Vancouver-based Lululemon Athletica says it is on track to reach its 2023 revenue and earnings growth targets ahead of schedule and has unveiled a new five-year growth plan to double revenue to $12.5bn by 2026.
Building upon the momentum of the last three years and having successfully delivered its overall revenue and earnings goals early, Lululemon has announced what it describes as the new Power of Three ×2 growth strategy, which features its plan to double men’s and digital revenues, and quadruple international revenues relative to 2021.
The business plans to double its 2021 revenue of $6.25bn to $12.5bn by 2026 and expects significant growth across key pillars including product innovation, guest experience, and market expansion.
The Power of Three ×2 includes a plan to double men’s and digital revenues, and to quadruple international revenues relative to 2021. The company’s women’s business, store channel, and North American operations will continue to play an important role in the strategy, with women’s and North America each expected to generate low double-digit compound annual growth rates (CAGR) in revenue over the next five years, while stores are expected to grow in the mid-teens.
“The success of our Power of Three formula in delivering on our 2023 growth strategy supports our goal to double the business over the next five years,”says CEO Calvin McDonald. “We remain early in our growth journey, with our strong product engine, proven ability to create enduring guest relationships, and significant runway in core, existing, and new markets.”
Having grown revenue from $3.3bn in 2018 to $6.25bn in 2021, Lululemon says it will continue to focus on its three strategic pillars to fuel revenue growth over the next five years:
Product innovation: Having achieved its 2023 men’s growth target two years early, the company expects to double the size of its men’s revenues in 2021 by 2026, along with ongoing expansion in its women’s and accessories businesses. Lululemon will leverage ‘Science of Feel’, its distinctive lens for innovation, to innovate across categories, with significant runway within core performance as well as opportunities in ‘Play’, which covers tennis, golf and hiking, and new categories such as footwear, which was recently launched.
Guest experience: On top of a tripling of its digital revenue between 2018 and 2021, the company projects to double its digital revenues by 2026. To accomplish this goal, Lululemon says it will continue to create “world-class experiences” by harnessing the power of its guest relationships to build stronger connections across both physical and digital, cultivate its community, and inspire through innovation. Last week, the company announced the expansion of Lululemon Like New, the brand’s first trade-in and resale programme.
What’s more, building on learnings from its pilot membership programme, as well as the company’s vision to create a new path for connected fitness, Lululemon will launch a new, two-tiered membership programme later this year. The aim is to build stronger engagement with its brand, community, and products, to create the most immersive fitness marketplace in the industry.
Market expansion: The Company is on track to quadruple its international revenue relative to 2018 in 2022. Under its new Power of Three ×2 growth strategy, lululemon expects to again quadruple its international revenues relative to 2021 by 2026. With significant runway in both new and core markets, lululemon is focused on ensuring local relevance and deepening connection as it continues to introduce the brand to more communities around the world. Engaging guests in China Mainland, growing its core markets, and scaling and entering new countries across APAC and Europe will be key to delivering on its new goal. The Company also plans to open its first stores in Spain and Italy.
Impact: People and planet
Lululemon added its Impact Agenda priorities, including supporting its people and creating a healthier planet, to its successful Power of Three growth model. The new plan includes focusing on building an environment that is equitable and inclusive, advancing equity in wellbeing across its communities, and working to prevent environmental harm and helping to restore the planet.
In addition to doubling men’s and digital, and quadrupling international revenues, other key financial goals of the new Power of Three ×2 growth strategy include:
- Total net revenue CAGR of 15% between 2021 and 2026
- Modest operating expansion annually
- EPS growth to outpace revenue growth
- Annual square footage growth in the low double digits
“We are setting bold but realistic 2026 targets from a position of financial strength, while delivering on our 2023 goals with significant growth across our core business,” says CFO Meghan Frank. “We have a long runway ahead and are well-positioned to build on our strong momentum and deliver sustainable long-term value creation for all our stakeholders.”
Lululemon recently surpassed the $6bn in annual revenue milestone for the first time, reporting a 43% hike in net revenue to $6.3bn for the fiscal year ended 30 January.