Lululemon has fixed many problems, but it’s not out of the woods yet

As athletic apparel retailer Lululemon looked to bounce back from a rough patch, it announced last fall plans to revamp and expand the assortment of its signature product — women’s leggings.

The new pants would be categorized by how snug they felt on the body, and they came with head-scratching names, such as “held-in” and “naked.”

The Web lit up with digital eye-rolling over lofty promotional language such as a promise on Lululemon’s website that the “hugged” style would “feel like a comfortable embrace from a close friend.”

But Lululemon customers, it seems, were far from put off. The company reported on Wednesday that sales in its women’s pants category jumped a robust 19 percent between September and January and helped fuel the company to $704.3 million in revenue in the most recent quarter, a 17 percent increase from the same period last year.

The upbeat response to the new offerings is a good sign for Lululemon.

The retailer, which practically created the ultrapopular stylish yoga wear category, has had some challenges lately in giving customers what they want. It was slow to respond to “athleisure” trends such as printed leggings and cutout tops, and problems with its supply chain sometimes meant that shoppers were coming into its stores but leaving empty-handed when they didn’t find what they were looking for.

Executives promised that more products would be refreshed. Lee Holman, the brand’s creative director, said he would do a major re-evaluation of the women’s tops business this year, with an eye toward making it easier to create head-to-toe outfits and to layer pieces.

In remarks to investors Wednesday, Holman suggested he is watching trends closely to make sure Lululemon is not back on its heels again. He talked, for example, about the team’s move to embrace higher-waisted silhouettes and to cater to a new wave of exercise classes that blend high-sweat and low-sweat activities.

There are additional reasons for optimism about Lululemon. Foot traffic to its stores was up strongly in the fourth quarter, something particularly meaningful in a quarter when shopping mall traffic was generally lackluster. The chain was also more successful in selling expensive or full-price pieces, which could help its profit margins. And crucially, the company said its inventory levels were improving, a sign it is fixing some of its supply chain issues.

And yet there are reasons to remain skeptical that Lululemon will find a way to get off the mat.

For starters, much of its revenue growth came from simply adding new stores. In fact, sales at stores open more than a year, an important indicator of retailer health, were up just 1 percent (or 5 percent, if you adjust for currency fluctuations). That suggests the retailer could be doing better at pulling more customers into its existing outposts.

And Lululemon pledged to “diversify its staple offering” for its fast-growing men’s business with a focus on yoga and also add gear for running and training, a strategy that would seem to put it in greater competition for a customer whom the likes of Nike and Under Armour have perhaps already cornered.

This story was originally published March 30, 2016 at 5:24 PM with the headline "Lululemon has fixed many problems, but it’s not out of the woods yet."