* Stock dropped when retailer confirmed holiday sales
* Some investors skittish as competition heats up
* Shares drop 1.8 pct to $68.22 on Nasdaq
Jan 16 Lululemon Athletica Inc
attracted so many shoppers during the holiday season that some
stores had trouble coping with the traffic, the yogawear
retailer's chief executive said, while also conceding that some
of the chain's new products fell flat.
CEO Christine Day, speaking at an investor conference on
Wednesday, said some stores had lines of 50 to 70 people long,
with customers waiting an hour just to buy a gift card.
On Monday, Lululemon caught the market off guard when it
released new estimates for its fiscal fourth quarter, ending
Feb. 3, that showed a sharp deceleration in same-store sales
growth. Lulu trades at a premium, and the market has come to
expect stellar sales growth every quarter.
"I think our product in the fourth quarter was some of the
best we've ever had," said Day. "That said, as you kind of
transition into a more technical space, particularly in Canada,
coming from our grassroots of really yoga and a little bit more
casual wear, for us there were some misses."
Day did not single out specific products. She said the
company also needs to make sure it carries enough products at
"gift-giving price points."
Lululemon has carved out a profitable niche selling
fashionable, pricey workout gear to women. One of very few
Canadian retailers to succeed in the United States, the chain is
expanding in Europe and Asia over the next two years, and it has
small but growing lines for men and girls.
Investors are split on whether Lulu's rapid growth can keep
pace with lofty expectations as more competitors, such as Gap
Inc's Athleta banner, muscle into its territory,
offering similar gear at lower prices.
On Monday, Lulu said it saw same-store sales growth in the
"high single digits" for the fourth quarter, well below its 26
percent growth a year earlier.
BOOSTING ONLINE, DISTRIBUTION
When it comes to holiday traffic, the issue was not that
Lululemon's highest-volume stores "maxed out," Day said.
Instead, some locations with slightly lower volume than those
top stores, especially those with newer managers, struggled to
handle the crowds.
Next year, those managers will have more experience, a new
handheld payment system will help cut down on lines and gift
cards will be available online, she said.
Day said Lululemon will also improve its distribution system
on the U.S. East Coast so it can replenish stores more quickly.
DEALING WITH HOLIDAY DISCOUNTS
Lululemon charges a premium for its goods - the brand made
workout apparel fashionable with signature $98 yoga pants - and
it sells very few products at a discount.
Day, speaking at the ICR XChange Conference in Miami, said
the pricing strategy is working.
"We recognize, though, that the consumer is changing, and we
have to change who we are, as it's going to a more discount
holiday, more gift cards during the holiday season to be
redeemed after at sales," she said.
"We're up for that game, and we have a lot of things that
we'll be implementing next year to play in that changing
Shares of Lululemon were down $1.25, or 1.8 percent, at
midday on Wednesday on the Nasdaq.