Companies & Industries

Lululemon bets that its next big market can be men’s fitness gear

Too girly?

Photographs by Nikki Ormerod

Photographs by Nikki Ormerod; Photographed at Barreworks Studio, Toronto

On a recent Friday afternoon in downtown Toronto, Christine Day, the CEO of Lululemon, was standing in front of a group of business people, talking about her underwear. Day was addressing a lunch meeting of the Toronto Region Board of Trade. And like any good retailer, she was also pushing her product—on this day a line of men’s underpants called the Game On boxer brief. The underwear, Day said, was enormously popular with NHL hockey players. In fact, she claimed, citing a secret survey conducted by her company, her brand was quietly tops in the league. “We are,” she says, “the underwear of choice.”

At first glance, Day’s enthusiasm for men’s unmentionables that day might have seemed out of place, or at most a throwaway joke. Lululemon has long been a women-centred brand; men have never been more than peripheral to its sales. But in the past year, the company has been dropping more and more hints that men will play a much larger role in its future. At an investors’ conference in January, Day called menswear “an enormous growth lever” for the company. In an earnings call at the end of March, she announced a new line of men’s golfwear that would be available in time for Father’s Day. The company has recruited a volunteer army of decidedly manly men to champion its products. And in some stores, menswear has been pulled from the corners and pushed out to the front, all the better to attract men who might be walking by.

Less than two years ago, men’s clothing sales made up just 8% of Lululemon’s revenues. In the next several years, the company hopes to more than double that, to about 20%. That might seem antithetical for such a heavily feminine brand. But Lululemon has good reasons to be looking beyond its traditional core. Chip Wilson, Lulu’s founder, built his empire on a story about women and yoga and looking really great in clothes that also felt really good. But today that story—just like a recent batch of Lululemon pants that were recalled for being see through— is starting to look a little thin.

Pace Breaker shorts | $64

Pace Breaker shorts | $64

With a stock priced for heavy growth, and an executive team wary of adding new stores too quickly, the company needs to start targeting new customers in its existing markets, fast, if it hopes to keep shareholders happy. But making men part of that mix comes with significant risks, like muddying the company’s carefully nurtured public identity. Worse still: men might not be interested. The Lululemon logo has spent a decade associated with yogic “oms” and butt-hugging pants. It’s worth asking: Is that still too girly for the average guy?

To understand why executives at Lululemon believe they can break through with men, especially in Canada, it helps to visit a barren strip mall in suburban Mississauga, a half-hour drive from downtown Toronto. Wedged between Portuguese and Korean restaurants is a thin storefront that opens into a barren gymnasium. On the inside, the gym looks like a slightly oversized storage locker, or possibly the hidden training ground for a group of Jason Bourne– like assassins. The walls are concrete. The equipment is Spartan. Everything smells a bit like cured meat.

Dispatch hoodie | $108

Dispatch hoodie | $108

Out back, in an alleyway, Andrij Kotowych is yelling at a group of shivering fitness nuts warming up before a workout. “Jason!” he bellows at one. “You love running!” Kotowych looks like everything Lululemon isn’t, or at least it hasn’t been until now. For one thing, he has the build of an amateur wrestler, not a yogi. His legs are slim and muscular. His chest is thick. His arms pop out just slightly from his torso. He can, he says, squat exactly 405 pounds. But Kotowych is dressed this day, as he is most days, in Lululemon shorts and a Lululemon sweater.

Kotowych teaches classes and competes in Crossfit, a kind of frenetic fitness regimen that combines Olympic weightlifting and lung-busting cardio routines. He is also a Lululemon “ambassador.” He wears the clothes and spreads the gospel of the company as a semi-official, unpaid representative.

The ambassador program is nothing new for Lululemon. For years, it’s been the company’s No. 1 marketing tool, a way to reach communities in an authentic way without blowing money on expensive endorsements. But, until recently most ambassadors—who usually receive some free clothing for their services—had been women and yoga coaches, not muscle-bound, bearded men.

That’s beginning to change. By reaching out to more men like Kotowych, Lululemon is putting its product in front of more men and, crucially, giving those men social permission to buy it. The belief is, if men try the clothes once, they’ll come back for more. And when they do, they’ll buy it in bulk, which men are much more likely to do than are women.

That was certainly the case for Kotowych. He noticed other men in Crossfit wearing Lululemon after he got involved in the sport about three years ago. He tried the company out and now considers it his default for athletic wear. And he says he doesn’t worry that it might make him look feminine. “I went in there and said, OK, they have a men’s section,” he says. “They have stuff for guys. It’s not a big deal.”

Low-Profile Ultimate socks | $14

Low-Profile Ultimate socks | $14

But the ambassador program is only the beginning for Lululemon. The company recently poached Felix Del Toro, a veteran of Gap and Warnaco—which designs and sells Calvin Klein apparel—to be its new senior vice-president and general manager of men’s. It’s also expanding its men’s clothing lines to appeal to more than just the Kotowychs of the world. By selling more golf shirts and the like, executives hope to bring in a slightly older, and likely wealthier, male shopper. Some of the stores, too, are being reorganized. At the Eaton’s Centre location in downtown Toronto, men’s clothes are the first thing you see when you walk in the door. All of that, Lululemon hopes, should add up to a significant boost in men’s sales.

The company is already starting to see some return from its efforts. Menswear accounted for 15% of Lululemon sales over the holiday season. A good chunk of that likely came from women buying clothes for men, as opposed to men buying it for themselves. But for the company, it was a promising result.

At the same time, if you look at Lululemon’s balance sheet, it’s not immediately clear why it needs the help. The company saw its gross profit climb 34% to $762.8 million in fiscal 2012. Comparable store sales rose 16%, and, on a sales-per-square-foot basis, Lululemon is still the top-performing apparel retailer in North America. In the new year, Lululemon will open new stores in the United States and Canada, as well as in new markets in Europe and Asia.

For analysts, though, that kind of growth won’t be enough to keep the company thriving. “Simply growing by adding new locations is not sustainable in the long run,” says David Ian Gray, an analyst at Vancouver’s DIG360. To meet expectations, Lululemon also needs to drive new revenues from the stores it already operates. And for that to happen, it needs new customers – customers like, for example, men. “They’re going to be looking for growth from within their existing assets,” says Alan Middleton, an assistant professor of marketing at the Schulich School of Business. “So I’m not entirely surprised they’ve done this.”

Studio boxer shorts | $32

Studio boxer shorts | $32

The push for more male shoppers is also part of a larger campaign, one that aims to deliver a more diversified—and thus more stable—base of customers to the company’s stores.

For all its success, Lululemon remains in many ways a niche company. And that makes it vulnerable. Because so much of its business is tied up in a few particular styles, a single manufacturing error— like the one that forced executives to recall the near-seethrough women’s pants in March—can cause millions of dollars in lost sales. Competitors, like Nike and the Gap, are also beginning to take larger bites out of Lululemon’s core women’s yoga demographic. And there’s always the risk that consumer tastes could change suddenly. If yogawear falls out of fashion, Lululemon would lose a possibly crippling hunk of its business.

The solution: more customers in more age groups with more interests. “They’re still not tapping into a huge component of the overall apparel market,” says James Smerdon, the director of retail consulting at Colliers International, in Vancouver. To change that, the company is now going after younger girls, through its Ivivva specialty stores, and a broader segment of women, with new lines like tennis- and golfwear.

And then there’s the men. By aiming at male shoppers, Lululemon is trying to tap into what retail consultants see as a larger shift in the male fashion world. In the past five years, men have been spending more money on clothes and putting more emphasis
on looking good, says Michael Penalosa, a retail analyst at Thomas Consultants in Vancouver. So far, that’s mostly meant buying better jeans, suits, shoes and accessories. But Penalosa believes that trend could be shifting toward Lulu-style casualwear as well.

That’s certainly the case for Tommy Snarr. Another Crossfit instructor, and co-owner of the gym in Mississauga, Snarr says he wears Lululemon every day, and not just to work out. “This time of year, I barely wear jeans,” he says. “I just wear Lululemon pants to the gym and out and about.” The clothing is expensive, Snarr acknowledges. Shorts can cost $78 or more. Jogging pants can run as much $108. But he believes the quality more than makes up for the price.

Besides, what’s stopping more men from buying Lululemon isn’t the cost, Snarr believes, it’s the name on the label. “I think most of it is the stigma that ‘it’s Lululemon, and that’s for girls,’” he says.

Precise T-shirt | $68

Precise T-shirt | $68

Snarr isn’t the only one who feels that way. Retail analysts and branding experts are generally skeptical of any female-centred brand that tries to hook more male customers. That’s especially true for one, like Lululemon, that has made women such a central part of its story. The company’s “soft, comfortable, self-empowering brand image—which resonated strongly with female shoppers—contradicts the competitive, rugged image men typically look for in activewear,” Sasha Poljsak, an analyst at Fusion Retail Analytics wrote in an e-mail. “Even the name, Lululemon, is not a very masculine name,” says Robert Kozinets, a professor of marketing at the Schulich School of Business.

Snarr, like Lululemon, believes that if men can be convinced to try just one of the company’s items, they will be hooked. But getting men to cross that threshold is no easy task. Male fitnesswear is already a hugely saturated field, and men who exercise
regularly often have deeply ingrained buying patterns.

To break through that barrier, James Smerdon believes, Lululemon will need a product that can do for men what yoga pants did for women: fundamentally change how men think about what they wear to the gym. “Now whether that’s a shirt or a short, it could be anything,” Smerdon says. “But it’s got to be unique.”

For Lululemon, that product could well be the Game On boxer brief. It’s the underwear line Day was touting that afternoon in Toronto, the one she says is so secretly popular in the NHL. Underwear was the one item almost every Lululemon fan Canadian Business spoke to for this story brought up without prompting. “The underwear are unbelievable,” Kotowych says. “The underwear, I wear all the time,” agrees Snarr. And the Game On boxer brief, it must be said, is outrageously comfortable. It’s soft, fits well. It fits loose and stays almost impossibly dry, even after a hard workout.

But it also costs $24 a pair. And, no matter how good it feels, that’s still a stiff price for any man to pay for his underwear.