Lululemon’s Disappointing Outlook Adds Urgency to CEO Search

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1:42Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Lululemon stocks up 3.2 % today. That's the good news. The bad news, it's down 20 % year to date. It's down 50 % over the trailing 12 months. I understand they don't have a CEO either, so I'm not sure what's going on there. Big fan of Lululemon, don't get me wrong, but I think there's a little bit of a... What was the last Lululemon item you bought?

2:20Not one, but I'm a big admirer. Okay. Yep. Poonam Goyal, senior U.S. e-commerce and retail analyst at Bloomberg Intelligence, joins us from Princeton. Poonam, I know Lululemon reported some results here. A, what did you see in the results? And B, what's the latest on their CEO search? So the latest on their CEO search is that it's still undergoing and we don't know where they are. As far as the results are concerned, they posted respectable 4Q numbers last night. A 1 % increase in revenue was better than the 1 % roughly decline that we expected. So a little better. The concern was really the guidance.

2:55The outlook for the next quarter, which is 1Q and the full year, was still very light. Now, I don't know if it's that they're being conservative because clearly the turnaround hasn't begun to take hold or that things are still soft as they continue to mark down product to get rid of some of that inventory and bring in new product. So I'd say mixed results overall, still cautious on the turnaround. We're not confident that it's beginning to take hold just yet, but we can somewhat say that maybe we've hit the bottom. Okay, I have a$75 credit at Lululemon every quarter because I have an American Express Platinum card.

3:35Of course you do. And this is one of the benefits of it. But I struggle to use it because I haven't found anything that I want to spend it on. And I, you know, I go on Reddit and a lot of people feel this way. They do or they did talk about having a new designer and some new product, but that has not made its way into stores just yet. What is the latest in terms of just innovation, new design, freshening up their lineup, Hunan? Yeah, so you're starting to see some of that trickle through. We were just at stores last week and we did see some new styles come through. I'd say the bulk of it, though, will be in the spring and summer.

4:08So that is when you will start to see some of the new product flow through. and hopefully more exciting lineups that you will feel excited to spend your$75 credit on. I'd say on the women's side, that's where most of the work is needed. For men's though, they've done really, really well. Their men's lineup is pretty solid. They're doing really well internationally. I do agree that in women's, in North America specifically, they need to show more and deliver more. And we expect to see some of that in spring, summer, and we'll know more if they'll resonate to see if the turnaround can actually take hold.

4:41So the other thing that Lululemon has to contend with is Chip Wilson, the founder. As far as I know, he doesn't actually have an operating role in the company. He's not on the board, but he is kind of in the peanut gallery agitating for changes, overhauls. What kind of influence does this have on the existing board and on investors' expectations? Yeah, he's been advocating for change for quite some time now. We did see some change come through just recently where they did appoint a new board of director and one of the current board of directors will not be renewing. So you're starting to see some shake up.

5:18I think he's still calling for more. Rightfully so. You know, Lululemon has definitely lost its mojo over the last three years and it's given up a lot of the upside to competition. So I think change is coming, especially as we wait for the new incoming CEO to see who that will be. I think that'll be the key inflection point to say, you know, can this new person bring Lululemon back on board? Can it reignite the double-digit gains that we're used to? Because quite frankly, a low single-digit increase is not what you expect to see out of Lululemon. So I'm looking at the ANR function on the Bloomberg terminal for Lululemon.

5:59I got three buys, one sell, and 30 holds. What are those 30 analysts waiting for, Poonam? A new CEO, new direction. Do we want to see the new product? I mean, I could go out there and go to LinkedIn and find that somebody. Well, Paul, you're applying. You know, it has to be the right person, right? You have to get the right person. We need to make sure that we get a person who understands the DNA of Lululemon, who understands the athletic wear space and really is a product-led person. For me, it's important to see that someone comes through who understands that retail 101 is about the product first and everything else after.

6:37Okay, but Calvin McDonald, the CEO who has just left and who has come under pressure because things started to kind of slide at the end of his tenure, he was that person initially because when he first joined, sales took off and he came over from Sephora. So he clearly has a merchandising background. He does, but it's in beauty. If you remember, as soon as he came on, I think the first big questions he had was, let's launch a skincare line, you know, the deodorants and some of the lotions, etc. That didn't go too well. It was a nice idea, very high gross margins, 80%. So in theory, sounded great, but it didn't really resonate and get a little lemon anywhere.

7:15I think what we need is someone who understands the apparel and the athleisure space. Someone who knows that you need style with performance, because that is what this brand demands. And constant newness. Like Lululemon has to outshine the broader competition. And that's become harder with just technologies being almost available to everyone right now. Stay with us. More from Bloomberg Intelligence coming up after this. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg This Weekend.

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8:52you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube all right it is still earning season believe it or not and um the retailers are reporting results we heard about lululemon earlier let's talk about Macy's. The stock is up about 5 % in this morning's trade. Mary Ross Gilbert is our senior equity analyst covering retail, and she joins us now. Mary, what did we learn from Macy's?

9:26Mary Ross Gilbert:What we learned from Macy's is that Macy's has inflected to positive comp sales. They were looking to achieve sustainable growth. We think they're there. And for this year, they're providing, I think very tepid guidance. They want to kind of budget, you know, do higher gas prices have an impact. But overall, the consumer is very resilient and they're attracting more of the middle income to higher income consumer, you know, across their brands, primarily, you know, the Macy's nameplate. So they're expecting comp sales, though, they're guiding to be down half a percent to up a half a percent. But we think they'll easily beat that.

10:08Mary Ross Gilbert:And of course, for the first quarter, they're already seeing strong traction. And at the high end, they're guiding for comp sales to rise one and a half percent. So what we're seeing is that the name plate looks like it has inflected to positive comps. And we certainly see the changes when we go in the store. What do you see when you go in the store, Mary, that that's different or maybe positive in general? Yeah. So what we're seeing is the stores are constantly evolving. I mean, every time I go in there, I'm seeing something new. So I'm seeing new brands. And what the company reported on the call is they've added 60 brands.

10:42Mary Ross Gilbert:So when I go in there and I'm, you know, obviously focused on women's wear, but I did kind of take a look and I saw Rod and Gun in our local store. So that was kind of a nice addition. And the stores are just, the merchandising is so strong. And the salespeople, this has been the best encounter that I've had with sales associates when I went in the store just yesterday, I encountered at least three associates. They were well-appointed, absolutely charming and engaging. And because they have some of these new labels, I actually tried something on. I'm really a Bloomingdale's person. I really love the premium brands, but I did see some really good brands in there.

11:26Mary Ross Gilbert:My favorite is Avec Lafie, and I tried on some of those jeans and they're, oh, they were amazing. Absolutely amazing. So I really think that Macy's has come back. They're bringing in all the brands that consumers care about. They're attracting younger consumers. So I really see very good execution here with the company. What about execution at Bloomingdale's? And I bring this up particularly with Saks's issues. Saks, of course, in bankruptcy protection right now and trying to find a way to get through all of its debt problems. That's all been a benefit for Bloomingdale's. So Bloomingdale's has been executing, you know, for the last few years and it's an ongoing process.

12:07Mary Ross Gilbert:So just in our local store, just opened was the Christian Louboutin shoe boutique. And of course these are licensed businesses, but it doesn't matter. You know, they're not reporting comp sales on all these different bases. It's just comp sales. So it does include the benefit of licensed brands, But so they now have a Chanel boutique and they they now have the Christian Louboutin. But they're always if you go to ready to wear, you're seeing constant, you know, new labels coming in. So it's very exciting. I love Bloomingdale's. And that explains why their comp sales were up 10 percent essentially in the fourth quarter.

12:44Mary Ross Gilbert:I think part of that is some of the gains coming from Saks and Neiman Marcus customers, given the bankruptcy, lack of product during that time. So they're the beneficiary and that's why they really emphasized how they're focused on expanding the chain this year. And the company, one of the executives did indicate probably a month ago that they would look at some of the stores that might be closing if it's relevant. So they're looking to see what opportunities are out there because they're only in 14 markets. So there's a great, I think, expansion opportunity, too, with Bloomingdale's. Right. And Scarlett, Mary, she shops in only the best locations.

13:31Westfield Century City. That's where she goes to the Macy's there. And you think the Short Hills Mall is nice. The Westfield Century City Mall is spectacular. And, by the way, Bloomberg's offices are right there. So that's how it works. You just go down to lunch and go down to the mall, and that's how it works. And Mary, what's Macy's saying about their store count in general here? Because there is a decade or more of the department store industry really reducing store count.

13:56Mary Ross Gilbert:Yeah, so they're closing 14 stores. It's probably mostly closed at this point. And then going forward, there's about 65 more to go. And those will close through 2028. They're not in a hurry to close them. They want to make sure they maximize the real estate value. And it's OK because those stores are profitable. But the go forward store base continues to be the 350 stores. And so they will get there. Like I said, by 2028, they'll have gotten rid of the last of the 65 stores they plan to close. So I think, you know, once we move past that, you know, the overall top line should look good. Stay with us.

14:39More from Bloomberg Intelligence coming up after this. Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow. And I'm Nathan Hager. Each morning, we're up early putting together the latest episode of Bloomberg Daybreak U.S. Edition. It's your daily 15-minute podcast on the latest in global news, politics,

15:02Mary Ross Gilbert:and international relations. Listen to the Bloomberg Daybreak U.S. Edition podcast each morning for the stories that matter with the context you need. Find us on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's get back to the market and talk about an individual name here, Unilever. What we've seen in the packaged goods sector is a lot of companies trying to figure out a way to jumpstart growth as inflation has eroded some of their pricing power and caused some challenges for their stocks.

15:45One of them is Unilever. We want to get the latest on what they may be thinking about in terms of maybe changing up the company strategies. We're joined by Diana Gomes, Bloomberg Intelligence Senior Equity Analyst. Diana, what can you tell us about Unilever? I mean, we kind of know the there's a million brands underneath the Unilever umbrella, but what are they doing to think about juicing growth at that company? Yes, thank you for having me. So Unilever is really coming through a few years of transformation where they split the Magnum ice cream, for instance, to really focus more in their core business, which is personal care and beauty as central stage.

16:28That's where the company has been really refocusing their premium innovation and really getting the marketing machine behind that segment in order to get to that 4 % to 6 % organic sales growth target in the medium term. However, we see some challenges, especially in the near term, to get there. And the guidance for 2026 was already quite cautious. partly because the foods business has been seeing quite weak demand, particularly in Europe, even though they have very strong brands. So almonds and gnoll are the leading stars in that unit. But obviously with the geopolitics uncertainty, that has some level of additional risk.

17:24Right. And when it comes to its food business, Unilever has been consistently reducing its exposure. It's sold off its spreads business. The part of the business that contains, I can't believe it's not butter. Last year, it spun off its ice cream division into Magnum ice cream and still holds a 20 % stake, but it's steadily selling that down. Is the goal here to shrink foods into something that's not meaningful because the CEO is at the end of the day, really a beauty and wellness guy rather than a foods guy? That's an interesting question. When asked about it, Unilever keeps defending that they are very behind the main brands of the foods business.

18:08But obviously, they are in the middle of that program to divest about one and a half billion euros in what they call non-core brands, foods brands. This would include some European local brands where probably the effort to really pull up that growth is seen as too much for the return. And it can be distracting for management as well. But this food business is still quite margin accretive for the whole Unilever group, now without Magnum ice cream. Also cash accretive. So it still makes sense to have it in the portfolio to some extent. But I do see why, especially in this background, why there could be some vision to try and accelerate that split and considering different options as they have been saying that they are.

19:09But just a reiteration of that in the last day or so. So I look at the ANR function, Diana, for Unilever, and I see 11 buys, 11 holds, and four sells. It shows to me the street has no idea what to do with this stock. What do you think the bulls want out of Unilever today?

19:32So it is about where people would be, I guess, in terms of not wanting to put words into their mouths. But the way I look at it, it depends where we see the journey to accelerate that growth further. The main goal is really to drive volume growth. And Unilever already showed that they can get to the 2%, at least 2 % mark in the fourth year results in the back of some of the fixes they had been doing also in emerging markets. So, it is about, I would say, where people's confidence is in terms of where it goes from here versus where it's already. And the very, the drive really is on the premium innovation and that focus.

20:30And we saw already a lot of the transformation bringing in benefits already last year in 2025. five. So it's can they do better in in the near term? Stay with us. More from Bloomberg Intelligence coming up after this.

20:49Mary Ross Gilbert:You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris and I'm Karen Moscow here to tell you about our new on demand news report delivered right to your podcast feed. Bloomberg News Now is a short five minute audio report on the day's top stories. Episodes are published throughout the day with the latest information and data to keep you informed. Yes, there are other products like this from a variety of news organizations, but they usually rerun their radio newscasts throughout the day. That's not what we do. We create customized episodes that can only be heard on Bloomberg News Now.

21:26And we don't wait an hour to publish breaking news. When news breaks, we'll have an episode up in your podcast within minutes. So you're always getting the latest stories and developments.

21:35Mary Ross Gilbert:Get the reporting and the context from Bloomberg's 3 ,000 journalists and analysts. We're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Listen on demand wherever you get your podcasts or watch us live on YouTube. General Mills Cheerios, right? Yes. That's how I start my day with a bowl of Cheerios. What happened with General Mills? What did they report? So basically it was mixed. Results were mixed compared to consensus.

22:17They seem to be doing better. Obviously there were some puts and takes, some had wins, but they seem to be a little bit more quarter dense rather than something that we can extrapolate into next quarter. So, yeah, I mean, obviously, I think the stock is down. And it's because, you know, while volume underneath underlying volume is improving, it's still it's still weak. And to get volume growth, it's still very expensive. Just looking at the PGEO function that breaks down kind of where they get the revenue. Boy, they break it down pretty finely. Baking mixes and ingredients, dough, super premium ice cream, cereal, convenient meals, snacks, yogurt, pet, other.

23:01Boy, they break it down. So are there certain segments that are doing better than others? Are they one of these consumer product companies that are saying, hey, if something's not working, we'll sell it and we'll try to invest in the areas that are growing? That is, you know, all of these companies have done some portfolio reshaping. You know, yogurt has been a headwind because they spin it off. So that is obviously one of the things, the latest, you know, spinoffs that they have done. But yeah, they are very sharp in terms of their portfolio, you know, reshaping. But it seems that now they're investing more on making the brands that they have grow.

23:44And some of them are growing and some of them are not. Stock is year-to-date down about 17 percent, hit a 52-week low today here. How are the General Mills of the world, the Procter & the Gambles, how are they dealing with the consumer facing, particularly the bottom end of the K-shaped economy facing economic pressures? And now it's more money to fill up your car with gas. How are they dealing with that? Yes. So this company, in particular, General Mills, they actually reduced guidance during Cagney last month. And it was basically because volume growth is just not there. And they're trying to increase marketing.

24:24They're not necessarily trying to rely on price cuts, but it seems that that is going to have to start happening. More competition. They're seeing, for example, for snacking, they seem to be a little bit more competitive than the category used to be. Dog seems to be still a little bit of a headwind for them. So we're seeing, you know, there seems to be a little bit more of cautionary tale for the consumer. And definitely with prices spiking for gas, it's not necessarily helping. You know, I don't know if it's just me, but I mean, when I go into a supermarket now, I see many more store brands in more categories.

25:07And they're also getting better placement in the shelves, which is important for you guys. Talk to us about just the competitive landscape of brands, name brands versus kind of the store brands. Yes. So basically, retailers have been investing on their private label portfolio. It's about a quarter of their revenue at this point. They're trying to obviously navigate. They don't necessarily want to anger the national brands. but they tend to fill out certain white spaces that are not necessarily catered by these national brands. And at some point, you know, sometimes they're competitive, more competitive.