Lululemon is avoiding the retail industry's worst trend
The brand avoided making steep discounts this holiday season, Sapna Maheshwari of Buzzfeed has reported.
At the ICR Conference in Orlando, CEO Laurent Potdevin said that the company sold 90% of its apparel at full price between Cyber Monday and Christmas, Maheshwari notes. She also says that he said that the company said sold 85% of its merchandise at full price for the quarter so far.
In a recent release, Lululemon revealed that it had strong holiday season results.
"We had a very successful holiday season driven by strong execution in stores and online during the key holiday weeks. Sales for the fourth quarter are exceeding expectations and gross margin rates and expenses remain in line with prior guidance. We are looking forward to 2016 and will enter the year with a very strong leadership team across the company that is relentlessly driving our strategic priorities and long term vision," Potdevin said in the release.
This is a huge feat.
The holiday season is a notorious for promotions, and sales, while fun for cash-strapped consumers, are detrimental to businesses.
During a third quarter earnings conference call, Art Peck, CEO of Gap Inc. - which has suffered multiple blows - stressed how the fourth quarter "is always a very promotional quarter."
Another retailer that has had to consistently put its apparel on sale is the struggling J. Crew.
A walk through J. Crew's stores proves how the store has had to resort to frequent discounts. J. Crew also opened a cheaper counterpart this past year, J. Crew Mercantile. This low-priced version of J. Crew is similar to its factory store, and therefore runs the risk of devaluing the brand as a whole.
"One only has to look as far as brands like Coach or Michael Kors to see the dangerous opiate that off-price distribution can become," Doug Stephens of The Retail Prophet told Business Insider this summer, when the news of J. Crew Mercantile made waves. "The volume outlet malls promise is compelling but the collateral damage to the brand - particularly among loyal full-price customers - is often next to irreparable."
Obviously, a sale is not the same as opening an outlet store, but it still shows consumers that they can get typically expensive apparel at cheaper prices. Once consumers get used to bargain bin prices, it's hard to condition them to want to purchase things at full price.
That is, unless, there's a product that consumers are willing to purchase at full price, which ostensibly, Lululemon has.
Lululemon has been poised for tremendous growth in 2016.
Wells Fargo analysts pointed to three changes the brand would be make to send sales surging: improved designs, improved production, and a tightened supply chain.
Wells Fargo wrote in a research note that the updated supply chain, in particular, "should allow for tighter inventory management going forward," and therefore it should help the brand avoid such sharp discounts.
Still, some people still flock to Lululemon's "We Made Too Much" section on its website. But on the flipside, Lululemon has diehard fans who rush just as quickly to sweep up new apparel at full price.