Can Lululemon's China bet propel growth amid slowing global sales?

Tracking Multinationals' China Exposure, Vol. #1

Lululemon's revenue slowdown in the Americas amid global "consumption downgrade"

In 2024, Lululemon (NASDAQ: LULU) has felt the impact of the global trend of "consumption downgrade," particularly in the Americas. Inflation-strapped consumers are increasingly seeking cheaper alternatives to high-end products, and this trend is becoming a concern for premium brands. Women's sales in the Americas have slowed significantly, contributing to Lululemon’s stock losing more than 44% from its March highs.

The slowdown has sparked worries that the brand might be facing a growth ceiling, particularly as it battles to maintain its foothold among consumers increasingly looking for alternatives to premium activewear.

While the Americas show signs of stagnation, China has emerged as a bright spot for Lululemon. In the first half of 2024, the company saw revenue growth of 39% in China (on a constant dollar basis), compared to just 2% growth in the Americas. China now represents 13.5% of Lululemon’s overall revenue, making it the brand's largest market outside the Americas.

NASDAQ: LULU net revenue

But can this growth continue? China is currently experiencing a consumption downgrade, and more Chinese consumers are turning to cheaper alternatives. The internet is buzzing with discussions of consumers finding alternatives to Lululemon on local platforms like 1688.com, which has raised concerns about whether the brand’s high price points will continue to appeal to Chinese consumers.

To provide insights on Lululemon's recent performance in China, our parent company, BigOne Lab, has developed a data tracking product using proprietary in-store mobile payment data. We'll share key data insights at the end of this newsletter.

Can Lululemon's China momentum continue? Lulu's strategic move.

In a bid to expand its consumer base, Lululemon recently signed Chinese comedian Jia Ling as its brand ambassador.

Jia Ling first rose to fame through Xiangsheng, a traditional Chinese comedic performance art known for its witty dialogue. She later expanded her career into films and television, becoming a beloved figure in the comedy genre. In February 2024, she directed and starred in the Chinese comedy-drama Yolo. The movie follows the story of Du Leying, a woman who spent years isolated at home but eventually overcame numerous challenges, lost 50kg, and transformed her life to become a boxer. Jia Ling herself underwent a remarkable physical transformation for the role, shedding over 50kg to portray the character. The film became a box office hit in China, resonating deeply with Chinese women who aspire to embrace health, strength, and personal empowerment—qualities Jia Ling embodied both on-screen and off.

Chinese comedian Jia Ling; picture source: https://www.nuyou.com.sg/lifestyle/the-inspiring-story-behind-chinese-actress-jia-ling-who-lost-50kg-due-to-a-movie-role/

Jia’s story resonated with many Chinese women who aspire to be healthy and strong. However, signing Jia Ling is a somewhat “unprecedented” move for Lululemon. For a long time, the "standard" beauty in China has been considered "白瘦幼" (pale-skinned, slim, and young). Before Jia Ling, Lululemon’s ambassadors in China, such as Yao Chen, Wang Zixuan, and Amber Liu, all embodied this typical beauty standard of a slim and elegant figure.

The portrayal of the “ideal” female in TV and media often pushes women to lose weight. However, in recent years, China’s beauty standards have been increasingly challenged by younger generations, who argue that women should not be victims of body anxiety or subjected to the "male gaze." Jia Ling’s appointment as Lululemon’s ambassador reflects this broader shift in societal attitudes.

Previously, many Chinese consumers complained that Lululemon was creating “身材焦虑” (body anxiety), citing that many models in Lululemon’s product pictures wore extremely small sizes (e.g., a 178cm woman wearing a size 2 or size 4), creating the impression that Lululemon is only for slim women.

Although Lululemon's move is not without controversy—some consumers have criticized Jia’s style as inconsistent with Lululemon's former image of the "elite, gold-collar, middle-class woman"—a vocal group of internet users has even stated that they will stop buying Lululemon products because of this decision.

However, overall, this shift from promoting elite aesthetics to focusing on strength and health could resonate with a broader section of the Chinese market, connecting with those who relate more to Jia Ling’s down-to-earth persona.

Did Jia Ling drive Lululemon's China sales amid consumption downgrade?

Was signing Jia Ling a wise decision for Lululemon? Could she boost Lululemon’s sales in China amid a consumption downgrade?