Lululemon Analyst Day 2019: Plans to Quadruple International Revenue and Double Men's and Digital Business by 2023 - Coresight Research
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April 26, 2019
Lululemon Analyst Day 2019: Plans to Quadruple International
Revenue and Double Men’s and Digital Business by 2023
On April 24, 2019, Lululemon hosted its analyst day in New York City. The company focused on
“the power of three” plan which included innovative products, omni guest experience, and
market expansion. The company provided its five-year outlook, which included aspirations for
the men’s business to double, the digital business to double, and the international business to
quadruple.
During the event, Lululemon:
• Shared its vision “to be the experiential brand that ignites a community of people living
the sweatlife through sweat, grow and connect.”
• Said that it has little brand awareness in men’s today, but expects its men’s portfolio to
double by 2023.
• Said it will expand into four selfcare products, launching in 50 selected stores and online
in May 2019.
• Outlined plans to quadruple its international revenue, with a focus on China, by 2023,
growing at a 30% CAGR.
• Said it will open a 20,000-square-foot experiential store in Lincoln Park, Chicago, in July
2019, which will offer all-day classes, provide a place for coffee, juices and smoothies, and
will also host over 45 ambassadors.
Lululemon Shares its Vision to be an Experiential Brand for People Living the Sweatlife
CEO Calvin McDonald shared the company’s vision “to be the experiential brand that ignites a
community of people living the sweatlife through sweat, grow and connect.” Management
commented that it sees a $3 trillion potential total addressable global market opportunity
through its “sweatlife” pillars and adjacent product categories, which include sports apparel,
adjacent product categories and the global wellness market.
Deborah Weinswig, CEO and Founder, Coresight Research 1
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
Copyright © 2019 Coresight Research. All rights reserved.
April 26, 2019 Figure 1. Lululemon Presents the Sweatlife Opportunity Source: Company reports Lululemon Finishes 2018 Crossing $3 Billion Management opened the investor day with an overview of its 2018 financial results and highlighted the company’s achievements. The company reached 24% revenue growth, 90% GAAP EPS growth, $3.3 billion in revenue and 45% e-commerce comps. Management stated that it had over seven million guests in 2018, and had a 92% high-value guest retention rate – meaning that customers in the top 20% of spend have a 92% engagement rate – highlighting that its most loyal customers are very loyal. Figure 2. Lululemon 2018 Financial Results Source: Company reports Lululemon Plans to Grow Core Categories and Expand into New Categories Including Selfcare and Footwear Management stated it is looking to expand its existing core women’s product categories and new product lines supporting yoga, running and training. In 2018, women’s core categories Deborah Weinswig, CEO and Founder, Coresight Research 2 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
April 26, 2019
comprised 70% of Lululemon’s revenue, with women’s bottoms driving the core of the
company’s business. Management commented the company is looking to expand its core
categories to drive even more business. Two categories they highlighted were bras and
outerwear. The company is currently looking to redesign the bra concept – so the bra becomes
as popular as the pant and the bra customer becomes as loyal as the bottoms customer. To that
end, the company is designing running bras, support bras and variations on the “strappy yoga
bra.”
The company said it is expanding into new categories: selfcare and footwear. The company
tested selfcare in four markets over the past year, including the following products: deodorant,
dry shampoo, facial moisturizer and lip balm. Management said they believe the customer
“trusts Lululemon” as a provider of these products and that initial feedback was positive. The
company will roll out these initial products to 50 doors and online in June 2019.
Lululemon said it used a “touch and feel” approach to developing the new products – using soft
packaging. Management said the lip balm has a different feel that others currently available.
The company also has future plans to enter the footwear market, but said it will take a
methodical approach to market entry and share detailed plans at a later date, promising
something “unique, defined, and focused.” Management said the new categories are not
material to its five-year projections.
Figure 3. Lululemon Expanding into Selfcare
Source: Company reports
Lululemon Expects to Double its Men’s Business by 2023
Management said it hopes to double its men’s business by 2023. In 2018, 21% of its revenue
was from its men’s category, a $690 million category today. Management highlighted that its
brand has low awareness with men, which it believes provides a significant opportunity. The
company is focusing on guest acquisition and building brand awareness, for example by:
• Creating a running franchise that includes thermal properties.
• Creating a training line for men that won’t abrade while working out.
• Developing a line that is “taking cues from streetwear.”
• Signing former Philadelphia Eagles Quarterback Nick Foles to be its first men’s brand
ambassador.
Deborah Weinswig, CEO and Founder, Coresight Research 3
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
Copyright © 2019 Coresight Research. All rights reserved.
April 26, 2019 Figure 4. Lululemon Plans to Double Men’s Business by 2023 Source: Company reports Lululemon Continues to Build its Community through Experiential Stores, Ambassadors and Events Lululemon is rooted in an active ambassador program that has helped to create its community. The company currently has over 2,000 ambassadors globally and 15,000 former ambassadors. A typical ambassador program with Lululemon lasts two years, but the company maintains the relationships afterwards. Management reported that “community” is a trend in the marketplace: People participate in events and communities. The brand was founded on the principle of people getting together to do yoga, run and attend events. Management said its community actively influences the company’s product innovations and designs. The company hosts over 4,000 events annually, and announced it will open a 20,000-square- foot experiential store in Lincoln Park, Chicago in July 2019. The store will offer all-day classes, provide a place for coffee, juices and smoothies, and will also host over 45 ambassadors when the store opens. Lululemon Plans to Quadruple International Expansion Over the Next Five Years and Double Digital Expansion: China is a Huge Opportunity In 2018, international revenues totaled $360 million. The company reported that it anticipates its international revenues will grow at a compound annual rate of 30%, quadrupling by 2023. The company is taking a balanced strategy between stores and online in China, skewed slightly more toward stores. The company reported that it is also investing in Korea and Japan. The company reported it expects its digital business to double by 2023, driven by website enhancements and the international market, particularly China. Deborah Weinswig, CEO and Founder, Coresight Research 4 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
April 26, 2019 Figure 5. Lululemon 2023 International Expansion Targets, by Region Source: Company reports Lululemon Expects Total Annual Growth at a CAGR in the Low Teens and EPS Growth to Meet or Exceed its Operating Income Growth The company reported that in addition to more than doubling men’s and digital revenue and quadrupling international revenue, the company expects total annual revenue to grow at a compound annual growth rate in the low teens. In the company’s last annual earnings report for 4Q19, the company’s annual revenues increased 26% to $3.3 billion. In its strategic plan, the company also said it expects modest gross margin expansion annually, modest SG&A expansion annually and operating income growth to exceed revenue growth annually. Figure 6. Lululemon Five-Year Financial Outlook, 2018-2023 Source: Company reports Deborah Weinswig, CEO and Founder, Coresight Research 5 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
April 26, 2019 The company expects earnings per share (EPS) growth to exceed, or equal, its operating income growth, annually. The company reported that it will have annual capital expenditures of 6-8% of sales. The company expects annual square footage growth in the low single digits. Figure 7. Lululemon Five-Year Financial Outlook, 2018-2023 Source: Company reports Deborah Weinswig, CEO and Founder, Coresight Research 6 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
April 26, 2019 Deborah Weinswig, CPA CEO and Founder Coresight Research New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@coresight.com Erin Schmidt Research Associate US: 1359 Broadway, 18th Floor New York, NY 10018 UK: 242-246 Marylebone Road London, NW1 6JQ Hong Kong: 2/F, LiFung Tower 888 Cheung Sha Wan Road, Kowloon China: 627 Huaihai Middle Road Huangpu District Shanghai 200000 India: K-Tech Innovation Hub 3rd Floor, Plama Center, Bejai Kapikad Road Mangaluru 575004 Coresight.com Deborah Weinswig, CEO and Founder, Coresight Research 7 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
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