"瑜伽界爱马仕"lululemon,正在全球上演此消彼长的戏码。
According to the first quarter report of fiscal 2024, the company's revenue from the Americas (with a focus on the United States and some Canadian regions) increased slightly by 3.5% year-on-year, compared with the 82% growth rate in the same period in 2021, 32% in 2022 and 17% in 2023.
It's clear that the American middle class is starting to stop paying for lululemon. At the same time, the company's share price in the U.S. stock market fell by 40% from the beginning of the year.
But that doesn't stop lululemon from continuing to make money. Because in China, the number of people who love lululemon is still increasing, compared with the Americas, Chinese mainland's revenue in the first quarter has increased by 45% from the original obscurity.
Based on this, lululemon decided to bet heavily on China. Not only will the number of stores open from 127 today to 220 in 2026, but the company has also hired director and actress Jia Ling as a brand ambassador, and opened the largest store in North China in Sanlitun, a fashion landmark in Beijing, to attract business.
However, the number of middle classes is limited. Especially in the market environment of conservative consumption by Chinese people and the encirclement and suppression of flat brands, can yoga pants priced at 1,000 yuan really support lululemon's bright future?
▲(lululemon在北京三里屯的三层门店,系华北最大门店)
1. The American middle class can't buy it
As an activewear brand that made its fortune in the Americas, lululemon's global net revenue increased 10% year-over-year to $2.2 billion in the first quarter of fiscal 2024; Net profit for the same period was US$321 million (equivalent to about 2.3 billion yuan), a year-on-year increase of 10.7%. Among them, the revenue of the Americas was 1.6 billion US dollars, with a growth rate of 3.5% and a revenue contribution of 73%. It has the largest number of stores in the United States, with 369 stores, ranking first in the world.
It is not difficult to see that the consumption from the American people is still the most important pillar of lululemon's revenue.
But compared to America's past glory days, these numbers are not pretty. "City Boundary" found that from fiscal year 2021 to fiscal year 2023, the revenue growth rate in the Americas region will be 40%, 29%, and 12%, respectively, and the proportion of revenue will be 85%, 84%, and 79%, respectively.
In other words, since 2021, lululemon has become more and more unsellable in the United States.
Back in 1998, when lululemon was first established in the United States, there was a halo of sports giants such as Nike and Adi, and many people were not optimistic about it. lululemon thinks very clearly, its target audience was firmly circled by founder Chip Wilson from the beginning - 32-year-old "super girls" with an annual income of 100,000-150,000 US dollars, unmarried, and highly educated. They love fashion and sports, and are willing to pay for lululemon and can afford it.
▲ (Visual China)
With a dislocation cut into the niche yoga track, as well as a keen insight into the needs of Super Girls, lululemon quickly built a brand reputation among yoga enthusiasts. In July 2022, lululemon surpassed Adidas with a market capitalization of $37.4 billion, ranking second among global sports brands, behind Nike.
Good times don't last long. When the limited Super Girl was almost covered by lululemon, the latter's growth showed a brake. According to 36Kr, lululemon faces the challenge of being seized market share by emerging brands. In 2024, Alo Yoga is rapidly replacing lululemon in the American market as the sportswear brand of choice for young wealthy women. Although Alo Yoga is more expensive than lululemon, the brand is more dynamic, and its star tennis skirt has become a popular frequent visitor on ins.
Along with signs of falling out of favor, in April, lululemon announced that it would close its distribution center in Washington state by the end of the year as part of its business optimization efforts and lay off 128 employees starting June 21.
And within the company, the turmoil is just as disturbing. In January this year, Zhang Xiaoyan, the head of lululemon's brand in China and the No. 1 employee in China, left to join Decathlon. In May, Sun Choe, lululemon's chief product officer and a veteran who joined the company in 2016, announced his departure and joined Vans nine days later.
These two positions, one is the head of product promotion in China and the other is the head of product in the base camp, and both play key roles in lululemon's senior management team. Personnel changes, combined with the poor performance of the U.S. market, make it easy to see why lululemon's share price has dropped from more than $500 at the beginning of the year to more than $300 today.
Two days after its June 5 earnings release, Wells Fargo announced that it would lower its price target on Lululemon from $425 to $350. This adjustment is based on expectations for lululemon's future performance. Wells Fargo analysts pointed out that lululemon maintains its brand presence in the sports and leisure space, but the company may face pressure in the short term in the face of challenges and competition in the market environment.
2. We want to do a big job in China
Any consumer brand with a little ambition must pay attention to the global layout, and the same is true for lululemon.
lululemon entered the Chinese mainland market in 2013, when yoga was still a novelty in China, and lululemon was mainly located in first-tier city shopping malls, most of which were close to gyms and yoga studios.
According to Jihai Big Data and Growth Black Box calculations, the penetration density of lululemon stores into yoga studios and gyms is 70.2, much higher than Nike's 31.5 and Adidas's 34.2. At the same time as opening the store, lululemon bundled the target audience by forming a yoga community. This approach has clearly worked, and the past decade has been a decade of phenomenal growth for lululemon in China.
In fiscal year 2022, Chinese mainland contributed revenue of US$682 million to lululemon, and US$964 million (equivalent to approximately RMB 7 billion) in fiscal 2023. As of April 2024, lululemon has opened 711 stores worldwide, including 127 stores in Chinese mainland, a net increase of 26 stores from the same period last year, and the number of stores is second only to the United States. And in the first quarter of 2024, Chinese mainland contributed $304 million in revenue to lululemon, accounting for 14% of total revenue. Although the proportion of revenue is less than 73% in the United States, the revenue growth rate has reached 45%, much higher than the 3.5% in the United States.
In terms of same-store revenue, in the first quarter, lululemon's comparable sales in the Americas were flat compared to the same period last year, and comparable sales in China increased by 33%, which also showed a relatively strong trend.
Seeing such gratifying results, lululemon executives did not hesitate to praise the Chinese market in the first quarter earnings call. Chief Executive Officer Calvin McDonald said Chinese mainland has been doing well. In the performance of the quarter, China achieved phenomenal growth. He also enthuses, "I was in China last week and saw how strongly our brand resonates across cultures and geographies. ”
And, considering the number of stores lululemon has, potential store locations, the success of its online business, and the fact that its international presence is still so low, Calvin McDonald believes that lululemon is still in the early stages of its potential in China.
Cheng Weixiong, an independent analyst in the fashion industry and founder of Shanghai Liangqi Brand Management Co., Ltd., agrees with Calvin McDonald's judgment, saying that lululemon has not been able to achieve vigorous development because it has not been in the Chinese market for a long time, and the yoga market for Chinese women has just risen, so lululemon can achieve vigorous development, and this development has not yet reached its peak, and it is still an upward curve.
All these affirmations have paved the way for lululemon to bet heavily on the Chinese market. And that's exactly what happened.
In the past June, lululemon made frequent moves and did three major things in China. First, the 618 price reduction promotion, in the lululemon Tmall flagship store, the price of yoga pants of certain styles and colors has dropped to four or five hundred yuan; the second is the official announcement of Jia Ling, the inspirational weight loss protagonist of the movie "Hot and Hot", as the ambassador; The third is the opening of a large store of 1,341 square meters in Sanlitun, Beijing.
The "City Boundary" visit learned that the Sanlitun store occupies three floors, and the store takes turns to play promotional videos endorsed by Jia Ling, displaying yoga, training, running, tennis, golf, hiking and other sports products. Staff said that the store is the largest store in North China, and it is also the first store to provide product customization, and consumers can print limited patterns and names on yoga mats or water cups.
On Xiaohongshu, many people posted the scene of everyone practicing yoga on the first day of the store, which is exactly the usual way for lululemon to expand the brand's voice. Calvin McDonald revealed that in the second quarter, "we'll be hosting our summer 'sweaty' games in China again. and building brand awareness in a unique and compelling way that includes both local events and larger-scale brand campaigns. ”
According to lululemon's global development plan, the goal of opening stores in 2024 is 35-40 new stores, except for 5-10 in the Americas, the rest are mainly in China. And these stores not only appear in first-tier cities such as Beijing, Shanghai and Guangzhou, but also radiate to second- and third-tier cities such as Qingdao, Foshan, and Fuzhou. By 2026, lululemon intends to expand the number of stores in Chinese mainland to 220.
3. Difficult incremental battles
Despite its confidence in China, lululemon has not had an easy time pulling more money out of the pockets of Chinese consumers.
Is it to put down your body to get new customers, or to maintain the original high-end positioning to stabilize the original fans? It becomes a dilemma for lululemon.
Taking the selection of brand ambassador Jia Ling this time, this move is seen by clothing industry insiders as a signal that lululemon is turning to the mass market. After seeing Jia Ling's endorsement, some fans called out that they had found the right person, and her endorsement can more perfectly interpret the brand's fitness beauty and sports beauty.
But in the eyes of another part of lululemon fans, lululemon is a representative of mid-to-high-end yoga wear, and its brand power is more reflected by its own products than by mass stars.
A female user who has been buying and wearing lululemon for many years complained to "City Circle", "For me, Jia Ling's tone is not compatible with lululemon. I haven't seen a professional actor. ”
▲(lululemon官网首页截图)
Cheng Weixiong also expressed a similar view on "City Boundary", not to mention that Jia Ling's movie is about boxing, and yoga represented by lululemon are two tracks. "Jia Ling's weight loss story is full of commercial promotion, which is a deviation from lululemon's professional IP positioning."
A report on lululemon's marketing and operation by Tianfeng Securities has pointed out that compared with traditional sports brands such as Nike and Adi who pay high fees to find celebrity endorsements, lululemon has a large number of brand ambassadors, and most of them are professional sports athletes.
The report's former international brand ambassadors include NBA player Kyle O Quinn, professional triathlete Flora Duffy, professional skier Craig McMorris, and Chinese brand ambassadors are also yoga instructors Lin Min. It can be seen that inviting celebrities to endorse and promote is indeed a break from common sense for lululemon.
Cheng Weixiong also mentioned that even if Jia Ling attracts a wider range of new users, "it remains to be considered whether those people are the high-repurchase and high-net-worth people that lululemon wants." After all, ordinary people with a monthly salary of several thousand yuan do not have the ability to buy yoga pants that cost thousands of yuan every day. This leads to one of the biggest points of controversy surrounding lululemon - expensive.
In the store, the lowest price of a yoga mat is 340 yuan, a casual light T-shirt costs more than 500 yuan, and a pair of yoga pants can easily cost thousands of yuan, and it is rarely discounted, many netizens compare it to a "middle-class harvester".
It's expensive. lululemon has been publicly reported on more than one occasion for quality issues. In 2019, lululemon was fined more than 80,000 yuan by the Shanghai Regulatory Bureau for passing off substandard products as qualified products. During 618 this year, a woman revealed that she bought a pair of pants with a discounted price of more than 400 yuan at lululemon's official flagship store, but when she received the goods, she found obvious stains on her crotch.
It is worth mentioning that lululemon revealed in its 2023 financial report that 40% of the company's fabrics come from Taiwan, China, 26% from Chinese mainland, 12% from Sri Lanka, and the rest from other regions. But at the same time, the earnings report said, "We don't have long-term contracts with most suppliers or manufacturers." In addition, because we hold limited patents and exclusive intellectual property rights in the technology, fabrics, or processes behind our products, our current and future competitors are able to manufacture and sell products with similar performance characteristics, manufacturing techniques, and styles. ”
When consumers perceive lululemon's lack of cost performance, some replacement brands have growth opportunities, such as: fitness blogger Chen Nuanyang's women's sports brand "Runaway Loli", Taobao flagship store monthly sales have reached 40,000 pieces; ANOTHER FLAT ALTERNATIVE TABLE, MAIA ACTIVE, PUBLICLY SHOWS THAT ITS SALES IN 2021 HAVE EXCEEDED 300 MILLION, WITH AN AVERAGE ANNUAL GROWTH RATE OF 166%.
In addition, there are such things as Particle Mania, VFU, GIGT, etc. The point is that the price of these cutting-edge brand yoga pants is only one or two hundred yuan, which is obviously more cost-effective than lululemon's thousand-yuan yoga pants.
Under the temptation of low prices, some people who want to buy lululemon but can't afford it have a place to buy. Even some of lululemon's original fans, like the "mutineers" in the United States, abandoned lululemon. It is equivalent to lululemon using years of defying the law to feed the competitors who encircled and suppressed it, but its cake was eaten.
Perhaps they realize that China has a long way to go for growth. While opening a store, lululemon expanded its product line, and began to develop a product line of shoes, men's clothing, accessories and other products in addition to yoga wear.
In the distribution of Sanlitun stores, the first floor is men's clothing, and the second and third floors are women's clothing. In the first quarter, men's clothing increased by 15% compared to the 10% revenue growth of women's clothing. lululemon plans to double revenue from its menswear business by 2026 and accelerate its expansion in key regions such as China to gain its market position in men's athleisure.
Cheng Weixiong believes that "as a listed company, it is normal for business diversification, but considering that men's consumer demand is not as strong as women's, lululemon's future focus should be on women's products." ”
Overall, lululemon is relying on the current growth of the Chinese market to support the desire for future growth. But it must be admitted that the Chinese market cannot grow so fast all the time, and one day it will encounter a bottleneck like the US market, and the long-term question for lululemon is what to do next when it is also tired of Chinese consumers.
Author | Chen Chang
Edit | Han Zhongqiang
Operations | Zhang Daxing