Transferred from: financial sector
This article comes from: financial circles
Lululemon, a well-known yoga clothing brand, announced on Wednesday that Sun Choe, its chief product officer, has officially resigned. As soon as the news came out, LululemonAliantebingoThe share price fell by 7%.Aliantebingo.2%. It is worth noting that Choe has been in Lululemon for as long as seven years, and his departure undoubtedly shocked the market. More interestingly, Lululemon's share price has fallen nearly 41 per cent since the start of the year.
Still, Lululemon's annual report for fiscal 2023 just released shows that the company's performance remains strong. In fiscal 2023, Lululemon's net revenue rose 19% year-on-year to $9.6 billion, comparable sales rose 13%, net profit surged 81.4% year-on-year to $1.55 billion, and gross profit margin rose 2.9% to 58.3%, according to the data. This series of eye-catching data shows that Lululemon still maintains strong profitability in the market competition.
Especially in the Chinese market, Lululemon's revenue in the fourth quarter of 2023 increased by as much as 78% year-on-year, which is undoubtedly an eye-catching achievement. However, despite the better-than-expected results, the group issued lower-than-expected North American market and full-year earnings guidance after the results, which led to the continued decline in Lululemon shares.
After an in-depth analysis of the financial data, we can find that the US market is still the bulk of Lululemon's revenue, accounting for about 80% of revenue. In the fourth quarter, however, revenue growth in the us market was only 9 per cent, down from 29 per cent in the same period last year. There is no doubt that this change has brought a lot of concern to investors.
In response, Calvin McDonald, chief executive of Lululemon, said: "outside the US, our business is still strong." His words revealed his confidence in the future development of the company. Indeed, globally, Lululemon's business is still growing steadily, especially in the Chinese market, where the growth rate is remarkable. However, in the face of the complex and changeable global market, Lululemon is also actively looking for new growth points. Since the beginning of this year, the company has accelerated the pace of full-category layout, especially men's wear and sports shoes. This strategy aims to broaden the product line and meet the needs of more consumers.
However, some market analysts expressed concern about this. They believe that Lululemon needs to be wary of falling into the "diversification trap" in the process of full product expansion. The so-called "diversification trap" refers to the phenomenon that brands that focus on a single characteristic may lose their core customers in the growth period, and the pulling effect of new products on performance is not as good as expected. This is no small challenge for any brand.
It is worth noting that in the Chinese market, Lululemon has begun a decline in product prices and market positioning adjustment. Yoga pants, which used to sell for about NT $1,000, are now priced as low as NT $400 to NT $500 at Tmall's flagship store. At the same time, the user group of Lululemon is also quietly changing, gradually expanding from the original yoga enthusiasts to a wider public. This series of changes shows that Lululemon is actively responding to market changes and striving to expand new customer groups. However, how to achieve full-category expansion while maintaining brand characteristics, and how to ensure product quality and brand image while the price goes down are all issues that Lululemon needs to seriously consider in the future development.