March 28, 2014, 2:28 PM

Despite a troubled year, LuLuLemon grows e-commerce

The last year was one of quality control problems, public relations glitches and a change in CEOs, but annual web sales for LuLuLemon grew 33%.

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The last year was one of quality control problems, public relations glitches and a change in CEOs, but in the end online shoppers still gave LuLuLemon Athletica Inc. plenty of business in 2013.

For the year ended Feb. 2. LuLuLemon, No. 122 in the 2013 Internet Retailer Top 500 Guide reported:

  • Web sales, which the company refers to as direct-to-consumer, increased year over year 33.4% to $263.1 million from $197.3 million in 2012.
  • Total sales grew year over year 16.1% to $1.59 billion from $1.37 billion.
  • Comparable-store sales increased 4%.
  • Net income increased 3.0% to $279.5 million from $271.4 million.
  • The web accounted for 16.5% of all sales compared with 14.4% in 2012. 

LuLuLemon, a manufacturer and retailer of specialty athletic apparel such as yoga pants, dealt with some tough public relations and quality control problems last year. In March 2013 LuLuLemon recalled a certain type of yoga and workout pants after consumers complained loudly in the press and on social media about the see-through nature of the garment. Next the retailer dealt with a major public relations problem when founder and chairman Chip Wilson during a cable news interview said that certain women might be in part the cause of the garment sheerness problem because of their body type and inability to correctly wear a certain type of yoga pants. 

In conjunction with its product quality and public relations problems, CEO Christine Day in June announced she would step down by the end of the year. She was replaced in December as chief executive by Laurent Potdevin, who previously worked as president of TOMS Shoes.

With a new CEO LuLuLemon is now looking at new ways to reach out to athletic apparel shoppers, regain trust and grow e-commerce. To facilitate faster fulfillment LuLuLemon in the final six months of 2014 will open a second distribution center near Columbus, OH, Potdevin told Wall Street analysts on the company’s recent year-end earnings call. 

Going forward LuLuLemon also will work to include a broader number of products on its e-commerce sites, although Potdevin didn’t release details. “Our people are looking at that constantly, especially as we grow our product offering, as we grow our men’s business and as we start touching different regions,” Potdevin told analysts. “Our e-commerce environment is really going to be a platform where we can engage the guest in a much broader assortment.”

LuLuLemon also is taking steps to rebuild trust with its customer base. In October LuLuLemon announced the hiring of several new product and quality control executives such as new chief product officer Tara Poseley who previously served as interim president at Bebe Stores Inc., as president of Disney Stores North America and CEO of Design Within Reach Inc. “We are returning to our design-led roots, fine-tuning our supply chain, and sourcing and providing an exceptional and inclusive guest experience,” Potdevin told analysts. 

LuLuLemon in the fourth quarter reported:

  • Direct-to-consumer, which represent all web sales, increased year over year 24.9% to $97.8 million from $78.3 million in the last quarter of 2012.
  • Total Q4 sales grew year over year 7.3% to $521.0 million from $485.5 million.
  • Comparable-store sales decreased 2%.
  • Net income was flat at $109.7 million.
  • The web accounted for 18.8% of all sales compared with 16.1% in 2012.

LuLuLemon also made some strides in improving customer service in the last quarter of the year, says customer service measurement and research firm StellaService. LuLuLemon connected customers to a live agent in under a minute, even during customer service crises, StellaServices say. The e-mail response time in the fourth quarter, averaged about 14 hours and LuLuLemon delivered purchases via standard shipping in about 4.5 days. “Despite supply chain woes that likely created strain on the customer service department throughout 2013, LuLuLemon’s actual customer service performance was respectable,” StellaService says.

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