Lululemon targets younger consumers with new ad campaign

Dive Brief:

On Monday, Lululemon launched “This is Yoga,” a new ad campaign that mixes yoga fundamentals with the Canadian retailer’s “athleisure” apparel, Fortune reports. The ads will run through July, according to the report.
For the campaign, Lululemon hired Vice Media's new ad agency Virtue Worldwide, which targets younger consumers, executives told Fortune.
Last year, Lululemon CEO Laurent Potdevin said that the company is anticipating the end of the its cornerstone athleisure style, saying the trend has become oversaturated by competitors.

Dive Insight:

Athleisure has been a hot commodity in an otherwise tepid clothing market, generating nearly $2 billion in apparel sales in 2014, according to market research firm NPD Group. That spawned concerted efforts from sportswear makers like Nike and Adidas and apparel retailers like Gap and J. Crew to compete in the space.

Potdevin has seemed prepared for the decline of the category, which the retailer and yoga wear maker arguably innovated. This new campaign aims to remind younger consumers that much of its apparel is less form-fitting and, therefore, less fitness-focused.

Last week, GlobalData Retail analyst Håkon Helgesen, in a note emailed to Retail Dive on Kohl’s recent partnership with Under Armour (which has also boosted its offering in the space), said that there is “weaker demand for athleisure” clothing. Last year retail analyst Jan Kniffen told CNBC that Lululemon will pay the price of being the space’s top downward-facing dog. "That piece of the business is not going to be there," Kniffen said then, adding that denim will soon reclaim a greater share of fashion sales.

Perhaps that’s why Lululemon’s new campaign also serves as a reminder that its garments are indeed focused on those heading to the gym.

Lululemon has struggled with quality and supply chain issues, which it has more or less corrected. More recently, it has faced a problem with its assortment. Its spring lineup lacked "depth and color … compounded with visual merchandising that did not powerfully translate our design vision,” Potdevin said on a March earnings call with analysts, according to a transcript provided by Seeking Alpha.

For full fiscal 2016, net revenue increased 14% to $2.3 billion from the previous year. Total same-store sales including e-commerce increased 6%, or by 7% on a constant dollar basis. Same-store sales increased 4%, or by 5% on a constant dollar basis. Within that, company-operated stores averaged sales of $1,521 per square foot. E-commerce net revenue increased 13% to $453.3 million, or 13% on a constant dollar basis. Gross profit for the year rose 20% to $1.2 billion, and as a percentage of net revenue was 51.2%, compared to 48.4% in fiscal 2015.