Lululemon is carrying approximately 7% fewer inventory units than a year ago, yet markdowns are rising while the company chases 20% more reorder volume into stronger products. Its experience exposes a weakness in aggregate inventory measures and suggests that planning performance increasingly depends on how quickly inventory commitments can be changed when demand moves.
In Brief
- Lower total inventory can conceal excess stock in declining categories and insufficient availability on emerging winners.
- Chase ordering creates value only when demand is identified, decisions are made and supply arrives within the remaining selling window.
- SKU reduction can improve inventory depth, but it also concentrates the consequences of choosing the wrong products.
Lower Inventory Can Conceal a Weaker Inventory Position
Lululemon ended its second quarter with inventory units approximately 7% lower than a year earlier. On the surface, that suggests tighter inventory control.
The composition of that inventory tells a more complicated story.
Sales of women’s leggings declined approximately 20%, a larger fall than the company had planned. Newer away from body bottoms performed better, but not strongly enough to compensate fully, leaving overall bottoms sales down by a mid single digit percentage.
At the same time, markdowns increased by 70 basis points and the company expects further seasonal clearance because some 2026 merchandise has not sold as planned.
Lululemon is therefore managing two opposing inventory positions at once. It has too much commitment behind parts of the assortment that are weakening and insufficient availability on products where demand is stronger.
This exposes a limitation in the way inventory performance is commonly assessed. Total units can decline while the economic quality of the inventory position deteriorates.
Inventory value, turns and days of supply remain important, but they do not reveal whether stock is aligned with where demand is moving. A business can improve its aggregate inventory measures while simultaneously carrying excess stock, losing sales on stronger products and increasing markdowns on earlier commitments.
The more useful question is not simply how much inventory the business holds. It is how much of that inventory can still be changed when the original demand assumptions prove wrong.
Chase Capacity Is a Planning Capability
Lululemon is responding selectively rather than increasing orders across the assortment. Product teams are reordering more aggressively into styles showing stronger demand, including selected away from body bottoms and Define products.
Across the business, the volume being chased is approximately 20% higher than last year.
Chase ordering is often treated as a replenishment mechanism. Its greater value is that it allows part of the inventory decision to be postponed until better demand information becomes available.
Instead of committing the entire seasonal position before product performance is visible, the business preserves the ability to place more inventory behind emerging winners.
That flexibility depends on more than suppliers being willing to accept additional orders. It requires early demand signals, available materials and capacity, rapid agreement across planning and commercial teams, shorter production cycles and transport options that do not remove the margin the additional sales are expected to generate.
The constraint may not be physical lead time alone. It may be the time required to recognise that demand has moved, determine whether the signal is reliable and agree how the inventory position should change.
Chase capacity should therefore be designed as part of the planning model, rather than treated only as a supplier or replenishment process.
Response Time Must Be Measured Against the Selling Window
Lululemon has been reducing lead times in its route from design to market, expanding its chase capabilities and working with vendors to manage future inventory flows as product performance becomes clearer.
The commercial value of those changes depends on how much selling time remains when additional inventory becomes available.
A shorter replenishment lead time can still produce a weak result if the demand signal is recognised late or the decision process consumes much of the available window. Inventory may arrive faster than it did previously while still arriving too late to capture meaningful full price demand.
Planning responsiveness should therefore be understood as the complete period between demand beginning to change and additional stock becoming available.
That includes four connected measures.
| Measure | Planning question |
| Time to detect | How quickly does the planning process identify that demand has moved |
| Time to decide | How quickly can the business determine whether and how to respond |
| Time to supply | How quickly can suppliers and logistics execute the change |
| Remaining selling window | How much profitable demand remains when the stock becomes available |
This provides a more commercially useful measure of responsiveness than supplier lead time alone.
Lululemon has not disclosed its current or target lead times, how much of the assortment can use its faster processes or how much additional demand has been captured through chase orders. It has also not explained whether vendor coordination allows planned orders to be cancelled, delayed, resized or redirected.
The 20% increase therefore confirms greater use of chase ordering. It does not yet show how effectively the capability is recovering sales or reducing inventory exposure.
SKU Reduction Changes the Planning Risk
Lululemon has reduced SKU density by 15% in the North American store format being introduced across its estate. It is also testing further assortment reductions and greater localisation in selected stores.
Reducing SKU numbers can simplify planning, improve inventory depth and concentrate buying power around a narrower assortment. It can also make each product decision more consequential.
When inventory is spread across fewer products, more of the demand and financial commitment sits behind each selection. If the choices are correct, availability and productivity can improve. If they are wrong, the business has fewer alternative products through which to recover demand.
The potential value of assortment simplification therefore depends on the planning capabilities around it.
The business needs to understand how accurately demand can be differentiated by product and location, how quickly winners can be replenished, whether inventory can be moved between markets and how much future supply can still be changed after the initial commitment.
Reducing assortment complexity without improving responsiveness may simplify the planning task while concentrating the financial impact of an incorrect decision.
Inventory Productivity Depends on Adaptability
Lululemon’s position illustrates why lower inventory and better inventory are not the same thing.
Lower total units can coexist with excess stock in weaker categories and insufficient availability on emerging winners. More chase volume can improve responsiveness while markdowns remain elevated on inventory committed earlier. Fewer SKUs can increase depth behind successful products while increasing exposure when the assortment is wrong.
A stronger view of inventory productivity needs to account for both the quality of the current position and the ability to change it.
That means measuring how much future inventory remains flexible, how quickly demand divergence is identified, how long the business takes to respond and how much profitable demand remains when the response reaches the market.
The planning question is no longer only whether demand has been forecast accurately or inventory has been reduced. It is whether the business can recognise when its original assumptions are wrong and change the inventory position before the commercial opportunity closes.
