Author | Wang Xiaojuan
Editor | Zhou Zhiyu
Once beloved by Super Girls, the popular yoga brand lululemon is now falling from grace.
Since the beginning of this year, lululemon's growth has significantly slowed down. In the second quarter, its overall revenue only grew by 7%, with a 0.2% year-on-year decline in revenue in its main battlefield, the U.S. market, and a decrease in revenue growth in the Chinese market from over 60% in previous years to 34%.
Furthermore, lululemon's market value is now only $31.1 billion, halving from over $60 billion at the end of last year.
Having once been adored by high-educated, fashionable middle-class women, lululemon rapidly became a clothing giant over the past decade. It even briefly became the world's second-largest sports brand by market value, second only to Nike.
However, now a group of core consumers are voting with their feet, turning to other more professional and niche yoga brands, while the general public finds lululemon too expensive.
In pursuit of growth, lululemon has started offering discounts, inviting more mainstream celebrities for endorsements, and opening more stores in lower-tier markets, but the effectiveness remains to be seen.
Super Girls brought a brilliant start to lululemon, and how it balances the development of multiple markets to sustain this brilliance is the answer that lululemon must provide on its path to solidifying its position as a clothing giant.
<h2>Stumbling</h2>
lululemon is no longer favored by Super Girls, not only in its home ground of the U.S. but also struggling to maintain growth in the Chinese market.
Recently, lululemon announced its second-quarter performance for the fiscal year 2024 ending on July 28, with revenue growing by 7% compared to the same period last year, reaching $2.4 billion; net profit increased by 15% to $393 million.
However, this performance fell short of market expectations, and on the day of the financial report release, lululemon's stock price plummeted.
Looking at segmented markets, in the U.S. market, which accounts for over 70% of the company's revenue, revenue declined by 0.2% year-on-year; in the entire North American market, net revenue only grew by 1%.
In the popular Chinese market, revenue grew by 34%, but compared to the compound growth rate of over 60% in previous years, the decline is significant.
With global growth slowing down, this can also be seen from the growth in same-store sales. In the previous quarter, lululemon's same-store sales only grew by 2%. This means that the current growth is mainly driven by opening more stores.
This indicates that lululemon is facing the dilemma of losing core users and downgrading consumption.
For lululemon, the brand initially represented a niche sport, a niche track, with users positioned as high-educated Super Girls. Together with them, lululemon created a relaxed, healthy, and controlled lifestyle, which became the selling point of lululemon.
In the early days of lululemon, there was no classic marketing model like celebrity endorsements, but rather a KOC model (Key Opinion Consumer model), collaborating with many professional yoga bloggers or Super Girls who could showcase the lifestyle presented by lululemon
Many women who have purchased lululemon express their liking for the brand because it does not have an exaggerated logo, but can still be recognized by those who know the brand. To some extent, lululemon's products have strong social attributes and identity labels.
However, after going public and rapidly expanding the brand, it is inevitable that it needs to reach more consumer groups. As it becomes more mainstream, this social attribute is disappearing. Without a sense of scarcity, many middle-class consumers naturally abandon it.
Nowadays, many professional consumers who were once connected to lululemon through yoga are leaving and turning to brands that are more focused on yoga, such as Alo Yoga and Vuori, two yoga apparel manufacturers whose scale is not as large as lululemon's.
As it becomes more mainstream, lululemon's prices also make it difficult to reach a wider audience. Yoga pants that cost thousands of yuan make the mainstream consumers who are experiencing downgrading in consumption turn away. Even the unemployed and those who have had their salaries reduced have to think twice before buying them.
Furthermore, lululemon seems to be lacking in product quality and innovation.
In July, lululemon launched the Breezethrough series, claiming to use lightweight quick-drying fabrics designed for hot yoga pants and summer wear. However, when consumers actually wore this clothing, the discomfort caused by the close-fitting fabric and hip seam stitching led to a large number of complaints from consumers. As a result, this product was discontinued at the end of that month.
As a key product deeply tied to the brand, this incident raises doubts about whether lululemon can continue to hold its main position.
Several investment banks, including Citigroup, have downgraded lululemon's stock rating and target stock price. A Morgan Stanley analyst pointed out that the reason for the downgrade is that lululemon's category growth is slowing down and is easily affected by competition.
However, compared to the negative growth and near saturation of the U.S. market, the hope for lululemon's growth in the future still lies in its international business, mainly in China. In terms of channels, lululemon plans to net open 35 to 40 stores this year, with 3/4 of the new stores opening in international markets outside the Americas, mainly in the Chinese market.
In June, in China, lululemon invited well-known actress and director Jia Ling as a brand ambassador, trying to deepen the brand's elite female label and increase its visibility.
Of course, whether the successful weight loss of Jia Ling can drive lululemon is still unknown.
<h2>Battle</h2>
While facing problems with its own positioning, industry competition has become more intense.
Yoga pants and tennis skirts have become the most popular fashion items this summer. But now, it seems that everywhere you look, young ladies are wearing lululemon yoga pants, but the growth opportunities seem to belong to the white-label replacements of lululemon.
On social media, when searching for lululemon, there are countless posts recommending alternatives. Consumers interested in lululemon but unable to afford its high prices are turning to alternatives, tirelessly comparing them and even trying to find the original factories with the highest similarity
Several years have passed, with the gimmick of replacing Lululemon, the booming of brands such as Loli and others with hundred-yuan yoga pants has emerged. With lower prices, they have quickly grown, even cooperating with Lululemon's suppliers to further narrow the gap.
The apparel industry itself is not a high barrier industry, and Lululemon itself does not have a moat. Many technologies are also controlled by suppliers. Faced with the encirclement of this replacement, Lululemon is finding it difficult to have autonomy.
In addition to competition with this replacement, Lululemon also needs to share the pie with other fashion brands associated with sports.
This summer, in the domestic market, tennis skirts have become more popular than yoga pants. Although Lululemon has also taken advantage of this trend by releasing tennis skirts, each brand has its established sports label, and tennis is more closely associated with the FILA brand.
In this complex situation, the core business is the first to be affected. In this quarter, Lululemon's mediocre performance is mainly attributed to the decline in the women's clothing market.
CEO Calvin McDonald stated during the earnings call, &#34;We did not have enough innovation in the colors, patterns, and decorations of core products, missing opportunities to increase consumer purchases.&#34;
Currently, Lululemon has realized this crisis and is now focusing more on product innovation.
During this earnings call, Calvin McDonald once again emphasized the balance between design and products, placing them on equal footing.
Based on this, the company also adjusted its reporting structure in May: Global Creative Director Jonathan Cheung reports to the CEO, Chief Product Officer Liz Binder reports to Nikki Neuburger, who serves as Chief Brand and Product Activation Officer. After the adjustment, design and products are no longer overseen by a single executive but are of equal importance.
Being too deeply tied to yoga pants as a single product implies greater risks. Lululemon, seeking growth, has been expanding into new customer groups and business lines.
For male users, Lululemon started with men's yoga pants and entered the men's sportswear and footwear market. Based on sports such as tennis, men's golf, and hiking, they have launched multiple men's sportswear items. Last year, they also partnered with China's first F1 driver Zhou Guanyu as a brand ambassador and opened the first men's pop-up store in Shanghai.
However, compared to yoga, the audiences for these sports are smaller, and each has competitors strongly tied to that particular sport. For example, in the outdoor hiking sector, Arc'teryx is a favorite among many middle-class men.
To achieve more growth, Lululemon has also entered outlets and even participated in shopping festivals like 618 with discounts of around 50%.
However, this growth strategy is becoming increasingly disconnected from its early positioning. Founder Wilson, who was previously &#34;driven out&#34; by the board, has publicly expressed disagreement with Lululemon's current expansion strategy
As lululemon expands its product range to cater to a more diverse user base, maintaining the lifestyle image it has cultivated and continuing to attract high-net-worth customers is also something the brand needs to consider

LULU

The Chinese market has become a key driver of growth

- Lululemon, once beloved by Super Girls, is facing a decline in its market position. Despite a 7% revenue growth this year, its US revenue dropped by 0.2%, and the Chinese market growth slowed to 34%. The brand's market value has halved to $311 billion from over $600 billion last year.
- The company's struggle lies in losing core consumers to more specialized yoga brands and alienating the mass market due to high prices. Efforts to boost growth through discounts and celebrity endorsements are being observed, but the effectiveness remains uncertain.
- Lululemon's future growth prospects hinge on its international business, particularly in China, as the US market faces saturation. The brand is challenged by intensifying competition and the need to innovate to regain its former allure among consumers.

Has lululemon, the favorite of the middle class, lost its momentum?