Friday, September 7, 2012

Photo of the Pigment Tonka Stripe Power Y & Striped Bordeaux CRB

Thanks to reader, Ms. G, for sending us a photo of the new Pigment Tonka Stripe Power Y.

Posted on one of the Facebook boards - a photo of the Tonka Stripe Bordeaux Drama Cool Racerback. Unfortunately, it also came from a Strategic Partner store. I'm hoping both of these will make it into the brick and mortar stores or on-line but since the embossed dot Bruised Berry CRB never did I am not hopeful that these will either. I am debating whether to chase the Bordeaux CRB or not. Gah. (Thanks to Ms. J. for the photo.)

2012 2nd Quarter Earnings Report Highlights

Nothing super earth -shattering in this call. Lulu did well again this quarter. Still pants are supposed to be coming back, possibly in a re-invented form. More showrooms will open in London. They think they've solved the bleeding problem.

[Day started out the call talking about the Sea Wheeze:] "Over 7,000 people joined us for a weekend of fun, including pre-run sunrise yoga, the 13-mile tour of our wonderful hometown city, complete with Cheer Stations at every community we ran through from dragons in Chinatown, tai chi at David Lam Park and the world's largest Cheer Station at lululemon's very first store on 4th Avenue...It is remarkable to think that a couple of back page ads in Runner's World, we could attract a sellout crowd to our first-ever run event. It is a reflection of our ongoing commitment to our communities, to the grassroots authentic relationships we have developed over time and to the deep connection and partnership that we enjoy with our guests. Our #1 priority is meeting our guests where they are at, and it was wonderful to see that they were equally willing to be excited and come celebrate with us here in Vancouver. To show how much the participants and the community enjoyed the event, for 2 hours that day, we were the top 5 of the top 10 trending topics in Vancouver, and this is while the Olympics were on."

[My commentary: The Sea Wheeze was pretty awesome and I definitely want to do it next year but I'll add a little reality check. There were only 5904 finishers of the race even though 7500 paid to race.  I was also told that 40% of the participants were lulu employees. That's ok. I think everyone who was there wanted to be there and had a great time but don't tell me the company didn't encourage their employees to participate.]

Some talk regarding quality issue and their letter to "guests" about their commitment to quality, see the highlighted paragraph towards the bottom.

 Q & A:

Q: (from analyst Jennifer Black, my personal favorite and the only one I think that actually buys/wears lulu.) I've heard that there's demand for larger sizes. I know you go up to a 12. And I know you phased out the Still Pant, which appeased some customers due to the looser fit. And I wondered what your thoughts were on extending your size ranges for both smaller and larger sizes.

A: It was such a mistake to ease out the Still Pant; we've heard that loud and clear. [Yay! I hope that means the Still crop and Still Short are coming back, too.] So the Still Pant will be coming back. And reinvented Still Pant will be coming back, Sheree is saying to me. So I think our guests can rest assured we've heard their feedback, and that will be back in the lineup. We are not planning on introducing larger sizes.

Q: I'm wondering if you can talk a little bit more about your core women's yoga business. It sounds like that -- those businesses are still very much positive comp-ing. And then if you could comment on U.S. versus Canadian comps and any transaction metrics you care to share, that would be great.

A: Boy, I'll tell you, we are just continuing to be so pleased at the response to that just basic core yoga business, and it also includes, obviously, the gym fitness studio.... And we still see, particularly in the States, it is a very technical athletic guest that is purchasing the product. [That definitely jives with my observation about where I spot lulu in the US - mostly at the gym or people who obviously came from or are going to the gym.] In Canada, because we have a more mature market state, you probably see a little bit more mix with that. 

Q: And what type of reads are you getting from the international consumer on your e-commerce platform?

A: London, we had both the showroom and we had an athlete's house during the Olympics. We had a lot of activity going on there. We do anticipate planning additional showrooms in the London market.

Q: I've noticed that the accessory and headwear and underwear components of the assortments seem to be increasing. I'm wondering how the -- how your success has been in these categories, 

A: The first half of the year, you saw us do more color, but probably not as much detailing and style innovation as we would really have liked to have done in the line. And you'll see that really coming out in the fall and winter drops that are just coming up. So it takes a while for that to get to the markets, so just to talk about those expectations. So yes, you did see more color coming through throughout the first half of the year and particularly into fall. [I've got to say I've really gotten into the bright and strong colors of the past few months. I marvel at how I was so into all the gray and black prints from the last couple of years and don't really reach for them much.] We've got some great color in the store right now.... [Teal is supposed to be one of the fall fashion colors. I wonder if lulu will be bringing back one of their teals.]

Accessories is a focus and our focus here is to create the most beautiful, functional products in this area. So I'm going to start with underwear first because underwear is an important part of the functional layering system. And we're looking at better construction technologies to have invisible undergarments that are completely non-chafing, wicking and so on and so forth. So that business is actually -- we're focusing on that in terms of technologies.[Hint - copy Zobha's Yoga Boyshort panties - they're the best]. And that's in both men's and women's, by the way. Headwear, we noted that there is an opportunity for share in caps and so on, and we continued to see women's headwear just outperform our plans. [Please bring back the Flight Running Bonnet. My four are getting worn out. Also, love, Love, LOVE the Bangbuster - best headband ever! Make one in every women's color you release.] So there's a lot of demand there for things that are functional and beautiful again. And in terms of bags, I don't know if you've seen our women's bags on the floor right now, but I think they're the best that we've ever done there. [Lulu gym bags are the best I've ever bought. Pockets galore. Just love them to pieces.] The details...

And we're also innovating in men's bags.[PS - My husband would like a smaller duffel to bring to the gym. He doesn't need one that could double as a weekend bag.]

Q: I was wondering if you can talk a little bit about the men's business.

A:  ...growth is slightly outpacing women's....there's a greater variety of fit in the bottoms [My husband would like to know why you have eliminated the 30" waist. He is driven to buy older style Run Response shorts on eBay these days.]

...For Q4, what we'll be seeing is we're capitalizing on some of the success that we had last year. So we'll be going into a category that's lightweight puffies, which we called "what the fluff?" And for men, it will be "fluff off." And yes, just thought I'd give you that little preview there. And we're also capitalizing on some of the warm wear business that we have with running luon and our tech fleece and so on and so forth. So those categories will be, you'll see, will be very strong.

Q: So just in the prepared comments, you quickly touched on that one product that bled. Can you talk about what actually happened there, how you were able to quickly adjust it, and why you view it as an isolated incident?

A :Primarily for us, it was the bright neons, which are very difficult to put on fabric, and we pushed the color limits pretty intently. So we did have bleeding with Paris Pink and a couple of small isolated issues, which were very hard for us to track down, in a couple of other colors that were also bright neons that came in the second quarter. So because we want to strategically continue to push the envelope with bright colors, we did bring in a color expert who's done an amazing job, and we've learned a lot of great new tricks from him, so we're actually very excited about even new capabilities. So the silver lining in having an issue with Paris Pink was that it created actually more opportunity for us. And so by changing some simple rinse agents [(TMI warning) I've got to say my latest Define Jackets in Power Purple, Pow Pink, and Bordeaux got a very sour odor in the armpit and I had to double wash and add vinegar to get it out. That has never happened to me before so not sure about the new process. It might keep the color but react weird with some people's chemistry. All the jackets were all lightly worn btw.] and a couple of other things that we've worked on with the manufacturers and the mills, we feel very comfortable now with the product and being able to do our strategic intent, which is push colors and maintain quality.

And what I'm so excited about in looking at the protos of the line that's coming in for holiday and beyond is we have some incredible outerwear layering system crossover pieces that will be really delivered for the holiday season, so these great running pants that can also be used for cross-country skiing. These -- Sheree mentioned the names, but if you saw the style and detailing behind the "what the fluff?" jackets and how they can be used for running, outerwear, things like cross-country skiing or active outerwear, just being out and about. These -- they're beautiful. They're incredible. The amount of transformability, which is what we always focus on, it's the best I've seen. 

Q: And then how you feel about your inventory levels for the lululemon e-commerce business. It seems like the assortment is somewhat limited versus where you might want to be in the stores.

A: our e-comm levels of inventory are great. We definitely see, as we've had more color, they're intended to drop for a week only. So if you don't -- or like 3 weeks only. If you don't buy pretty quickly, then you're not going to get them, and that's actually by design. So that's not an inventory level issue. That's a strategy, as part of our scarcity, so that we aren't putting everybody in the same outfit, that there is a limited availability of certain styles and colors. And that's our model. So those aren't inventory challenges. That's the model at work and working beautifully to sell the majority of our products at full price. And that's how our model works. So I wouldn't want to be -- I wouldn't call those inventory problems. That's brand strategy.

New Sattva Pant

New Sattva Pant made of merino wool/french terry (will update with more info on the fabric blend). They are $108. Shown is black and Bordeaux. Very soft and lightweight. (Thanks to Ms. Q. for the photos.)

Update - Oooh, just saw a photo of a Tonka Stripe Pigment Power Y posted. Will update when I find a photo. I'm hoping there'll be a CRB coming in this color pattern.(Hmm, the woman found it in a strategic partner store in Singapore so I'm not sure how long it will take to arrive in North America.)

OT: Lorna Jane Coming to Orange County

Lorna Jane Calypso Run Tank, $59.99 (AUS$)
The Australian sportswear company Lorna Jane is opening a new store in Huntington Beach (at Bella Terra) this Saturday and another store in the Irvine Spectrum on September 21. I've read some good things about Lorna Jane from people. Their price points are similar to Lululemon but the return policy seems even more restrictive according to their website and from comments I've read - 7 days after purchase and for store credit only. If anyone has any insight into Lorna Jane's clothes we'd love to read it. I like some of the styles and others have giant "Lorna Jane" splashed across it which has no appeal to me at all. I have to mention that high resale and a giant resale market (10,000+ listings on eBay right now) is a significant factor in why I continue to buy lululemon. The fact that I can get a portion of my "investment" back when I am bored with a piece of clothing or ready to update to a new color/style is a big part of lulu's appeal to me. However, I will definitely check out Lorna Jane. It's nice to mix things up. One european brand I am very curious to try is Sweaty Betty, from the UK. I don't think they have any stores in the US yet but they recently opened a US website.

There was an interesting paragraph in the linked OC Register article about Lululemon: "However, a problem involving bright colors that bled when washed may impact sales, according to one July 31 analyst report by BMO Capital Markets. "Following our recent trip to Asia, we believe LULU's recently expanded manufacturing partnerships could be partly to blame [duh - ya think?] in terms of isolating the problem. However, because this is a grass-roots company, we think this is a significant customer-relations issue that could tarnish the brand's reputation among LULU's loyal customer base and possibly result in lost sales." Lululemon declined Tuesday to respond to the report."

I will comment that my latest Cool Racerback and Define purchases have been made in Indonesia instead of China and haven't had problems with bleeding so I'm thinking lulu dumped the bad Chinese manufacturer who was causing a lot of the bleeding. I've been watching the boards for comments about Flare Light and Bordeaux bleeding but haven't seen any mentions of it so I'm crossing my fingers the bleeding is behind us. (Thanks to Michelle for the tip on the new store.)