Lululemon CEO: 'There's definitely missed opportunity as a result of the supply chain'

In a new interview with Yahoo Finance anchor Alexis Christoforous, Lululemon CEO Calvin McDonald discussed how supply chain issues in Vietnam and around the globe are affecting the athletic apparel maker.

Video transcript

ALEXIS CHRISTOFOROUS: I know that lululemon has seen explosive growth during the pandemic. Second-quarter revenues coming in at 1.45 billion, an increase of more than 60% year over year. But I also know that you get a lot of product from Vietnam. And I'm curious to know how these supply chain issues are impacting lululemon?

CALVIN MCDONALD: Yeah. Thanks for the question and the time today. As we shared in our last guidance report, about 30% of our product is sourced from Vietnam and we guided about 20% of our back half receipts have been impacted by the shutdown. Still included in our guidance of 25% growth for the year factors in the situation in Vietnam with the manufacturing coming online, which it has.

We have very good relationships with our vendor partners and we're supporting them. And although we know as we saw in Q2, there's great demand for our product and we definitely didn't satisfy all of it. We're pleased with the results that the team is doing to try to get the product here as best as we can.

ALEXIS CHRISTOFOROUS: So I know that you are forecasting a strong end to the year. There seems to be no relief in sight from this supply chain crisis, even though now the port in Los Angeles is running 24/7. Is that starting to change your outlook for the rest of the year?

CALVIN MCDONALD: We guided 24% to 25% for Q3 two-year CAGR. We guided 25% for the year and we stand by those guidance numbers at this point in time. Way back when the pandemic started, we took a leadership position across all of our stakeholders, we paid our rent, we paid our employees. And didn't lay off any, and we honored every PO that we had at the point in time.

And I think that just puts our business in a good position with our relationships with our partners and we're supporting them through these difficult transitioning periods. And as they come online, I think those goodwill and investment in relationships is putting us in a well-- in a good position and we're leveraging other avenues like airfreight to get the product here as we need to, to satisfy the demand that we're seeing with our guests.

ALEXIS CHRISTOFOROUS: So you sound pretty confident that you're going to be able to meet demand, that you're going to have the inventory to meet demand during the critical holiday sales season, is that fair to say?

CALVIN MCDONALD: I think it's fair to say we'll have-- I am confident we'll have the inventory to support the revenue that we've guided to. As we indicated, we are in a very strong position with great momentum in the brand and in the business. And I definitely-- we're not satisfying all the demand that we have in what we've guided to.

And the team is doing a wonderful job getting the product here to meet the guidance numbers. But there's definitely missed opportunity as a result of the supply chain. I wouldn't want the audience to think that we're satisfying every demand that we have but the team is doing a wonderful job in satisfying to what we've guided to.

ALEXIS CHRISTOFOROUS: What are sort of some of the harder items that customers are going to have to come by or maybe they might want to secure here earlier in the season rather than waiting to the last minute?

CALVIN MCDONALD: I mean, it's-- Vietnam's an important sourcing region for us and crosses a number of our product categories. We do a lot of dual sourcing around the globe. So there isn't one product in particular that I would say is 100% sourced in Vietnam and we don't anticipate to have supply. But I think the general theme this holiday is shop early applies to everyone.

And as I said, we anticipate to have inventory of our product. There isn't one that I'd call out in particular. But I do think guests should shop early. And the team is doing a wonderful job in trying to continue to satisfy and help the flow of goods right up to and post-holiday period.