5 Reasons You Should Believe in Lululemon's Turnaround

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5 Reasons to Believe in Lululemon’s Turnaround

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Lululemon Athletica has struggled over the past year because of quality control issues with its signature luon yoga pants and a series of missteps by management. However, the athletic apparel retailer is finally poised for a comeback thanks to five catalysts.

Transcript of 5 Reasons You Should Believe in Lululemon's Turnaround

Page 1: 5 Reasons You Should Believe in Lululemon's Turnaround

5 Reasons to Believe in Lululemon’s Turnaround

Page 2: 5 Reasons You Should Believe in Lululemon's Turnaround

Lululemon in downward dog position

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What caused Lululemon’s downfall?

• Lulu was forced to recall 17% of its signature luon pants last year because they were inadvertently see-through.

• This damaged Lulu’s reputation for quality.

Shares of Lululemon are down nearly 25% so far this year.

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Other reasons for the selloff…

• Negative PR surrounding controversial comments made by Lululemon’s founder Chip Wilson.

• The sudden exit of former chief executive Christine Day.

However, as you’ll see in the following slides there are plenty of reasons to be optimistic

about the retailer’s comeback.

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1. New leadership at the top

• Potdevin took over for Mrs. Day in January.

• As part of the management shuffle, the retailer’s founder Chip Wilson resigned from his position as chairman of the board.

Meet Laurent Potdevin, Lulu’s new CEO.

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2. A cult-like following • While investors have been quick to pull out of the

stock, customers keep coming back for more. • Lulu beat estimates for its fiscal fourth quarter,

reporting a 7% jump in net revenue to $521 million. • The retailer also achieved double-digit sales growth

in its direct-to-consumer segment, earning $97.8 million in online sales during the fourth quarter.

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3. New opportunities in the men’s market

• Potdevin says Lulu’s men’s segment could become a billion-dollar business.

• The slacks shown to the right cost $128 and are already nearly sold out online.

Lululemon is making a greater push into men’s fitness and everyday apparel.

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4. A fresh product pipeline

• Items from the new &go line cost 40% more than the retailer’s typical yoga gear, which could boost Lulu’s margins if they’re a hit with customers.

Lulu’s new line for women dubbed “&go” could reinvigorate the brand.

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5. New product categories

• By adding new product categories including beach gear, cycling, and running, Lulu is addressing new growth markets.

Lululemon is diversifying its product mix in a big way.

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The hidden opportunity for investors

From new leadership at the top to a fresh product mix, Lululemon’s turnaround is just starting to take form. Yet, Lululemon’s stock is stuck in the dumps…

trading around $45 today, or nearly 46% below its 52-week high. This creates an opportunity for investors

to get in at the bottom. Investors can get more insight into Lulu’s business when the retailer reports fiscal 2014 first-quarter earnings on Thursday, June

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