For lululemon's fiscal Q2 2024 (May-July 2024), results were again softer (see our Q1 story here). Our data indicated that visits per location increased +2.1% in the U.S. and August month-to-date is +150 basis points stronger.
The issue for the brand, per management, is that its women’s product isn’t selling as well as it historically has, especially in seasonal product, the category needed more inspiration and newness flow. (The executive behind this is no longer at the company and they changed the product and merchant organizational structure in May to foster greater collaboration and speed to market.) CEO Calvin McDonald noted, “By newness, I'm referring to the seasonal updates we bring into the assortment, typically expressed as color, print, patterns and silhouettes...It's become clear to us that this reduced newness, which is below our historical levels and stems from earlier product decisions, has impacted conversion rates given the fewer new options available to our female guests. While this reduction was seen across our women's assortment, it had a more pronounced impact in bottoms and in our online channel. The newness that we had performed well. We simply did not have enough to inspire her to purchase.” If they can correct the deficiency, we’d expect to see an acceleration in traffic; however, management articulated a spring 2025 timeframe for that, and so improving conversion isn’t in the near term.
The lower conversion rate (per management) resulted in an overall U.S. comparable sales decline between -3% and -4%. We’d also observe that the product misses more of a leisure and fashion offering, and as such, it’s likely more susceptible to the economic and consumer trends that we shared above, as well as the macro trend of category stall-out that we wrote about here. Additionally, this is the category that Vuori and Alo Yoga are targeting. We often use shopping patterns in Los Angeles as a read on +/- momentum for fashion brands and “brand heat” given Los Angeles’ large size and heavy presence of influencers and those who are influenced by influencers. As shown in the table below, Vuori has delivered large gains in visits for the fiscal Q2 period; it has grown visits from 12% of Lululemon’s visits in the base period (on a coverage-adjusted basis) to 18% – that’s a lot of building heat, or “hot yoga”.
