Once upon a time, nearly every girl in the U.S. dreamed of owning a pair of Lululemon leggings.
Most of us remember the envy we felt when seeing friends strutting down the streets in a pair of Lululemon Align leggings — and how embarrassing it was to be the only one in our friend group without a pair.
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Some of us would save up for weeks while working a summer job to afford a pair of the highly coveted leggings, and others would beg their parents to get them a pair as a birthday gift.
Related: Lululemon sees its ‘it-girl’ title slip through the cracks
Lululemon’s immense success in the U.S. might have boosted the company’s ego a bit too much since it continued to use the same strategy that had worked for many years, putting newness and innovation on the back burner.
People walking in front of a Lululemon store.
Shutterstock/TheStreet
Lululemon gets an ego boost and announces the development of a new business strategy
In April 2022, Lululemon (LULU) announced the development of a five-year growth plan called the Power of Three x2. The strategy aimed to double its 2021 revenues to $12.5 billion by 2026 through product innovation, improved guest experience, and market expansion.
However, this new strategy might have been implemented too little too late in the U.S.: the constant red flags in this sector finally caught up with the company.
Related: Lululemon fighting to keep the ‘it-girl’ title away from competition
Although the U.S. had once been one of Lululemon’s strongest regions, thanks to its sustained growth, the increased competition, its target audience’s desire for newness, and an uncertain economy resulted in slower growth percentages.
In the first quarter of fiscal 2024, Lululemon’s comparable sales in the U.S. were flat for the first time in the last couple of quarters after various warnings of declining quarterly growth seemed to have gone unnoticed.
Lululemon claims successful holiday sales but continues to report declines in its U.S. sector
On Dec. 5, Lululemon published its third-quarter earnings results for fiscal 2024. Despite the slow growth in its main market, Lululemon exceeded nearly all analysts’ expectations, keeping its streak for the entire year thus far.
During the holiday shopping season, Lululemon’s U.S. sector experienced the highest increase in traffic to its e-commerce site and shopping app. This boost allowed the company to benefit from selling products from last season since it doesn’t usually run sale events across stores.
With the continued investment and successful execution of its Power of Three x2 strategy, Lululemon expects to get back into its U.S. market graces by 2026. The new plan will allow the development of new full-price products that better resonate with clients.
Although Lululemon continues to state that it’s seeing progress in its U.S. sector with an increase in its e-commerce channel, its latest earnings reported flat revenues, slower in-store traffic, and comparable sales in the Americas were negative overall compared to last year.
Lululemon raises its outlook for its upcoming quarterly reports
Lululemon provided its guidance for its upcoming fourth-quarter earnings of 2024, reflecting an optimistic quarter after the better-than-expected results, mainly attributed to its international markets.
“Our performance in the third quarter shows the enduring strength of Lululemon globally, as we saw continued momentum across our international markets and in,” said Lululemon CEO Calvin McDonald. “Looking to the future, we are pleased with the start to our holiday season, and we remain focused on accelerating our business and growing our brand awareness around the world,” he added.
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The company now expects revenues to increase by 11% to 12% to $3.58 billion compared to last year, a slight increase from its previously stated outlook of $3.47 billion to $3.51 billion.
Earnings per share are now predicted to range from $5.81 to $5.85, up from its previous guidance range of $5.56 to $5.64.
Although Lululemon exceeded analysts’ expectations and claimed improvement in the U.S., its shares are down by over 3% as of Wednesday’s market close and have declined 21.5% one year from today.
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