Seeking Alpha

Lululemon up and down as investors digest new direction

  • Shares of Lululemon (LULU +0.2%) are having a very bouncy day off the news the retailer found a new CEO.
  • The entrance of Lauren Potdevin to the top job at Lululemon is being overshadowed a bit by the exit of founder Chip Wilson who created a stinging backlash and potential overhang with his disparaging comments on the size of women's bodies.
  • Looking forward, Credit Suisse say the experience of Potdevin at Toms is a positive for the lifestyle brand.
  • Lululemon trades 14% off its YTD high, but some traders think the CEO hole was keeping the stock range-bound. Positive pricing checks on the retailer's holiday mix and a vibrant online business supports the case that margins are holding up.
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Comments (5)
  • imac007
    , contributor
    Comments (589) | Send Message
     
    Lauren Potdevin is a home run choice. He is an engineer with an MBA. He was President and CEO for Burton, the best in breed board company. They also had tech sports wear. He spent time as President of Toms, developing an international presence. He brings marketing experience of luxury sportswear to men. This just as pro athletes are embracing yoga and the men's line are starting to gain traction at Lululemon. My frugal daughter has gifted me both a shirt and a pair of pants which I absolutely love.

     

    In fairness, Chip Wilson defended the design of their line. Design is about form (look), and function (yoga gear). He said that they designed the clothing for a specific demographic. Those people who don't fit the demographic should not expect the same wear characteristics as those who it was designed for. Form suffers as a result. The author here has characterized Wilson's defense as making "disparaging remarks" about body size. Using the product outside its designed function has similar risks. It's not designed to function well if used to sit on concrete planters, curbs or steps, for example. Both form and function are placed at risk.

     

    Wilson also referenced the fact that they are a technology company. When the supply chain fails to execute design specifications, the result is a flawed product (see through Luon). Tech companies, like Apple, can issue an update to fix an issue. The Lululemon update requires a visit to the store. I think he is entitled to defend their design, only the media want to change the frame of reference. There is no controversy in innovation with an uncompromising commitment to quality design. The media try to create controversy in the founder's themselves. It is a badge of honor. The controversy has only elevated the branding of the company. Being third in terms of $/sq.ft on the retail scene doesn't hurt their credibility as a business either.

     

    The company reminds me of Apple. There have been detractors who claim both companies should offer different sizes and lower price points. Margins and limited options are cited as market share deterrents, stopping them from growing. The analysts fail to understand that uncompromising commitment to design is what differentiates these technology companies. They are experience companies with a stickiness to their culture. Once users experience the product, they don't want the alternative.
    10 Dec 2013, 12:18 PM Reply Like
  • lorneb
    , contributor
    Comments (203) | Send Message
     
    Imac007;

     

    Well said!!
    10 Dec 2013, 01:05 PM Reply Like
  • imac007
    , contributor
    Comments (589) | Send Message
     
    Thanx!
    10 Dec 2013, 01:47 PM Reply Like
  • Nebmarley
    , contributor
    Comments (11) | Send Message
     
    It makes me wonder the timing of the announcement. I had expected they would announce it on Thursday, along with their earnings release. Can somebody help me here? Thank you.
    10 Dec 2013, 05:59 PM Reply Like
  • imac007
    , contributor
    Comments (589) | Send Message
     
    Could be they thought they would get a double bump from the two potential catalysts. Uncertainty weighs heavy. Going into earnings without a stable management team in place could have deflected from a stellar report. This way earnings is about the actual numbers.

     

    One thing I find interesting is the parallels between the new CEO and Board Chair and the old CEO and Board Chair. Wilson and Potdevin were both board company CEO's. Both Day and new Board Chair Michael Casey, are graduates from the Starbucks corporate culture. Casey was Executive Vice President, CFO and Chief Administrative Officer, Day was President of Starbucks Asia Pacific division. Both were at Starbucks over 20 years. The best of breed mindset that founded the company and the mindset that drove retail sales have been preserved in the mix.
    10 Dec 2013, 07:07 PM Reply Like
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