Even with part of the company consolidating, Laurent Potdevin said Lululemon Athletica Inc. is in growth mode and in control.
“It was definitely not a cost-cutting measure,” chief executive officer Potdevin said of the decision to close 40 of its 55 Ivivva stores by late August and shift most of the business for the girls’ line to the web.
“We love the brand, but when we think about the business, moving forward we want to find a way to serve the customer,” Potdevin said. “For this brand, that’s the mother, and she loves the convenience of being able to buy online, and that can grow.”
As for the estimated $50 million to $60 million in costs related to the restructuring of the brand, that’s expected to be realized by the third quarter.
But those costs aren’t a hindrance to Potdevin’s plans to double Lululemon’s revenue to $4 billion by 2020.
There’s a substantial gulf between the 2020 goal and the $2.3 billion in revenue the brand tallied last year, but efforts to get there include opening another 30 Lululemon stores this year and having the brand take over seven of the 15 Ivivva doors that the company will retain.
“The macro environment is not great,” Potdevin said. “But given the strength of the brand that we have, I think we’re very much in control of our destiny.”
He also said the store format “allows us to bring collections to life” and when things aren’t working, they can be changed quickly.
That’s what happened earlier this year when sales lagged, in part because its assortments weren’t vibrant enough, and the company changed its merchandising, injecting color and pattern into its offerings.
“I laid out things we were going to do and we did those exactly and now we’re doing even better than we had planned,” Potdevin said. “There’s some volatility, but we’re in control. We’ll have some blow out quarters and we’ll have some tougher quarters.”
The financial markets tend to not be as forgiving and when Lululemon showed even a hint of sliding growth with fourth-quarter results in March, the company’s stock quickly fell 23.4 percent to a 14-month low of $50.76.
Better-than-expected first-quarter results, which showed a 5 percent gain in revenues to $520.3 million, sent the stock up 11.6 percent to $54.29 on Friday, but the company hasn’t made it back to the $66.30 price reached before revealing its yearly results.
Financial analysts are generally pleased with the recent upswing in Lululemon’s business.
Ike Boruchow of Wells Fargo characterized the company’s first quarter as “very surprising and encouraging.”
But expectations on Wall Street can be crushing.
Potdevin hedged a bit when asked if the market expects too much growth from Lululemon considering shares fell dramatically when the company posted a 14 percent increase in both revenue and profits for 2016.
“I don’t know if the market maybe has expectations that are ahead of where we are, but I think of all the opportunities ahead, like international — the rest of the world has the potential to be bigger than North America [for us] — our digital business has the ability to be a billion dollar business,” Potdevin said. “I think we do have the ability to grow revenue at a mid-teen rate and grow comp stores in the mid to high-single digits over the foreseeable future.”
That future could include growth from products at a higher price point, like the Enlite sports bra selling for $98, the success of which Potdevin said has made the company more confident in the possibility of rolling out pricier items.
Other types of products are likely to be added as well, but moving into a complete lifestyle collection isn’t an aspiration — Potdevin said plainly, “The world doesn’t need another brand like that.”
He didn’t rule out the possibility of growing by way of an acquisition, however, and noted Lululemon’s “strong” financial position.
“We’re a leader in the athletic lifestyle and were interested in continuing to own more of that lifestyle,” Potdevin said. “We’re open-minded.”
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