Thanks for Visiting!

Register for free to get the full story.

Sign Up
Already have a Placer.ai account? Log In

Lululemon's Rising, But Can It Avoid This Key Expansion Risk?

By 
Ethan Chernofsky
June 18, 2019
Lululemon's Rising, But Can It Avoid This Key Expansion Risk?
SHARE
Explore our free tools to get timely insights into key industries
Check out the latest trends for
No items found.
Key Takeaways

In a major win for the world of offline retail, Lululemon posted quarterly numbers that beat expectations and enabled the company to raise their guidance for 2019. Lululemon rode a strong brand, beloved products, and a unique ability to own a specific market segment to impressive revenue and same-store sales growth in early 2019.

We dove into their location analytics to see if the foot traffic data matched the performance and whether that success has sustained into Q2.

Consistent Growth

Lululemon’s revenue jump was reflected in foot traffic as well, where the brand saw traffic increases throughout Q1 and into Q2. In fact, analyzing foot traffic compared to the baseline for the first five months of 2019 saw three times in Q2 where the metric came in 100% or more above the 2019 baseline.

This speaks to the unique ability of the brand to drive consistent interest and self-produced peaks whether they align with Easter, Mother’s Day or Memorial Day. It also indicates the continuation of the positive momentum the brand created in Q1.

The Risk

The quarter's success was so impressive that it provided further support to the company's aggressive expansion plan. But as with any retail brand, there is a unique risk in periods of growth - primarily the creation of long term inefficiencies. This can be a more serious risk for a brand that has a city-centric growth approach where much of the initial expansion is focused around areas of existing strength. Taking a look at Lululemon’s store locator shows a heavy focus on major cities - with expansion happening in those cities and the surrounding areas.

While a strategy of this kind makes sense - there are lots of people in cities, and there is a proven demand - it also puts companies at risk of cannibalization. And there are indications in several cities that this specific issue may be rearing its head for Lululemon.

Lululemon's Cannibalization Risk

For example, analyzing two locations in Austin, Texas shows a significant degree of overlap between the two sites. This doesn’t mean that either store isn’t performing, but does indicate a likelihood that either single location would be able to effectively serve the wider audience.

A similar challenge can be seen in three Chicago area stores where an analysis of customer overlap shows that there is a tremendous cannibalization risk for a store in Fashion Outlets Way.

It is possible that these specific sites are able to create the optimal and complementary location makeup for Lululemon to maximize revenue in the area. However, an ongoing strategy that doesn’t effectively maximize a specific location leaves opportunities on the table and increases the risk of ultimate store closings and relocations.

New ‘Agile’ Approach

Interestingly, Lululemon’s answer may be found in the new agile approach to store locations they announced in April. The use of different types of locations - defined by their size, permanence and experiential focus - could help the brand optimize their store mix. Taking the same Chicago example, while there is a strong element of cannibalization, each store has a specific strength that could be leveraged within the new model.

Analyzing the same three locations, one property sees an average visit duration that is 22% more than the other sites. This could point to a powerful capacity to create a more experiential location with a heavier focus on events and classes in the site already driving longer customer visits.

A second location sees a unique distribution of visits that drives customers to the store earlier in the mornings, compared to the other two sites.

From optimizing staffing to building a mix of stores that help serve a particular area to its fullest, there is a powerful potential to avail the wider spread of stores as a single path to serving a given location - especially one as big as Chicago.

Can Agility Overcome Cannibalization?

One of the biggest challenges that major brands have faced in expanding offline retail is determining how to effectively grow without hurting existing sites. While Lululemon shows no signs of slowing its powerful market takeover, the company will still need to grapple with this issue.

Whether Lululemon emphasizes spreading out stores to more effectively cover key regions, or leverages their agile approach to address a wider market with differentiated store types, much of Lululemon’s expansion success will rest on its ability to optimize their property mix.

Learn how downtown regions across US cities are measuring up with our free tools.
Check out the latest trends for
No items found.

Related Topics

Explore our free tools to get timely insights into key industries
Check out the latest trends for
No items found.
SHARE
Get 3 brand & industry
breakdowns every week
Subscribe to the newsletter
Oops! Something went wrong while submitting the form.

Get a Demo

Please enter your first name
Please enter your last name
Please provide a valid email
Please enter your email
Please enter company name

Thanks for reaching out!

One of our experts will be in touch soon

Try Placer.ai Free
Oops! Something went wrong while submitting the form.

Recent Publications

Get 3 brand & industry breakdowns every week

Subscribe to the newsletter
Superstores and Wholesale Clubs Ahead of the Holidays
Home Depot and Lowe’s Heading Into the Holidays
Starbucks and Dutch Bros: Short Visits Lead the Way
Planet Fitness: Raising the Bar(bell)
Checking in With Full-Service Restaurants: First Watch, Chili’s, and Outback Steakhouse
RBI and Yum!: QSR Resilience in 2024
Boot Barn and DSW: Stepping Up Their Game
Target’s October Circle Week: A Data-Driven Snapshot
Chipotle, Shake Shack & Wingstop: Dining Success in Q3 2024
Playa Bowls and Tropical Smoothie Cafe: Berry Big Business
Cheesecake Factory & BJ’s Restaurants: Full-Service Success
Checking in on McDonald's and Wendy's 
Sprouts Farmers Market: A Specialty Grocer With a Traditional Twist
CAVA: The Craze Continues
Placer.ai Reaches $100M Annual Recurring Revenue
Catching Up With Carter's 
A Texas Roadhouse and LongHorn Steakhouse Showdown
Placer.ai Mall Index: September 2024 Recap – Labor Day Peaks and Holiday Season Predictions
Albertsons Q3 Check-In
Looking Ahead to the 2024 Holiday Season
Trader Joe's: Continuing to Thrive in 2024
Bowlero and AMF: A Ten-Pin Knockout
Recreational Retail: Store Performance in 2024
Placer.ai White Paper Recap – September 2024
A QSR and Fast-Casual Face-Off
Sam’s Club’s In-Store Retail Media Network Opportunity
The Rising Stars: Six Metro Areas Welcoming Young Professionals
Costco in 2024: A Deep Dive
Sherwin-Williams in 2024: Brighter Than a New Lick of Paint
Life Time and Orangetheory: Premium Fitness Flourishing
C-Stores: More Than A Pit Stop
Darden: Dining Dominance Undeterred 
Placer 100 Index for Retail and Dining: August 2024 Recap
Placer.ai Office Index: August 2024 Recap
Placer.ai Mall Index: August 2024 Recap – Back-To-School In Full Swing
Auto Parts Retailers: The Traffic Continues
Pumpkin Spice Works its Magic Once Again
School Season Sparks Retail Growth
Placer.ai White Paper Recap – July & August 2024
Big Lots’ Big Rightsizing Move in Four Data Points
Fun Away From The Sun: Checking in With Eatertainment
Domestic Migration and Population Growth: Strong Currents Off The Carolina Coast
The Civic Impact of Summer Events
Retail Trends in College Towns: A Back-to-School Snapshot
Five Below and Ollie’s Bargain Outlet: Consumers Still on the Hunt for Discounts
Macy’s & Bloomingdale’s: Into 2024 and Beyond
Limited Time Only: The Trend Continues
Beauty in 2024: Many Ways to Win
Dollar General & Dollar Tree: Powering Ahead in Q2 2024
The Home Depot and Lowe's Foot Traffic Remodel in Q2 2024
Superstore Update: Summer Savings Spree
Placer.ai Mall Index: July 2024 Recap – From Fourth of July to Back-to-School
Placer.ai Office Index: July 2024 Recap
Summer Movie Madness: Blockbuster Films Boost Foot Traffic
Driving Success: Toyota in 2024
Denny’s and IHOP: An All-Day Breakfast Matchup
Warby Parker: Seeing Clearly Now
Planet Fitness at the 2024 Halfway Point
Serving Summer 2024: RBI and Yum! Brands Q2 Foot Traffic
Starbucks, Dutch Bros., Dunkin’: Finding Summer Success
Fast Food and Fast Casual Favorites, Plus CosMc’s Takeoff
Chipotle and Sweetgreen: Fast-Casual in Q2 2024
First Watch, Texas Roadhouse, and Applebee’s: An FSR Roundup
Albertsons Companies: H1 2024 Recap
Teaming Up For Success: Sports Stadium Sponsorships
Limited Time Offers: Price Wars Boost Visits
Placer 100 Index for Retail & Dining: June 2024 Recap
Placer.ai Mall Index: June 2024 Recap
Placer.ai Office Index: June 2024 Recap
Inside Out 2: The New Blockbuster Bringing Crowds Back to Theaters
Petco and PetSmart: A Head to Head
Frozen Delights: Exploring Ice Cream Chains Across America
Placer.ai White Paper Recap – June 2024
Barnes & Noble: Writing a New Story
Small Format Stores - Sprouting, Blooming, and Expanding
Retail and Dining on Father’s Day
Thrift Store Visit Scores
Charting Value Grocery’s Visit Growth
Placer 100 Index for Retail & Dining: Introduction and May 2024 Recap
Digging Into Darden: Q2 2024 Update
2024 Retail and Dining Trends Update
TRU and avid: Midscale Hotels on the Rise 
Diving Into Kroger: A Strong Start to 2024
Placer.ai Mall Index: May 2024 Recap – Mall Visits on the Rebound
Placer.ai Office Index: May 2024 Recap
2024 Memorial Day Recap
Las Vegas: A Tourism and Migration Deep Dive
Eatertainment Chains: Full on Food, Fun, and Foot Traffic
The Promise of Luxury Apparel
Catching Up With Ulta Beauty & Gap Brands
Ollie’s Bargain Outlet and Five Below: Q1 2024 Treasure Troves
CAVA Still Going Strong
Driving Success: Auto Parts Chains in 2024
Checking in With DICK’S Sporting Goods
Mother’s Day Shopping and Dining Trends
Placer.ai Mall Index: April 2024 Recap – Retail Resilience Heading into Spring
Dollar Stores Still Gaining Momentum
Off-Price Apparel Chains After Q1 2024: Demographics in the Balance
Walmart, Target, and Wholesale Clubs Continue to Thrive
Home Improvement and Decor Check In