Lululemon, the style model that helped outline “athleisure” to buyers world wide, was one of many latest entries on this 12 months’s Fortune 500, which ranks U.S. corporations by income. The attire maker, led by CEO Calvin McDonald, debuted in 461st place on the again of $8.1 billion in income for 2022, an almost 30% improve from the 12 months earlier than. Lululemon now makes almost three times as a lot income because it did in 2018, when McDonald turned CEO.
However how was Lululemon in a position to persuade buyers to pay a premium for its clothes, equivalent to a pair of leggings that may promote for upwards of $100?
For McDonald, Lululemon’s success boils all the way down to innovation. “When I look at a lot of the successes that we have today, they’re rooted in the differentiation of the brand…[with] a margin structure that allows us to put innovation into a product that our competitors just simply cannot [match],” he mentioned in a recorded interview for Fortune China’s China 500 Summit in Shanghai on Nov. 9.
The Lululemon CEO identified that the model doesn’t comply with the season mannequin utilized by most retailers, the place many collections are designed round spring/summer season or fall/winter collections. A extra secure product lineup helped Lululemon handle the disruptions of the COVID pandemic.
“We’re not season to season, we don’t build our business through collections,” McDonald defined. “So we were able to take on arguably greater inventory with less risk that allowed us to satisfy the demand, acquire the new guests and work our inventory down without having to promote and discount and maintain a premium status of the brand,” he mentioned. (Lululemon calls its prospects “guests”)
The model’s success now permits it to enlarge and bolder investments, together with taking “a leadership position in a lot of the innovation in and around materials,” McDonald mentioned. He cited just a few examples in his interview, together with making attire utilizing supplies from partly plant-based sources, and recycling textiles to show outdated attire into new merchandise.
Previous to becoming a member of Lululemon as its CEO in August 2018, McDonald spent two years because the president of Sears Canada, adopted by 5 years as CEO for the Americas for make-up model Sephora.
Rising globally
McDonald and Lululemon have large ambitions. The CEO advised traders final 12 months that he wished the corporate to generate $12.5 billion in income by 2026. On the China 500 Summit, McDonald says the model is now increasing to “creating solutions for unmet needs,” together with new choices in menswear, workplace apparel, {golfing} and mountaineering.
A giant a part of Lululemon’s story is China, now the corporate’s third biggest market behind the U.S. and Canada. The style model is rising extra common within the Chinese language market as customers focus extra on general health and wellness. Lululemon’s technique of constructing communities has additionally construct the model in China, equivalent to internet hosting yoga occasions or its “Summer Sweat Games” sporting competitors.
And in response to McDonald, there’s nonetheless big world development potential for the athleisure model. “We’re in 25 markets today, and [in] every market we’re growing double digits,” he mentioned.
Fortune’s Brainstorm Design convention is returning on Dec. 6 on the MGM Cotai in Macau, China. Panelists and attendees will debate and talk about “Empathy in the Age of AI” or how new applied sciences are revolutionizing the inventive business.
