Contrary to Chip Wilson’s claim that Lululemon Athletica created the global athleisure market, the brand’s current chief has dubbed the look “really lame.”
“Athleisure will fade like any other trend,” Laurent Potdevin said in an interview with the Wall Street Journal, describing Lululemon as a functional brand that just happens to be fashionable.
Wilson, who founded the company in 1998 and was CEO until 2005, recently attacked its board and management for ceding the market opportunity it created to Under Armour and Nike.
“I feel strongly that our current board and management team must clearly articulate and execute a strategy with urgency towards regaining Lululemon’s competitive advantage and profitable growth and they must take responsibility,” wrote Wilson, who resigned from the board last year, pointing out that three years ago Lululemon’s stock was double the value of Under Armour’s, whereas today it’s worth less than half. “Since December 2013 when the current management team was appointed by this board, Lululemon stock has dramatically under-performed the market and its peers.”
But Potdevin disagrees. “In the past two years, we went from playing defense to playing offense,” he told the Journal.
Indeed, the active lifestyle brand posted a 3 percent increase in same-store sales in the quarter ended May 1. Direct-to-consumer sales rose 17 percent to $97.6 million, while net revenue jumped from $423.5 million to $495.5 million. But profits also fell from $47.8 million to $45.3 million, as the brand opened 11 new stores.
That’s in line with Lululemon’s somber outlook for the current fiscal; earlier this year the brand predicted net revenue would be in the range of $2.29 billion to $2.34 billion. At the same time, management is betting its new launches (like an expanded, more diverse men’s offering) will boost both traffic and conversions.
The brand had also said it would work to shorten lead times by leveraging the fabric it owns in order to react faster to emerging trends as opposed to ending up with excess inventory (the website famously has a “We Made Too Much” section), a common supply-chain problem that Potdevin said has been solved, which should be music to investors’ ears.
However, Lululemon’s stock (LULU) dipped below $70 on Friday and analysts polled by Zacks Research predict prices will reach as low as $40.