Lululemon's Sizes Do Not Fit All

Lululemon Athletica (NASDAQ: LULU  ) suffered a public relations disaster earlier this year. It had to recall some black yoga pants that turned out to be sheer in the posterior -- exactly the area many Lululemon fans claim the yoga retailers' pants improved.

Maybe some investors don't know too much about fashion, but it's easy to see why that might be a seriously bad scene for trust. It was also easily the butt of jokes, and I'm sure it wasn't amusing for anyone who actually bought the defective pants.

One set of shareholders has recently filed a class action lawsuit against the retailer, making particularly damning claims. They contend the company didn't disclose the defective pants, and that the disaster happened because management was trying to reduce costs and boost profit margins despite decreased quality -- a terrible business move. From a high-end yoga retailer, that move could leave lasting damage to the brand, and also implies the company was scrambling to raise its profitability.

Around the same time, longtime CEO Christine Day's resigned. CEO resignations can theoretically be good news for struggling companies in some cases, but in this one, Day had steered the company through quite a successful run.

Now, Lululemon's got a whole other PR issue to contend with. It's come to more widespread knowledge that the yoga retailer's merchandise selection doesn't stretch beyond size 12. In other words, it's targeting women of certain smaller sizes and leaving many others searching elsewhere for active clothing. It's probably also leaving many of those frustrated potential shoppers insulted, too.

A catty cult?
I've had my moments in which I wasn't quite convinced that super-pricy yoga pants made sense (shouldn't sweats do the trick?). Obviously, though, given Lululemon's success, many women are willing to pay a pretty penny for yoga attire, particularly if it makes certain body parts look good.

True, companies have every right to choose a target demographic. Some stores cater only to plus-sized women. Some target teens, and some look to lure baby boomers. Still, there's a fine line between demographic aims and insulting misses.

Size is a sensitive subject these days. Everybody knows that slender and occasionally disturbingly skinny has defined "beautiful" for quite some time now, and many believe it's mean and unfair.

A company that equates "size" and "fitness" related to an activity meant to be healthy, fit, positive and therefore good for everyone is basically implying that some don't deserve to be part of the skinny-girl club, at least with Lululemon's cabal.

Sizing up the others
So how are rivals handling yoga and fitness clothing? They're doing a better job than the cult-like Lululemon, as it turns out.

Gap's (NYSE: GPS  ) Athleta website lacks the cultish posturing, and its size chart illustrates that it has yoga and other fitness attire for sizes 0 through 20. In fact, its advice is practical: "We're dedicated to giving you a product that DOES MORE than just look good. Enhance your performance by choosing the right fit, fabric, and features so you can take your game to the next level."

Another rival, VF's (NYSE: VFC  ) Lucy activewear, includes sizes 00 through 18. Yet another, prAna, offers a narrower size chart, but its choices still reach size 16.

Here's another reason Lululemon's behind the curve. There's an increasing push for fashion to acknowledge that being a size 12 or over isn't something to be ashamed of. More consumer brands are realizing that "normal" or plus-sized women are beautiful, too. H&M recently used size 12 model Jennie Runk in a plus-size swimwear ad, which displayed a beautiful, curvy woman in a bathing suit. The average American woman is a size 14, in fact. Women come in all shapes and sizes.

This stock is not a beautiful investment
Beauty is in the eye of the beholder, there are many forms of "beautiful," and, most of all, pretty is as pretty does. It's sad to think that some people still have to be convinced that plus-sized women are just as attractive as thin ones. At different times in history, curves and heavier weights were considered incredibly attractive.

For example, Marilyn Monroe was no waif. She is still one of the most popular icons of beauty, yet still the definition of beauty has emphasized thin.

The ridiculous part of this from an investing standpoint is that if the average American woman indeed wears a size 14, Lululemon is actually shutting out a significant portion of the market. If more women shun its stores because of budgetary constraints or even the sizing controversy, and other women can't find any clothing there that fits, this stock is even more overvalued than one might think.

Lululemon's forward price-to-earnings ratio is a hefty 27, compared with Gap's 14 and VF's 16. Although neither of those companies is an apple-to-apples comparison, since both have many brands and concepts under their umbrellas, the diversity also makes them more than one-trick ponies.

Gap and VF may not have the most torrid growth in the world in the last 12 months, but both have displayed solid growth in sales and profits. VF's profitability is particularly impressive. They're also arguably more stable than Lululemon on many levels. Gap's not always the hippest game in town, but it's a stable company with recognizable concepts, and VF has incredibly strong brands including Timberland, The North Face, Smart Wool, and many more.

We're learning about some less attractive factors regarding Lululemon, as a retailer and as an investment. Lululemon leaves some women out, so maybe investors should leave Lululemon alone.

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Read/Post Comments (13) | Recommend This Article (9)

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  • Report this Comment On August 17, 2013, at 2:16 PM, konagurl wrote:

    What companies like Lululemon don't seem to understand is that it's often the so-called plus-sized women who are seeking out work-out wear in order to NOT be quite so plus-sized. In a society that considers skinny and fit to be the most attractive, doesn't it make sense that wanting to lose weight and get fit is a goal for many women? And having good-quality, attractive clothing to begin that journey -- not end it -- is a marketing dream come true for other companies. Lululemon won't be seeing any of my "get fit" dollars...

  • Report this Comment On August 17, 2013, at 2:24 PM, milliegirl812 wrote:

    I ran into this problem last year when I was starting to get fit, went to Sports Authority, couldn't find anything above a size L for women. Now that I'm small enough to wear the stuff in SA or even Lululemon I won't shop there. If they didn't want my business when I was an XXL, why should I give it to them now that I'm a M.

  • Report this Comment On August 17, 2013, at 3:37 PM, alexis4444 wrote:

    I like Lululemon clothes. It is always a problem getting athletic clothes in Large and XLarge sizes. Did you ever go into a golf shop and try to get a XLarge golf shirt for a women? If companies think that the market is profitable for Large and XLarge sizes than they will start to make clothes for women in those sizes. Nobody wants to make things that don't sell.

  • Report this Comment On August 17, 2013, at 4:41 PM, Hibiscusanole wrote:

    Marilyn Monroe danced, lifted weights, and had a flawless figure. She would have fit the ballet leotards that are sized like Lululemon. I do agree that everyone should be represented. Look at the hormonal disadvantage that equally beautiful Liz Taylor faced as she aged. Even Rihanna may one day wear a larger size. Life is tough.

  • Report this Comment On August 17, 2013, at 9:08 PM, Staceyseg wrote:

    All of the comments written are right on target. I am one of the founders of Lola Getts Active, active wear made exclusively for the plus size gal 14-24. We believe that plus size women also want to look good while getting fit and healthy. Retailers such as Sports Authority, dicks, and Sports Chalet are all aware that this customer is shopping in their stores but can't find anything plus size to buy. They dont know how to market to this customer. Yes it cost more to develop a proper fitting line for plus size women but it is doable. We have even done it domestically and our prices range from $51-$99 .

  • Report this Comment On August 18, 2013, at 12:34 PM, jahaut wrote:

    Alyce, I'm sorry if you're a heavier woman. But are you kidding me that the average American woman is a size 14?! That's just an insult to America. My old girlfriend was an 8 (she was on the bigger, AVERAGE American side). She loved Lululemon. She had bangin legs, yes, but they sucked in the extra pounds in her mid section well. How many pounds do you want the pants to hold in? Have you been to a yoga class? Have you seen many heavy people? Im talking heavy, can't fit into yoga pants heavy. If it's at that point, yoga probably isn't the best exercise for them. I'm all for people being healthy and losing weight, but we gotta draw the line somewhere.

    Ladies, I'm sorry, get on a treadmill, put it on an 8 incline and lose the weight. Lululemon will be ready and waiting. Think about it as delayed gratification. An incentive to look good. That's all I got.

    Great company, superior product. Strong Buy.

  • Report this Comment On August 20, 2013, at 5:42 AM, PeteMR wrote:

    Jahaut nailed it as far as I'm concerned. In what world is lulu not a successful brand? Sure, they had their sheer issue, but they owned up to it and made it right. What it seems everyone here is saying is that lululemon is at fault for creating a brand based on health, fitness, and community. But that's a problem... And somehow cult-like? lulu doesn't want to be Nike and honestly they shouldn't because that brand is low quality compared to lulu. In terms of fitness brands, I challenge you to find one that is as good quality as lulu is. If you're mad at them for not having a size 14 or 16, you're simply looking at it wrong. lulu has their demographic in mind, and they cater perfectly to them. They sell good looking, athletically fitting apparel for people who are physically active. Of course, there are people who wear it just to look good, can't fault them for that at all. But those aren't the people lulu is looking to sell to, they want athletic people. There's a reason that when you're in their stores, they ask you what your favorite way to sweat is. If you don't actively try to sweat and workout, you're probably not their market. Stop being mad at lulu because you want to wear black yoga pants but they don't have a size 16, chances are you're not in front of the yoga class. Walk in to a lululemon in any area people are fit, tell me it's a company you don't have faith in. Walk into any gym essentially anywhere, and tell me no one is wearing their clothes. Can't be the expert on an athletic brand if you're not a part of the athletic community, no?

  • Report this Comment On August 20, 2013, at 9:20 AM, TMFLomax wrote:

    Hi there,

    Thanks for the comments.

    I'd like to rebut a few that I find surprising. I believe that comments such as heavier women "should get on a treadmill" or "don't like to sweat in a workout" are pretty offensive stereotypes. Seriously? I've known some heavier women who absolutely are more fit and more active than I am, and probably than a heck of a lot of other people are. There are a lot of skinny women who do nothing -- let's remember, some things about weight are about genetics and differences in, say, metabolism. (Which also makes the limited sizing issue offensive.)

    I looked up data that the average size of the American woman is a size 14, and that truly does NOT surprise me. Trying to say a woman who was a size 8 was on the "heavier" side is a piece of comment I would like to see substantiated by some actual research data, because that is nowhere even near what I was seeing in my research.

    I also noticed when I was doing my research that there is wide disagreement about what size Marilyn Monroe actually was, but I think what we can agree on is that she was curvy. She was not Twiggy (for those of you who remember Twiggy).

    Incidentally, I never said that "no one in the athletic community" wears lululemon's clothes, so I'm not sure where that came from. Of course people do. Many women might think twice about it now though. Particularly women who may have worked hard to get to a lower weight (as some have talked about above).

    I'm glad to see some feedback, I'm finding it interesting. konagurl, milliegurl812, Hisbiscusanole, Staceyseg, good for you all!

    alexis4444, thanks for your thoughts too, since you aren't being harsh about the reality of the difficulties of finding larger sizes. I still wonder if it's a chicken/egg issue though. If companies offered these sizes, maybe they would get more business than their research implies they would. The healthy/fitness trend is a building one right now -- there is a ton of public education about the benefits of exercise -- and that goes for all shapes and sizes. Again, companies like LULU may be missing the whole picture, and the future trend, in a major way.

    Best,

    Alyce

  • Report this Comment On August 20, 2013, at 1:11 PM, LQM2 wrote:

    I believe part of LULU's appeal is they don't try to appeal to everyone. I don't recall any Athletica ads showing size 20 models. LULU is like a little badge that says, "I'm disciplined enough to stay size 12 or below". I like it.

  • Report this Comment On August 22, 2013, at 3:42 AM, JPJPJPJPJPJPJP wrote:

    This investment thesis is irrational. It seems like the opinion is basically "I can't fit in the apparel; therefor, the stock doesn't fit in my portfolio" If this is the case, I would argue "would a rational investor not buy Weight Watchers (WTW) if they are slim?"

  • Report this Comment On August 22, 2013, at 9:04 AM, TMFLomax wrote:

    I'm surprised how many people have interpreted this article as "I can't fit into their apparel" and that's it -- my own personal size is neither here nor there (although I did actually say that I have a few items of their apparel, and knowing the size limits, I feel like I wish I had taken my money elsewhere). That some people "can't fit" isn't the point here (and I'm getting a lot of a sense that many seem to blame those who "can't fit"), it's that the company doesn't fit THEIR apparel for more people. From an investment standpoint, they are shutting out a significant part of the marketplace, and since it seems exclusionary in a negative way, that is actually the thesis here. I'm not a fan of brands that don't deal with target demographics with a sense of grace. (ANF is another one that I have often written about brandwise, because I feel that its supposedly "aspirational" brand conveys a narrow version of what "beautiful" is. I don't happen to find that pleasant.)

    Again, I like Athleta's branding message much better. That fitness is for everyone. That if people who wear larger sizes would like to try yoga, workouts, what have you, they have the attire for them to do so.

    Alyce

  • Report this Comment On August 22, 2013, at 9:23 AM, TMFLomax wrote:

    Oops. I just realized I cut out the part about having some lululemon clothes of my own. I believe I cut it because I was editing and thought it was off point -- it seems some people believed it was the point. Which it really isn't.

    Alyce

  • Report this Comment On August 27, 2013, at 1:52 PM, HealthyAndHappy wrote:

    Lucy's size chart goes down to a size XXS, but they do not seem to offer clothing in that size. I suppose being small (not skinny) is just a concept to them.

    Lululemon's size 12 has a 32.5" waist and 43" hip which would be the same as a size L or 12-14 at Athleta. Lululemon's numbered sizing offers a more customized fit. Lululemon offers 6 different sizes that go from a 22.5" to 32.5" waist. Athleta only offers 5 sizes in that waist range. Athleta's size chart also shows 3 sizes to fit a 33' to 38" waist, but currently do not have pants that go above a 36" waist. So Athleta offers 7 sizes and Lululemon offers 6 sizes. I shop at Athleta and their XXS tops, jackets and skorts are large on me. Their petite pants fit me very well though. Athleta tries to serve everyone, but ends up making clothing that tends to be ill fitting. I pay top dollar for Lululemon's clothing because no other company makes athletic wear that fits me like Lulu does.

    The former CEO of Lululemon said it would cost about 30% more to make plus sizes. Would plus sized women really pay about $127 for a pair of pants when most of them are probably working out with a goal to lose weight? If Lululemon started making plus sized clothing, that would be a good time to sell.

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