Lululemon Athletica Inc. has reorganized its senior staff in an effort to elevate its product design and spur greater innovation.
Lee Holman has been named executive vice president and creative director, in a new position where he will oversee both men’s and women’s product design and report directly to Lululemon’s chief executive officer Laurent Potdevin. Holman had been senior vice president of women’s.
Tom Waller has been promoted to senior vice president of Whitespace, reporting directly to Potdevin. Whitespace is Lululemon’s team of scientists and engineers who work to drive long-term innovation. Prior to joining Lululemon in 2012, Waller was head of Aqualab at Speedo International.
Stuart Haselden, chief financial officer, will assume broader operational responsibilities, adding executive vice president of operations to his title.
Lululemon has begun a search for someone to fill the newly created position of chief supply chain officer, who will be responsible for continuing to optimize the company’s scalable, global supply chain across multiple categories and report to Haselden.
Tara Poseley, who joined the company in October 2013 as chief product officer, will be leaving the company after a transitional period. Lululemon has eliminated the chief product officer position. “Standing out requires a fierce commitment to constant innovation in functional performance,” Potdevin said. “Changes to the organizational structure, including the new role of creative director, are critical to executing upon our 10-year vision.”
He credited Poseley with “the build-out of strong product, innovation and merchandising teams.”
One insider indicated that the management changes, including the naming of a creative director, reflected a “strategic initiative to further unify men’s and women’s design under a singular creative vision” and that there were no product concerns underlying the changes.
Holman has been with the Vancouver, Canada-based Lululemon since 2014. “We have already begun to see his design vision across the women’s business,” a company spokeswoman said.
Holman, a 20-year veteran of the industry, joined Lululemon from Nike, where he served as creative director of Nike Sportswear and more recently as vice president of global apparel, innovation and equipment design, men’s and women’s. Earlier, he was creative director for Burberry, and held jobs at Abercrombie & Fitch, Levi Strauss & Co. and Paul Smith.
Felix del Toro, Lululemon’s senior vice president and general manager of men’s, will continue to oversee the men’s business and will report to Holman.
The company’s long-term vision over the next 10 years is to expand internationally and grow its men’s and women’s businesses to $1 billion and $3 billion in annual revenues, respectively, in five years.
Lululemon has come under pressure due to the increasing number of brands and retailers selling athletic, athletic-inspired and yoga merchandise, especially the likes of Under Armour, which has aggressively moved into the women’s space previously dominated by Lululemon. Then there are the likes of Tory Burch, who last month launched Tory Sport focused on activities like tennis, studio, golf and running.
Lululemon’s financial results have been up and down over the last few years. In the second quarter, gross profit was 46.8 percent of revenues, compared with 50.5 percent a year earlier.
“It’s really, really important for everybody to understand that the short-term growth margin pressure that we are experiencing is not the result of higher markdowns or quality issues,” Potdevin said in a recent conference call covering the second-quarter performance. “We’re building a very scalable, complex platform at a time where we’re growing internationally, and we’ve added resources to the team, and we have validated not only that we will see the margin expansion that we committed to, but see it in 2016 and beyond.”
Revenue for the second quarter was $453 million, increasing 16 percent over the same quarter last year. For the first half of the year, men’s comprised 15 percent of sales.
For the third quarter of fiscal 2015, Lululemon expects net revenue to be in the range of $477 million to $482 million based on total comparable sales in the high-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.35 to $0.37. This guidance assumes 141.6 million diluted weighted-average shares outstanding and a 30.2 percent tax rate. The guidance does not reflect potential future repurchases of company shares.
For this year, revenues are projected at between $2.025 billion and $2.055 billion based on total comparable sales in the high-single digits. Diluted earnings per share are expected to be in the range of $1.87 to $1.92 for the full year. This guidance assumes 141.8 million diluted weighted-average shares outstanding and a 30.2 percent tax rate.
In the second quarter, Lululemon’s net income fell 2.2 percent to $47.7 million from $48.7 million. Earnings per diluted share rose to 34 cents from 33 cents, driven by the repurchase of one million shares during the quarter.Revenues for the quarter ended Aug. 3 rose 15.9 percent to $453 million from $390.7 million as comparable-store sales increased 11 percent on a constant-dollar basis.
Lululemon plans to open 15 to 20 stores in the Middle East over the next five years as part of a licensing agreement with United Arab Emirates-based Majid Al Futtaim. In addition to the Middle East, the company plans to focus on major population centers for future stores including London, Paris, Munich, Singapore, Hong Kong and Beijing.
As the company enters new territory, it needs to bring greater innovation to its products based on different climates and lifestyles in different parts of the world. Lululemon’s roots are in yoga-inspired athletic apparel.