Lululemon Getting In Shape, Though Challenges Remain

October 20, 2014 Leave a comment

Posted on September 11, 2014 by Judith Russell

Yoga apparel retailer Lululemon Athletica released second quarter 2014 earnings Thursday that were in line with Wall Street expectations. The company increased guidance for the remainder of the year by one penny per share, which buoyed its stock price in pre-market and early trading.
Total net sales for the three-month period ended August 3 rose an impressive 13 percent to $391 million from $345 million in the second quarter of fiscal 2013, helped by growing sales of more fashion-oriented product, much of which is worn as streetwear, and by a reinvigorated core bottoms product line.
CEO Laurent Potdevin said in a statement, “We are pleased to be on track with the implementation of our strategic road map, and are starting to see the results of our work across product, brand and international expansion.”
Comparable store sales, or sales at physical stores open at least a year fell by 5 percent, though online sales jumped 30 percent. Total comparable sales for the quarter were flat compared to the second quarter of 2013. Online sales at Lululemon were $63.5 million, or 16.2% of total company revenues, an increase from $49 million, or 14.3% of total sales last year. For the first half of the year, total comps were up 1 percent.

On the earnings conference call Thursday morning, management indicated that traffic increased by mid-single digits in the quarter, driven by a significant pickup in July, but said that sales conversion has declined.
The company, which put the yogawear category on the map, is no doubt feeling increasing competitive pressure from Gap Inc.’s Athleta and by athletic apparel juggernauts Nike and UnderArmour, all of which are in hot pursuit of share in the growing athleisure, or workout-as-streetwear, market.
Gross margin fell 350 basis points from 54 percent last year to 50.5% in the current year period, pressured by the higher mix of lower-margin fashion items. The company is taking steps to improve efficiency and lower product costs, including opening a new distribution center, but warned that these initiatives would not fully impact gross margin until 2016.
SG&A expense was $129 million, or 33.1% of sales, compared to $107 million, or 31.1% of sales in the corresponding period last year due primarily to higher store and technology expenses. In the remainder of the year, the company plans to increase marketing expenses to drive traffic into stores.
Net income declined 13.8% to $48.7 million, or $0.33 per share, from $56.5 million, or $0.39 per share, in the year-ago period.
Lululemon operated 270 stores as of August 3, an increase of seven new stores in the quarter, and 44 new stores since the second quarter of 2013, including its first Asian store in Singapore and its first store carrying just men’s product in the Soho neighborhood of New York City.
The company has increased its earnings per share guidance for the fiscal year to $1.72-$1.77, based on a full-year sales estimate of $1.78 billion-$1.8 billion and a total comp increase in the low single digits.
Once one of the highest-flying apparel retailers in the business, Lululemon has spent the last year and a half recovering from a series of missteps. In early 2013 it recalled its Luon yoga pants for being see-through. Last year, company founder Chip Wilson was ousted as board chairman after making derogatory comments about overweight customers. Last month, Wilson sold half of his 28 percent stake in the firm to private equity firm Advent for $845 million.

The stock price has declined 24 percent so far this year, and has plunged 40 percent from its peak level of over $81 per share reached in June 2013.

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Under Armour Appoints Neiman Marcus Head to Its Board of Directors

October 20, 2014 Leave a comment

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Posted on October 17, 2014 by

The line between luxury and sport continue to be blurred. Athletic footwear and apparel wunderkind Under Armour announced Thursday that Karen Katz, president and CEO of Neiman Marcus Group LLC, has joined the company’s board of directors.

Katz brings her expertise running the international multi-brand omnichannel company, whose portfolio includes Neiman Marcus, Bergdorf Goodman and mytheresa.com, to the flourishing athletic brand. Since joining Neiman Marcus in 1985, she has served in executive and leadership roles in the company’s merchant, stores and e-commerce organizations, including as executive vice president of stores, president of Neiman Marcus online, and president and CEO of Neiman Marcus stores.

Under Armour chairman and CEO Kevin Plank said, “Karen brings a wealth of retail knowledge and a keen understanding of the customer shopping experience across channels. With her experience leading an iconic retailer known internationally for luxury brands and superior service, Karen will be a great asset to our Board as we continue to expand UA’s presence across the globe.”

Katz said, “I have admired Kevin Plank and Under Armour from afar.” She added, “He has assembled an impressive team. I am honored to join the Under Armour Board, and look forward to seeing how a founder and CEO operates a dynamic and fast-growing company known for innovation and its competitive edge.”

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Creep in 4 faults means big quake may be poised to hit California

October 16, 2014 Leave a comment

Geophysicist Jim Lienkaemper uses a theodolite to measure the distance the Hayward Fault line has moved in a year. Photo: Jessica Christian / The Chronicle / ONLINE_YES

Updated 4:36 pm, Wednesday, October 15, 2014

Four highly stressed seismic faults in the Bay Area’s densely populated San Andreas system are moving on the surface and could rupture in a major earthquake at any time, according to scientists tracking their movements.

The faults include the Calaveras, which runs roughly from Hollister (San Benito County) to Danville; the Hayward, between Suisun Bay and San Jose; the Rodgers Creek Fault in southern Sonoma County; and the Green Valley Fault, which runs roughly from Vallejo to Fairfield.

“The extent of fault creep controls the size and timing of large earthquakes, and measuring that creep rate helps tell us how much strain is building up on the faults underground — although it can’t tell us when a fault will rupture in a quake,” said geophysicist James J. Lienkaemper of the U.S. Geological Survey in Menlo Park, who led the study.

Lienkaemper and his colleagues have been analyzing the rates of those tiny continuous movements along Northern California faults for years. The movement is only a few millimeters a year, but the effects over the years can be visible in roadside cracks and offset curbs.

The surface movements of a fault can relieve a certain amount of stress, but deep underground, the faults can remain locked for centuries until they finally rupture in a full-scale, damaging earthquake, Lienkaemper said.

The scientists’ report was published Monday in the Bulletin of theSeismological Society of America.

They estimate that the next major quake on any of the four faults could be comparable to the 6.9-magnitude Loma Prieta quake 25 years ago, which killed 63 people and caused $6 billion in damage. Lienkaemper and his colleagues said the Hayward Fault, long considered the most likely to rupture in the near future, could eventually trigger a magnitude 6.8 quake. The Calaveras Fault could also rupture with a magnitude of 6.8; the Rodgers Creek and the Green Valley faults could each yield a magnitude of 7.1.

The Hayward Fault last ruptured in 1868, with the magnitude now estimated at 6.8, while the Rodgers Creek Fault last broke in 1745, according to evidence uncovered by trenches scientists have dug in the area. The last known major earthquake on the Calaveras Fault struck about 1740, and on the Green Valley Fault, the last rupture occurred about 1609.

“Given how long ago they had their last earthquakes, they are more than ready to produce a major earthquake again now,” said Roland Burgmann, a geophysicist and expert on crustal deformation at UC Berkeley who was not involved in Lienkaemper’s report.

For 35 years, San Francisco State University has maintained a Fault Creep Monitoring Program that enlists students, technicians and faculty to measure the barely perceptible signs of fault creep using surveyors’ tools called theodolites and — more recently — GPS instruments.

Lienkaemper now leads that project, and his team’s report is based on the project’s measurements of creep rates over the years on many faults, from quake-prone Parkfield on the San Andreas fault in southern Monterey County to Humboldt County, where the fault veers out to sea and joins undersea faults in what scientists call the Mendocino Triple Junction.

Lienkaemper’s colleagues include Robert W. Simpson of the USGS and Forrest S. McFarland and John Caskey of San Francisco State University.

David Perlman is The San Francisco Chronicle’s science editor. E-mail: dperlman@sfchronicle.com

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Walmart investing in e-commerce, slowing physical growth

October 16, 2014 Leave a comment
FierceRetail

 

October 16, 2014

 

Walmart (NYSE:WMT) announced it would increase spending on e-commerce and digital initiatives as the retailer shifts focus away from store openings to building a digital presence.

The company will increase spending on technology infrastructure from an estimated $1 million this year to between $1.2 and $1.5 billion in fiscal 2016. The retailer will also add between 26 and 30 million physical sq. ft. worldwide, a decrease from this year’s 32 to 34 million sq. ft.

During the company’s annual meeting for the investment community, the retailer outlined expenditure plans for fiscal 2016. Total capital spending will range between $11.6 and $12.9 billion, with $1.2 to $1.5 billion of that allocated for e-commerce and digital initiatives.

“This is an exciting time for Walmart, as there are so many new ways to serve customers. Exceeding customer expectations has always been our goal, and we have short-and long-term opportunities to do that even better,” said Doug McMillon, president and CEO, Walmart. “We’ll change the mix of our capital spend next year to provide greater access, while continuing to focus on price leadership, service and a broad assortment. We’ll give customers the choices they want and need in ways that only Walmart can.”

The company also lowered its net sales growth expectations for the year from between 3 and 5 percent to between 2 and 3 percent due to a tougher sales environment

“Globally, we expect to finish this year with approximately $12.5 billion in e-commerce sales,” said Charles Holley, Walmart’s executive VP and CFO. “Looking forward we expect an increase in global e-commerce sales of around 25 percent in fiscal year 2016, and we anticipate growth over the three-year period from fiscal years 2016 through 2018 to average 30 to 40 percent.”

Walmart also recommitted to investing in smaller-format stores while cutting investments from larger formats. The brand will open between 60 and 70 supercenters and 200 to 220 Neighborhood Markets in 2016. Walmart recently announced that it would rebrand all of its smaller format stores to be under the Neighborhood Market brand.

The company is optimistic about its winning formula. McMillon outlined the four key customer dimensions that Walmart is focused on for winning over consumers of the future: price, assortment, experience and access.

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SHUTTLE VS. PROJECTILE LOOMS – WHAT’S THE DIFFERENCE?

October 13, 2014 Leave a comment

Often when you’re reading about selvedge denim, people will wax on about the famous “vintage shuttle loom” but there isn’t much more information given about what makes these looms different from the more modern machines that are used to make the majority of the fabrics we see today.

Quick searches online will turn up plenty of information about different looms but a lot of it gets more technical than the average person would like to know and it can soon be overwhelming. In an attempt to simplify the information out there and to make sense of all this, we’re scratching the surface to differentiate how shuttle looms and projectile looms make denim.

ROY

SHUTTLE LOOMS

As most of us know, selvedge or “self-edge” denim is denim that has self-finished edges. The self edge, besides for being aesthetically pleasing, prevents the fabric from fraying and unraveling and generally (but not always) is a sign of a higher quality denim.

Vintage Shuttle Loom

For the most part, selvedge denim are made on a vintage machine shuttle looms that fell out of favor for quicker and more efficient machines in the early-mid twentieth century. These machines are currently enjoying a resurgence in popularity as more people become selvedge conscious.

114237-004-371AF204 copy

How the shuttle loom works is simple in concept:  warp yarns (the vertical yarns) are set in the loom, the pattern is programmed in, and a shuttle carrying the weft yarn (the horizontal filler yarns) is shuttled horizontally across the loom which is then beaten together with the warp yarns to begin creating the fabric.

The shuttle makes numerous continuous passes back and forth with that single weft yarn which is what creates the finished edges. Most of the time, the mill creating the fabric will use white or natural warp yarns along with a single colored yarn at the edges of the fabric and the result is the colored selvedge lines that are so revered now.

warpweft copy

Shuttle looms were the industry standard for quite a while and during that time almost all denim was selvedge denim. One of the challenges faced with using these looms is their slower speeds. A traditional shuttle loom can produce on average about 150 picks (rows of weft yarns) per minute.

As technology progressed and consumer demand for denim grew, companies began favoring machines that could weave fabrics at those much higher speeds. Several types of looms came about as improvements upon the shuttle loom with the projectile loom being one of the most common for denim manufacturing.

PROJECTILE LOOMS

Projectile Loom

The projectile loom does away with the shuttle and instead shoots the weft yarns across the warp one row at a time that work in sequence to form the fabric. The high level explanation of how the loom operates is also simple:  the warp yarns are still set into the loom but instead of a shuttle, there are multiple smaller projectiles that grip onto the end of the weft yarn and shoot it across the loom through the warp yarns.

When the projectile reaches the other side, it releases the yarn and drops down to a conveyor belt which then transports the projectile back while another projectile shoots across the loom. This rapid fire sequence can produce well over 1000 picks per minute, and that’s on a textile that’s often twice as wide.

Because the projectiles don’t loop back around with the weft yarn when it reaches the other side of the loom, the weft yarn is cut at the edges of the fabric thus leaving the ends of the fabric frayed and unfinished. Later, an overlock stitch is used to secure the edges of the fabric on a finished garment which is a defining feature of non-selvedge denim.

non selvage denim 1 copy

Non-selvedge denim can differ from selvedge denim in many ways but often times, it’s not just due to the fact that it’s made on a projectile loom and is instead a combination of many factors like how the yarn is dyed, cotton used, weight of fabric, speed in which the fabric is made, etc.

Projectile looms themselves don’t inherently make lower quality fabric, there actually are plenty of mills making fabrics on projectile looms that can be comparable to some selvedge fabrics. It’s just that most mills are more focused on volume rather than quality and so they use the much faster projectile looms to fulfill that goal. For a more visual representation, check out the video below:

Obviously, there are many complexities about shuttle and projectile looms and how fabrics are made that went unmentioned here but hopefully with this baseline knowledge, you will able to dive deeper with all the details there are to know about looms!

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Venture Capitalists Return to Backing Science Start-Ups

October 13, 2014 Leave a comment

A ROCKET, AND MAYBE A SPACE PLANE Xcor raised $14.2 million and is building its plane’s fuselage.
CreditMike Massee/XCOR Aerospace

They all have one thing in common: money from Silicon Valley venture capitalists.

After years of shying away from science, engineering and clean-technology start-ups, investors are beginning to take an interest in them again, raising hopes among entrepreneurs in those areas that a long slump is finally over. But these start-ups face intense pressure to prove that their science can turn a profit more quickly than hot tech companies like Snapchat and Uber.

NUCLEAR POWER, NO WASTE Leslie Dewan of Transatomic, which is developing small reactors.
CreditMark Ostow for The New York Times

And last month, Google said it was buying Lift Labs, a San Francisco biotechnology start-up that makes a high-tech spoon for people with hand tremors.

“We’re trying to revolutionize pesticides,” said John Sorenson, a former genetics researcher and Vestaron’s chief executive, who for years struggled to find investors as he watched other start-ups, like Snapchat and Square, raise many millions of dollars. Vestaron finally closed its third round of financing last month. “Thankfully, venture funders are starting to invest again in real, hard-core science and innovation,” Mr. Sorenson said.

Over all, industrial and energy start-ups attracted $1.24 billion in venture capital financing in the first half of 2014, more than twice as much as in the period a year earlier, according to statistics from the National Venture Capital Association. Still, investment remains well below peaks reached in 2008, when industrial and energy start-ups attracted $4.64 billion.

Investment in biotechnology start-ups rose 26 percent in the first half of 2014, to $2.93 billion, from the period a year earlier and is on track to exceed the 2008 peak of $5.14 billion.

The investments are still dwarfed by the money pouring into other kinds of technology companies, especially those offering web and mobile services. Software start-ups attracted $11.2 billion in venture capital financing last year, 85 percent more than in 2008.

Investors partly feel betrayed by the billions of dollars they lost on the clean-tech boom and bust, when backers of solar panels, algae biofuels and futuristic batteries promised to change the world, but the companies mostly flopped. That experience has made investors wary of science-based start-ups with long development timelines in still nascent or heavily regulated markets.

GREEN PESTICIDE Vestaron’s product made from spider venom kills insects like rootworm larvae.CreditAdam Bird for The New York Times

But there is a growing feeling, investors say, that Silicon Valley has been avoiding the world’s more difficult problems, a sentiment captured by a Founders Fund motto: “We wanted flying cars, instead we got 140 characters.”

“I’m just so interested in anything that gets me closer to an Iron Man suit,” said Adam Draper, the chief executive and founder of Boost VC. One of the companies that Boost has mentored or coached is Bagaveev, a start-up using 3-D printers to make rocket engines that launch nanosatellites, a type of satellite that may weigh as little as a couple of pounds, into orbit. “Social media’s already happened. V.C. funding is supposed to be about funding what comes next.”

Transatomic Power, founded in 2011 by nuclear scientists at the Massachusetts Institute of Technology, is in the early stages of developing small-scale molten-salt reactors that could generate reliable, clean energy without creating nuclear waste. The technology is from the 1960s, but Transatomic Power is developing new designs, using its financing to run tests on materials and models. The start-up would need far more funding, or a partner, to start building the reactors.

“The world needs a source of stable, cheap electricity, and a new approach to nuclear power would seem like an obvious solution,” said Leslie Dewan, a co-founder and the chief executive of Transatomic Power. “But it’s tricky getting $300 million from investors,” she said. “Maybe we need to build an iPhone app.”

Vestaron, a pesticide company started in 2001, has similarly lofty goals in agriculture and food, a specialty basking in newfound attention from Silicon Valley. Vestaron says its spider-venom insecticide controls beetles, caterpillars and other pests without harming other animals. The insecticide, the company says, reduces agriculture’s environmental footprint, makes work safer for agricultural laborers and overcomes the resistance pests have built up to other pesticides over the years.

John Sorenson, chief of Vestaron, which hopes to reduce farming’s environmental footprint and improve safety.
CreditAdam Bird for The New York Times

This year, the Environmental Protection Agency approved the active ingredient Vestaron derives from the venom, giving the start-up the go-ahead to sell its pesticide commercially to vegetable and greenhouse farmers in 2015. Vestaron, which has a target of $1 million in sales in the first year, will use the latest round of financing to introduce its products to farmers, and eventually to home and garden uses, Mr. Sorenson, Vestaron’s chief, said.

But even when science start-ups attract money, they are pressured from the beginning to think about profit.

For Xcor Aerospace in Mojave, Calif., that meant putting aside its long-term goals of building suborbital space planes and focusing instead on developing rocket-engine igniters to sell to NASA and aerospace companies. With a steady stream of income, Xcor was able to put the engine on the back of an experimental aircraft to test its space plane concept. After raising $14.2 million in May through the Space Angels Network, a group of angel investors in the aerospace field, Xcor is finally putting together its plane’s fuselage.

Bagaveev can only dream of that kind of money. It raised just $535,000 in seed funding in April from a group of investors to develop reusable launchers that can send a satellite weighing up to 22 pounds into space — a technology that Nadir Bagaveyev, the company’s founder and chief executive, says will help open outer space to small companies that cannot afford multimillion-dollar satellites.

“We’re like the UPS of space,” Mr. Bagaveyev said. “You bring it to us, and we promise to bring it up within a week to a month.”

Bagaveev will use the seed money, Mr. Bagaveyev said, to try to prove that his idea has potential. The start-up is planning its first test launch at the end of the year, and Mr. Bagaveyev hopes that will help the company attract more investment.

“We’ll show what we’re capable of, and then we’ll be back for more investment,” he said. “I think investors are bored with investing in another messaging app. And our idea is crazy enough that it might just work.”

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MOOC U: The Revolution Isn’t Over

October 6, 2014 Leave a comment

 

  • October 6, 2014
6105-Selingo commentary

By Jeffrey Selingo

Three years ago, this headline appeared in The New York Times: “Virtual and Artificial, but 58,000 Want Course.” We all know the rest of the story. When the artificial-intelligence class at Stanford University started that fall, 160,000 students in 190 countries had signed up, touching off MOOC mania on campuses around the world.

Massive open online courses were heralded as the invention that would disrupt higher education’s expensive business model and would become the next big innovation in the tech world. By the end of 2012, the Times declared it“the year of the MOOC.”

But a year later, after a series of high-profile failed experiments using MOOCs, another proclamation from the Times about the massive classes arrived in this front-page headline: “After Setbacks, Online Courses Are Rethought.” In the news media, MOOCs had gone from being higher education’s savior to a bust in a little more than a year.

That doesn’t mean MOOCs are dead, however. Far from it. More than six million people have signed up for a MOOC since 2011. Massive open online courses are clearly resonating with an audience looking for instruction on the web. And the format is able to scale education in a way that simply can’t be done on a physical campus.

MOOCs might not put thousands of colleges out of business in the next 50 years, as Sebastian Thrun, a co-founder of Udacity, predicted in 2012, but they are changing how students learn, how professors teach and grade, and how higher-education leaders figure out what differentiates face-to-face instruction from online learning.

These remain the early days of MOOCs. Remember the early days of the web? “No one knew what web search would become in 1998,” Ryan Baker, an associate professor of cognitive studies at Teachers College, Columbia University who has taught a MOOC, told me. “We had Infoseek and AltaVista, and Yahoo tried to do it like a phone book. And then Google came along, and that’s how we remember search today.”

It’s during this time, after the phase of the initial and unrealistic hype, that the primary players—Coursera, edX, and their college sponsors—need to answer three fundamental questions about the position of MOOCs in the academic ecosystem if the technology is ever to deliver on some of its promises.

What role should MOOCs play at traditional colleges and universities?Although a few MOOC pioneers still see the free online courses as capable of changing the world, the courses right now can be best viewed as a supplement to formal classroom learning and as a professional-development tool for people who already have a college degree. MOOCs have augmented a system of education, not replaced it. Lost in the disillusionment over the end of the MOOC hype are the hundreds of thousands of students who have actually completed the courses, and how for many of them the online classes served a critical need for professional and personal development.

College leaders should focus on using MOOCs to complement and enhance their continuing-­education programs, as the number of options students have for education in small bites and on their own schedule continues to grow.

How do colleges make open online courses actually open? Despite the word “open” in their name, MOOCs are not really open in a way that allows anyone to adapt and redistribute courses or that allows open collaboration among users. Indeed, it’s still not clear exactly who owns the content delivered through a MOOC: the professor or the college. The answer has significant implications for MOOC students because it will affect the incentives both colleges and professors have to offer free online classes, and ultimately the ability of today’s MOOC students to have access to a rich catalog of courses when they want them.

Perhaps the biggest battle yet to come between the MOOC providers and colleges is just how long MOOCs should be “turned on” for students. Most MOOCs are run like traditional courses, with a start date and an end date, meaning students who drop out usually can’t pick up another offering of the course until the following year.

Course materials often disappear from the web a few weeks after a class ends. Andrew Ng of Coursera told me he wants to run courses more frequently and to allow the content to always be available. But that means colleges and faculty members would need to allow intellectual property to live online indefinitely, and professors would need to be available to moderate courses year round, all for classes that don’t make a cent for colleges.

How can the quality and success of MOOCs be measured? Both Coursera and edX have turned away so many institutions asking to offer MOOCs that they have lost count. But when the providers reject colleges, they don’t have the best interests of today’s MOOC students in mind. After all, those students are searching for skills-building courses across a range of careers and interests, so they want more choices of colleges and classes, not fewer.

Both the MOOC providers and their college partners still view free online courses through the lens of the traditional, on-campus students they are accustomed to teaching. They are trying to protect what they currently offer to 18-year-olds fortunate enough to have gotten into top-tier colleges, rather than thinking about MOOCs for the adult continuing-­education market the courses are already serving. (Udacity has already changed its direction to serve that continuing-education audience.)

Higher education also measures the success of MOOCs by applying traditional measurements of completion. Declaring MOOCs a failure because fewer than 10 percent of students complete them ignores the motivation of many students who enroll to try out courses or to sample a particular lecture. They hadn’t planned to complete the course, and they have nothing to lose when they stop taking it.

The companies that rode to fame on the MOOC wave had visions of offering unfettered online elite education, not just providing what amounts essentially to continuing education for adults. For many of today’s MOOC students, however, what the companies created is incredibly valuable.

But we should eventually expect more from MOOCs given the time and money colleges have spent developing and offering the courses.

Whether MOOCs follow through on their pledge to alter higher education and, in the process, reduce costs and improve outcomes for everyone depends on whether colleges and the MOOC providers tackle the difficult questions facing them in the next few years while they are out of the media spotlight.

Jeffrey Selingo is a contributing editor at The Chronicle. This essay is adapted from his latest book, MOOC U: Who Is Getting the Most Out of Online Education and Why, published this month by Simon & Schuster.

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