Retail pricing is seeing 'a bifurcation' between market leaders and legacy brands: Vuori CEO

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Retail pricing is seeing 'a bifurcation' between market leaders and legacy brands: Vuori CEO
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Vuori CEO Joe Kudla joins Yahoo Finance Live to discuss the company's plans to open a store in New York City, competing with Lululemon, and battling inflation.
Video Transcript
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DAVE BRIGGS: The athleisure explosion continues. An industry estimated to be worth more than $660 billion by 2030 gets a new player IN New York City this weekend. The active California lifestyle brand, Vuori, opening its first Manhattan location Friday. And their CEO, Joe Kudla, joins us now. Joe, good to see you. What's old is new again. Explain the evolution of the brand from DTC primarily online to now brick-and-mortar stores.
JOE KUDLA: Absolutely. You know, when we launched the brand back in 2015, we had a vision to bring a new perspective to the marketplace. We felt like the brands that existed had, you know, just grown a little bit tired, overdistributed at mass market retail. And we wanted to do something fresh and new for men. And it was all designed around this ethos of build to move in styled for life. We wanted to build product that would take you through a tough workout into your everyday life.
And the only way that we knew how to reach consumers was through the internet. And I'm very grateful, being an early adopter of digital advertising, we built a really great presence online. But like all great things online, you reach ceilings and costs of advertising have gone up incrementally since our inception. And we've found that our ability to operate stores, where we can embrace community, be in service to the community, add value to people's lives, provide a really great experience in the physical world has really taken kind of a front and center role in our growth strategy looking forward. So very, very excited about all of our stores in the US, but also especially this one that we've got opening this week in New York City.
SEANA SMITH: Joe, we talk about the explosion of athleisure. You mentioned the fact that you started as a men's brand. You now offer women's apparel as well. When you talk about the growth opportunity here, you're up against some major players within this space. What do you think is the potential market that you would be able to capture over the next five to 10 years?
JOE KUDLA: Look, we're very bullish about our business. We believe that some of the most important apparel businesses of our time are being built today by activewear brands, performance fabrications that don't wrinkle, they're breathable. They move with your body. They're just more comfortable. There are lessons that we learned during the pandemic when we were all living in sweatpants. Now, we're taking those lessons. And we're applying them to sportswear, product that you would wear to work, product that you would travel in, wear to the golf course. You know, those are very fast growing categories for us.
And so when we look at the addressable market, we don't just look at the activewear space, we look at apparel in general, which we all know is very large. And we're excited to be bringing and offering not only for your workouts but for every aspect of your life.
DAVE BRIGGS: Some of those competitors, Seana mentions, obviously, Lululemon stands out. I'm sure more than a few said, you don't get in a space that they already dominate, but you certainly have competed right with them. How do you differentiate yourself from, say, Lulu or Rhone or [INAUDIBLE]. And I know this new store, which opens in a couple of days, is about 500 feet from Lulu. So it certainly matters to shoppers here in New York.
JOE KUDLA: Yeah, absolutely. We're right around the corner from Nike, a brand that I grew up with and looked up to. But you know, when we think about what differentiates Vuori, we were born on the beaches of Southern California. And for folks that have spent time there, you know that there's this effortless casual DNA that people live by in Southern California.
And we wanted to bring that into activewear in a way that had really not been done before. Again, going back to built to move and styled for life, it's product that you actually want to wear, not just product that's going to identify you as a person going to the gym. So we prioritize incredibly soft fabrics that over 50% of the materials we work with are custom-developed by us to strike that balance between performance and comfort. We prioritize a modern athletic fit, so it just looks great on.
And we strip the product out of all those unnecessary, in our humble opinion, design features that identify you as somebody's going to compete in a sport or work out. And it makes our product extremely versatile. So our customers love our product not only for working out but just wearing it everywhere, whether you're at home, you're out and about, you're going to the office. Vuori works for you across so many different aspects of your life. So we're very proud to have brought in that versatility to the men's market. And now, we're bringing a lot of those lessons, a lot of those fabrics that we're famous for to our women's assortment, which today is about 50% of our business.
SEANA SMITH: Well, Joe, there certainly has been demand for your product. It's evident in the growth numbers that you've been posting over the last couple of years. But we are entering this economic slowdown. Inflation remains high. Consumers are beginning to pull back on some of their spending. I'm on your site right now. Joggers, $94. Hoodies, $96. Are you seeing any evidence of people either trading down or spending less just in terms of their overall purchases?
JOE KUDLA: Yeah. I mean, there's no doubt that we are dealing with challenging times in the US and globally. What we're seeing is a bifurcation between market leaders and brands that are truly differentiated and have a really unique value proposition and your middle of the pack kind of mass market legacy brands. You know, you're seeing some of the public companies in our space that are market leaders still growing. You know, in the 20%, 30% year over year range, whereas some of the legacy players are seeing flat or comping down.
We're really fortunate to be in the space where we have a highly differentiated position. We're speaking to a premium-- you know, it's a premium product. And we aren't seeing any changes to date between Vuori and its relationship with our customers. They're still showing up. We're posting really strong growth. We're encouraged about Q4 and the holiday ahead.
But we are being cautiously optimistic when we look towards next year. We're not going to try to swing for the fences. We're looking at our investments and our growth very wisely with a fine tooth comb. And we want to be intelligent as we enter this new landscape, where we're not ultimately clear on what's going to happen to the United States economy.
DAVE BRIGGS: And the pandemic was really good for Vuori. I mean, you went from fewer than 100 employees to around 500 and expect to go to 1,000. Are men and women now wearing athleisure to work? Is that post-pandemic office wear?
JOE KUDLA: Yes. In some respects, we're not seeing categories like our loungewear transition as well into the office. Still, very much for, you know, your after 5:000 and weekend wear. But you know Vuori has really made a name for itself beyond just core active in those travel commute assortments, those outdoor assortments, which for us is really rooted in outerwear. And those categories have seen incredible growth over 2022. And we anticipate that trend to continue into 2023.
SEANA SMITH: And Joe, real quick as we wrap this up. We've heard from a number of retailers over the last couple of quarters. Inventory levels are excessive here when we compare to what we've seen over the last year or two. What are you seeing at Vuori?
JOE KUDLA: Absolutely. I think for a lot of our peers, you saw delays in their spring deliveries, which pushed product up against fall. And so we saw promotions. You know, as we transition from spring, summer, into fall, you're seeing the same thing with deliveries. As you know, the supply chain was materially broken heading into this fall.
We've been very fortunate to be very close to our supply chain and our partners. We have have not been immune to these challenges. We've dealt with some delays. But materially, we're in a very good position, as the brand continues to acquire market share and grow at a very fast pace. We've been able to work through inventory challenges without getting overly promotional, which has been a goal for us since we launched our business back in 2015.
SEANA SMITH: Well, Joe, you've got two big fans of Vuori here on set. So I have a feeling we will be visiting your Soho location in the near future. Joe Kudla, thanks so much for joining us. We wish you the best.
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