Expect more SE/more higher-priced technically sophisticated/detailed items
Opening Remarks:
[Day] In the third quarter, we achieved 31% revenue growth with 50% year-over-year EPS growth, and we set a new record in comparable sales per square foot of $1,880. Our new stores continued their strong performance, and we also bought back our last remaining franchises in Colorado and Santa Barbara. [Interesting. I had heard those stores were pretty good about mailing things to you if you called them but I guess no longer.]
In Q4 2011, we have the right mix of new styles and color and a healthy and clean inventory. New product highlights for Q4 include new running luon, polar fleece, featherweight down layering pieces, a dance capsule and bright colors.
To set Q4 and Q1 up for success, our Q3 in-transit inventory includes 2 modules. We brought forward a portion of the spring deliveries built around a back-to-studio marathon training, cycling commuter themes, along with our black-and-white capsules. [I wonder what the spring deliveries are that have been accelerated.]
One of the highlights of the quarter was the launch of our ivivva Canada and then subsequent November launch of ivivva in the U.S. Even without an ivivva U.S. store presence, our U.S. sales are exceeding Canadian e-Commerce sales, with strong demand coming from Chicago, L.A. and New York.
We also completed the seamless migration of our e-Commerce servers from a shared to dedicated environment to meet growing demand. In addition, we were excited to see our guests’ reaction to our new lululemon site redesign, which launched in early November with new features, such as video education, and a new front page every day with new feature campaigns.
In Q1 2012, we will launch our first localized website in Australia, with the U.K., Hong Kong and potentially one other market to follow later in the year, supported by our planned opening of 2 new showrooms in both Hong Kong and London in early 2012.
In December, we will begin our initial round of interviews for an SVP of Brand and Community and replacing Chris Ladd, our former Head of e-Commerce, who left for personal reasons. [Ladd was the guy they got from Crocs. According to his LinkedIn profile he now works at The Finish Line.]
So as we finish 2011, we are positioned where we want to be. We continue to perform at the top of our sector and remain focused on our 4 strategic growth priorities: driving comp store sales, e-Commerce, new stores and preparing for international expansion.
[John Currie, CFO]
...direct-to-consumer sales, which increased by 71%
We ended the quarter with 165 total stores versus 134 a year ago. There are 118 stores in our comp base, 40 of those in Canada, 68 in the United States and 10 in Australia
Revenues from our direct-to-consumer channel totaled $23.9 million or 10.4% of total revenue versus $14 million or 7.9% of total revenue in the third quarter of last year
Q&A Section
This year, we anticipate we'll be in a more normal markdown post-holiday mode.
Q: ...you mentioned something in your prepared remarks about elevating the brand, the work to elevate the brand. We've been hearing a lot of the luxury brands that we cover are seeing price points move higher. The consumer's looking for higher quality, more premium, more interesting, unique product. Are you guys incorporating that theme into your strategy? Are you seeing a mix shift in terms of price points that your consumer is being attracted to?
A: [Day]We definitely are. We see that there's not a lot of price pushback, and as we've been innovating in the garments, adding more details -- and we haven't taken pricing on the basics, but we are pricing the premium above the basics. So like the special edition hoodie, for instance, that's in the stores right now, is just getting snapped up. So we definitely see we have opportunity, and that's that part of the reason why, strategically, I'd rather be spending my time chasing that market, which we really consider differentiates ourselves. So Sheree and her team have done a great job. I think when you see the spring product that hits, I think it's some of our best stuff we've ever done. So I'm really excited about the work that we've done there.
[Waterson] As we continue to innovate more and more for our technical products, both in our fabrics, our trends and in our make and functionality, the value equation is so much higher. And the guest is, as Christine said, really snatching it up. So yes, they like it.
Q: Could you talk a little bit about your e-Commerce penetration? It's a strong number. ...Could you talk a little bit about where your penetration was running at the end of the quarter, or how it's trending in November?
A: I think the #1 thing is that U.S. is accelerating, so our penetration in the U.S. and broadly across the U.S. Because I think in the initial build, as you'd expect, primarily the big cities and where we have the big stores, we're starting to see the brand penetrate more generally across the U.S. ... So I think you are going to see a little less coming in store comps maybe in the future, because we're penetrating more through the convenience of e-Commerce. So I think that's really the big story there. And then with ivivva, as we said, the big penetration spots are really built around those dance studios, where we've seen -- and markets where there's a lot of children in dance, or young girls. For instance, New York, Chicago, L.A. have been the initial hot spots for ivivva. And then internationally, we're seeing a lot of business coming in lululemon continues to be from, really, the Germany, U.K., France. And then shifting over into Asia, it's really Hong Kong and Japan.
Q: Will you be doing a warehouse sale in the fourth quarter, or none at all in 2011 and then bringing them back in 2012 with a better in-stock position?
A: We will be doing one in 2012, yes.... Actually, we are looking at January or February for one. So there may be one in Q4.
A: [Waterson] the color that we're introducing for Q4 is phenomenal, and the guest is responding. So for Q3, we had some more subtle color palettes, and we know that she really responds to some of the brighter colors. And so those are being very well received right now. And in terms of detailing, this is one place where we really know that counts for lululemon. So we've looked at fit, function and finishing. And in terms of the fit, continuing to focus on body-flattering styling, as well as for running, as an example, fits that feel like nothing's on your body, which is exactly what a runner wants to feel like. The functionality of the fabric, again, being light as air and in terms of running -- or seamless and so on and so forth, and in terms of yoga, just being extremely functional. And then our finishing is, I'd say, one of the things that we're best in the world at. So whether or not it's the perfect functioning pocket or zipper or ventilation system or it's a gorgeous ruffle or treatment, it's something that the design team now is really putting their attention to, so…
[Day] But I think in terms of -- maybe hidden in your question, are we shifting to more fashion? No. It's always fit, function and technical product first, adding elements that come from the fashion world to that. And that's our magic formula. So we will always still be athletic, technical, functional wear.
Q: Wanted to know maybe, Christine, a little bit more about the performance of the new dance category, how that's going. Is it very meaningful? And are you contemplating other interesting new classifications that are in the works, that you've talked about before?
A: You'll see us, and I discussed it in there, that we're doing a bike commuter line for spring.
