Lululemon Reports Brand Relevancy as It Adapts to Consumer Changes

Canadian athletic apparel company Lululemon Athletica Inc. reported impressive earnings for both the fourth quarter that ended Jan. 29 and full year 2022, indicating the demand for athletic wear has not waned.

The company posted a 30% increase in net revenue for the fourth quarter, reaching $2.8 billion, compared to the same period in the previous year. Lululemon’s full-year revenue surged by 30% to reach $8.1 billion, exceeding its own estimates.

In a Tuesday (March 28) earnings announcement, CEO Calvin McDonald credited Lululemon’s success to its “innovative products, powerful guest experiences, and strategic market expansion.”

Pandemic Influences

The pandemic changed the way people live and work, leading to a surge in activewear sales as people sought comfortable clothing for working from home, working out and lounging around the house. However, as the world starts to recover from the pandemic and people return to the office, many are wondering whether the athleisure wear trend will continue or if people will return to traditional workwear.

Despite the challenges of the pandemic, Lululemon has continued to expand, becoming a lifestyle brand. With that mindset, the sportswear company has embraced running accessories such as wristlets, water bottles and scrunchies, leading to a more prominent presence in the luxury market and establishing itself as a brand that caters to a particular way of life.

Skipping Steep Discounts

Although Lululemon has faced challenges in selling certain products as shoppers curtailed spending on non-essential items, the company’s inventory levels have improved. Lululemon’s inventory levels at the end of the fourth quarter represented a 50% rise from the same period in the prior year, which reflects an improvement from the third quarter, when the company’s product inventory reached $1.7 billion, an 85% surge compared to the previous year.

Despite the surge in demand for activewear during the pandemic, Lululemon has not relied on discounts or promotions to drive its top line growth and has no plans to do so.

McDonald emphasized that the company does not rely on discounts or promotions to grow its business and that regular price sales will return to their standard levels as the company switches to new spring products.

See also: Allbirds Goes Back to Basics as Efforts to Attract New Customers Fail

Doubling Down on the Connected Economy

Memberships and loyalty programs have been part of most brands and retailers’ efforts to gain customer retention, and it’s a strategy that’s working for Lululemon, especially with its Mirror product, acquired by the brand in 2020.

Read more: Lululemon Enters Deal To Buy Interactive Fitness Firm MIRROR For $500M

“Our ability to connect directly with guests in real time and across both our physical and digital channels gives us a number of ways to engage beyond a purchase transaction,” McDonald said in reporting third-quarter 2022 financial results, while pointing to the Q3 launch of the brand’s membership program.

Today, the company offers two membership options: the Essential, which is free, and the Studio, which requires the purchase of a Lululemon Mirror priced at $995 or more. The company noted during its Q4 2022 earnings call on Tuesday (March 28) that while its Mirror hardware sales during the holiday season came in below company expectations, over a period of five months, more than 9 million members signed up for the Essential program.

“As you know, since our acquisition, the at-home fitness space has been challenging. While members love our content, hardware sales did not match our expectations,” the company said.

During Tuesday’s earnings call, Lululemon announced plans to expand its second tier and provide access to its digital fitness content through a new app launching this summer at a reduced monthly fee.

See also: Lululemon Looks to Memberships and Perks to Drive D2C Engagement

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