Under The Outbreak, Lululemon Sold Off Its Inventory For The First Time In Three Years

Lululemon athletica Inc., a Canadian Yoga apparel retailer, has been cautious about discounts. Surprisingly, it quietly launched a five-day discount promotion in online stores. This is lululemon's first discount promotion in three years in its direct marketing channels (including online and stores).

At lululemon's online stores, most of the clothing and accessories worn by men, women and girls are on sale. Take the brand's most popular women's Yoga Leggings as an example. The original price of $128 is now down to $79.

In the past, financial analysts often praised lululemon's refusal to offer discounts, which were common to many of its competitors. Analysts believe that consumers become so addicted to discounts that they are no longer willing to buy in full, so big discounts can erode profit margins.

This is one of the biggest problems troubling the retail industry in recent years. American brands such as gap and Victoria's Secret attract customers through sales promotion. In recent years, discount signs have always been put up in the windows of these brands.

The latest quarterly report shows that lululemon, like many of its competitors, has been affected by the epidemic. Although lululemon's online business has performed strongly in the past few months, sales in the latest quarter were down 17% year-on-year as stores were forced to close for months and the physical retail business shrank.

Generally speaking, retailers in the United States will start large-scale discounts on Independence Day (July 4), rather than after this week. Therefore, lululemon's "abnormal move" has caused many people's concern that lululemon may have overstocked inventory, which means that their sales and profits may not be as optimistic as many people think, but many analysts do not think so

And in view of the new approach to inventory reduction, one of the analysts wrote on Thursday. A variety of large-scale promotion measures have been taken to ensure that the inventory management will not continue in the remaining period of this year

The analysts also said they thought it would be better for lululemon to choose to sell inventory at one time rather than keep them in the backlog.

"Historically, one-off promotional inventory clearance has been a quick, efficient, low-risk way to dispose of excess inventory without permanently damaging brand equity," they said. In fact, (lululemon) inventory promotion frequency is very low, and the time is very short, so we think that this gives customers a chance to "pick up the leak", and should not equate it with the discount behavior that damages the brand value. "

Lululemon's share price was up 1.7% to $315.08 as of Thursday's close, although it fell 1% in pre market trading. Lululemon is considered by analysts to be one of the beneficiaries of the outbreak, because people have to work out at home. The group's share price has risen by more than 30% since 2020.

In addition, lululemon has just acquired mirror, a New York home fitness equipment manufacturer, for $500 million, in line with the "post epidemic era" trend of home fitness.