Supply Chain Matters provides our readers periodic updates to current examples of how supply chain snafus can impact business performance.
We specifically have provided ongoing commentaries related to Lululemon Athletica and its prior sourcing and production snafus of its most popular line of yoga pants for women. Readers will recall that in March of 2013 this global B2C online and brick and mortar specialty retailer was forced to both recall and stop selling its most popular line of women’s summer yoga pants after discovering that the “sheerness” of the fabric allowed too much to be seen underneath. The CEO was compelled to publically apologize to customers for the problem and a short time later, announced her desire to step down from her CEO role due to personal reasons. Later in 2013, both a new CEO and Chief Products Officer was brought on-board, unfortunately too late to make any influential impact regarding the 2013 holiday buying period.
This week the specialty retailer reported financial results for its quarter that ended February 2. Revenues were up 7.3 percent but sales excluding newly opened stores dropped by 2 percent. Profitability was nearly flat with the earnings reported in year earlier quarter. Lululemon management again indicated on the conference call with equity analysts that forecasted revenues in the first half of this year will be constrained because the retailer did not order enough seasonal merchandise to accommodate demand for its products. Orders for seasonal merchandise were placed 6 to 9 months prior. The company’s stock was down over 13 percent this year but has rallied on the latest earnings news.
A summary of reported earnings reported by the Wall Street Journal noted: “Lululemon changed its CEO and chief merchant, beefed up its supply chain staff and implemented new controls, but suffered weaker sales over the past year after a long run of fast growth.” The publication further quoted the new CEO of Lululemon as indicating; “We are chasing some product… We can’t move as much product as we’d like on such a short lead time.”
While Lululemon is making its much needed investments in its supply chain capabilities, our general and specialty apparel supply chain readers are fully aware that 6 to 9 month lead times in today’s dynamic world of fashion and online commerce occurs at a far faster clock speed. Retailer Zara, a division on Inditex as long has been the benchmark in supplier responsiveness and apparel supply chain agility, moving from new product design to in-store inventory in a matter of a few weeks.
From our lens, it would seem that Lululemon has further work to do around supplier responsiveness with a far tighter connection of product design, consumer and supply chain response.