Lululemon CEO Looks Beyond Yoga Wear for Growth

Lululemon Athletica Inc (NASDAQ:LULU), best known for its trendy yoga wear, hopes to drive growth in coming years by expanding its range of fitness-related apparel and accelerating international plans, its newly appointed chief executive said on Thursday.

Laurent Potdevin, who was recruited to revive the company's fortunes after an embarrassing recall and supply chain issues last year raised questions about growth prospects, made the comments in Vancouver at the retailer's analyst day.

He said the company's casual wear, which uses many of the fabrics and technology developed for its yoga gear, would become a key component of its growth.

Lululemon's push into other product lines comes as it faces stiffer competition in the niche market it once dominated.

The company, which eschews traditional advertising for word-of-mouth branding, recently launched a limited collection of casual fitness wear called "&Go" to test demand.

"The recent success of our &Go capsule, which I'm sure you've seen, speaks to the elasticity of the brand," said Potdevin during his presentation.

"This lifestyle product collection resonated with our guests exceptionally well and will become an important part of our collection."

But Vancouver-based Lululemon, which opened its first European store in London earlier this month as part of its international drive, is still dealing with the fallout from last year's recall of yoga pants that proved too see-through.

The company, which once boasted same-store sales growth of more than 30 percent, reported its first decline in quarterly comparable sales since 2009 last month, hit by weak post-Christmas holiday sales.

The company's rapid growth in recent years, combined with its March 2013 recall, caused supply chain issues last year. Delivery problems of products to stores and an overhaul of the company's quality control have hampered performance.

The problems, combined with comments by the company's founder that some women's bodies "don't work" for its yoga pants, put a blemish on the company's feel-good, inspirational image.

Still, Potdevin said sales at the new London store, key to the company's plans to accelerate its European roll-out, were exceeding its target by 60 percent.

He sought to reassure analysts that Lululemon was focused on making sure its infrastructure could support its expansion plans, bring products to stores more quickly, and still be efficient enough to maintain strong margins.

Executives on Thursday repeatedly underscored Lulu's role in creating what became an extremely hot market as it presented some of its new products, which included samples of its growing men's and young girls collections.

Potdevin said its men's line could eventually become a billion-dollar business and its Ivivva stores for young girls had a half billion-dollar potential. The standalone Ivivva stores were currently seeing sales of $900 a square foot, with double-digit comparable-store sales growth, executives said.

(Editing by Jeffrey Hodgson and Matthew Lewis)