Lululemon Athletica Inc (NASDAQ: LULU), the popular apparel brand, saw its CEO, Calvin McDonald, deliver insights into the company's trajectory at the Goldman Sachs Group Inc (NYSE: GS) 30th Annual Global Retailing Conference on Tuesday.
Here's what you need to know about the brand, and McDonald's views on the company's trajectory.
A Growth Story In Progress: While Lululemon saw a 30% spike in sales last year, double its initial projections, McDonald believes the best is yet to come. The company is one-and-a-half years into its five-year strategic plan, called "Power of Three x2."
The strategy hinges on three primary pillars: product, guest experience, and market expansion.
Despite its surging popularity, Lululemon still deals with challenges in brand recognition. As McDonald said, "outside of U.K. and Australia where we're low-teens. In the U.S., we're less than 50 percent."
But there's a silver lining - according to him, "once we get a guest, they really are a guest for a very long."
Future Plans: McDonald teased an upcoming women's line centered around a unique fabric during a CNBC interview. "I've had a couple of t-shirts made for myself, purely to experience this new fabric," he said, hinting at the innovation behind it.
On inventory management - a hot topic among analysts on the Street - McDonald doubled down on the company's current approach. "We've managed our inventory effectively, selling at full prices without having to resort to discounts," McDonald said. By the end of Q2, inventory was up 14%, and Lululemon maintained pre-pandemic markdown levels, which indicates a well-balanced inventory system.
North American & International Expansion: North America remains a strong market for Lululemon, with Q2 showing a growth of 11%. However, the bigger picture for McDonald is international expansion, specifically pointing out the opportunities in China. "Last quarter, international sales made up 22% of our business, and I've said it should be 50 percent," McDonald said.
With Lululemon already making its mark in 25 global markets, all witnessing double-digit growth, the China market is poised to grow.
The Road Ahead: The Lululemon CEO highlighted the brand's agility when being asked about the broader economic outlook and its impact on the company. "We're keeping an eye on market movements, ensuring we're agile enough to respond to shifts, but our primary strategy is fueling growth through innovation," he said.
Lululemon's recent growth numbers in China - at 60% - may be a precursor to the company's international strategy. "We're employing the same approach we used in North America - grassroots community-building, forging strong relationships, and delivering quality products without resorting to discounts," McDonald said.
Addressing the issue of "shrink," which always gains attention in retail discussions, he acknowledged a changing environment, calling for retailers to collaborate with local teams and law enforcement to address any challenges.
LULU Price Action: Shares of Lululemon closed Tuesday's trading session 2.35% lower to $388.12, according to data from Benzinga Pro.