In this episode, Scott Becker discusses two key lessons from Lululemon’s recent struggles: the challenge of maintaining market leadership and the contrasting styles of corporate leadership.
Chapter 1: What are the two key lessons from Lululemon's recent struggles?
This is Scott Becker with the Becker Private Equity and Business Podcast. Today's discussion, the first episode of the day, is two lessons from Lululemon. And here are the two lessons from Lululemon. First, Lululemon, I'll get to the lessons in a second, dropped about 15% on Friday. It's down about 25% year to date. Over the last year, it's down about 26% or so. But the two big lessons are,
Chapter 2: Why is maintaining market leadership harder than achieving it?
Once you get good at something, we often say it's about getting rich. Once you get rich, it's very hard to stay rich. Once you get good at something, you become a market leader. You have to so invest in market leadership and creativity and growth to stay a market leader. This in some ways is often harder than climbing the hill to get there is staying there. And we see this over and over again.
Chapter 3: How do companies like Apple and Epic stay innovative and competitive?
It's why I'm reminded of companies like Apple, of Epic and others, that just do this remarkable job of constantly plowing money back into constantly improving and trying to stay great. Epic's done it by their core product and expanding and getting better and better at it. Apple's done it through the iPhone and then all the interconnected systems with it.
Chapter 4: What challenges do companies face in sustaining product excellence over time?
But you could even see with Apple how hard it is to keep that sort of rose, that bloom on the rose. And stake rates, it requires a constant commitment to improvement and getting better. Intuitive, the robotics company, another company that's done an amazing job in that area in the face of increased competition of getting better and better. They're on the DaVinci 5 robot.
Chapter 5: How has competition affected the robotics industry and companies like Intuitive?
It just constantly keeps on getting better. It doesn't rest on their laurels. Other companies in that space have ended up sort of letting their lead sort of go away over a long period of time. So I'm always amazed at the Walmarts, the Amazons, the Apples that keep on keeping at it. Woo is an example of it's gotten a little bit stale. Hardly anything that draws you to the store anymore.
Chapter 6: Why do some retailers like Lulu and Woo struggle to keep customer interest?
It's very easy to be anecdotal. But if I have to buy a new black T-shirt, I prefer to go to Viore today than Lulu. I don't love them. But so many different things go into that as well. So that's one. And you can never also... take advantage of your customer. At some point, Lulu moved to the $130 sweatpants, which just seemed like highway robbery. It is what it is. That's one.
Chapter 7: What role does pricing play in customer perception of brands like Lululemon?
Staying on top is very, very hard. You have to stay constantly creative, constantly at it. So many companies have done it. So many companies haven't done it. Amazing how Lulu has sort of lost its shine. The second thing that I find fascinating is, CEOs today come in two different types. There's the straight talkers and then there's the market talkers. And here's what I mean by that.
The Lulu person, rather than saying we all recognize that they've got to constantly get better. One of the beauties of Brian Nicole, the new CEO of Starbucks, is he is very clear about here's the things we have to do to constantly get better. And so I love listening to Brian Nicole. She's constantly at, we got to get better at this. We've got to make our life easier for our baristas.
We've got to make it more customer friendly for our customers. It's just fantastic in simplifying the menu and trying to make it better. It hasn't made me all of a sudden return to Starbucks all the time, but at least I understand what he's trying to do. The contrast is the CEO of Lulu spends so much time talking about market factors. There's caution in the headlines. There's inflation.
There's other issues. There's tariffs. There's AI. Whatever it is that he has to say other than saying Lulu's got to get better. What I've seen in a couple of the companies I run is over periods of time, we can get stale.
And at those times, we have to re-double down on commitment to creativity, being a magnet for audience, being a magnet for attendees, being a magnet for listeners, whatever it might be. And I think this is the great corporate distraction, not coming back to what the company could do better, but looking at market factors and trying to explain it to the market like that.
And what really happens, of course, is the markets are used to this. They don't buy it. Thus, Lulu's CEO talks, The stock falls 15% as he claims everything other than himself. In any event, thank you for listening to this version of the Becker Private Equity and Business Podcast. Thank you very, very much.
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