The future of Lululemon: Men's clothes, shampoo and bags
New York (CNN Business) Lululemon pulled in $3.3 billion in sales last year. But to become bigger, Lululemon will reach beyond its strength in women's yoga pants. The upscale athletic brand unveiled a five-year growth plan Wednesday to double its men's and digital businesses. Men's workout clothes, dress pants and new products like boxers currently make up a small fraction of Lululemon's sales. Lululemon makes 26% of its sales online. "Men's is one of our largest and most exciting areas of future growth," chief executive Calvin McDonald said last month. He came to Lululemon from Sephora in August, and the growth strategy is McDonald's first major initiative at the company.
International markets represent around 15% of the company's sales today. The new plan calls for Lululemon to quadruple its international sales. Lululemon will also strike more partnerships with companies like SoulCycle, expand its bag selection, and start selling deodorants, moisturizers and shampoo under a new "Selfcare" product initiative. "We believe Lululemon has a unique opportunity to push beyond traditional expectations," McDonald said Wednesday.The plan marks a new phase for Lululemon, which went public more than a decade ago. It weathered founder Chip Wilson's messy departure from the company, as well as its former CEO's resignation last year over misconduct.
Looking to stay hot
Lululemon (LULU) has been one of the hottest retail stocks over the past year, gaining 83%. Wall Street is bullish on Lululemon because it controls nearly all of its sales, rather than relying on outside retailers. And its leggings and athletic clothes carry high profit margins.
Sales grew 24% last year and profit increased 30%. But to remain a darling of Wall Street, Lululemon had to present investors with a long-term growth strategy.
The brand expects its new efforts will help it grow sales in the low teens over the next five years. One analyst, Simeon Siegel from Nomura, predicts the brand could double its revenue to $6.5 billion in 2023.
Stores will be a key component of Lululemon's plan to grow in North America and overseas. Lululemon operates around 440 stores — 285 of which are in the United States — and it expects to open up to 50 stores in total this year, including a new 25,000 square-foot flagship in Chicago in July with yoga studios and meditation space.
Lululemon expects to open up to 30 stores in international markets, but the brand acknowledges challenges ahead. "We certainly have a brand awareness obstacle to overcome in our international markets," chief operating officer Stuart Haselden told analysts last month. Haselden will lead the new overseas initiative. Lululemon will also have to overcome a saturated market for athletic clothes for both men and women.
Nike (NKE), Lululemon's much larger competitor, is encroaching on the brand's turf with a focus on athletic clothes for women.
Athleta, Gap's premium women's athletic clothing brand, is also scaling up. Gap is not only betting on the women's athleisure market. It debuted the men's brand Hill City last fall to compliment Athleta, which could threaten Lululemon.