lululemon athletica (NASDAQ: LULU ) is aggressively moving into new product categories with the release of its fresh fall fashion line. When you think Lululemon, you may think yoga pants and Luon tanks, but that could soon change. The yoga apparel maker's latest strategy is to get customers to wear their gear not only to the gym, but also in the workplace or during a night on the town with friends. Let's see what Lululemon has up its sleeve and whether this plan will pay off for the retailer down the road.
Versatility at its best
From working out to going out, Lululemon hopes customers will wear its new apparel outside of the gym. The company is reinventing the rules of its business by expanding into apparel that can be worn in the workplace with products like its new Forme Jacket and Blazer Vest, pictured below.
Lulu's new line includes sweaters, stylized crop pants, and dresses. In its latest ad campaign for the products, Lululemon quips, "Perfect day-to-night versatility ... we just swap our sneakers for heels." Now this is a strategy with extra legroom. If these products are a hit with consumers, the company could significantly improve sales while at the same time broadening its customer base from strictly workout folk to a much larger addressable market. These products aren't cheap, the brand's latest sweater look will cost you around $108. However, it is made with fabric that is less workout and more quality such as cashmere and rayon blends made from bamboo.
Initial demand for these items looks strong. In fact, certain pieces from Lululemon's fall line, such as its Avenue Blouse, pictured here, Sweet Jorts, and Get It On Pant, have already sold out online. This is a good sign for a brand that has suffered recently at the hands of increased competition and internal drama between the company's board and founder Chip Wilson.
Nevertheless, selling out online could suggest that Lululemon still struggles with inventory problems. Not having enough products in stock has burned the retailer in the past. If you remember, Lululemon's Luon pants recall last year forced the retailer to reevaluate its supply chain, which led to product delays and weak inventory around the all-important holiday shopping season.
A lesson in supply and demand
You can't sell products you don't have. If Lululemon's new fall line is a hit with consumers, the company must be sure it has an abundance of the new merchandise, both in stores and online. Only then might we see a turnaround in Lululemon's stock, which has fallen more than 42% over the past year. The stock is now trading at roughly $39 a pop, nearly 50% below its 52-week high. Fortunately, in addition to its new product line, the company has other strong catalysts going forward. Enter Laurent Potdevin, Lulu's new chief executive.
Potdevin brings a fresh perspective to Lululemon. Not to mention, having previously worked at Toms shoes, he is a perfect match with the company's grass-roots corporate culture. I'm already encouraged by the innovation we've seen from Lululemon since Potdevin took over for Christine Day in January.
A new direction
Another promising development is Wilson's recent decision to sell half his stake in the company to private-equity firm Advent International for $845 million. Ultimately, this is a good thing for shareholders because it will enable Lululemon to focus on product development and supply chain efficiencies rather than worrying about internal conflicts between Wilson and the board of directors. This, together with new leadership and a promising fall lineup of products, could fuel a comeback in Lululemon in the quarters ahead.