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Lululemon CEO explains why his stock can't be measured by traditional metrics

Lululemon CEO explains why his stock can't be measured by traditional metrics

With Lululemon's stock down more than 17 percent in the past month, Jim Cramer questioned if the athleisure movement has peaked.

But Lululemon's CEO Laurent Potdevin told Cramer that the brand is about more than just clothing. Thus, he claimed the stock cannot be measured by traditional metrics of a spreadsheet. It is really a combination of the evolution of athleticism and mindfulness, he said.

"It's so much more than apparel … when you think about Lululemon and its history, it's an investment in people," Potdevin said. "Giving them their best life, personal development and creating incredible product that allows them to live their life."

Three weeks ago the yoga-inspired apparel company reported a quarter that Wall Street regarded as suboptimal. Lululemon delivered in-line earnings and 4 percent same-store sales growth, but analysts expected a 5.8 percent increase. And while management raised guidance, it did not raise forecasts as much as analysts had hoped. Lululemon's stock has still risen 25 percent this year.

"This was an OK quarter, but when you are dealing with a high-flying growth stock, anything less than a flat out beat is considered a major disappointment," Cramer, the "Mad Money" host, said.

Laurent Potdevin, Lululemon CEO
Ashlee Espinal | CNBC

So after that quarter, Cramer questioned why Lululemon would want to migrate into the mall at a time when many bricks-and-mortar retailers like Macy's, Sears and J.C. Penney have struggled.

"I think digital really augments what we can do in the mall," Potdevin said. "Think about the brands that drive traffic in the mall. I mean you've got Louis Vuitton, Lululemon and the Tesla of this world and we are driving traffic. We've got very successful stores in the malls."

Lululemon has undergone a dramatic transformation to create an infrastructure that can support a complex and scaleable business, Potdevin explained. Two years ago, the company had a huge amount of growth but investments that lagged. It had no digital strategy and no international strategy. It has now evolved from a founder-led culture to a high-performance culture, he said.

"We've got a diverse, global team … and diversity breeds innovation. And being curious and collaborating, we are really in a position where we are just getting going," Potdevin said.

Potdevin attributed the success of Lululemon over the years to its decentralized leadership model. The model gives store managers and brand ambassadors the autonomy to have an authentic relationship with the brand. That means they aren't simply endorsing the brand, they are speaking about their own experiences.

Even with innovation, Lululemon has not forgotten that it all started with yoga.

"Everything we do is driven by innovation … if we don't solve a problem for the athlete and if we are not proud of the product we don't do it," Potdevin said.

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