Lululemon leans on newness to lure reluctant US customers

Dive Brief:Lululemon continues to chase growth via brick and mortar. The brand added 56 net new company-operated stores in 2024, including 14 from the acquisition of its Mexico operations, ending with 767, the company said Thursday.The company plans to open 40 to 45 stores in 2025, including 10 to 15 in the Americas; abroad, most will open in China. New markets will include company stores in Italy, and franchises in Denmark, Belgium, Turkey and the Czech Republic. The brand also plans about 40 “optimizations,” which includes expanding the size of some locations.Q4 net revenue rose 12.7% year over year to $3.6 billion, which includes an extra week in 2024. Excluding that week, net revenue rose 8% and comps rose 3%, with Americas comps flat and international comps up 20%. Gross margin in the period expanded 100 basis points to 60.4%. Net income rose 11.8% to $748.4 million.Dive Insight:Brick and mortar is key to Lululemon’s growth, and plans are to expand its square footage by 10% this year, via new stores as well as expansions of existing spaces, CEO Calvin McDonald told analysts Thursday.“Stores remain an important part of our growth story. Not only are they highly productive, but they are also hubs in our local communities and allow us to engage directly with our guests, which provides us with another important competitive advantage,” he said.The U.S., its largest market, is emerging as a weak spot for the brand, with slower traffic in Q1.“However, we see guests who visit us responding to the newness and innovations we brought into our assortment,” he said. “We believe this is a positive indication as we continue to flow new product, engage withour guests through unique and compelling activations and launch brand campaigns. We are controlling what we can control, and we expect to see modest growth in U.S. revenue for the full year of 2025.”Recent launches have indeed helped Lululemon compete against rivals like Alo, Vuori and Rhone, with its share of the athleisure market up “substantially during February” and strength continuing into March, according to research from M Science.Even Lululemon’s share of core leggings, joggers, tights and pants — areas that have been weak spots — was flat year over year last month, “a nice change from the steep declines we observed each quarter since 3Q23,” M Science analyst Matt Jacob said in emailed comments.“Inflation will likely impact [Lululemon’s] sales,” Jacob also said. “However, we expect the company, which has a more high-end customer, to potentially fare better than others in the clothing space.”In Q4, Lululemon beat margin expectations and met sales expectations, but the brand doesn’t have a lot of runway, according to research from Jefferies analysts led by Randal Konik.“The theme remains that growth continues to fade, making further increases in sales and [earnings] challenging,” Konik said.