Lululemon Sets Sights on $12.5 Billion Revenue Stream by 2026
Lululemon Athletica has a new game plan.
The Vancouver-based athletic apparel, accessories and footwear retailer revealed a new five-year growth plan Wednesday morning, ahead of the firm’s planned analyst day, setting its sights on $12.5 billion in revenues by 2026.
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“The success of our Power of Three formula in delivering on our 2023 growth strategy supports our goal to double the business over the next five years,” Calvin McDonald, the company’s chief executive officer, said in a statement. “We remain early in our growth journey, with our strong product engine, proven ability to create enduring guest relationships and significant runway in core, existing and new markets. Following our compelling track record of delivering against our goals, I am excited about taking our growth strategies to the next level to serve more and more guests around the world.”
In Lululemon’s most recent quarter, the company had about $6.25 billion in revenues for 2021, putting the company two years ahead of schedule, in terms of achieving its revenue goals.
“We know how our guests sweat,” McDonald told analysts Wednesday morning. The CEO called out momentum across the company, thanks to strength in macro trends, including wellness and at-home fitness, as well as product categories, such as Lululemon’s Align collection, which he said was a billion-dollar business. “We’re in the early innings of growth,” he said.
But investors seemed unsure of the company’s latest targets. Shares of Lululemon teetered back and forth, between positive and negative, at the start of Wednesday’s session, ultimately closing down 4.76 percent to $385.40.
Either way, Lululemon revealed its updated strategy during Wednesday’s analyst day, dubbing it the “Power of Three x2.”
“Not because we aren’t creative. But because it’s a proven formula,” McDonald said, referring to the name. “So we’re going to continue doing what we’re doing.”
The plan entails additional product innovation, guest experiences and market expansion in order to double the retailer’s 2021 revenues in the next five years. The company also hopes to double the men’s and digital businesses, while quadrupling international sales. In addition, Lululemon’s women’s business and North American operations are expected to generate low, double-digit annual compound growth rates in their respective categories, while the retail store channel will likely grow in the midteens range, the company said. Lululemon anticipates total net revenues will increase 15 percent, at an annual compound growth rate, by 2026. Earnings per share growth is also expected to outpace revenues growth.
“We are setting bold but realistic 2026 targets from a position of financial strength, while delivering on our 2023 goals with significant growth across our core business,” said Meghan Frank, Lululemon’s chief financial officer. “We have a long runway ahead and are well positioned to build on our strong momentum and deliver sustainable long-term value creation to our shareholders.”
Some near-term goals include more new products, specifically in the men’s and women’s accessory businesses. Sun Choe, chief product officer, told the crowd that the updated assortment will include more from the hiking category. But she added, “There’s potential to grow mindshare across all activities.” Lululemon is also aiming for 100 percent of products to be sustainable by 2030.
“We know through surveys that 80 percent of our guests care about social and environmental issues,” said Celeste Burgoyne, president, Americas and global guest innovation at Lululemon.
Meanwhile, in the last year, the firm has released women’s sneakers, sustainable mushroom bags, Mirror accessories and tennis apparel, among other categories.) Lululemon also recently expanded its Like New resale program. In addition, the retailer is the official outfitter of Team Canada (a role it will retain through 2028).
Creating more brand awareness across markets will also be key in acquiring new customers and reaching the company goals, said Nikki Neuburger, Lululemon’s chief brand officer.
“People who know us love us,” Neuburger said. “But there are millions more people who are still not aware of the brand.”
At present, brand awareness in the U.S. — one of Lululemon’s most mature markets — is just 25 percent. In the U.K. it’s roughly 15 percent, followed by 7 percent in China.
“For comparison, many other brands in this space are at about 85 percent,” McDonald said. “So we see that as a really exciting opportunity as we continue to drive growth and get more product into more hands.”
First up, Lululemon will open its stores in Spain, Italy and Thailand in the next 12 months, while building on its momentum in mainland China, the Asia-Pacific region and other parts of Europe. The retailer anticipates China being the second biggest market globally by 2026. An experiential store in Houston is coming later this year.
Frank said Lululemon would no longer separate Mirror revenues from total company revenues in future earnings reports. Last December, just as the world was beginning to reemerge from the pandemic, the retailer lowered its annual revenue guidance for Mirror. Some analysts said the at-home fitness system, which Lululemon purchased in 2020 for $500 million, could be a potential headwind, with many consumers going back to gyms or in-person group workout sessions.
During analyst day, Mike Aragon, Mirror’s CEO, acknowledged to WWD that many Mirror shoppers have indeed said they plan to return to their gym routines, or exercise outdoors with friends. But he added that it’s not necessarily a bad thing, “because either way they’ll be buying more clothes.” What this means for the future of Mirror sales is still unclear.
But while investors appear skeptical, some analysts remain bullish.
“We have confidence that new product, integrated marketing and online momentum combined with loyalty, a healthy high-end customer demographic and athleisure fashion trends will yield traffic, improving conversion and comps,” John Kernan, an analyst at Cowen, wrote in a note. “Our survey indicates a high degree of loyalty and conversion levels should increase as we expect new product to incorporate fashionable versatility.”
Shares of Lululemon are up approximately 13 percent, year-over-year.
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