Lululemon needs more customers in order to become the $4 billion business it plans to by 2020, and opening more stores and launching more innovative leggings isn't going to be enough to get them. So, on Wednesday afternoon, after reporting strong (but not meteoric) fourth-quarter and fiscal 2016 earnings results, the company's executives announced a few plans to ramp up that customer acquisition. The biggest news? For the first time, the brand will launch a full-fledged global ad campaign, and while they wouldn't reveal too many details, it sounds significant.
CEO Laurent Potdevin said during the earnings conference call that while the company had found success with its "grassroots" approach (including building a vast network of influencers) to marketing, it hadn't yet found a strong way of "amplifying" its own voice and communicating to the world what Lululemon stands for as a brand. "As we grow as a global brand, it's becoming extremely important," he said. The company has partnered with an unnamed creative agency that's "one of the world leaders in editing and building content for Millennials." Yes, like everyone, it's going after those Millennials. Whether an Instagirl or celebrity offspring is involved, we will have to wait until mid-May, when it drops, to find out. The distribution is also unknown, but Potdevin said it will be in line with the way in which Millennials typically absorb content.
While Lululemon may need more customers, it didn't seem to be falling out of favor with the ones it already has. In the fourth quarter, which included a successful holiday season, net revenue increased 12 percent to $789.9 million. For the year, it was up 14 percent to $2.3 billion. Comparable sales, meaning those in stores open at least a year, were up 8 percent and 6 percent, respectively. Most significantly, in 2016, the company returned to positive operating income growth for the first time in three years. Like the previous quarter, leggings remained a leading category while sports bras continued to be the company's newfound moneymaker. To that end, the company plans to introduce new sports bra styles in the year ahead. Growth in the men's category was also strong, Potdevin said.
The company also furthered its expansion into Europe and Asia, opening new stores in London and China (where the upcoming campaign will likely be targeted heavily to increase brand awareness in those regions).
That said, executives warned that sales are off to a "slow start" so far in the first quarter of 2017 — not a great sign — which they're blaming on a dearth of product color options, which they plan to correct. They went on to promise a lift in subsequent quarters thanks to the aforementioned initiatives as well as new, innovative products, new merchandising hires to make product look more desirable, improvements in omnichannel, and promising outerwear and accessories collections set to drop this fall.