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Lululemon Bets Men’s Business Will Reach $1B by 2020

Look out, Nike. Lululemon wants to capture a greater share of the men’s market and has set its sights on reaching revenues of $1 billion within that category by 2020.

On an investors call Wednesday morning, CEO Laurent Potdevin revealed that the activewear brand will continue to expand and diversify its men’s offering in 2016 by focusing on apparel designed for training, running and yoga, in addition to further unifying men’s and women’s designs under a single vision.

Creative director Lee Holman, a former Nike executive who joined Lululemon last October, quipped, “We are moving from a house of brands to a branded house.”

On the supply chain side, the brand intends to cut costs by reducing its reliance on airfreighting, while also working to shorten lead times by leveraging the fabric it owns in order to react faster to emerging trends.

That focus on efficiency is what helped Lululemon achieve fourth-quarter sales of $704.3 million, an increase of 17 percent from $602.5 million in the year-ago period. Meanwhile, quarterly profit was $117.4 million or $0.85 per diluted share, compared with $110.85 billion last year or $0.78 per diluted share.

However, inventory levels—still elevated due to the West Coast ports slowdown—were 36 percent higher at the end of the fourth quarter versus the comparable three-month period in 2014. But CFO Stuart Haselden pointed out that this was less than previously expected, thanks to markdowns, and a sequential improvement from the end of Q3.

But despite a strong holiday season that delivered “exceptional” full-price sell-through and double-digital growth in women’s bottoms, the Vancouver-based brand has issued a subdued forecast for the fiscal year. Net revenue is expected to be the range of $2.29 billion to $2.34 billion based on a mid-single digit increase in comps, while diluted earnings per share are projected to be in the range of $2.05 to $2.15.

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Haselden explained this outlook was due to slower traffic both online and in-store in the first quarter so far. “That’s against the backdrop of a pretty challenging retail environment,” he said. “If the guest votes above this we can do better, but at this point we feel like that guidance for our comps is appropriate and certainly reflective of traffic trends in the first quarter.”

The brand is betting the launches it has lined up for Q2 will boost both traffic and conversions.

“One of the biggest callouts we hear from our stores and our brand ambassadors is a desire for technical on the bottom and natural on top, and we’re really covering that with our new assortment,” Holman offered, noting a heightened focus on how colors and prints work together, as well as different textures and fabrications, particularly on the recently introduced “pant wall.” “We call it engineering rather than veneering. It’s about getting back to design principles regarding fit, fabrication and finish.”

Lululemon is also ramping up its international store openings this year, adding 11 new locations overseas compared with the nine it opened in 2015, primarily in Asia and Europe. Haselden added, “We’re excited about the results we’re seeing in Asia and we’re hoping to target other capital cities, like Seoul, Tokyo, Shanghai and Beijing, in the near future.”