Winners & Losers: Dollarama cashes in, Lululemon bottoms out

“Empty your mind. Do not think about the weird sizing of the pants you’re wearing”

 

 Dollarama

Cheap and cheerful

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With talk of a recession dominating headlines for months, Canadians were apparently scared into buying more stuff at Dollarama. The company reported revenue grew nearly 15% in the second quarter, and same-store sales increased by 7.9%. The surge was due to consumers buying more higher priced items. Indeed, Dollarama is benefitting from a larger shift in the retail landscape that began with the 2008 financial crisis. The market has fragmented, with retailers either moving upscale or downscale, and Dollarama was well-positioned to capture increasingly price-conscious shoppers. And it appears to be building a real following with consumers, if this ilovedollarama Instagram account featuring 7,000 photos of Axe deodorant and other sundry items is any indication. Still, the chain is challenged by the falling Canadian dollar. Founder and CEO Larry Rossy said the low loonie is forcing the company to raise prices, and that its price threshold could jump from $3 to $4 by the end of next year. “So as a consumer, I guess next year will not be a pleasant year from a purchasing point of view because you’ll probably be seeing some inflation in all likelihood,” he said. But it will be hard to disappoint Dollarama loyalists like this Facebook user, a connoisseur of who earned her credentials by visiting “EVERY” dollar store in Saskatoon: “The other Dollar stores sell crap…DollarRama wins hands down, all the way !!!”

 Lululemon

A kick in the pants

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The yoga retailer and corporate embodiment of an inspirational Instagram meme released mixed second-results that sent its stock tumbling more than 16%. Investors and analysts are concerned that Lulu’s margins are shrinking and that inventory is piling up fast. In fact, product stockpiles grew 59% year-over-year while the company sales are projected to increase by 15% in the next quarter, leading to questions about how Lululemon will get rid of so much yoga apparel without resorting to deep discounts. Meanwhile, Lululemon is angering customers (again) by raising prices on some of its products. Some varieties of cropped pants, for example, jumped from US$72 to $88. One irate customer expended 450 words on the company’s message board decrying the price changes, calling the move “insane” and “sneaky.” The complaints are in response to Lululemon’s retooling of how it sells women’s yoga pants. Instead of organizing pants by silhouette (tightest to loosest), Lululemon will produce and sell bottoms based on “engineered sensation,” a triumph of marketing bafflegab over plain English. The company says consumers were confused before and would buy pants that didn’t fit. Now they can choose from sensations such as naked, relaxed, hugged, tight, and held-in—five categories that are easily understood and not at all weird and definitely will not lead to more confusion for consumers in any way.

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