Lululemon Athletica is focusing on new products and community events to draw customers at a time when many are concerned about inflation and the economy.
The athletic apparel, footwear and accessories company has seen that these concerns have led consumers to spend less and visiting stores less frequently, Lululemon CEO Calvin McDonald said Thursday (March 27) during the company’s quarterly earnings call.
“We are operating within a dynamic macro environment that has really contributed to a cautious consumer, where we’ve seen material impact to traffic across the industry,” McDonald said. “While we’ve experienced some of these traffic trends, the guest who is visiting has responded very well to our newness and innovation.”
The company has seen this response in terms of positive units per transaction (UPT) and average order size, McDonald said.
In terms of products, Lululemon is maintaining a “pipeline of innovation,” with recent introductions including a new fabric designed for training workouts, new casual pants that delivers comfort and versatility, and a yoga product that provides softness and a relaxed fit.
The company’s events are meant to build loyalty with existing customers and attract new ones by engaging with guests directly and in ways beyond purchases. With the company’s stores serving as hubs for this engagement, the events include classes taught by fitness instructors, launch parties and exclusive experiences for members.
“That, to me, is one of the very unique aspects of our brand, when I talk about our moat and what makes us unique,” McDonald said. “The ability to activate a campaign integrated across our community, our ambassadors, and bring it to life is something we definitely see great value in and plan to do even more this year than last year.”
Lululemon added 56 net new company-owned stores last year, including 14 from the acquisition of its Mexico operations, according to a Thursday earnings release.
It saw the growth of its store revenue outpace that of its digital revenue, with store revenue up 12% and digital revenue up 4%, according to a Thursday earnings infographic.
“Overall, there’s a very good energy across the teams in the business, and the guests are responding very well to product, and we’re controlling and focused on what we can control,” McDonald said. “I think we’re well positioned as these macro challenges soften moving forward.”
Addressing tariffs, Lululemon Chief Financial Officer Meghan Frank said during the call that the company has embedded a headwind of 20 basis points in its guidance to reflect the current tariffs on imports from China and Mexico.
The company is “closely monitoring the environment,” Frank said. “We’ll continue to look across our cost structure as well as to pricing, should the environment change.”
